Adding to their financial woes, San Francisco city departments could soon be on the hook for a much larger electricity bill every year.
Currently, departments from the San Francisco Municipal Transportation Agency, which runs Muni, to City Hall enjoy low- or no-cost electricity from the Hetch Hetchy hydroelectric system, which is run by the San Francisco Public Utilities Commission. The agency subsidizes electricity costs at about $25 million annually.
But the reserve fund the SFPUC has relied on for the subsidy will dry up by June 2014. SFPUC chief Ed Harrington has said the agency needs to consider having city departments pay more.
“It’s certainly something we have to deal with,” Supervisor David Campos said. And while the possibility of increasing the rates comes at a tough economic time, Campos said putting off the decision will only make it “much worse down the road.”
“We have a responsibility to the Hetch Hetchy system,” he said. “We need to maintain that system.”
A 1-cent hike would increase the costs for several city departments from a high of about $1 million a year to a low of $100,000. It would mean an increase of $1.3 million for Muni’s power bill, $200,000 for the Fine Arts Museums and $400,000 for the San Francisco Unified School District.
But increasing power bills will likely be a tough sell at a time when budgets are being cut annually.
“We have an amazing system, but our average cost of that system is about 9 cents a kilowatt-hour. [PG&E] is charging customers right now about 15 cents a kilowatt-hour,” Todd Rydstrom, assistant general manager of the SFPUC, said during a Sept. 13 meeting. “We’re on average producing power and delivering it for 9 cents a kilowatt-hour, but we are only charging the general fund departments 3.75 cents.”
The commission is expected to hold a Nov. 8 hearing on a power rate hike, which the Board of Supervisors eventually would have to approve.
There is about $70 million in the Hetch Hetchy fund this fiscal year. The money has accumulated from nonsubsidized charges to some city departments and through the sale of surplus power on the wholesale market, according to SFPUC spokesman Tyrone Jue. The agency has “deferred critical capital projects to build up the fund balance that has allowed us to absorb the rate subsidies,” and during the past three years has “started responsibly funding deferred capital needs and maintenance,” Jue said.
The earliest these new rates could take effect would be July 1, 2012, the start of the next fiscal year. The most recent estimate shows The City is facing a $350 million deficit for that fiscal year.