Enclosed are the FY 06-07 operating and capital project budgets for the Hetch Hetchy Enterprise as recommended by the Mayor and approved by the Board of Supervisors.

The projected revenues to support the operating and capital budgets total $121.0 million: $100.4 million for the sale of power and energy; $19.0 million from the sale of water; and $1.6 million from interest and other miscellaneous income.

The operating budget totals $105.3 million; a net decrease of $1.2 million over last year's budget of $106.5 million. The net change primarily includes: $10.7 million reduction for purchase of power: $2.0 million increase for salary standardization; $4.4 million increase for PG&E litigation and $3.1 million increase to support the following new programs - Community Choice Aggregation, Retail Services Support, Field Services, and the National Park Service. Eleven (11) new positions were added to support the new programs.

Hetch Hetchy's capital projects total $48.0 million; $11.6 million is appropriated to the Mayor's Energy Conservation Account, $1.8 million to the Community Choice Aggregation Project, and $34.6 million to support Hetchy's infrastructure.