HomeMy WebLinkAboutStaff Report 13420
City of Palo Alto (ID # 13420)
Utilities Advisory Commission Staff Report
Meeting Date: 3/2/2022
City of Palo Alto Page 1
Title: Staff Recommends the Utilities Advisory Commission Recommend the
City Council Adopt Two Resolutions: 1) Approving an Amendment to the
Amended and Restated Water Supply Agreement Between the City and
County of San Francisco and Wholesale Customers in Alameda County, San
Mateo County, and Santa Clara County, and Authorizing the City Manager to
Execute the Amended Agreement; and 2) Approving a Minimum Purchase
Transfer From the City of Mountain View to the City of East Palo Alto
From: Director of Utilities
Lead Department: Utilities
Recommendation
Staff recommends the UAC recommend the City Council adopt two resolutions (Attachment A
and Attachment B) as follows:
1) Approving the attached “2021 Amended and Restated Water Supply Agreement
Between the City and County of San Francisco Wholesale Customers in Alameda County,
San Mateo County, and Santa Clara County” (Attachment C) and authorizing the City
Manager to execute such Agreement when final execution copies are prepared and
distributed by the Bay Area Water Supply and Conservation Agency (BAWSCA);
2) Approving a Minimum Purchase Transfer from the City of Mountain View to the City of
East Palo Alto.
Executive Summary
The City purchases water from the San Francisco Regional Water System (System or RWS) and is
one of twenty-six BAWSCA members, also known as “Wholesale Customers.” In June 2009, the
City entered into a Water Supply Agreement with the City and County of San Francisco (San
Francisco) and Wholesale Customers in Alameda County, San Mateo County and Santa Clara
County (WSA). There are two proposed WSA amendments for Palo Alto City Council’s
consideration.
The primary amendment to the WSA allows for the paired transfer of a portion of an agency’s
Minimum Purchase Quantity and Individual Supply Guarantee (ISG) through an expedited
procedure. Four Wholesale Customers (Alameda County Water District and the Cities of
Milpitas, Mountain View, and Sunnyvale) may purchase water from sources other than San
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Francisco Public Utilities Commission (SFPUC), such as State Water Project, local groundwater,
or treated water from Valley Water, but they are each obligated to purchase a specific
minimum annual quantity of water from the SFPUC (Minimum Purchase Quantity). The
amendment safeguards the financial and water supply interests of Wholesale Customers,
including Palo Alto, who are not participating in such transfers.
The second proposed amendment to the WSA is a separate proposed minimum purchase
obligation transfer between two Wholesale Customers. In 2017, the City of Mountain View
(Mountain View) transferred 1 MGD of ISG to the City of East Palo Alto (East Palo Alto). Now,
Mountain View and East Palo Alto request a parallel action to the proposed WSA Amendment
described above. This separate amendment would apply the expedited process in the proposed
WSA Amendment to approve a paired transfer of Minimum Purchase Quantity together with
the ISG that Mountain View already transferred to East Palo Alto in 2017. Details of this
conversion are outlined in an agreement between Mountain View and East Palo Alto that is
available for information purposes in Attachment E. This amendment includes the same
safeguards to protect the financial and water supply interests of Palo Alto and other Wholesale
Customers who are not participating in the transfer.1
In addition to the two amendments described above, the proposed WSA Amendment language
expands the waiver of minimum purchase obligations during certain declared emergencies.
Specifically, the WSA Amendment allows the SFPUC to issue a waiver of minimum purchase
obligations if there is a state of emergency declared by the Governor of California that impacts
water supply use or deliveries from the System.
Background
The WSA establishes the terms by which the twenty-six Wholesale Customers purchase water
from the System. The WSA builds upon the 1984 "Settlement Agreement and Master Water
Sales Contract between the City and County of San Francisco and Certain Suburban Purchasers
in San Mateo County, Santa Clara County and Alameda County."
In September 2017, BAWSCA and the Water Management Representatives (WMRs) of the
BAWSCA member agencies began reviewing the issue of Minimum Purchase Quantities, as
described in Section 3.07.C of the WSA, and discussing the creation of a process to transfer
Minimum Purchase Quantities. Throughout 2017 and 2018, the WMRs held multiple meetings
during which the agencies currently subject to Minimum Purchase Quantity requirements and
the other Wholesale Customers shared their interests and concerns regarding changes to the
Minimum Purchase Quantity requirements and allowing transfers of Minimum Purchase
Quantities.
