Published By: Commission
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MINUTES COMMISSIONERS The Honorable Ann Moller Caen, President |
DEPARTMENTS AND ENTERPRISES Water Enterprise Gavin Newsom Michael Housh |
ORDER OF BUSINESS:
1. Call to Order: 10:10 A.M.
2. Roll Call: Present – President Ann Moller Caen, Vice President E. Dennis Normandy, Commissioner Richard Sklar, Commissioner David Hochschild
President Caen congratulated Commissioner Sklar on his re-appointment to the Commission and expressed dismay that former Commissioner Brooks had not been affirmed in his reappointment. President Caen lauded Commissioner Brooks for his outstanding and dedicated public service as a member of the Commission. Commissioner Sklar noted that Commissioner Brooks had ably served as President of the Commission last year, and expressed his disappointment and frustration that despite former Commissioner Brooks’ record of exemplary public service his reappointment had not been sustained by the Board of Supervisors on a political basis rather than that of good governance.
PUBLIC HEARING
3. Public Hearing to consider budget proposals for the Operating and Capital Budgets for the enterprises and bureaus under the jurisdiction of the San Francisco Public Utilities Commission for FY 2008-2009, and possible action. (Persons who are unable to attend the public hearings may submit to the City, by the time the proceedings begin, written comments regarding the subject of the hearing.) These comments will be brought to the attention of the Commission and will become a part of the official public record. Written comments can be sent to: Michael Housh, Commission Secretary, San Francisco Public Utilities Commission, 1155 Market Street, 11th Floor, San Francisco, CA 94103. (MacDonald)
Staff Recommendation:
Consider the proposed Operating Budgets for the enterprises and bureaus of the Public Utilities Commission for Fiscal Year 2008-2009, and possible action, and continue this agenda item to a special meeting noticed for Friday, February 15, 2008 for further hearings and possible action.
Public Comment:
There was no public comment.
Acting General Manager Tony Irons introduced the discussion of the FY 2008-09 San Francisco Public Utilities Commission Budget and noted that given the time available at today’s meeting staff would present as much as they had time and then conclude at the planned special meeting on Friday, February 15th. Commissioner Sklar again emphasized the importance of presenting the budget proposals at a high level as a program budget, presenting from each section what each program hoped to accomplish during the next year and how broadly they proposed to do so. Commissioner Sklar noted that this would in turn enable the Commissioners to have the sufficiently wide overview of what was being proposed in order to make the necessary policy decisions to guide and underlay the budget. Commissioner Sklar noted that the details of execution of these policies were the domain of staff but that the Commission needed to have budget information presented to them in such a way that showed each program’s objectives and costs and be presented in context of old, ongoing, what came next in program objective and funding tied to this so that it was clear where the program had been, where it stood presently, and where staff recommended we go forward.
Assistant General Manager for Finance Scott McDonald noted that this was how staff proposed to present this year’s budget as program budgeting continued to evolve throughout the agency. Mr. MacDonald observed that this budget proposed few new increases in program levels over last year, except in the support bureaus.
Commissioner Sklar asked that instead of the support bureaus that the enterprise budgets be taken up first. Acting General Manger Irons suggested that each of the enterprises Water, Wastewater, and Power be presented and then the support bureaus. The AGM for Finance reported that last year was the first year where actuals and projections of expenditures presented by program. Mr. MacDonald noted that there was still some learning to do and further explained that cost shifting from one program to another and from year to year had resulted in the creation of some anomalies that would be observable in some reports. Mr. MacDonald noted that increased use and staff training on the Maximo system would result in the desired improvements in addressing concerns with accurately presenting cost shifts from year to year. Mr. MacDonald also noted and reported ongoing efforts to address the significant amounts of debt reflected in the Wastewater Enterprise Budget and described continuing multi-year efforts to stabilize the debt during last year and this year. In response to a question by Commissioner Sklar, Mr. MacDonald noted that there were no summary reports of overall revenues and expenditures available for each enterprise. Acting General Manager Irons requested that the Commissioners offer guidance as to what they wanted to see or anything that required further explanation during each of the program based budget presentations.
Commissioner Sklar expressed frustration that this year’s proposed budget information had not been organized so it could be read like the first page of a financial statement or Profit and Loss statement with figures reported representing this year, last year, and projections for next year as had been requested last year. Mr. MacDonald reported that this information was available under Tabs 1 and 12 in the Commissioner’s Budget binders. President Caen observed that footnoting each fund balance would have also been helpful. Commissioner Sklar emphasized that having a high level profit and loss statement style of presentation would better enable the Commissioners to devote their attention to exercising their role as Directors, noting that having this information would allow the Commissioners a clear high level view of where each program had been, where they were, and where it was most optimal for them to go forward. Acting General Manager Irons noted that a summary of the Water, Wastewater, Power, and Support Bureau reports tallied together could produce the kind of report the Commissioner wanted.
