HomeMy WebLinkAboutStaff Report 177_10TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER
DATE: APRIL 5, 2010
REPORT TYPE: INFORMATIONAL
DEPARTMENT: UTILITIES
CMR: 177:10
SUBJECT: Report of City Manager Action Pursuant to the City's Water
Contract with San Francisco on the Conduct of the Bay Area Water
Supply and Conservation Agency's Fiscal Year 2005-06 and Fiscal
Year 2006-07 Audit of the Suburban Revenue Requirement
This report is for the Council's information only. No action is required.
DISCUSSION
On December 12, 2005, the Council delegated to the City Manager the authority to execute
certain documents for the City of Palo Alto under the Settlement Agreement and Master Water
Sales Contract (Contract) with San Francisco when the City acts as a Suburban Representative
[CMR 434:05]. The authority required staff to report to the Council whenever the City Manager
acted under the delegated authority. On February 24, 2010, the City Manager exercised that
authority when he signed a Tolling Agreement and a Settlement Agreement between the City and
County of San Francisco and the Suburban Representatives.
The Suburban Revenue Requirement is the amount the Contract allows San Francisco to collect
from the Suburban Purchasers, the group of agencies that purchase water wholesale from the San
Francisco regional water system. These same agencies comprise the membership of the Bay
Area Water Supply and Conservation Agency (BAWSCA). The City of Palo Alto is one of the
five Suburban Representatives of the BAWSCA member agencies for the Contract
administration. The Contract requires that a "compliance audit" be performed on San
Francisco's calculation of the Suburban Revenue Requirement each fiscal year. Each year, the
Suburban Representatives may choose to conduct a "suburban review" of the compliance audit.
The Contract allows a specific period of time for a party to the agreement to serve a Demand for
Arbitration for each fiscal year on the calculation of the Suburban Revenue Requirement. In
order to modify the calculation for FY 2006, a Demand for Arbitration must have been served by
April 18, 2009.
On March 20, 2009, the SFPUC notified BAWSCA of an error in the calculation of the Suburban
Revenue Requirement for FY 2006 and FY 2007 related to the accounting of expenses for the
CMR: 177:10 Page 1 of 2
retiree health subsidy. In order to evaluate the error asserted by the SFPUC, more time than the
short time between notifying BAWSCA of the error and the deadline to modify the FY 2006
Suburban Revenue Requirement was needed. Therefore, a tolling agreement was developed to
allow sufficient time to evaluate the SFPUC's claim. The City Manager signed that tolling
agreement on April 2, 2009 [CMR: 230:09).
The tolling agreement extended the amount of time to settle issues going back to FY 2006 and
2007, but it expired March 1, 2010. During the auditor's review of the FY 2009 Suburban
Revenue Requirement, two additional errors were discovered that could have ramifications for
FY 2006 and 2007. In order to allow sufficient time to check into these issues, a revised tolling
agreement was necessary to extend the deadline to June 1, 2010 to resolve these two errors.
In addition, a settlement agreement was signed that credits the wholesale customers for errors
already resolved, but also provides that should these two most recent errors result in further
necessary adjustments, the parties are not precluded from making any necessary credits.
POLICY IMPLICATIONS
The attached Tolling Agreement and Settlement Agreement were executed in accordance with
Council authority delegated to the City Manager. If the issues raised by the claims cannot be
resolved without going to arbitration, the Council will be asked to approve that action.
ATTACHMENTS
A. Tolling Agreement between the City and County of San Francisco and the Suburban
Representatives
B. Settlement Agreement between the City and County of San Francisco and the Suburban
Representatives: Suburban Revenue Requirement for FY 2005-06 and FY 2006-07
PREPARED BY: ANE RATCHYE
Utilities Assistant Director, Resource Management
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
J
VALERI O. F 1 E G
Director of Utili ies
JA KEENE
Ci nager
CMR: 177:10 Page 2 of 2
ATTACHMENT A
TOLLING AGREEMENT
THIS AGREEMENT is made as of the 1st day of March, 2010, between the City and
County of San Francisco ("City"), acting by and through its Public Utilities Commission
("SFPUC") and the. Alameda County Water District, the California Water Service
Company, Inc., the City of Hayward, the City of Palo Alto, and the City of Redwood City
(collectively, "Suburban Representatives").
WHEREAS, in 1984 the City entered into a Settlement Agreement and Master Water
Sales Contract ("Settlement Agreement") with Suburban Purchasers in Alameda, San Mateo and
Santa Clara Counties; and
WHEREAS, under the Settlement Agreement, the Suburban Purchasers (which are listed
on Exhibit A, attached) are to select five Suburban Representatives to act on their behalf in
certain respects as regards administration and implementation of the Settlement Agreement; and
WHEREAS, the five Suburban Representatives named above have been selected by the
Suburban Purchasers to serve in that capacity for Fiscal Year 2008-09 and, thus, have the
authority and duties granted to them under the Settlement Agreement; and
WHEREAS, a dispute exists between the City and the Suburban Purchasers as to the
proper amount of the Suburban Revenue Requirement for Fiscal Year 2005-06 and 2006-07, and
the amount properly posted to the Balancing Account for Fiscal Year 2005-06 and 2006-07
limited to two issues: (1) classification of Hetch Hetchy power only expenses and (2) calculation
and classification of 2006A bond expenses; and
WHEREAS, under the Settlement Agreement the amount posted to the Balancing
Account for Fiscal Year 2005-06 and 2006-07 cannot be modified by an arbitrator unless a
Demand for Arbitration is served on or before April 18, 2009 and March 16, 2010, respectively,
unless the City and the Suburban Representatives otherwise agree under Section 8.02(d) of the
Settlement Agreement; and
WHEREAS, the parties previously entered into Tolling Agreement, dated April 10, 2009,
1
2232826.2
related to Fiscal Year 2005-06, to allow for factual investigations and discussions to take place,
in an effort to.resolve the dispute through agreement rather than through arbitration; and
WHEREAS, the parties intend to enter into a Settlement Agreement for all outstanding
issues for both Fiscal Year 2005-06 and Fiscal Year 2006-07, subject to the exceptions described
above ("Fiscal Years 2005-06 and 2006-07 Settlement Agreement"), such that neither the
SFPUC nor any Suburban Purchaser may challenge the SFPUC's calculation of the Suburban
Revenue Requirement for FY 2005-06 or FY 2006-07; and
WHEREAS, it is desirable for further factual investigations and discussions to take place
regarding the outstanding issues for Fiscal Year 2005-06 and Fiscal Year 2006-07 that have been
excluded from the Fiscal Years 2005-06 and 2006-07 Settlement Agreement, in an effort to
resolve the dispute through agreement rather than through arbitration.
NOW, THEREFORE; the parties agree as follows:
1. The date by which the City or one or more Suburban Purchasers may serve a
Demand for Arbitration regarding (1) classification of Heteh Hetchy power only expenses and
(2) calculation. and classification' of 2006A bondexpenses for Fiscal Year 2005-06 and Fiscal
Year 2006-07 is extended to June 1, 2010.
2. The parties agree to exchange information relevant to the issues, meet at mutually
convenient times and places, and discuss the issues in dispute.
3. This agreement may be executed in counterparts.
2
2232826.2
IN WITNESS WHEREOF, this Agreement is entered into by the parties by their
respective duly authorized officers, the Suburban Representatives acting on their own behalf and
on behalf of the Suburban Purchasers.
