Fixing Hetch Hetchy Dam costs $1 billion more than it should

Public Utilities Commission officials understandably like to see the dam as being half-full when assessing the state of the massive overhaul of San Francisco's aging and seismically vulnerable water system. For instance, they like to point out that, thanks to the recession, construction bids are coming in tens of millions of dollars below what was anticipated.

But despite those bargains, the projected cost of the water system upgrade has jumped $193 million since 2007, according to the PUC's revised budget released in June. In other words, the good deals on bids aren't netting ratepayers any savings — they're just preventing unplanned costs from reaching militarylike proportions.

"They actually had their asses saved by the bad economy," says George Wooding, president of the West of Twin Peaks Central Council, an umbrella group of 16 homeowners' associations.

For those of you keeping score at home, the price tag for the water system rebuild is now $4.6 billion — $1 billion more than the sum touted in a 2002 bond measure. Back then, San Francisco voters agreed to let the PUC almost triple their rates over the next 12 years after being warned that a major earthquake could leave residents without water for two months and send the city into an economic tailspin.

While it'd be easy (and fun) to blame incompetent bureaucrats for creating a liquid fiasco, even PUC critics acknowledge that complications were bound to arise with such a massive public works project. After all, the city's water travels more than 150 miles across major fault lines from Hetch Hetchy Reservoir in Yosemite to the faucets of 2.5 million Bay Area consumers. The PUC is overseeing 85 local and regional projects to make the system's tunnels, pipelines, dams, and treatment plants earthquake-ready by 2015.

"I don't believe we're looking at people just diddling the money away," says Art Jensen, CEO of the Bay Area Water Supply and Conservation Agency, which represents the system's suburban users.

PUC officials blame the recent budget issues on unexpected seismic and environmental problems at the Harry Tracy Water Treatment Plant in San Bruno and the Calaveras Dam in Alameda County. "Nobody likes the increased cost ... but no one in good conscience can step forward and say we shouldn't do this," PUC spokesman Tony Winnicker says. "It's an unavoidable reality."

Still, PUC general manager Ed Harrington says he's optimistic that the favorable bidding climate will continue long enough to eventually offset the unforeseen costs stemming from the two budget-busting projects.

And if things don't go so well, no need to worry — the PUC can just pass along the costs of new unavoidable realities to its customers.

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