BILL ANALYSIS AB 1398 Page 1 ASSEMBLY THIRD READING AB 1398 (Papan) As Amended January 6, 2000 Majority vote UTILITIES AND COMMERCE 9-0 ----------------------------------------------------------------- |Ayes:|Wright, Pescetti, | | | | |Calderon, Campbell, | | | | |Frusetta, Maddox, Papan, | | | | |Reyes, Wesson | | | | | | | | ----------------------------------------------------------------- SUMMARY : Declares legislative intent to implement recommendations of the State Auditor's audit of the San Francisco Public Utilities Commission (SFPUC). EXISTING LAW : 1)Provides for SFPUC to supply water at wholesale rates to various retail water suppliers. 2)Prohibits a local agency from imposing fees or charges that exceed the estimated reasonable cost of providing the service for which the cost or fee is imposed. FISCAL EFFECT : Unknown COMMENTS : SFPUC is a subdivision of the City and County of San Francisco (San Francisco) responsible for the storage, quality control and distribution of San Francisco's drinking water. SFPUC provides retail drinking water and sewer services to San Francisco, wholesale water to 29 other water agencies in three other Bay Area counties (i.e., San Mateo, Santa Clara and Alameda), and hydroelectric power to government operations. The primary water source is the Hetch Hetchy Project which provides about 85% of the water. Additional water sources include about 15% from watersheds in San Mateo, Santa Clara and Alameda Counties. Proposed water rates must be adopted by SFPUC and then be approved by the San Francisco Board of Supervisors. None of the 29 outside agencies are represented on SFPUC. The Board of Supervisors can only approve or reject rates, but cannot alter AB 1398 Page 2 the water rate recommendations from SFPUC. As currently structured, the water agencies outside San Francisco receive water pursuant to contracts which regulate the allocation of costs. The current contractual agreement, which expires in 2009, establishes wholesale water rates through a formula that assures users from the 29 other water agencies pay only for their direct cost of delivery. They do not subsidize water users from San Francisco. However, in 1992 citizens of San Francisco, approved an initiative to freeze their own water rates through the year 2004. The author has expressed concern that the freeze may have an impact on water rates of citizens outside San Francisco. In upcoming years, San Francisco is expected to perform over $2 billion in seismic and infrastructure repairs on the Hetch Hetchy Project. Without substantial upgrades to the delivery system, a major earthquake could result in a severe disruption of water supplies for the system's 2.3 million customers. Pursuant to a request of the author, the State Auditor is currently conducting an audit of SFPUC with regard to several factors including: a) reliability of the regional water system; b) plans for repairs and upgrades to the system; and, c) long-range financial plans for funding any capitol projects, especially in light of the freeze on San Francisco's own water rates. The State Auditor's report is scheduled for completion in February 2000. This bill will be used to implement the findings of the State Auditor's report. Analysis Prepared by : Carolyn Veal-Hunter / U. & C. / (916) 319-2083 FN: 0004045