Report 99124 Summary - February 2000

San Francisco Public Utilities Commission:

Its Slow Pace for Assessing Weaknesses in Its Water Delivery System and for Completing Capital Projects Increases the Risk of Service Disruptions and Water Shortages


The San Francisco Public Utilities Commission (commission) has been slow to assess and upgrade its water delivery system so it can survive catastrophes such as earthquakes, floods, and fires. It also has been slow to estimate the amount of water it will need to meet future demand and to seek additional sources of water. As a result, the nearly 2.4 million customers in four Bay Area counties who rely on the commission for their drinking water are at greater risk of disruptions and water shortages if an emergency or a drought occurs.

The commission is part of the City and County of San Francisco. Among other responsibilities, it provides drinking water to retail customers in San Francisco and to 28 wholesale suppliers serving parts of San Mateo, Santa Clara, and Alameda counties. Using a complex system of dams, reservoirs, treatment plants, pump stations, tunnels, pipelines, and valves, the commission transports much of its water to the Bay Area from Hetch Hetchy Reservoir in Yosemite National Park, almost 150 miles away.

Some parts of the commission's water delivery system, such as critical pipelines, are nearly 75 years old and are in dire need of repair or replacement. In addition, parts of the water delivery system do not meet modern seismic standards. However, the commission did not begin to study the system's overall reliability until 1994 and has completed only two of the study's three planned phases, with a delay of nearly three years between the completion of the first phase and the start of the second. This delay was due to the commission's failure to appoint promptly a staff member to manage the project and to problems with the contracting process.

The commission also has been slow to develop its water supply master plan, which will estimate the amount of water needed in the future and recommend ways of acquiring more water. Although the commission has known since 1994 that it eventually will need to find additional sources of water, it did not actively begin to develop the water supply master plan until 1996, and the results are not expected until March 2000.

Further, some customers have expressed concern regarding the commission's slow pace in completing capital projects aimed at upgrading its aging water delivery infrastructure. Information provided by the commission shows that it completed 54 capital projects at a cost of about $270 million in the last 10 years, resulting in an average of five capital projects at a cost of $27 million annually. Given the size, complexity, age, and declining condition of the commission's water delivery system, this project completion rate appears low.

There are many reasons for the apparent slow pace in completing capital projects, ranging from a shortage of project managers on staff to operational deficiencies such as a lack of up-to-date procedures for awarding contracts and for planning, designing, and constructing capital projects. Until recently, project managers also lacked an adequate system to track the progress of capital projects and preventive maintenance. Finally, although ongoing development is crucial to ensuring that staff members stay abreast of industry changes and that they improve their technical expertise, the commission is not providing any formal project management training to staff members who manage capital projects.

Although the commission is addressing the concerns with its more than $3 billion capital improvement program, its success is uncertain because it is still developing some plans while it has implemented others only recently. For instance, the commission seeks to hire a program management consultant to provide the management services, specialized technical expertise, and staff development assistance it needs to undertake its huge capital improvement program. However, San Francisco's budget analyst is reviewing the proposed contract, and approval of this consultant by the commissioners and the board of supervisors is by no means certain.

For each of its three drinking water-related divisions, the commission is developing capital improvement plans to evaluate and prioritize the projects necessary to improve the reliability of the water delivery system. The plan for the Hetch Hetchy Water and Power Division, however, does not yet contain cost or schedule estimates for all identified capital projects. In addition, the commissioners have not yet adopted the three plans.

The commission also is working on a long-range financing plan for its Water Supply and Treatment and City Distribution divisions. This plan intends to show how the commission will finance the capital projects for these two divisions. However, a January 2000 report from the commission's consultant relies heavily on using voter-approved revenue bonds to finance the projects and does not sufficiently describe contingencies should San Francisco's voters reject the bond measures. A similar report covering the Hetch Hetchy Water and Power Division is not yet complete.

Executive-level turnover at the commission and the time it will take to fill these positions also contribute to the uncertainties. The absence of strong, consistent leadership greatly diminishes the commission's chances of success in meeting the significant challenges it faces in the near future, including the need to implement a large-scale capital improvement program and to obtain additional water supplies. On the other hand, turnover among the commission's executives also presents a unique opportunity to build a management team that will provide the leadership and expertise necessary to implement a cohesive capital improvement program.


To ensure that the commission follows through on its plans, it should submit reports annually to the Legislature and its suburban customers for the next five years. These reports should describe the progress the commission has made in implementing each of its plans and the accomplishments it has achieved.

To improve the reliability of its water delivery system, the commission should continue to finalize, adopt, implement, monitor, and as necessary revise the plans and actions it has in progress. In particular, it should:

  • Complete its facilities reliability study and its water supply master plan.

  • Continue to address its operational deficiencies, including its contracting procedures, project operations procedures, tracking of capital projects, and tracking of preventive maintenance.

  • Develop and implement a formal training program for project managers and ensure that staff members receive adequate training while this program is being developed.

  • Be prepared to take alternative action if the commission or the board of supervisors decides not to approve the contract for its program management consultant.

  • Complete the capital improvement plans for its three water-related divisions and seek formal approval from the commissioners.

  • Develop a formal comprehensive plan to outline the staffing requirements necessary to complete its capital improvement plans.

  • Complete and adopt a long-range financial plan for the Water Supply and Treatment Division, City Distribution Division, and Hetch Hetchy Water and Power Division. In addition, it should develop contingencies for its long-term financial plan in case the voters fail to approve the bonds for financing the capital improvements.

  • Given the size and complexity of the challenges it faces in the near future, the commission should seize the opportunity to appoint individuals who have effectively implemented large-scale capital improvement programs. Further, it should take measures to ensure that it fills available positions promptly.


The San Francisco Public Utilities Commission agrees with most of our recommendations and did not fully address others. Our comments follow the commission's response.