CITY AND COUNTY OF SAN FRANCISCO
ACTING BY AND THROUGH ITS PUBLIC UTILITIES COMMISSION
By:
Edward Harrington, General Manager
Authorized by Commission Resolution No. 10 'CO
ICD 1
Secretary to the Commission
APPROVED AS TO FORM:
Dennis J. Herrera, City Attorney
By:
eputy City Attorney
3
Date:
, 2010
2232826.2
ALAMEDA COUNTY WATER DISTRICT
By:
CALIFORNIA WATER SERVICE COMPANY
Robert Guzzetta
CITY OF HAYWARD
By:
CITY OF PALO ALTO
CITY OF REDWOOD CITY
4
Date: February Z5 , 2010
Date: , 2010
Date: b brititifT , 2010
Date: 2- '24' t ° , 2010
2232826.2
SUBURBAN PURCHASERS
San Mateo County
Brisbane
Burlingame
California Water Service Company (South San Francisco,
San Carlos, San Mateo, Atherton, Menlo Park, Woodside)
Coastside County Water District (Half Moon Bay)
Daly City
East Palo Alto
Estero Municipal Improvement District (Foster City)
Guadalupe Valley Municipal Improvement District (Brisbane).
Hillsborough
Menlo Park
Mid -Peninsula Water District (Belmont)
Millbrae
North Coast County Water District (Pacifica.)
Redwood City
San Bruno
.Skyline County Water District
Westborough Water District (South San Francisco)
Santa Clara County
Milpitas
Mountain View
Palo Alto
Purissima Hills Water District (Los Altos Hills)
San Jose (northern portion)
Santa Clara (northern portion)
Stanford University
Sunnyvale
Alameda County
Alameda County Water District (Fremont, Newark, Union City)
Hayward
EXHIBIT A
22328262
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO. 10-0035
WHEREAS, A dispute exists between the City and its Wholesale Water Customers as to
the proper amount of Suburban .Revenue Requirement for Fiscal Years 2005-06 and 2006-07,
and the amount properly posted to the Balancing Account for Fiscal years 2006-06 and 2006-07
under the terms of the 1984 Settlement Agreement and Master Water Sales Agreement; and
WHEREAS, This Commission in Resolution No. 09-0055 approved a tolling agreement
dated April 10, 2009 that extended the time to resolvethe outstanding issues related to the
Suburban Revenue Requirement for Fiscal year 2005-06 until March 1, 2010; and
WHEREAS, The deadline for filing a demand for arbitration under the April 10, 2009
tolling agreement applicable to claims relating to the FY 2005-06 Suburban Revenue
Requirement expires. on March 1, 2010, and the deadline for filing a demand for arbitration
related to the FY 2006-07 Suburban Revenue Requirement is April 18, 2010; and
WHEREAS, Two additional issues related to the 'classification of Hetch Hetchy expenses
and the calculation and classification of 2006A bond expenses in Fiscal years 2005-06 and 2006-
07 have arisen as a result of the FY 2008-09 Suburban Revenue Requirement compliance audit,
and the parties believe that additional factual investigations and discussions could resolve these
issues through a settlement agreement rather than through arbitration; now, therefore, be
RESOLVED, That this Commission authorizes the General Manager to 'enter into an.
agreement with the Suburban Representatives to extend the -time for filing demands for
arbitration for Fiscal Years 2005-06 and 2006-07 through June 1, 2010.
1 hereby certify that the foregoing resolution was adoptedby the Public Utilities
Commission at its meeting of
cl) 1\ /
Secretary, Public Utilities Commission
ATTACHMENT B
SETTLEMENT AGREEMENT
SUBURBAN REVENUE REQUIREMENT FOR FY 2005-06 AND FY 2006-07
THIS AGREEMENT is made as of this 16 day of Fe6ru4i ! , 2010 between
the City and County of San Francisco ("City") acting by and through its ✓Public Utilities
Commission ("SFPUC") and the Alameda County Water District, the California Water Service
Company, Inc., the City of Hayward, the City of Palo Alto, and the City of Redwood City
(collectively the "Suburban Representatives").
WHEREAS, in 1984 the City entered into a Settlement Agreement and Master Water
Sales Contract ("1984 Contract") with Suburban Purchasers in Alameda, San Mateo and Santa
Clara Counties; and
WHEREAS, under the 1984 Contract, the Suburban Purchasers (which are listed on
Attachment A) may select five of their Members as Suburban Representatives to act on their
behalf in certain respects as regards administration and implementation of the 1984 Contract
and, in the absence of such a selection, the five agencies that purchased the largest amounts of
water from the City in the previous year will be automatically designated as the Suburban
Representatives; and
WHEREAS, the five Suburban Representatives named above were selected by the
Suburban Purchasers to serve in that capacity for Fiscal Year 2008-09, purchased the largest
amounts of water from the City during that year, and thus have the authority and duties granted
to them by the 1984 Contract; and
WHEREAS, a dispute has arisen between the City and the Suburban Purchasers as
to the proper amount of the Suburban Revenue Requirement for Fiscal Years 2005-06 and
2006-07; and
WHEREAS, the parties entered into a Tolling Agreement dated as of April 10, 2009 in
order to allow for further investigations and discussions to take place in an effort to resolve the
dispute through agreement rather than through arbitration; and
2157822.2
WHEREAS, further investigations and discussions have occurred between the staff of
the SFPUC and the staff of the Bay Area Water Supply and Conservation Agency as a result of
which the parties are satisfied to resolve the dispute as to both fiscal years on the terms
included in this Settlement Agreement, except in so far as the two outstanding issues identified
herein related to (1) classification of Hetch Hetchy power only expenses and (2) calculation and
classification of 2006A bond expenses; and
WHEREAS, the parties intend to extend the Tolling Agreement until June 1, 2010 in
order to allow for further investigations and discussions to take place in an effort to resolve the
two outstanding issues in dispute through agreement rather than through arbitration.
NOW, THEREFORE, the parties agree as follows:
1. Pacifica Water Recycling Project. The SFPUC classified expenses of $322,341
for this project in FY 2006-07 as Joint Source of Supply. Without conceding that this,
classification was incorrect, the SFPUC will adjust the Suburban Revenue Requirement for that
year by $313,947. This reduction reflects the exclusion of the wholesale share of project
expenses ($322,341 x .6870 = $221,448) plus a reduction in administrative and general
expenses of $92,499 due to a resulting change in the composite rate used to allocate those'
expenses.
2. Treasure Island. The SFPUC included $37,459 for Treasure Island in the
General Manager's Office expenses, a portion of which was allocated to the Suburban Revenue
Requirement for FY 2006-07. The SFPUC will adjust the Suburban Revenue Requirement for
that year by excluding the amount so allocated ($7,144).
3. Correction of Hetch Hetchv Water and Power Asset Classifications.
A. Early Intake. The SFPUC incorrectly classified $1,125,688 in capitalized
expenses at Early Intake in FY 2006-07 as "Water" rather than as "Joint." The Suburban
Revenue Requirement for FY 2006-07 will be reduced by $16,954, which is the amount of return
and depreciation overcharged. A corresponding adjustment will be made to the Suburban
Revenue Requirement for FY 2007-08. The classification error will be corrected in calculating
the Suburban Revenue Requirement for FY 2008-09.
