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SFPUC flags budget shortfalls as conservation and low water sales squeeze revenues
Summary
PUC staff told commissioners that strong conservation and wet weather have cut water sales, producing an annual retail shortfall of about $10 million and a projected Hetch Hetchy fund depletion by mid-2013; staff outlined options including debt financing, modest rate increases and cuts to operating programs.
The San Francisco Public Utilities Commission heard a detailed budget briefing Tuesday that warned conservation-driven declines in water sales could force program cuts or earlier rate increases. Todd Reekstrom, assistant general manager and CFO, told the commission that retail water revenues are roughly $10 million lower annually and that continued lower deliveries could require a roughly 12% retail rate request by fiscal year 2014'15 if trends persist.
Reekstrom said the PUC is working on a multi-year financial plan and emphasized that most near-term growth in the adopted two-year budget was debt service and cash-funded capital. He told the commission "we've had no audit findings" and described steps to separate Hetch Hetchy financials to improve transparency for potential credit-rating work.
The presentation broke the budget into enterprise totals: water about $406 million, wastewater $251 million and Hetch Hetchy power roughly $211 million, and identified roughly $289 million of unmet capital needs over a 10-year plan that cannot be cash-funded under current assumptions. Reekstrom said Hetch Hetchy reserves could be depleted by June 2013 under current projections and suggested a suite of responses: bond issuance, certificates of participation and modest increases in internal retail rates for some city departments to generate additional annual revenue.
Commissioners and staff discussed levers to close the gap including calibrating the cash-funded capital program, targeting low-cost borrowing (a $524 million bond sale was scheduled), and possible adjustments to power and general-fund rates. Reekstrom noted that a one-cent-per-kilowatt-hour increase on certain subsidized general-fund power rates would yield about $4 million annually for Hetch Hetchy and could support about $40 million of upfront capital.
Commissioners asked staff to prepare budget hearing materials for January that show multiple scenarios and the distributional impacts of any rate or subsidy changes. The commission deferred final decisions to the formal January budget hearings, asking staff to present clear comparisons of options and the consequences for operations, capital projects and ratepayers.
The commission did not adopt specific rate changes at the meeting; staff will return with detailed scenarios and the rate-study timetable in early January.
