San Francisco Public Utilities Commission Meeting – February 11, 2025

The San Francisco Public Utilities Commission (SFPUC) met on February 11, 2025, to approve audited financial statements, adopt the fiscal year 2025-26 operating budget amendments, a 10-year Capital Plan totaling $11.06 billion, a 10-year Financial Plan, authorize $1.054 billion in water revenue bonds, and approve several contracts and amendments. Commissioners also ratified the termination of the Los Vaqueros Reservoir Joint Powers Authority. The meeting included detailed presentations on affordability challenges, with projected annual rate increases of 8.6% for the average combined water and wastewater bill over the next decade.

Consent Calendar

• Item 7a: Award Contract WW-744 for Seacliff 2 Pump Station and Force Main Upgrade. Approved unanimously.

Public Comments & Testimony

• Dave Warner (public speaker) praised the quality of the audited financial statements and staff’s work, calling them a solid foundation for projections. On items 10–13, he questioned why a lower share of debt (71% vs. 78%) still led to rates exceeding affordability thresholds, and urged earlier commissioner involvement in budget trade-offs. He also noted that lower-income households may struggle more to reduce water demand.
• Peter Drekmeier (Policy Director, Tuolumne River Trust) commended the transparency of the financial presentations but warned that rate increases (9.7% in FY26, 11.5% in FY27) could spark a ratepayer revolt. He flagged a 30 million gallon per day gap between the water enterprise’s demand projections (229 mgd) and the finance bureau’s sales projections (196 mgd) for 2035, and urged a workshop to reconcile this difference and the Alternative Water Supply Plan.
• Tom Smegle (CEO, Bosca) expressed support for the 10-year Capital Improvement Plan, especially for the regional water system, and highlighted staff’s cost-reducing analysis that lowered the capital program for the Palo Alto Pipeline.

Discussion Items

Items 8 & 9 – Water and Power Enterprise Interim Funding Programs (Letters of Credit)

Staff presented a combined item to authorize new letters of credit with Sumitomo Mitsui Banking Corporation (SMBC) and PNC Bank. The program saves money by using low-cost credit facilities instead of issuing bonds prematurely. For the Water Enterprise, SMBC’s existing facility was renewed at a lower fee, and a new $150 million facility was added with PNC Bank. For the Power Enterprise, a new $100 million facility with SMBC was approved. Both banks have strong short-term ratings. The authorizations will allow the SFPUC to release capital appropriations efficiently. Commissioner Leveroni asked about total facility authorizations – staff noted existing $1.5 billion plus new $950 million, with wastewater authorization not yet needed. Commissioner Arce inquired about the bond issuance process – staff explained that Board of Supervisors approval follows commission adoption, and a bond overview will come February 25. The items were approved unanimously.

Items 10–13 – Operating Budget Amendment, Bond Authorization, 10-Year Capital Plan, 10-Year Financial Plan

Staff presented a nearly two-hour block covering:

• Item 10: Amendment to the FY2025-26 operating budget, with only 1.5% changes ($2 billion total), mostly from updated CleanPowerSF volume forecasts and funding source adjustments.
• Item 11: Authorization for $1,054,138,857 in water revenue bonds (0.6% increase in debt authorization to meet coverage requirements).
• Item 12: Adoption of the 10-Year Capital Plan for FY2026–2035 totaling $11,062,520,691. The plan is balanced and 29% revenue-funded (up from 22%), above the 15% policy minimum. Notable projects: Southeast Treatment Plant improvements, nutrient reduction ($1 billion added), and deferral of the Daly City Recycled Water Project.
• Item 13: Adoption of the 10-Year Financial Plan. Key projections:
  • Water rates: ~6% annual increase.
  • Wastewater rates: ~10.5% annual increase.
  • Combined bill: 8.6% annual increase (corrected from 9.6% typo).
  • Affordability targets projected to be exceeded by FY2037 (low-income) and FY2040 (typical household) due to wastewater capital costs.
  • Power: Hetch Hetchy projected 6.4% annual increase; CleanPowerSF 0.6% annual increase.
• Commissioner Arce emphasized early public engagement on trade-offs. Commissioner Jamdar questioned the ability to control capital expenses; staff noted that regulatory requirements (e.g., nutrient reduction) and the need to maintain bond ratings drive costs. Commissioner Leveroni asked about off-budget positions (positions funded by capital budget) and the meaning of stronger metrics leading to higher short-term rates. Commissioner Stacy stressed the importance of deferring non-essential projects. Staff reiterated that conservative assumptions (6% interest, lower sales forecasts) are meant to protect credit ratings and avoid even larger rate hikes. All four items were voted on separately and passed unanimously.