B. San Joaquin Pipeline No. 2. The SFPUC incorrectly classified $359,471
expended on relining San Joaquin Pipeline No. 2 in FY 2006-07 as "Joint" rather than "Water."
2
2157822.2
The Suburban Revenue Requirement for FY 2006-07 will be increased by $5,414, which is the
amount of return and depreciation undercharged. A corresponding adjustment will be made to
the Suburban Revenue Requirement for FY 2007-08. The classification error will be corrected
in calculating the Suburban Revenue Requirement for FY 2008-09.
4. Summary. The four adjustments described above will be effected by a credit to
the balancing account as of June 30, 2009 in favor of the Suburban Purchasers in the amount of
$355,862, summarized as follows:
Pacifica Water Recycling Project
Treasure Island
Early Intake
San Joaquin Pipeline
Total without interest
FY 2007-08 Interest (4.302)
FY 2008-09 Interest (2.571)
Net Credit Due Suburban Purchasers
$313,948
7,144
16,954
(5,414)
$332,632
14,310
8,920
$355,862
Attachment B:provides a more detailed tabulation.
5. Correction of Retiree Health Care Expenses, In March 2009, the SFPUC
discovered that it had classified health care expenses for retired Water Enterprise employees as
a "City only" expense for fiscal years 2003-04 through 2006-07. In previous years, this expense
had been considered "Joint" and allocated in part to the Suburban Purchasers. Under the
1984 Contract, no changes to the Balancing Account could be made with respect to fiscal years
2003-04 or 2004-05, which were considered "closed" as of March 2009. Fiscal years 2005-06
and 2006-07 remained "open," although the compliance audit for each had already been
completed. This discovery was communicated in a letter dated March 20, 2009, a copy of which
is attached marked Attachment C.
Subsequent to the delivery of the March 20, 2009.Ietter and the execution of the Tolling
Agreement referred to in the Recitals to this Agreement, the SFPUC unilaterally adjusted the
Balancing Account as of the close of FY 2007-08 by increasing the amount due from the
Suburban Purchasers by $2,889,614, as shown on Attachment D.
3
2157822.2
The Suburban Representatives agree that (1) the classification of retiree health care
expenses as "City only" was incorrect, and (2) the adjustment to the Balancing Account as of
June 30, 2008 shown on Attachment D is correct.,
6. Fiscal Years 20G5-06 and 2006-07 Now Closed, with the Exception of the Two
Issues Identified in Paragraph 7 Below. Subject to these exceptions, neither the SFPUC nor
any Suburban Purchaser may challenge the SFPUC's calculation of the Suburban Revenue
Requirement for FY 2005-06 or FY 2006-07.
Nor may any of those parties attempt to reopen, or challenge, the SFPUC's correction of
its misclassification of retiree health care expenses by means of the adjustment to the Balancing
Account as of June 30, 2008 described in Section 5. The Suburban Purchasers may, however,
challenge the SFPUC's calculation of the Suburban Revenue Requirement for FY 2007-08 for
any reason other than the classification of Water Enterprise retiree health care expenses as
Joint Administrative and General. in addition, the Suburban Representatives may seek
injunctive relief if necessary to require the SFPUC to make the adjustments to the Suburban
Revenue Requirement for FY 2007-08 required by Section 3 and to make the adjustment to the
Balancing Account as of June 30, 2009 required by Section 4.
7. Classification of Hetch Hetchy Power Only Expenses and Calculation and
Classification of 2006A Bond Expenses. Further investigations and discussions will be
occurring between the staff of the SFPUC and the staff of the Bay Area Water Supply and
Conservation Agency to investigate and reach agreement on the following outstanding issues:
A. Expenses in SFPUC index code 329000 may have been misclassified as
joint expenses instead of as Hetch Hetchy power only expenses; and
B. 2006A bond expenses pertaining to the cost of wholesale debt may have
been miscalculated or misclassified. •
8. Complete Agreement. This Agreement represents the complete agreement
among the parties with respect to these two fiscal years, subject to the exception for the two
issues described in Paragraph 7 above, which are still being investigated by the Parties.
Attachments A, B, C and D are incorporated hereby this reference.
4
2157822,2
9. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute a complete and binding
agreement of the parties.
IN WITNESS WHEREOF, this Agreement is entered into by the parties by their
respective duly authorized officers, the Suburban Representatives acting on their own behalf
and on behalf of the Suburban Purchasers.
CITY AND COUNTY OF SAN FRANCISCO
ACTING BY AND THROUGH ITS PUBLIC UTILITIES COMMISSION
By:
Edward Harrington, General Manager
APPROVED AS TO FORM:
Dennis J. Herrera, City Attorney
By:
puty City Attorney
5
Date:
,2010
2157822.2
ALAMEDA COUNTY WATER DISTRICT
By:
CALIFORNIA WATER SERVICE COMPANY
B i
Y• ��
Robert Guzzetta
CITY OF HAYWARD
By: /!, . Date: Fee
CITY OF PALO ALTO
CITY OF REDWOOD CITY
By:
6
Date: feA%G% ZS , 2010
Date: Z zs' , 2010
, 2010
Date: '• z y . I n , 2010
Date: o?
2010
2157822.2
ATTACHMENT A
SUBURBAN PURCHASERS
San Mateo County
Brisbane
Burlingame
California Water Service Company (South San Francisco,
San Carlos, San Mateo, Atherton, Menlo Park, Woodside, Skyline)
Coastside County Water District (Half Moon Bay)
Daly City
East Palo Alto
Estero Municipal Improvement District (Foster City)
Guadalupe Valley Municipal Improvement District (Brisbane)
Hillsborough
Menlo Park
Mid -Peninsula Water District (Belmont)
Millbrae
North Coast County Water District (Pacifica)
Redwood City
San Bruno
Westborough Water District (South San Francisco)
Santa Clara County
Milpitas
Mountain View
Palo Alto
Purissima Hills Water District (Los Altos Hills)
San Jose (northern portion)
Santa Clara (northern portion)
Stanford University
Sunnyvale
Alameda County
Alameda County Water District (Fremont, Newark, Union City)
Hayward
2157822.2
Pacifica Water Recycling Project
Reduction of O&M Expense=
Alloc atio n P erc entag e
Suburban $hare
Change in Composite Costs
Tot al
i
(322,341.00)
68 .70 %
S. (221,448 .27)
S (92,499.43) See note 1
$ (313,947.70)
TI Accrual included in Genera l M anager Office Expense
Amount of Accrual= $ (37,459)
Allocation of Accru al
E nterprise Department Water • Allocation
Perce ntage Share Related Fa ct or' T otal
CWP 42.37 % (15 ,871 .38) 0%
HHP 1825% 4
(6,836 27) 26 .47% 6824%% (1,234,84)
Water 39.3814 (14 751 .35) 100 .00% . 40.06% - (5,909.39)
100.00% (37,459 .00) (7,14424)
•
Correction of HtiW&P Asset Classifications
Rate of
Beginning Ending Average R eturn Return
Early Inta ke HHP07FA-01 (Wa ter to Jo int; - 1,125,689 562,845 8,54 % 48,066.93
SJPL #2 Relining Jo int to Wa ter). . 0 959471.77 179.736 8 .54% 15,349 .44
Adiustmen t to Batancin q A ccount as 6130109
Pacifica Water Recycling Pro ject $ (313,947. 70)
TI Acc rual $ (7,144.24)
Correction of l*tW&P Classification 5 (11,539.95)
To tal 5 (332,631. 88)
FY 07-08 interest 4. 302% 8 (14.309.82)
Subtotal 5 (346,941.70)
FY 08-09 Inte rest 2.571% S (8,919.87)
Total with Inte rest $ (355,861.57)
Nn s:
N egative values are amounts in favor of wholesale customers
Positive values are am ounts in favor of City
1. Change In Composite Co sts
Deemed Overhead $ 1,209, 836 -02 4% 5 (2,903. 61)
Services of SFPUC $ 18,201, 192 -924% $ (43,692. 86)
OtherA &G 5 19,130,401 -0. 24% S (45,912.96)
To tal 5 38,541,429 5 (92,499. 43)
Return + Suburban Corrected
Depreciation, D eprec ation A,dj Usag e Share Share Differ enc e
- 48,066.93 64.13% 30,825 .32 13 ,671.39 (16,953.93)
- . 15,349.44 64 .13% 4,429 .62 9,843.60 _ 5,413.98
(11,539.95)
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GAVIN NEWSOM
MAYOR
ANN MOLLER CAEN
PRESIDENT
F.X. CROWLEY
VICE PRESIDENT
FRANCESCA VIETOR
COMMISSIONER
JULIET ELLIB
COMMISSIONER
ED NARRINGTON
GENERAL PAANAGEf
ATTACHMENT C
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
1165 Markel Si., 111h Floor, San Francisco, CA 941034 Tel. {4151 554.3155 + Fax (015) 554-3161'• iTt (4151554.3498
March 20, 2009
Mr. Arthur Jensen
General Manager
Bay Area Water Supply and Conservation Agency
155 Bovet Road, Suite 302
San Mateo, CA 94402
Re: Suburban Revenue Requirements for FY 2005-06 and FY 2006-07
Dear Mr. Jensen,
1t has come to our attention that the retiree health subsidy paid by, the. Water Enterprise ,
was charged incorrectly as a City -only expense for fiscal years 2003-04 through 2006-07.