1 In 2017, Palo Alto transferred 0.5 MGD of ISG to East Palo Alto. Palo Alto does not have a minimum purchase
obligation, so a similar arrangement would not be applicable.
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Pursuant to Section 2.03 of the WSA, the WSA may be amended by a minimum of two-thirds of
the Wholesale Customers representing at least 75 percent of the quantity of water delivered by
San Francisco to all the Wholesale Customers during the fiscal year immediately preceding the
amendment.
On March 4, 2019, the Palo Alto City Council passed Resolution No. 9821 to approve the
Amended and Restated WSA, at which time the Wholesale Customers expressed a collective
interest in working together to develop a process for the expedited and permanent transfer of
Minimum Purchase Quantities.
Under Article 3 of the Amended and Restated WSA, the SFPUC agrees to deliver water to the
Wholesale Customers up to the amount of 184 million gallons per day (MGD), referred to as the
“Supply Assurance,” and the Wholesale Customers have allocated shares of the Supply
Assurance among themselves, referred to as ISG. Section 3.04 of the Amended and Restated
WSA enables a Wholesale Customer that has an ISG to transfer a portion of its ISG to one or
more other Wholesale Customers, subject to several conditions.
Paired transfer of a portion of an agency’s Minimum Purchase Quantity and ISG
Section 3.07 of the Amended and Restated WSA provides that four Wholesale Customers
(Alameda County Water District and the Cities of Milpitas, Mountain View, and Sunnyvale,
collectively, the “Minimum Purchase Customers”) may purchase water from sources other than
the SFPUC, but they are each obligated to purchase a specific minimum annual quantity of
water from the SFPUC, referred to as a “Minimum Purchase requirement." If a Minimum
Purchase Customer does not meet its minimum purchase requirement in a particular fiscal
year, it must pay the SFPUC for the difference between its metered water purchases during the
fiscal year and its minimum annual purchase quantity set forth in Attachment E of the Amended
and Restated WSA. The Amended and Restated WSA does not currently allow a Minimum
Purchase Customer to transfer a portion of its minimum purchase requirement and the
associated financial obligation to another Wholesale Customer.
In 2019, the Wholesale Customers directed BAWSCA to draft a proposed amendment to the
Amended and Restated WSA to provide a procedure for expedited and permanent transfers of
Minimum Purchase Quantities that safeguards the financial and water supply interests of
Wholesale Customers not participating in such transfers.
Minimum Purchase Transfer from the City of Mountain View to the City of East Palo Alto
In 2017, Mountain View and East Palo Alto were interested in transferring 1.0 MGD of
Mountain View's Minimum Purchase Quantity to East Palo Alto, however, at the time, there
was no procedure in the WSA to effectuate such a transfer without amending the WSA.
Therefore, the parties elected to execute a water rights transfer agreement by which East Palo
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Alto agreed to pay Mountain View $5 Million for the permanent transfer of all rights, title,
interest to 1.0 MGD of Mountain View’s ISG to East Palo Alto.
In 2020, Mountain View and East Palo Alto began discussing a possible future transfer of a
portion of Mountain View's Minimum Purchase Quantity to East Palo Alto.
In April 2021 and June 2021 the Councils of East Palo Alto and Mountain View, respectively,
each approved the conversion of the 1.0 MGD of Mountain View's ISG sold to East Palo Alto in
2017 into a paired transfer of ISG and up to 1.0 MGD of Mountain View's Minimum Purchase
Quantity to East Palo Alto, in increments of 0.25 MGD, subject to the City Councils' approval of
an agreement for each incremental transfer and the approval of the Wholesale Customers and
San Francisco. East Palo Alto and Mountain View are authorized and prepared to execute a
negotiated agreement memorializing a 0.25 MGD transfer of Mountain View's Minimum
Purchase Quantity to East Palo Alto.