Item 14 – Ratify Termination of Los Vaqueros Reservoir Joint Powers Authority

Staff explained that the proposed expansion project was no longer viable due to unresolved risks (e.g., complete dam replacement required, 8% annual evaporation losses, cost increases, and unwillingness of Contra Costa to proceed). The SFPUC had invested about $4.5 million in planning, but the project was removed from the 10-year capital plan. The JPA board resolved to dissolve in January 2025, and ratification by 75% of member agencies was needed. Commissioner Jamdar noted the value of learning about Delta water transfers. Public comment from Peter Drekmeier supported dissolving the project. The item passed unanimously.

Item 15 – Award Contract to PG&E for Renewable Gas Interconnection

Sole-source contract to PG&E for $7 million (10-year term) to design, construct, and operate facilities to inject renewable natural gas from the Southeast Treatment Plant’s biogas utilization project into PG&E’s pipeline. Commissioners had been briefed on this project previously. Approved unanimously.

Item 16 – Increase Duration Contingency for College Hill Reservoir Contract

Request to add 560 calendar days (no cost increase) to Contract WD-2717 with Ranger Pipelines Inc. due to PG&E tariff changes that delayed electrical panel fabrication and installation. The project is critical for seismic resiliency to serve San Francisco General Hospital. Approved unanimously.

Item 17 – Amendment to Construction Management Services Contract (East Bay Region)

Amendment No. 1 to Contract PRO.0140.A with CPM CM PROS Joint Venture, increasing the contract by $25 million (from $9M to $34M) and extending duration by 2 years (to 9 total). The increase is driven primarily by the Ozonation project at Sunol Valley Water Treatment Plant (scope grew from $85M to significantly larger) and additional tasks for pre-NTP services and design review. Commissioner Arce expressed support, noting unforeseen industry changes. Commissioner Leveroni asked about overall project cost escalation – staff cited pandemic impacts on bids. Approved unanimously.

Key Outcomes

• Approved audited FY2023-24 financial statements (unmodified opinions for all three enterprises).
• Approved Consent Calendar (Item 7).
• Approved Items 8 & 9: New letters of credit for Water Enterprise ($150M with PNC) and Power Enterprise ($100M with SMBC).
• Approved Item 10: FY2025-26 operating budget amendment (unanimous).
• Approved Item 11: $1,054,138,857 water revenue bond authorization (unanimous).
• Approved Item 12: 10-Year Capital Plan (FY2026–2035, $11.06B) (unanimous).
• Approved Item 13: 10-Year Financial Plan (unanimous).
• Approved Item 14: Ratification of termination and dissolution of Los Vaqueros Reservoir Joint Powers Authority (unanimous).
• Approved Item 15: $7 million contract to PG&E for renewable gas interconnection (unanimous).
• Approved Item 16: 560-day duration increase (no cost change) for College Hill Reservoir contract (unanimous).
• Approved Item 17: $25 million amendment for East Bay construction management services (unanimous).
• Commissioner Arce volunteered to engage community organizations (e.g., API Council) in advance of the next budget cycle to discuss affordability and gather input.