In response to questions by Commissioner Hochschild concerning the addressing the multi-year debt burden in Wastewater, Mr. MacDonald explained the bond related basis of the debt structure and discussed the mitigating impact of the rate increases adopted by the Commission. Mr. MacDonald noted that had the three tier rate structure been adopted it would have only resulted in around a $2 million differential as there would have been a relatively small number of third tier ratepayers. AGM MacDonald reported that 98% of the revenue increases are attributable to the rates increases.
In response to questions by Commissioner Sklar, Mr. MacDonald noted that the budget presentation was not a cash flow sheet, that it was not a profit and loss statement, nor was it a balance sheet. Commissioner Sklar asked why these basic tools were not available and noted that an over abundance of detail in some of the presentations made it difficult to get a clear overview to make basic decisions. Vice President Normandy agreed that the budget presentations needed to be presented in such a way as to facilitate the Commissioners carrying out their responsibilities like a Board of Directors when approving the budget by having the high level overview to work from, backed by detailed reports. The Vice President noted that if a profit and loss kind of statement would have better facilitated the Commission’s needed decisions and take action within the deadlines imposed by the Budget process. Commissioner Sklar observed that it was vital that the Commissioners have a clear overview and description of what each specific program in our business was and what it specifically proposed to do in the next budget year. Commissioner Sklar offered several specific general descriptions that would be more helpful leaving the depth of detail to how the managers proposed to carry out the work authorized.
Mr. Irons proposed going forward with the Water Enterprise presentation, while staff prepared some of the summary and overview reports requested by Commissioners. Mr. MacDonald presented an overview of the Budget binders presentation of the proposed Water Enterprise Budget. Commissioners Hochschild and Sklar found this presentation more helpful in understanding what was being presented and proposed. Michael Carlin Assistant General Manger for Water then presented an overview of that enterprise’s proposed FY 2008-09 Budget. In answer to a query by Commissioner Sklar, Mr. Carlin reported the division point between Hetch Hechy and the Water Department was at Alameda East transfer portal with upstream being Hetch Hechy and in general downstream from there the Water Division. In response to a query from Commissioner Sklar, AGM Carlin then laid out the 2006-07 projected figures for the budget and what was spent as well as the proposed 2007-08 budget and its expended funds. In response to a query by Commissioner Sklar, Mr. Carlin addressed asset management and “state of good repair” issues and noted that as training in and increased use of Maximo work order system became more widespread the level of control and reporting by program was significantly improving. Mr. Carlin reported that the consolidated emergency response plan and the emergency operations center were working out well and that the enterprise’s business plan was in final development. In addition, Mr. Carlin reported work going forward for implementation of a single operations plan from Hetch Hechy all the way to the City. Mr. Carlin also reported that steps were underway to get managers thinking in terms of two year budgeting.
Vice President Normandy applauded Mr. Carlin’s presentation noting that this kind of presentation was exactly what the commissioners wanted, noting that it facilitated maximizing existing Hetch Hechy resources and the eventual spin off Hetch Hechy Power into the Power Enterprise.
Commissioner Sklar emphasized that if the Commissioners had before them similar profit and loss statements for each enterprise consistent from year to year they would have the tools to accurately understand wider picture of where each program had been, where it was, and then make informed decisions as where it might go without getting into the workings of how staff accomplished these wider purposes. This, Commissioner Sklar noted, would enable the Commission to understand where changes were and what was needed to be worked out. President Caen also noted that the Commission did not have data on capital outlay in the materials presented. Commissioner Sklar next raised the issue that in August of 2006 the Commission had discussed the likely impact of global warming on flow and inquired if funding was in place to begin to address this concern. Mr. Carlin relied that talks were ongoing with Modesto and Turlock Districts to develop an operational plan to respond to any changes in flow available. Commissioner Sklar noted that perhaps it was now time to consider again his previous suggestion of raising the height of O’Shaughnessy Dam. Mr. Carlin continued with his presentation discussing the continuing priority of the Water System Improvement Program project activities, in particular, as they related to operational shut downs and then discussed watershed improvements as well as the upcoming master water sales agreement expiring in July 2009. Assistant General Manager Carlin next turned to maintenance issues and in response to a question by Commissioner Sklar gave staff a C+ with improvements in focus on preventative work and a better setting of priorities. In response to questions by Commissioner Hochschild, Mr. Carlin discussed what was involved in cleaning and testing of the pumps and explained that as the system was largely computerized there was a better understanding of when and where work would be needed. Commissioner Sklar emphasized again that it was critical that staff request the needed resources and hoped that the maintenance grade would become a B next year. Next, Mr. Carlin outlined the relatively few minor new proposals. A major success for the agency was the announcement that the Public Utilities Commission was one of two cities in the country, New York being the other, to receive a major $8 million water contamination pilot project grant. Mr. Carlin attributed Chief Suhr’s very able assistance as a key to the success of this potentially very critical new level of ability for water monitoring effort.