The error affected the calculation of the suburban revenue requirements in those years.
However, only FY 2005-06 and FY 2006-07 remain open with respect to changes to the
Balancing Account. We calculate as a result of these errors that the suburban revenue
requirements were understated by $1,2.17,179 in FY 2005-06 and by $1,490,092 in FY
2006-07. We propose that an adjustment of $2,889,614 including interest, in favor of the
City, be posted to the Balancing Account as of June 30, 2008. Enclosed are copies of the
corrected suburban revenue requirement calculations .and other supporting schedules.
The issue has been appropriately reflected in the FY 2007-08 calculation, following
discussions with the external auditor.
Background •
The retiree health subsidy expense is an allowable joint expense under the Master Water
Sales Contract. The retiree health subsidy reflects the current year's required cash
payment for current costs. This contrasts to the accounting and financial reporting
'provisions of GASB 45 Other Postemployment Benefits (OPEB), which because of
recent changes in accounting standards, now appears an the SFPUC financial statements
as a long-term liability and is excluded from the suburban revenue requirement
calculation until actual cash payments are required.
Prior to FY 1998.99, the retiree health Subsidy was included in General Administration
and allocated between retail and suburban resale customers using the composite
allocation factor. ' After_a reorganization in 1998. which eliminated the Administrative
Division, retiree health subsidy was split 61/39 between the City Distribution Division
and .the Water Supply & Treatment Division. The Water Supply & Treatment Division
portion was shown as joint Transmission & Distribution (T&D) expense and allocated
between retail and suburban resale customers on base use. In FY 2002-03, the Water
Supply & Treatment Division portion was shown as joint Administrative & General
(A&G) . expense and allocated between retail and suburban resale customers using the
composite allocation factor. Since FY 2003-04, the entire retiree health subsidy, was
erroneously shown as a City -only T&D expense and allocated only to retail customers.
During the performance of this year's compliance audit, we realized that the retiree health
subsidy was not being appropriately allocated between retail and suburban resale service.
We discussed the issue with our external auditor and assessed the merits of splitting the
subsidy between City -only T&D expense and joint T&D expense versus moving the
expense "below the line" and treating it as a joint A&G expense. We concluded that an
accurate basis for apportioning the subsidy between City -only and joint categories cannot
be easily determined since retirees may work in multiple•divisions and departments over
their careers. Consequently, we concluded treating retiree health subsidy as an A&G
expense was the more reasonable baths for apportioning this cost. The external auditor
has concurred with this assessment.
Proposed Resolution
In the past we have been able to resolve issues like this without invoking the arbitration
provision provided in the contract. We hope this issue can be resolved in the same
manner. If the City's previously stated proposal is acceptable to the suburban resale
customers, we request that you indicate so by counter signing this letter on the line shown
below and returning a copy of it to us before April 8, 2009. Preliminary discussions
have been held with Mr. Ummel. If you believe more information•is required before you
can make that decision, SFPUC staff is available to meet with BAWSCA staff to review
the issue and discuss the basis of our analysis. Because the expiration of the limitations
period deadline (April 18, 2009) is rapidly approaching, any review and discussion must
be completed within the next week or two .absent a tolling agreement extending the
deadline.
Please contact me if you have any questions or request a meeting with SFPUC staff:
Sincerely you
Todd
As
1
Enclosures
Manager and Chief Financial Officer
cc: Suburban Representatives (w/encl) •
Joshua D. Milstein, Deputy City Attorney (w/encl)
Accepted on behalf of the Suburban Resale Customers.,
Arthur R. Jensen
:General Manager & CEO BAWSCA -
- SCHEDULE A
• SUBURBAN BALANCING ACCOUNT IMPACT
RESULTING PROM THE RECAPTURE OF RETIREE HEALTH SUBSIDY MISALLOC ATI ON
Unde rpayment (See following sheets)
Interest in FY 200405
Interest In FY 2005-06
Interest in FY 2006-07
Interest in FY 2007-08
Total .
Interest Rat e
on'Batancing
• Account FY 2003-04
2.277 %
4.153 %
5.189%
4.302%
$ (875,407)
$ (19,933) .
$ (37,1 83)
$ (48.389)
$ (42,199)
($1,023,111)
FY 2004-05 FY 2005-08 FY 200E-07 Tot al Cr edit
$ (1,116,893) $ (1,217,179) $ (1,490,092) $ (4,699,571)
$ (46.385) $
$ (60,362) $ (63,159) $
$ (52,641) $ (55,080) $ (64,104) $
($1,276;281) $ (1,335,418) $ (1,554,196) $
•
Requested Balancing Account Adjustment as of June 30, 2008 for FY 2005-06 and FY 2006-07
Note:
1) FY 2003-04 and FY 2004-05 are outside -of the Limitations Period .
(19,933)
(83,568)
(171,910)
(214,024)
(50 89,006)
$ (2,889,614)
Schedule B
Summary of Certain Health Care C osts
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1996
1997
1996
471303
T&0 City
Operati ons
2,713.959
2,502.660
2.173,238
1,989.865
1,722,476
871,472
3/0 01561 free Heahh Subsidy
471301 471308 470000 477402
T&D City Mainz. Other Suburban General
Ops/Galerm T&D Administration Administration
551,224 352,422
352,402 225,306
260.864 • 166,795 .
