PUC tells supervisors mid‑cycle budget can cover higher capital needs while keeping rates affordable

Harlan Kelly, general manager of the San Francisco Public Utilities Commission, told the Board of Supervisors’ Budget & Finance Committee on May 8 that a mid‑cycle review of the PUC’s two‑year budget yields “good news” and that increases identified in the department’s operating and capital plans can be covered through savings, refinancing and project phasing. Kelly said the department is using a 10‑year capital and financial plan to balance three priorities: continuous service delivery, maintaining infrastructure and preserving ratepayer affordability.

Kelly said the PUC’s annual operating budget is about $890 million and highlighted refinancing and low‑cost bond financing that he said will generate substantial long‑term savings. He reported that the Water Enterprise’s WESIP work is nearly 75 percent complete and that the PUC secured an early repayment of about $350 million in capital funds that reduced financing needs. On the capital side, Kelly proposed a rolling 10‑year capital program of roughly $7.5 billion, a net increase from the prior plan driven by additional water and auxiliary water supply system projects and investments in aging Hetch Hetchy and Moccasin facilities.

A central focus of Kelly’s presentation was the sewer system improvement program (SSIP). He said a 20‑year assessment identified about $6.9 billion in system needs and the commission has approved a Phase 1 package totaling about $2.7 billion, of which roughly $2.0 billion is earmarked to rebuild digesters at the Southeast treatment plant. Kelly underscored the program’s urgency, noting the system’s age (he cited that about 13 percent of sewer lines are more than 100 years old) and recent sewer collapses as examples of risk to service and compliance.

Todd Reitstrom, assistant general manager and CFO for the PUC, briefed the committee on four related ordinances and budget amendments (items 2–5 on the committee agenda). Reitstrom said two overtime supplements are fully funded through salary and debt service savings, a capital reappropriation moves funds into the SSIP, and a consolidated year‑two budget amendment reflects reduced financing costs and a request to release reserves for wastewater capital in FY13‑14. Reitstrom described the proposals as self‑balancing and emphasized that some capital spending was rescheduled to later years as part of validation and re‑phasing of projects.

The department previewed a rate‑setting timeline: an independent rate study in summer, a Rate Fairness Board hearing later in the year, PUC action in December and Board of Supervisors consideration around February so that rates (if adopted) could take effect July 1, 2014. Kelly said the commission is seeking to keep the combined water and wastewater bill under roughly 2 percent of average household income — a tighter affordability target than the single‑utility guidance he cited.

The committee’s budget analyst recommended approval of the proposed ordinances and adjustments. The committee approved items 2–4 together and accepted technical amendments and the amended item 5 without opposition. The PUC said it will return with more detailed hearings on rate design and outreach to customers ahead of the formal rate process.