Commissioner Hochschild next discussed his concern that the Public Utilities Commission’s water conservation efforts were not sufficiently aggressive. Commissioner Hochschild suggested that water conservation should be addressed on a par with the conservation standards statewide for power, and that our efforts at water conservation were in need of a boost to get there. Commissioner Hochschild noted that there was still far too much water lost that was recoverable. In response, Mr. Carlin reported that San Francisco users had the lowest per capita urban use in the state and that aggressive efforts were underway to make this record even better. Mr. Carlin noted that improved billing allowed staff to identify and focus on potential problems early and outlined proposals for automated billing and tracking of use. Assistant General Manger Scott MacDonald further explained the ways, drive by monitoring or by a fixed radio based monitoring system, the automated meter reading could work to pinpoint where conservation efforts needed to be focused. Commissioner Hochschild emphasized that this was a core issue as it was in power conservation. Mr. MacDonald agreed but noted that the technology was not quite there yet for water systems as it was in power distribution. Commissioner Hochschild asked if meters could display use to help users monitor and conserve? Acting General Manager Irons noted just such a display was being proposed for use in the new 525 Golden Gate Avenue PUC Headquarters building. Commissioner Sklar noted that the Commission was willing to commit more funding to conservation, and Commissioner Hochschild urged that the Agency make itself the national model.
On a related topic Commissioner Sklar inquired if anything further had happen at the Board of Supervisors with the recommendation made by the Commission to allow pass throughs of water and wastewater rates increases if conservation measures had been undertaken by property owners. Upon learning that nothing had occurred in response to the Commission’s suggestion, Commissioner Sklar asked that Mr. Irons pursue this matter with the Supervisors. Next Commissioner Sklar asked concerning his previous proposal to consider use of seasonal pricing to encourage conservation efforts by high end system uses. President Caen directed this issue be added to the old/ongoing business report. Vice President Normandy asked that a formalized summary of what had been requested, what had been done, and with what level of success be prepared. and followed up with mid-year reports to keep the Commissioners abreast as programs went forward.
The Commission took a brief recess at 11:35 A.M
The Commission returned to session at 11:45 A.M.
Assistant General Manger for Power Barbara Hale began the next series of Budget presentations. In response to a question by Commissioner Hochschild, Ms. Hale focused on what were actual activities as well as what was being proposed. Commissioner Sklar then noted discomfort with the decision making process on certain new activities, asking where were the expenditures from the Transbay Cable, when would the Public Utilities Commission have access to the estimated $3.5 million in grant revenues, and where was the commitment to energy efficiency in the Southeastern neighborhoods that the Commission had mandated? Ms. Hale responded that there was an apparent discordance between what the Commission had decided and what the Board of Supervisors directed were to be done with certain of these funds, noting a Board direction to fund study of Newark to San Francisco transmission. Commissioner Sklar noted that when the Commission had approved the Combustion Turbines Project a commitment was made and that this was where the revenue should be budgeted, on dedicated energy conservation in the Southeastern neighborhoods as the Commission had determined. Commissioner Sklar noted that if necessary representations could be made to the Board of Supervisors to clarify these questions. Turning to related topics, Commissioner Sklar asked concerning the status of the Lennar Hunters’ Point project and asked concerning the status of the solar loan program. Ms. Hale responded that the Board had not approved the loan program based on concerns about the appropriateness of use of the seismic safety bond funds for this purpose. Ms. Hale reported that therefore there was no existing loan program, and that staff was working on ways to accomplish the program with other means.
Assistant General Manager for External Affair Laura Spanjian explained that the deadlines for the November ballot would not allow the issue to be placed before the voters then. Commissioner Hochschild recommended that the PUC go forward with creating this program on our own, especially given the Mayor’s strong public support for going forward. Commissioner Sklar suggested that the incentives be included in this budget proposal. Commissioner Sklar expressed optimism that this matter could be resolved without litigation. Deputy City Attorney Noreen Ambrose suggested that that further discussion of this matter be deferred until the closed session.