285,410 212,729 136,007
558,189
471303
F&D Qty
T otal Operati ons
2,713,959
2,502.660
2,173,238
1,989,665
1,722,476
1,429,661
903,646
577,706
427,679
634,146
602.129 602,129
504,543 504,543
476.613 476.619
Classification . T&D - City T&D - City T&D -Joint A&0 • Joint A&G - Joint
AG Current 0 3,96.xls
43.086
43,277
44,321
42,430
73.571
86.696
S10 01551 Health Service Administration Cost
471301 471308 470000 ' 477402
T&D City !Mainz Other Suburban G eneral
Ops&Gaterm T&D . Administration •Administr ation
43,086
43,277
44,321
42,430
47,037
58.156
62,051
4,934
T&0 - City T&D - Cily T&D • Joint A &G - Joint A& G - Joint
Total
60,172
.86,554
98,642
84,860
120,608
86,6996
58,156
62,051
4,934
3/20/2009
SCHEDULE C-2
CALCULATION OF DIFFERENCE IN SUBURBAN REVENUE REQUIREMENT
FY 2003.04
SAN FRANCISCO WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REQUIREMENT
FISCAL YEAR 2003-04 FINAL CALCULATION
EXPENSE CATEGORY REFERENCE TOTALSFWD DIRECT
CITY
OPERATINI3 AND MAINTENANCE EXPENSE:
SOURCE OF SUPPLY
PUMPING
PURIFICATION
TRANSIu9SSIQN & DISTRIBUTION
CUSTOMER ACCOUNTS
TOTAL O&M
O&M PERCENTAGE OF TOTAL SFWD
ADMINISTRATIVE AND GENERAL EXPENSES:
DEEMED CITY OVERHEAD CHARGE
SF PUBLIC UTILITIES COMMISSION
OTHER A50
CLAIMS OVER LIMITATION
CONTRACT ADMINISTRATION EXPENSES
COMPUANCE AUDIT
PMO COST
PROPERTY TAXES (OUTSIDE CIT9'ONLY)
4.03(a)
4.03(b)
4.04(c)
4.03(0)
443(e)
4.04(a)
4.04(b)
4.04(c)
4.04(c)
'4.04(c)
8.03(6}
4.05
RETURN ON SFWD RATE BASE 4.08
SPWD DEPRECIATION
SUSURBAN HETCH HETCHY ASSESSMENT 4.08
SUBURBAN REVENUE REQUIREMENT FY 200304 FINAL CALCULATION
57,573.890
5,810,954
26,459,242
46,543,682
8,869,908
DIRECT
SUBURBAN
$420 90
5,097,435 0
0 0
31,240,878 863
8,486,608 173.398
95,106,474 44,835,241
100.00%
1,129,154
18.184,880
20,583.566
825.282
209,939
179,730
5,379,101
1,292.810
4.07
0
464,283
9.498,518
625,262
0
0
0
0
SCHEDULE A
JOINT JOINT EXPENSE, SUBURDAN TOTAL
ALI.CCATION FACTOR
$7.573270 ANNUAL USAGE
722.519 ANNUM. U8At3E
26,459,242 ANNUAL USAGE
15,401,941 ANNUAL USAGE
0 2%OFTOTAL
174,281 50.156.972
0 1,120,164 COMPOSITE 0&M
O 15,720,597 COMPOSITE O&M
0 11,065,03.4 COMPOSriEO&M
p 0 0%
O 209939 501
O 179,730 604
O 5318,191 32.661
O 1,262,010 ANNUAL USAGE
FROM: WORKSHEET A-3
FROM: WORKSHEET A•3
FROM: SCHEDULES
SAN FRANCISCO WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REOUIREMENT '
FISCAL YEAR 2003414 FINAL CALCULATION WITH CORRECTION OF RETIREE HEALTH SUBSIDY$1,722,476 Racaet0d Irom T&D -City to AEG -Joint
•
EXPENSE CATEGORY
OPERATING AND MAINTENANCE EXPENSE:
SOURCE OF SUPPLY
PIMPING'
PURIFICATION
TRANSMISRLON &.DISTRIBUTION
CUSTOMER ACCOUNTS
REFERENCE TOTAL SFWO •
DIRECT SUB CITY URBAN
4.03(8)
4.03(b)
4.04(c)
4.03(d)
4.03(e)
TOTAL O&M
0314 PERCENTAGE OF TOTAL SFWD
•
ADMINISTRATIVE AND GENERAL EXPENSES:
DEEMED CITY OVERHEAD CHARGE 4.04(8)
SF PUBUC UTILmF.8 COMMISSION 4.040)
4.04(0)
OTHER MG
CLAIMS OVER LIMITATION 4.04(c)
CONTRACT ADMINISTRATION EXPENSES . 4.04(c)
COMPLIANCE AUDIT 6.09(6)
PMOCOST ..
PROPERTY TAXES (OUTSIDE CITY ONLY) 4.05
RETURN ON SFWD RATE BASE 4.06
SFWD DEPRECIATION 4.07
SUBURBAN HFT014 HEIGHT ASSESSMENT 4.08
SUEURI9AN R6 VENUE REQUIREMENT FY 2003.04 FINAL CALCULATION
56,178,802
494,068
18.092,838
10,532.710.
