San Francisco Public Utilities Commission

California

Proposition H (approved in June 1998) essentially froze the City of San Francisco’s (City) wastewater rates, but Proposition E (passed in November 2002) amended the City’s Charter authorizing the San Francisco Public Utilities Commission (SFPUC) to establish rates, fees and charges enabling the City to provide services at levels that were sufficient to protect, maintain, and repair the water, clean water, and power utility systems while enhancing the City’s financial stability and bond ratings and to meet its requirements and covenants under the existing bond indentures.

Consequently, the City retained RFC to conduct a comprehensive cost of service and rate design study that included a review of revenue requirements, user classifications, costs of service, and the design of a system of user charges for the City’s Water and Clean Water Enterprises. While SFPUC provides water and wastewater services to a population of over 2.3 million people in the City of San Francisco and 29 other Bay Area communities, this study focused on the analysis and design of retail rather than wholesale rates. The water study involved analysis of several departments including City Distribution, Water Supply & Treatment, as well as Hetch Hetchy Water & Power which generates hydroelectric power and regulates releases of pristine water that supplies much of the Bay Area’s water. Cost of service rates were designed for both inside and outside-City customer classes.

The wastewater study involves analysis of several departments including allocation of direct administrative charges. The wastewater study analyzed the substitution of a low-income discount for the existing lifeline rate and the effect it would have on all customers. Additionally, cost allocations were updated to more accurately represent costs by class to develop cost of service rates. One of the more unusual aspects of the wastewater study was the incorporation of an oil and grease (O/G) parameter in the cost of service analysis. Wastewater collection costs were partially allocated to O/G to reflect the increased cost of cleaning pipes in areas with high O/G concentrations. Other issues examined included mass balance, winter water usage, a wet weather discount, and billing frequency.