Next, Commissioner Sklar turned to the question of the $16 premium being paid to purchase renewable energy and asked details about where it was coming from and how much it was costing each year? President Caen asked if efforts should be expanded to budget for these purposes in advance. Commissioner Sklar noted that this lead to reopening the banking issue and that this should be a topic for a future discussion.
Next, Ms. Hale presented information concerning the Ferry Building project, and the progress on Community Choice Aggregation. In response to questions by Commissioner Sklar concerning staffing and expenditures, Ms. Hale discussed the background of these projects and reported on the ongoing process since the Board of Supervisors approval of the draft plan. Commissioner Sklar next asked in regard to the Lennar/Hunters Point Project concerning the Public Utilities Commission’s costs to purchase green power for this project and the current status of the overall project. Acting General Manger Tony Irons suggested that this discussion be deferred to be addressed in a comprehensive in-depth discussion at a future meeting including issues such as cost of service rate paying. That, Mr. Irons, noted would present a more complete picture of the issues involved to the Commission. Commissioner Sklar agreed to defer addressing this topic but asked that the Commission be appraised as soon as this discussion was ready to go forward. Commissioner Hochschild asked concerning the Airport CT Project. Commissioner Sklar noted that this was an airport issue and that they were using airport funds to pay for it. Commissioner Hochschild asked that a report be prepared that set out who was funding each aspect of these projects so sources and uses of funds were clear. Ms. Hale proposed to prepare a report that tracked all costs showing that there was complete recovery.
Vice President Normandy asked what, if any, impact would result from proposed new federal port call regulations on plans for the Public utilities Commission to supply shore side power to visiting cruise ship.
In response to Ms. Hale’s presentation concerning other details in the proposed capital and operating budgets for the Power Enterprise, Commissioner Sklar noted that it was vital that the Agency look at what has been tried by others to see what might work for us as well.
Commissioner Hochschild then raised concerns with the need to expand significantly solar development efforts and what might be the best models such as through Power Purchase Agreement model to employ. Commissioner Sklar urged that we not think small but consider a variety of options beyond just two projects where sites such as at the airport were available and could be significantly expanded. Ms. Hale explained that the airport had been approached about additional 1 megawatt available in solar expansion and had said no. Commissioner Sklar recommended that this topic be pursued again as this site provided a very significant opportunity for expansion of locally generated renewable energy given conversations that he had had with a colleague on the Airport Commission. Commissioner Sklar pledged to continue his efforts to convince the airport to go along.
Next Commissioner Hochschild asked about where the $3 million proposed for solar incentive programs was described and expressed frustration with the pace and scale of investment in energy conservation noting the relatively small investment in the overall budget. Commissioner Sklar noted that he had recently discussed the matter with Mayor Newsom and asked concerning what was being done and what was budgeted to implement the Commission’s mandated shift away from use of incandescence bulbs. Vice President Normandy asked that staff make sure that appropriate recycling capacity was ready to take in the increased use of energy efficient bulbs. Ms. Hale responded that staff was going forward with an aggressive replacement program and that as the new bulbs typically had a much longer life of use there would be opportunity to ramp up the needed recycling capacity as the transition went forward.
Reviewing the discussion to this point Commissioner Sklar asked Ms. Hale where in the report details of various program expenditures night be found. Ms. Hale proposed to report details of program activities but noted not all programmatic details where included under Tab 5. Acting General Manager Irons directed the Commissioner’s attention to the section in the report on the capital side. Finding that the information for the operations side as presented was insufficient, Commissioner Sklar asked that staff prepare expenditure reports in dollar amounts by program for operations as for the capital programs in the Power Enterprise. Mr. Irons proposed that these figures be reported as with a project budget, that breaks out the major elements. Commissioner Sklar noted that both were needed as well as a summary to present a usable overall picture. Commissioner Sklar noted it would be useful to see Treasure Island, the Mayor’s Energy Conservation Account (MECA), Hunters Point, the proposal for the new Transbay Terminal, and the Combustion Turbines Project presented as project budgets.
Responding to Ms. Hale’s recommendation for filling out staffing to meet the goals set out in the enterprise’s business plan and expand staffing including a Deputy Assistant General Manager position, Commissioner Sklar asked concerning what seemed to be an imbalance in the Power Enterprise Organization Charts. Acting General Manager Irons reported that Ms. Hale absolutely needed a deputy in order to carry out the Commission’s policies for the Power Enterprise as the Power Enterprise grew as planned and staffed up to reach the goals defined for it by the Commission these imbalance would sort out..