173,309
34,471,599
3622%
405,747
5.694.380
4,008426
0
104 970
89,085
2.132.551
884,023
16,655,821
12417,070
16.940,790
$92,504,851
SCHEDULE A
.101 JOINT EXPENSE SUBUROANTOTAL
ALLOCATION FACTOR
$7,673,690 ' 5420 50 $7,57
5,819,964 5.097,435 0 72
26.459242 _ 0 0 28.45
44,921,200 r 9515,4 863 15.401
8,859,906 8, '':,. 173,398
DIFFERENCE IN SUBURBAN REVENUE REQUIREMENT
,270 ANNUAL USAGE
,619 ANNUAL USAGE
242 ANNUAL USAGE
1' ANNUAL USAGE
0 2% DP TOTAL
93,443.998 43.112,785 174,261 60,165,' 72
100.00%
1.120.154
18.184,660
22.286.031
625,282
209.939
170.730
5,378,101
1 292,810
0
404,283
9,495.516
925.282
0
0
0
0
O 1,120,1, 4 COMPOSITE 0&M
O 1572 • COMPOSITEO&M _
O + 787,61» OMPOSITE O&M
p' 00%
0 • 209,539 50%
0 • 179,730 50%
O 5.378,101 40.46%
O . 1,292.810 ANNUAL USAGE
FROM: WORKSHEET A-3 •
FROM: WORKSHEET A-3
FROM: SCHEDULE 8
55,176,602
494,058
19.092,830
10,532,710
173.395
34.471.699
38.89%
41$,226
5,799,340
4.717,329
0
104,870
69,066
2,176,691
684.023
16,686,148
• 12,417,070
18,940,796
r 593,650.267
($876.4071
SCHEDULE C•2
CALCULATION OF DIFFERENCE IN SUBURBAN REVENUE REQUIRE/AUNT
FY 2004.05
SAN FRANCISCO WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REQUIREMENT
FISCAL YEAR 2004-05 FINAL CALCULATION
SCHEDULE A
EXPENSE CATEGORY
REFERENCE TOTAL SFWD DIRECT DIRECT
CITY SUBURBAN
JOINT JOINT EXPENSE' SUBURBAN TOTAL
ALLOCATION FACTOR
OPERATING AND MAINTENANCE EXPENSE:
SOURCE OF SUPPLY
PUMPING
PURIFICATION
TRANSMISSION 5 DISTRIBUTION
CUSTOMER ACCOUNTS
TOTAL O&M
O&M PERCENTAGE OF TOTAL SFWD
ADMINISTRATIVE AND GENERAL EXPENSES:
DEEMED CITY OVERHEAD CHARGE
SFPUBLIO UTILITIES COMMISSION
OTHER ASO
CLAIMS OVER LIMITATION
CONTRACT ADMINISTRATION EXPENSES
COMPLIANCE AUDIT
PMO COST
PROPERTY TAXES (OUTSIDE CITY ONLY) 4.05
. 4.03(a)
4.03(b)
4.04Ea)
4.03(d)
4.03(e)
4.04(3)
4,04(E)
4.04(c)
4.04(x)
4.04(c)
8.03(b)
RETURN ON SFWD RATE: BASE 4.08
SFWD DEPRECIATION
SUBURBAN HETCH HETCHY ASSESSMENT
4.07
4.03 ~
611;369,813
5,381,372
27,251.590
34.459,935
8,995.444
87,486,154
100.0%
1,151.398
17,622,408
17,569.629
0
214.945
179,730
3,762,021
1,928,708
• 50
4203,425
0
24.125,220
. 8,815,535
30 311,359,813 ANNUAL USAGE
O 1.167.945 ANNUAL USAGE
O 27,231,550 ANNUAL USAGE
505 10,334,201 ANNUAL USAGE
179,909 0 2% OF TOTAL
37.144.190 160,414 50,143,550
0
715,584
5,087,393
0
0
0
0
0
SUBURBAN REVENUE REQUIREMENT FY 2004.05 PRELIMINARY FINAL CALCULATION
O 1.161,398
O 17,103,544
O 12,002,132
O 0
O 214,945
O 179,730
O 3,762,021
O I;320,783
FROM: WORKSHEET *4
FROM: WORKSHEET A-3
FROM: SCHEDULE 3 , '
COMPOSITE O&M
COMPOSITE Otm
COMPOSITE out
0%
5054
5018
42.58%
ANNUAL USAGE
67,576,708
771,639
18,177,723
6,866,183
179,509
33,591,080
38.4014
442.137
6.557,761
4,916,019
0
107,473
89.865
1,601,747
884,044
17.020,907
15,085,817
19,616,207
E 599,930,031
SAN FRANCISCO WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REQUIREMENT
FISCAL. YEAR 200405 FINAL CALCULATION WITH CORRECTION OF RETIREE HEALTH SUB= ;1,989.885 Recasted Irom T&D.CIky to A&! -Idol
SCHEDULE A
EXPENSE CATEGORY
REFERENCE TOTAL $PWD DIRECT • DIRECT
CITY SUBURBAN
401
JOINT EXPENSE SUBURBAN TOTAL
ALLOCATION FACTOR
OPERATING AND MAINTENANCE EXPENSE:
SOURCE OF SUPPLY
PUMPING •
PURIFICATION
TRANSMISSION & DISTRIBUTION
CUSTOMER ACCOUNTS
•
TOTAL OSM
O&M PERCENTAGE OF TOTAL SFWD
4.08(11)
4.0$(b)
4.04(6)
4A3(d)
4.03(6)
ADMINISTRATIVE AND GENERAL EXPENSES:
OEEMED CITY OVERHEAD CHARGE 4.04(6)
SF PUBLIC UTILITIES COMMISSION 4.04(b)
OTHER ASG 4.04(0)
CLAIMS OVER LIMITATION 4.04(0)
CONTRACT ADMINISTRATION EXPENSES 4.04(c)
COMPLIANCE AUDIT 6.03(6)
PMOCOST
PROPERTY TAXES {OUTSIDE CITY ONLY)
RETURN ON SFWD RATE SASE
SFWD DEPRECIATION .
SUBURBAN HETCH HETCHY ASSESSMENT
4.06
4.06
4.07
4,08
511,369,013 50
5,381.372 4,203,426
27,281,690 ' 0
32,470,070
0,995444 8,
85,478,289 35,154,325
100.0016
5.151,398
17,822,408
79,859,391
0.
214,945
179.730
3,782.021
1,328,795
0
718,664
5,067.393
0
0
0
a•
0
SUBURBAN REVENUE REQUIREMENT FY 2004-05 PRELIMINARY FINAL CALCULATION
• 30
0
0
506
179,903
180,414
511,3 ',613 ANNUAL USAGE
1,15 , 48 ANNUAL USAGE
27,281 690 ANNUAL USAGE
10,334 ' 1 ANNUAL USAGE
0 216 OFTOTAL
60,143,60 '
•0 1,151, ' 8 COMPOSITE O&M
O 17 COMPOSITE O&M
O . 4,701,99 COMPOSITE 0&M
O 0 056
O 214,946 60%
O 179.730 5076
O 3,782,021
O . 1,328,798 ANNUAL USAGE
FROM: WORKSHEET A•3
FROM: WORKSHEET A-3
FROM: SCHEDULE B
43.0818
57.575.706
771,639 .
18.177,723
5,886,183
179.903
33,591,060
39.30%
462.469
6,721,693'
5.813.255
0
107.413
89,586
1.643,420
884.044
17,042,897
15,055,817
19,816.207
3101,046.930 f
DIFFERENCE IN SUBURBAN REVENUE REQUIREMENT
(51,118,893)1
SCHEDULE C•1 '
CALCULATION OF DIFFERENCE IN SUBURBAN REVENUE REQUIREMENT
FY 2065.06
FRANCISCO WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REQUIREMENT
FISCAL YEAR 2005-068 FINAL CALCULATION
EXPENSE CATEGORY
REFERENCE TOTAL SFWD DIRECT •
OPERATING AND MAINTENANCE EXPENSE:
SOURCE OF SUPPLY
PUMPING
PURIFICATION
TRANSMISSION & DISTRIBUTION
CUSTOMER ACCOUNTS
TOTAL O&M
ODA PERCENTAGE OF TOTAL SFWD
ADMINISTRATIVE AND GENERAL EXPENSES:
DEEMED CITY OVERHEAD CHARGE
SF PUBLIC UTILITIES COMMISSION
OTHER A&G
CLAIMS OVER LIMITATION
CONTRACT ADMINISTRATION EXPENSES
COMPLANCE AUDIT
MAO COST
PROPERTY TAXES (OUTSIDE CITY ONLY)
RETURN ON SFWD RATE BASE
$FWD DEPRECIATION
SUBURBAN RETCH HETCHY ASSESSMENT
SUBURBAN REVENUE REQUIREMENT FY 2005-06 FINAL CALCULATION
4.03(8} •
4.03(b}
4.04(0
4.03(0
4.03(8}
4.04(a}
4.04:1
4.04(0)
4.01(c)
4.04(0)
6.031b)
4.05
4.08
4.07
4.08
DIRECT
CITY SUBURBAN
511,147,048 1-0
4,681,917 4,152.968
27,975.827 0
34.708.194 22,259,034
10,685.080 10,471,378
89,099.088 36,883.378
100.00%
•
1,161.127 0
15,722,915 359,390
24.603,393 8,303.990
0 0
220.113 • 0
179,730 0
179,853 0
1.342,378 • 0
50
0
0
0
213.702
213,702
SCHEDULE A
JOINT JOINT EXPENSE SUBURBAN TOTAL
ALLOCATION FACTOR
SI1,047,046 ANNUAL USAGE
. 428.961 ANNUAL USAGE
27,976•,827 ANNUAL USAGE
12.509,160 ANNUAL USAGE
0 2%0F TOTAL
51,981,086
0 1,164.127 COMPOSITE O&M
0 10,363,525 COMPOSITE O&M
O 10,394.409 COMPOSITE O&M
O 9 0%
O 220,113 5014
0 119.730 60%
O 179.033 44.2311.
