San Francisco Public Utilities Commission
Rate Fairness Board

MINUTES

Tuesday, November 7, 2006
4:30 p.m. – 6:30 p.m.
Room 421, City Hall

Members
Howard Ash
Bobbrie Brown
Edward Harrington
Ed Lee
Nadia Sesay
William Wilkinson
Vacancy

1. Call to Order and Roll Call

   Chair Bobbrie Brown called the Rate Fairness Board meeting to order at 4:39pm and roll call was taken. Present: Bobbrie Brown, Howard Ash, Todd Rydstrom (representing Ed Harrington), Ben Rosenfield (representing Ed Lee), Nadia Sesay and William Wilkinson; plus one vacancy
   

2. Public comment on items within the Board's jurisdiction but not on the agenda

   Member of the public David Pilpel spoke on late charges for customer bills and whether they are reflective of costs. Staff agreed to research this and have a response for the next meeting.
   

3. Election of Chair and Vice Chair

   In light of the fact that there may be an additional member at the next meeting, Mr. Rosenfield moved to continue this item until the next meeting; Ms Sesay seconded the motion and the Board unanimously decided to continue the selection of Chair and Vice Chair until next meeting; Bobbrie Brown agreed to continue to serve as Acting Chair. 

4. Review of Sunshine Laws

   Ms. Brown introduced Deputy City Attorney John Roddy to discuss the City’s Sunshine Ordinance as it relates to the RFB.  Sunshine Ordinance guidelines were distributed to RFB members (other materials distributed to RFB members detailed in section 5 below).

   Deputy City Attorney John Roddy reviewed the ordinance and highlighted relevant aspects, including: RFB meetings must be duly noticed and adhere to the posted agenda; private communications among RFB members, to the extent that it constitutes deliberation, is prohibited and should be done in public; and four members are required for a quorum.
   
   Mr. Roddy further explained that members of the RFB should submit Financial Conflict of Interest Disclosure statements in the spring and, for those that haven’t already done so, participate in Sunshine Ordinance training on the next occasion it is offered.

   Ms. Brown requested that all RFB members familiarize themselves with the Sunshine Ordinance. 

5. Discussion regarding scope of staff water and wastewater rate analysis, staff plan for preparing rate report and schedule for rate adoption

   Joe Yew, PUC Finance Director, introduced this section and briefly described the contents of the information packet distributed to members (all attached by reference). The packet included:

   • 11/7/06 Meeting Agenda
     
   • Distribution List
     
   • Sunshine Overview (addresses in item 4 above)
     
   • Bylaws
     
   • Proposition E – Articles 8B and 16.103 of City Charter
     
   • Proposition 218 Overview
     
   • RFB 2006-2007 Schedule
     
   • Water and Wastewater Enterprise Projections
     
   • Capacity Charge Brochure
     
   • Summary of Wastewater Rate Structure Changes
     
   • Precipitation vs Water Sales

   Acting Chair Brown asked RFB members to carefully review the contents of the materials and several items were reviewed in detail:

   Schedule
   
   Board members and PUC staff discussed the schedule and how best to coordinate the timing among RFB meetings, PUC meetings, and public meetings. 

   Assistant General Manager for Business Services, Scott MacDonald, explained that PUC Commission meetings are generally held the 2nd and 4th Tuesday of every month. PUC staff will work with PUC Communications to plan public meetings that are planned for January, February and March; at the next meeting PUC staff will report back on those details.

   Members of the RFB discussed the number of public meetings last year, Mr. Ash stated there were five public meetings in the first round and one in the second round. PUC staff informed the RFB that they are not required to hold public hearings but can do so if they wish.

   The RFB members requested to move the meeting time to 4pm. Staff agreed to look into room availability to see if this would be possible.

   Mr. Ash requested that the schedule include the days of the week; PUC staff will make this addition to future schedules.

   Proposition 218 Overview

   Mr. Roddy gave an overview of Proposition 218 in light of the recent court ruling.  Proposition 218 applies to water, wastewater, and trash; it does not apply to gas and power or non-commodity charges such as, installation fees, late fees, and impact fees. He explained that the ruling has two types of impacts, procedural and substantive.

   Procedural requirements include:

   To increase rates, the utility is required to mail a notice, then have a 45 day waiting period, then a public meeting
   Notice should be sent to all customers and property owners; notice should include proposed rate or a rate table
   If a majority of San Francisco parcel owners, i.e. out of approximately 130,000 owners, protest against the proposed fee, the agency may not impose the fee. 
   
   Substantive requirements include:

   Utility rates may not exceed the cost of providing the service
   Service users may not be charged more than each user’s proportionate share of costs attributable to the services the user receives
   
   Local agencies may not transfer fee revenues out of a utility fund, especially to a general fund, except where the local agency can demonstrate that the transfer defrays the local agency’s cost of providing services such as street maintenance or public safety necessitated by the utilities activities
   
   Mr. Rydstrom raised questions pertaining to low-income discounts and Proposition 218; Messrs. MacDonald and Roddy explained that staff was looking into that closely and would have information shortly.