Commissioner Hochschild then asked what was primary among our priorities for the Power Enterprise. Commissioner Hochschild strongly emphasized that in his view the most significant impact would be a greater priority on conservation and that there must an increased emphasis on conservation. Vice President Normandy noted that if staff were needed to carry out the Commission’s priorities then staff should be added. Mr. Irons noted that the various duties assigned among staff could be changed as priorities get refined. President Caen agreed that these details were better left to staff’s discretion. Commissioner Sklar emphasized that it was the Commission’s role to set Agency priorities. Responding to Ms. Hale’s presentation on expanded activities in the regulatory arenas, Commissioner Hochschild noted that he was fully supportive of staff’s effort to leverage state power projects to enhance our own role. Commissioner Hochschild observed that it was critical that we be active and at the table in this arena. Commissioner Sklar suggested that funds proposed to be allocated for other lobbying activities might be better spent in this arena.
Commissioner Sklar next asked concerning investigation of opportunities to develop our own geothermal power. Ms. Hale reported those funds were in the allocation for MECCA. Vice President Normandy again urged staff to consider successful models in use elsewhere and bring them into our system. Ms. Hale next described two proposals to provide power to Redevelopment areas and continuing to serve Treasure Island. Commissioner Sklar asked if staff had considered that we would have to buy power before getting involved in expand resources for green power we were not producing. Ms. Hale proposed to do a careful evaluation and bring it back to the Commissioners for an in-depth review. Commissioner Sklar wished to wait until all of these issues were vetted so that a decision could be made to go forward as proposed or instead focus on conservation and expanding use of local renewables.
Acting General Manager Irons followed up on this discussion reported that there was ongoing investigation of options for developing our own resources for geothermal power and proposed to address this topic in a comprehensive way at a future meeting. Assistant General Manger Hale noted in this regard that there was a continuing emphasis on creation of new renewables to free up our existing high value hydropower resources. Commissioner Sklar stated having to purchase power when we lacked our own local renewable resources did not make sense. Commissioner Sklar noted that it was the responsibility of the Commission rather than the opinion of the city family that should drive the Public Utilities Commission’s programs. Commissioner Sklar noted that staff should not feel squeezed between what the Board of Supervisors may ask and what the Commission decides to do in response. Commissioner Hochschild noted that the Agency would do well if we could just become consistent with the state loading order. Acting General Manager Irons observed in addressing many of these questions that the Commission must set the direction for staff and also respond to what the Board of Supervisors has directed staff to do.
Ms. Hale next discussed the ongoing efforts to recruit staff, reporting that this was an ongoing problem across utilities across the country. Commissioner Sklar noted that the Commissioners had no objections to getting staffing necessary.
Ms. Hale then explained that there was a 90-10% cost split concerning implementation of energy conservation projects where client departments paid 90% of the costs so that the true conservation expenditures figure were in fact significantly greater that shown in the budget amounts.
In a follow up question raised by Commissioner Hochschild concerning why the city was still buying 20,000 old bulbs each year, Ms. Hale again suggested that it might be most efficient for PUC staff to simply go to City Hall and change out the existing bulbs while encouraging and urging the Purchaser’s Office to stop buying incandescent bulbs. Commissioner Sklar noted he had raised this question with the Mayor about the change out of old light bulbs in the Mayor’s Office every time he visited City Hall.
Ms. Hale next outlined the capital and staffing expenses involved in the Combustion Turbines (CT’s) Project and it was noted that there would be a detailed discussion of where this project was going at a future date.
Finally the Power Enterprise presentation wrapped up with a brief overview of the Civic Center Green district presented by Acting General Manager Tony Irons. Commissioner Hochschild asked if this constituted a new use of Hetch Hechy power and was told this may or may not ultimately be included unless it penciled out. Commissioner Sklar questioned the need for a building to building transmission network as part of this plan. Acting General Manger Irons responded noting that the proposed district could be a national model for conservation and adaptation of existing facilities for more efficient use of existing resources. Commissioner Hochschild expressed concern that building a new grid was getting the priorities out of focus. Commissioner Sklar noted that there were many ways that a legal district, a necessary fiction to achieve a goal to accomplish our purposes, could be most efficiently done. Ms. Hale noted that all that was being asked for in this budget were the funds to examine the choices available.
Commissioner Sklar applauded the serious discussion as the example for others to follow and asked that the next session of the Budget Presentations address in detail bringing systems up to a state of good repair and that there be a specific report on efforts to control longstanding odor problems at the Southeast Treatment Plant immediately as had been promised to the Community.
There being no further business to discuss on this day, the President Caen continued the agenda item to the next scheduled special budget meeting on Friday, February 15, 2008 and this meeting was adjourned at 1:42 P.M.
Michael Housh
Secretary