O 1.342,378 ANNUAL USAGE
FROM; WORKSHEET A•8
FROM: WORKSHEET A-3
FROM: SCHEDULE B
37,370,590
280,190
16,866.130
8.348,112 ,
213.702
34,902.739
38.17%
455.980
8,409,583
0,421,890
0
110087
89,885
79,850
898.824
15,872.743
15,071,439
20,132,570
5101,82$13
''SAN FRANCISCO WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REQUIREMENT
FISCAL YEAR 2005-06 FINAL CALCULATION WITH CORRECTION 43F RETIREE HEALTH SUBSIDY 52.173,238 Recasted 1
REPERE_._.. ,...TA, SFW13 DIRECT JO�+1T JOINT EXPENSE SUBUBIIANTOTAL
DIRECT
ALLOCATION FACTOR
EXPENSE CATEGORY •
OPERATING AND MAINTENANCE EXPENSE:
SOURCE OF SUPPLY
PUMPING
PURIFICATION
TRANSMISSION A DISTRIBUTION
CUSTOMER ACCOUNTS
TOTAL OAM
OEM PERCENTAGE OF TOTAL MVO
ADMINISTRATIVE AND GENERAL EXPENSES:
DEEMED CITY OVERHEAD CHARGE
SF PUBLIC UTILITIES COMMISSION
OTHER A&G
CLAIMS OVeR LIMITATION
CONTRACT ADMINISTRATION EXPENSES
COMPLIANCE AUDIT
PMO COST
PROPERTY TAXES {OUTSIDE CITY ONLY)
RETURN 014 SFWD RATE BASE
SFWD DEPRECIATION
SUBURBAN HETGH HETCHY ASSESSMENT 4.08.
SUBURBAN REVENUE REQUIREMENT FY 2005-05 FINAL CALCULATION
SCHEDULE
T&D $illy 10 A&G.Jofi1
4.03(1)
4.03(8)
4.0410)
4.03(d)
4,03(e)
CITY SUBURB
DIFFERENCE IN SUBURBAN REVENUE REQUIREMENT
4,04(3)
4.04(13)
4.04(6}
4,04I0)
4.04(c)
8.03(8)
4:05
4.06
4.07
.511,047,048 i0
4,581.917 4,152.905
27,978,527 0
32,594,556
10.085.080
,R
88,085,628 34,110,140
100,00%
1,164,127 0
18.722,015 359.390
28.571,537 5,303.990
0 0
220.113 0
179,730 0
179,533 0
1.342,378 0
50 51104 ,048 ANNUAL USAGE
O 42 ,951 ANNUAL USAGE
O 27.97 .827 ANNUAL USAGE
O 18, 140 ANNUAL USAGE
213,702 0 2% OP TOTAL
213,702 51,961
O 1,164,127 COMPOSITE O&M
O 16,1¢1 COMPOSITE O&M
O ,597,84 COMPOSITE O&M
O ' 220.113 00%
O 179.730 50% •
O 179,633 45.5014
0 1.342,378 ANNUAL USAGE
FROM WORKSHEET A-3
FROM: WORKSHEET A-3
FROM: SCHEDULED
57,370.690
251,196
16,558,139
8.340,112
213.702
34.882,739
40,150!.
•
457,387
6,569,85,5
7,454,910
0
110057
89,885.
81019 •
895,634
14,552.683
15.071.433
20,132,870
5103,639,348
44,217.1701
SCHEDULE 0-3
CALCULATION OF DIFFERENCE IN SUBURBANIIEVENUE REQUIREMENT
FY 2006-07
SAN.F ANCT$CI5 WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REQUIREMENT
FISCAL YEAR 2000.07 FINAL CALCULATION
SCHEDULE
EXPENSE CATEGORY
REFERENCE TOTAL SFWD DIRECT. DIRECT JOINT . JOINT EXPENSE SUBURBAN TOTAL
.CRY SUBURBAN ALLOCATION FACTOR
OPERATING AND MAINTENANCE EXPENSE:
SOURCE OF SUPPLY
PUMPING
PURIFICATION
TRANSAASS1ON & DISTRIBUTION
CUSTOMER ACCOUNTS
TOTAL OSM
O&M PERCENTAGE OF TOTAL SFWO
ADMINISTRATIVE AND GENERAL EXPENSES:
DEEMED CRY OVERHEAD CHARGE
SF PUBLIQ UTILITIES COMMISSION
OTHER MG
CLAIMS OVER LIMITATION
CONTRAOT ADMINISTRATION EXPENSES
COMPLIANCE AUDIT
PMO COST •
PROPERTY TAXES (OUTSIDE CITY ONLY)
RETURN ON SFWD RATE BASE
SFWD DEPRECIATION
SUBURBAN HETCH HETCHYASSESSMENT
4.03(a)
4.05(6)
4.04(0)
. 4.03(d)
4,03(o)
4.04(a)
4.04(6)
4.04(o)
4.04(0)
4.04(0)
0.03E4
4,05
4.06
4.07
4.00
314,833,834
4,695239
28,041,146
38,207.385
10.569,007
51,444,800
4,248,026
0
23,378,249
10.357,715
94.348,551 39.420300
100;00%
1,209,836
18,752,161
22,900,013
' 0
248,704
170.730
0
1,375,511
SUBURBAN REVENUE REQUIREMENT FY 2000.07 FINAL CALCULATION (ROUNDED)
0
550,969
3,689,615
0
0
0
0.
0
50 513,388,935 ANNUAL USAGE
0 447,213 ANNUAL USAGE
0 25,041,145 ANNUAL USAGE
D 12,529,017' ANNUAL USAGE
211,382 0 2% OF TOTAL
211.302 54.706,310
0 1,209,930 COMPOSITE O&M
0 10,201,192. COMPOSITE O&M
O 19,130,401 CC IPOSITE OaM
O 90% •.