In conjunction with the larger amendment to allow Wholesale Customers with ISGs to
permanently transfer a portion of Minimum Purchase Quantity through an expedited
procedure, East Palo Alto and Mountain View propose the Wholesale Customers and San
Francisco approve, in advance, the terms and conditions for converting up to 1.0 MGD of
Mountain View's ISG purchased by East Palo Alto in 2017 into a paired transfer of 1.0 MGD of
ISG together with 1.0 MGD of Mountain View's Minimum Purchase Quantity to East Palo Alto,
in 0.25 MGD increments, if Mountain View and East Palo Alto mutually agree to such
incremental transfers in the future and provided the conditions outlined below are met.
Because the 2017 Mountain View/East Palo Alto ISG transfer predates the Minimum Purchase
Amendment, the Mountain View/East Palo Alto Minimum Purchase Transfer must be
accomplished separately from the adoption of the Minimum Purchase Amendment.2
Discussion
Main Amendment: Paired Transfer of a Portion of an Agency’s Minimum Purchase Quantity and
ISG
The proposed amendment, shown with redline changes to Sections 3.04, 3.07, and 2.03 of the
Amended and Restated Water Supply Agreement in Attachment D, allows Wholesale
Customers with ISGs and Minimum Purchase obligations to permanently transfer a portion of
Minimum Purchase Quantity through an expedited procedure. The proposed amendment
offers the following benefits:
1. Procedural safeguards built into the process by which a Wholesale Customer transfers a
portion of its Minimum Purchase Quantity and ISG ensure that such transfers will not
2 Palo Alto’s 2017 transfer of 0.5 MGD of ISG to East Palo Alto did not require Wholesale Customer approval
because Palo Alto does not have a minimum purchase obligation.
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result in new or different risks to the water supply and financial interests of Wholesale
Customers not participating in a transfer.
2. A Minimum Purchase Customer may transfer a portion of its Minimum Purchase
Quantity within its respective ISG to reduce its financial obligation to pay for imputed
sales for Minimum Purchase water that it did not use.
3. Intra-system water transfers are one potential solution to long term water reliability
needs among the Wholesale Customers. This expedited, permanent transfer procedure
will allow intra-system water transfers of Minimum Purchase Quantity to occur without
a contract amendment approved by the Wholesale Customers, thus removing
administrative obstacles to such transfers.
4. Expedited permanent intra-system transfers of portions of Minimum Purchase Quantity
and ISG will facilitate the development of new water supplies by the SFPUC that are
necessary to support the Cities of San Jose and Santa Clara becoming permanent
Wholesale Customers.
5. The Wholesale Customers may increase the 6 MGD cap on the total aggregate amount
of Minimum Purchase Quantity that may be transferred by all of the Minimum Purchase
Customers over the course of one or multiple transfers if demand for Minimum
Purchase Quantity transfers exceeds 6 MGD in the future.
San Francisco, acting by and through the SFPUC, approved the 2021 Amended and Restated
Water Supply Agreement, as negotiated by BAWSCA, on January 26, 2021, pending approval by
the requisite number of the Wholesale Customers.
Second Proposed Amendment: Minimum Purchase Transfer from the City of Mountain View to
the City of East Palo Alto
The proposed amendment would provide advance approval for the conversion of up to 1.0
MGD of Mountain View's ISG sold to East Palo Alto in 2017, into a transfer of up to 1.0 MGD of
Mountain View's ISG plus up to 1.0 MGD of Mountain View’s Minimum Purchase Quantity to
East Palo Alto, in 0.25 MGD increments, if all of the following terms and conditions are satisfied:
a. Mountain View will transfer up to 1.0 MGD of its Minimum Purchase Quantity to East
Palo Alto, in increments of 0.25 MGD, subject to the Mountain View City Council's and
the East Palo Alto City Council's approval of an agreement for each incremental transfer.
b. For each incremental transfer, a Temporary Modified Minimum Annual Purchase
Quantity will be calculated for East Palo Alto that is equal to East Palo Alto’s five-year
average water use from the SFPUC for the most recent non-drought years prior to the
2017 ISG purchase, plus the incremental transfer amount(s).
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c. For each incremental transfer, Mountain View will maintain, and be responsible for
paying any imputed sales for, its current Minimum Purchase requirement in effect at
that time, as set forth in Attachment E of the WSA, including up to 1.0 MGD ISG transfer
to East Palo Alto, until East Palo Alto's water use meets the Temporary Modified
Minimum Annual Purchase Quantity for three consecutive years.
