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PUC says wholesale prepayment agreement will lower retail water bills by $5–$6 a month
Summary
The SFPUC described a wholesale customer capital prepayment arrangement that would allow 26 wholesale agencies to prepay roughly $362.3 million and that staff estimates will lower average retail monthly bills by about $5–$6 over the next 8–10 years; the committee forwarded the items as amended.
Todd Rechtroms, Assistant General Manager and CFO of the San Francisco Public Utilities Commission, told the Budget and Finance Committee that a wholesale prepayment and collection agreement would permit 26 wholesale customers to issue debt and prepay about $362,300,000 in existing capital obligations. Rechtroms said the structure is permitted under the wholesale water supply agreement signed in February 2009 and that the prepayment would generate refunding savings the SFPUC expects to pass along to retail customers.
"Average monthly bills will be typically $5 to $6 lower than they otherwise would have been come fiscal year 2014, 2015 and 2016," Rechtroms said, describing the near‑term retail impact of the wholesale refunding. He added that retail customers also benefit because the wholesale customers' refunding reduces long‑term rate pressure.
The Budget Analyst presented modeling showing the wholesale customers' principal and interest over the 25‑year term and noted that while a $362.3 million prepayment would cause the SFPUC to forgo an estimated $230.2 million in future interest earnings (2014–2034), the prepayment is authorized under the existing agreement and would reduce retail rate increases through fiscal year 2022. The analyst also recommended clarifying ordinance language about administration and fund maintenance.
Committee members asked about tax‑certificate indemnities in the proposed agreement; SFPUC staff said wholesale customers would indemnify the commission for certain errors in surcharge determinations and the SFPUC would use "best efforts" to spend tax‑exempt proceeds on eligible capital expenses.
The committee accepted the budget analyst's recommended amendments to the ordinance and sent Items 5 and 6 forward as amended without objection.