O 246,704 5014
O 179,730 50%
0 0 44.88!4
0 1375,811 ANNUAL USAGE
FROM: WORKSHEETA•8
FROM WQRKSHEETA•3
FROM: SCHEDULE
59.196,190
30E215
19,264,267
0,813,535
211,352
37,794,017
40,06%
404,660
7,291,395
7,683636
0
124,352
59,965
0
945,045
17,142,034
55,450299
22,900,264
I 5110,903,4721
SAN FRANCISCO WATER DEPARTMENT
CALCULATION OF THE SUBURBAN REVENUE REQUIREMENT
FISCAL YEAR 2006.07 FINAL CALCULATION WITH CORRECTION OF RETIREE HEALTH SUBSIDY
52.602.660 Reaasled from TAD :Oily to Aaaaoint
SCHEDULE A
EXPENSE CATEGORY
REFERENCE TOTAL SFWD DIRECT
CITY
DIRECT
susURBAN
JOI
T JOINT EXPENSE SUBURBAN TOTAL
ALLOCATION FACTOR
OPERATING AND MAINTENANCE EXPENSE;
SOURCE OF SUPPLY
PUMPING
PURIFICATION
TRANSMISSION 8 DISTRIBUTION
CUSTOMER ACCOUNTS
TOTAL O&M
O&M PERCENTAGE OF TOTAL SFWD
ADMNISTRATIVE AND GENERA. EXPENSES:
DEEMED CITY OVERHEAD CHARGE
SF PUBLIC UTILITIES COLLMISSIDN.
OTHER Ala
CLAIMS OVER LIMITATION
CONTRACT ADMINISTRATION EXPENSES
COMPLIANCE AUDIT
PAM COST
PROPERTY TAXES (OUTSIDE CITY ONLY)
RETURN ON SFWD RATE SASE
SFWD DEPRECIATION
SUBURBAN RETCH HETCHY ASSESSMENT
•
4.03(a)
4.03(6)
4.04(c)
4.03(4)
4.03E4
424(s}
4.04(6)
4.04(C)
4.04(0)
4.04(o)
6.03(5)
4.05
4.08
4.07
4.08
114,833,634 51,444,099
4.695=9 4,240,025
28,041,146 . 0
03,704.606 •,975,58'
10.569,097 1 D, c , 5
91,643,521 35,928,229
100.0016,
•
1,209.636 0-
18,752,161 550,959
26,302,676 3,869,818
0 • 0
246.704 0
179,730. 0
0 0
1,375,611 0
SUBURBAN REVENUE REQUIREMENT FY 2008-07 FINAL CALCULATION (ROUNDED) .
SO
0
0
0
211,382
211,382
51
44
28,04
12,82
•
54.706, 10
.935 ANNUALUSAIIE
213 ANNUAL USAGE
145 ANNUAL. USAGE
017 ANNUAL USAGE
0 2%OF TOTAL
O 1.209, - : COMPOSITE O3M
O 18 COMPOSITE O&M
O .'1,833,08 COMIOSITEO&M
D 0 0�/%,�y 50+. 0 245,704 :
0 170,730 60% •
O 0 46.242.
O . 1,376,011 ANNUAL USAGE
FROM WORKSHEET, A3
FROM; WORKSHEET A3
FROM: SCHEDULE B •
59,189,198
307,235
19,254.267
0,613,536
211,382
37,794,817
41.15%
•
497,646
7,489,791
8,002,004
0
124,352
89,865
0
945,045
17.102,778
16.456,099
22.900,264
r
5112,393,564
DIFFERENCE IN SUBURBAN REVENUE REQUIREMENT
( MI .440,052E
ATTACHMENT D
SAN FRANCISCO. WATER ENTERPRISE AND .
ITCH HETCHY WATER AND POWER ENTER-PR1SE
Statement of Changes in the Balancing Account
Year ended Julie 30, 2008
Suburban Revenue Aquircmcnt calculation:
Operating and maintenance (O&M) expense:
San Francisco Water Enterprise (Water Enterprise):
Source of supply
Pumping
puriticatiau
Transmission and distribution
Customer accounts
Total Water Enterprise operating and maintenance
O&M peraentage of total Water Enterprise .
Hatch Hetehy Water and Power Enterprise (Retch Hetohy):
Operating expenses
Maintenance expenses
Admialstrative and general (A&O) expenses:
Deemed city overhead cltacge:
Water Enterprise
Hoch Hetclty
SE Public Utilities Commission: ,
Water Enterprise .
Hetch Hetchy. .
Other A&CG— Water Enterprise '
Contract administration expenses Water Enterprise
Compliance audit— Water Enterprise
Property traces (outside city. only):
Water* Enterprise
Retch Relay
Return on assets employed (unaudited):
Water Enterprise (note 4)
Hetch Hetahy (note S)
Depreciation allocation (unaudited):
Water Bnterpriae (note 6)
Retch Ha chy (note 6)
Total Suburban. Revenue Requirement calculation
Balance due From Suburban Purchasera, July 1, 2007
Charge due from Suburban Purchasers (note 2)
Interest on adjusted beginning balartrA
Suburban revenue* billed
Credit an grant received for project C1]W201
Settlement adjustment (note 3)
Balance as diking 30.2008 -- due from the Suburban
Purchasers
See accompanying notes to the statement of changes itt the balancing account.
3
Total
15,612,267
4,601,547
28,789,979
37,634,970
11„ _127
$ 97,765,941. _-
Amount
allocated to
the Suburban
Purchaaera
9,766,214
511,041
19,675,072
11,797,568
222,545 '
41,912,440
42.93%
8 99,163,969 10,119,345
16,043,035 4,538,458
1,250,471
521,029
17,723,741
9,013,708
23,718,803
258,114
179,730
1,427,485
172,070
23,744,041
3.598,189
536,827
86,808
7,434.832
1,439,616
10,182,482
129,057
89,8.65-
975,543
116,681
18,281,816
3,812,262
16,651,923
Z 305 000
118,672,955
12,881,853
2,889,614
554,177
(113.932.046)
(461,670)
21,006
$ 20,625,889 :
SAN FRANCISCO WATER ENTERPRISE AND
RETCH HETCIIY WATER AND POWER ENTERPRISE
Notes to Statement of Changes in the Babncing Account
June 30, 2008
Property taxes are allocated based upon annual usage. Joint Botch •Hetchy operating, maintenance,
general and administrative expenses are allocated based upon.annual usage.
Charge Due from Suburban Purchasers •
•
Retiree health care subsidies paid by the Water Enterprise were charged incorrectly for the fiscal years
ending June 30, 2004 through June 30, 2007. The subsidies were not appropriately allocated between retail
and suburbanresale service, therefore understating the Suburban Revenue Requirement.. The proper
classification of this expense has been determined to be "Joint A&G." Under 'Section 8,02(4) of the
agreement, the fiscal years ending June 30. 2006.and .2007 remain open with respect to changes to the
Balancing Account from prior years. The Suburban Revenue Requirement has been increased as follows:
Increase in
the amount
allocated
Year .. to the
ended Suburban
June 30, Purchasers
Retiree healthcare subsidy 2006 $ 1,217,179
Retiree healthcare subsidy 2007 • : 1,490,092
2,707,271
Interest on adjustment 2007 63,159
Interest on adjustment 2008 ^� 1.19184 •
Increase in beginning balance $ F 2,889,614 *-
Amendment to the Agreement ,
The. Suburban Purchasers alleged the Suburban Revenue Requirement calculation is .overstated by the
return and depreciation on certain disputed costs related to equipment purchases capitalized in the fiscal
years ended June 30, 1998 and June 30, 1999, The City and theSuburban Purchasers reached a resolution
• out March 22, 2004, on the issues related to the equipment purchases capitalized during the fiscal years
ended June 30, 1998 and June 30, 1999, and the writo-off of certain engineering expenses related to septic
system design. As part of the resolution, the City will receive a credit of $21,006 per year commencing in
the year ended June 30, 2003, and continuing through the year ending June 30, 2010.
5 (Continued)