d. East Palo Alto will not be required to pay imputed sales associated with the Temporary
Modified Minimum Annual Purchase Quantity for any incremental transfer of the 1.0
MGD of Mountain View's Minimum Purchase requirement.
e. For each incremental transfer, once East Palo Alto has met the Temporary Modified
Minimum Annual Purchase Quantity for three consecutive years, the incremental
portion of Mountain View's Minimum Purchase Quantity transferred to East Palo Alto
will become East Palo Alto's Minimum Purchase Quantity, and Mountain View's
Minimum Purchase Quantity will be reduced by an equivalent amount. East Palo Alto's
new Minimum Purchase Quantity will be included in Attachment E of the WSA and both
cities' Individual Water Sales Contracts will be updated to reflect this transfer.
f. With exception of the incremental transfers that are the subject of this resolution and
the agreement between East Palo Alto and Mountain View described herein, any
additional transfers of Minimum Purchase Quantity, either from another Wholesale
Customer or from Mountain View in excess of the 1.0 MGD, are subject to Section 3.04
of the 2021 WSA.
Additional Language Changes and Annual Reporting
In addition to the two amendments described above, this package incorporates two additional
language changes:
1) New language in Section 3.04 H to clarify that a transfer of Minimum Purchase and/or
ISG that does not satisfy the requirements of Section 3.04 may be implemented via a
separate amendment to the WSA.
2) New language in Section 3.07 C to expand the waiver of minimum purchase obligations
during certain declared emergencies. Based on experience from the previous drought
when the State led the call for water use reductions, water use restrictions, and
eventual water rationing obligations, SFPUC issued a waiver of Minimum Purchase
Requirements “at risk”. The proposed WSA Amendment allows SFPUC to issue a waiver
“during a state of emergency declared by the Governor of California that impacts water
supply use or deliveries from the Regional Water System”.
The proposed amendment codifies existing reporting and imposes a new reporting requirement
inSection 3.07.C that states:
“ . . . After the end of each fiscal year, the SFPUC will send a
written notice to each Wholesale Customer that is subject to the
minimum annual purchase requirements of this section with a
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copy to BAWSCA. The notice will include: (1) the quantity of water
delivered to the Wholesale Customer during the previous fiscal
year; (2) whether or not the Wholesale Customer met its minimum
annual purchase requirement under this section; (3) any Imputed
Sales charged to the Wholesale Customer; and (4) the status of
any Temporary Modified Minimum Annual Purchase Quantity of
the Wholesale Customer, if applicable.” (new)
In addition, BAWSCA will prepare a new annual report that includes a summary of the SFPUC’s
annual reports to each Wholesale Customer as well as additional RWS purchase trend
information, as available.
Resource Impact
Palo Alto is not a participant in a current or future transfer of ISG under this amendment
because Palo Alto is not subject to a Minimum Purchase and Palo Alto has sufficient ISG to
meet its current and future water demand. This amendment avoids shifting or transferring
participating agencies’ contractual costs, or obligations, to Palo Alto and will not result in any
new or different financial risks to Palo Alto.
Policy Implications
The execution and administration of the 2021 Amended and Restated WSA reaffirms the water
reliability and quality requirements in the WSA and is consistent with the spirit of the 2009
WSA.
Environmental Review
Prior to approval of the WSIP, San Francisco prepared a program environmental impact report
(PEIR) for the WSIP in compliance with the California Environmental Quality Act (CEQA) and the
San Francisco Planning Commission certified the WSIP Final PEIR in Planning Commission
Motion No. 17734 in 2008. The City reviewed the Final PEIR and CEQA findings and adopted
them to the extent the findings were relevant to its decision to approve the WSA.
At this time, the City need not take any further action to comply with the requirements of CEQA
as the amendments are not a "project" for the purposes of the CEQA. The amendments at issue
involve an administrative activity that does not result in a direct change to the environment
(see 14 CCR Section 15378(b)(5)), and would not result in a direct or reasonably foreseeable
indirect physical change in the environment (see 14 CCR Section 15060(c)(2)).