   Mr. Ash asked about Proposition 218 and Capacity Charges and Mr. Roddy explained that Capacity Charges are governed by a different government code. The Proposition deals narrowly with “property-based” fees and services.

   Mr. Rydstrom asked about conservation rates and whether that’s been affected by 218. Mr. Roddy believed there would have to be a cost basis to maintain the conservation rates and that option is also being looked at and would be addressed at a later meeting.

   Mr. Rosenfield inquired whether there is case law related or pending cases pertaining to low-income discounts and Proposition 218.

   Related to the discussion on Proposition 218, David Pilpel requested a copy of the Bighorn-Desert View Water Agency v. Beringson case; Mr. Roddy agreed to send a copy.

   Capacity Charge Brochure
   
   Mr. Ash, referring to a section on appeals in the Wastewater Capacity Charge brochure, asked on what basis could a customer appeal the charge. Mr. MacDonald explained customers could request a credit for prior use through the appeal. In addition, if a project is in a redevelopment area and a prior “master” agreement exists, they are exempt from the Capacity Charge. Mission Bay projects are exempt for the next several years while Hunter’s Point and Treasure Island would not be exempt, as no agreements exist.

   Mr. Ash asked about projects in the Presidio and staff is working to identify those projects, as they do not go through that standard City building permit process.

   Summary of Wastewater Rate Structure Changes (including Capacity Charge, CAP and LINPH)
   
   To date, $1.7 million has been collected in Capacity Charges; Mr. Ash asked what amount if any has been spent and what the process is for spending the money. Mr. MacDonald explained the money could be used for debt service and capital projects only and PUC staff agreed to return at the next meeting with more details on the process for spending those proceeds.

   Ms. Ostberg described the PUC’s two main low-income assistance programs, the Community Assistance Program (CAP) and the Low-Income Non-Profit Housing (LINPH) Program. Ms Ostberg explained that the CAP program is modeled after PG&E’s CARE and Sunset Scavenger’s Lifeline low-income programs. Last year, the CAP program discounted $617,000 off customer bills and there were 5,585 recipients as of June 30, 2006.

   Mr. Ash asked about number of accounts that may be eligible and requested a report on how quickly we ramped up compared to Sunset Scavenger. PUC agreed to provide information related to this question at the next meeting.

   Ms Ostberg then described the effort to provide relief to low-income customers living in multifamily buildings, the LINPH program. The challenge, she explained, is how best to reach the target population to promote affordability and conservation when they do not pay water and sewer bills directly.

   Mr. Ash requested the number of households in the buildings benefiting from the LINPH discount and PUC staff agreed to have this information for the next meeting.

   Mr. Ash asked about the status of Plumbers to People. Staff will report back on this next week; Ms Brown offered to assist in this area.

   Precipitation vs Water Sales
   Ms Ostberg spoke briefly about the past two years being comparatively wet and how that negatively impacts revenues; this is especially true for wholesale customers.

   Revenue Projections
   Ms. Ostberg took the RFB through the revenue projections for both the Water and Wastewater Enterprise.

   Mr. Ash asked whether the RFB has jurisdiction over wholesale rates as well as retail. Mr. MacDonald explained that wholesale customers are under contract.

   Mr. Ash inquired about the impact of the 3-tiered rate for residential sewer and requested to see an analysis of its impacts, especially since the RFB will also explore a tiered rate for water. Ms Ostberg stated that this information will be included in the Rate Report and a first draft will be presented at the next meeting.

   Ms Ostberg proposed that for the next meeting, 11/28, in addition to PUC staff providing a first draft of the Rate Report, there also will be a discussion on the capital programs: Water System Improvement Program (WSIP) and Wastewater Interim Capital Improvement Plan (CIP).

   Ms Ostberg then described debt-related activities since the RFB met last. A total of $507 million was raised through bonds for the Water Enterprise, $360 million of which is new money for projects and the balance used for refunding and repaying commercial paper. Ms Ostberg does not expect additional debt issuances in FY 07.  The Wastewater Enterprise 5 year Capital Improvement Program (CIP) is underway and addressing critical needs, such as in areas of flooding and odor control.  To finance this, Wastewater has been using available debt service reserve funds, approximately $30 million, and, in December, the first tranche of Commercial Paper program will be issued.

   In preparation for rate setting, Mr. Rydstrom requested that the RFB and staff revisit the “Fairness Criteria Matrix” developed previously. Mr. Rydstrom also asked PUC staff to update the revenue projections to include percentage changes year over year as well as common size ratios. PUC staff agreed to respond to these requests for the next meeting.

   Ms. Sesay requested that a row be added to the projections tables indicating the par value of bond issues (actual and projected). RFB members also requested that the Revenue Projections include actual rate increases.

   Mr. Pilpel suggested that PUC staff include definitions of financial targets in the projections; PUC staff agreed to provide that at the next meeting.

6. Adjournment

Acting Chair Brown adjourned the meeting at 6:08 pm.