Attachments:
• Attachment A: Resolution
• Attachment B: Draft Resolution
• Attachment F: Presentation
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* NOT YET APPROVED* Attachment A
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RESOLUTION NO. _____
Resolution Of The City Council Of The City Of Palo Alto Approving An
Amendment To The Amended And Restated Water Supply Agreement Between
The City And County Of San Francisco And Wholesale Customers In Alameda
County, San Mateo County, And Santa Clara County
R E C I T A L S
A. Water supply agencies in Alameda, San Mateo, and Santa Clara Counties have
purchased water from the City and County of San Francisco (San Francisco) for many years.
B. The San Francisco Public Utilities Commission (SFPUC or Commission) operates
the Regional Water System, which delivers water to communities in Alameda, San Mateo, and
Santa Clara Counties, as well as to customers within San Francisco (collectively, “the Parties”).
C. The Parties entered into the “Settlement Agreement and Master Water Sales
Contract between the City and County of San Francisco and Certain Suburban Purchasers in
San Mateo County, Santa Clara County and Alameda County” in 1984 (1984 Settlement
Agreement and Master Water Sales Contract).
D. In April 2003, water supply agencies in Alameda, San Mateo and Santa Clara
Counties (collectively referred to as the "Wholesale Customers" or "BAWSCA member
agencies") established the Bay Area Water Supply and Conservation Agency (BAWSCA), as
authorized by Water Code Section 81300 et seq.
E. Upon expiration of the 1984 Settlement Agreement and Master Water Sales
Contract, the Parties entered into the “Water Supply Agreement between San Francisco and
Wholesale Customers in Alameda County, San Mateo County, and Santa Clara County” (Water
Supply Agreement or WSA) on July 1, 2009, authorized by SFPUC Resolution No. 09-0069,
dated April 28, 2009.
F. In 2017, the Wholesale Customers directed BAWSCA to act as its authorized
representative in discussions and negotiations with San Francisco to amend the Water Supply
Agreement to address a number of substantive issues and these negotiations resulted in the
Parties' adoption of the Amended and Restated Water Supply Agreement (Amended and
Restated Water Supply Agreement) in 2018, authorized by SFPUC Resolution No. 18-0212,
dated December 11, 2018.
G. On March 4, 2019 this Council, by Resolution No. 9821 approved the Amended
and Restated Water Supply Agreement.
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H. Under Article 3 of the Amended and Restated Water Supply Agreement, the
SFPUC agrees to deliver water to the Wholesale Customers up to the amount of 184 million
gallons per day (MGD), referred to as the “Supply Assurance,” and the Wholesale Customers
have allocated shares of the Supply Assurance among themselves, referred to as Individual
Supply Guarantees (“ISG”).
I. Section 3.04 of the Amended and Restated Water Supply Agreement enables
a Wholesale Customer that has an ISG to transfer a portion of its ISG to one or more other
Wholesale Customers, subject to several conditions.
J. Under Section 3.07 of the Amended and Restated Water Supply Agreement,
four Wholesale Customers (Alameda County Water District and the Cities of Milpitas,
Mountain View, and Sunnyvale, collectively, the “Minimum Purchase Customers”) may
purchase water from sources other than the SFPUC, but they are each obligated to purchase
a specific minimum annual quantity of water from the SFPUC, referred to as a “Minimum
Purchase requirement”.
K. If a Minimum Purchase Customer does not meet its Minimum Purchase
requirement in a particular fiscal year, it must pay the SFPUC for the difference between its
metered water purchases during the fiscal year and its minimum annual purchase quantity
set forth in Attachment E of the Amended and Restated Water Supply Agreement.
L. The Amended and Restated Water Supply Agreement does not currently allow
a Minimum Purchase Customer to transfer a portion of its Minimum Purchase requirement
and the associated financial obligation to another Wholesale Customer.
M. In September 2017, BAWSCA and the Water Management Representatives
(WMRs) of the BAWSCA member agencies began reviewing the issue of Minimum Purchase
Quantities, as described in Section 3.07.C of the Water Supply Agreement, and discussing the
creation of a process to transfer Minimum Purchase Quantities.
N. Throughout 2017 and 2018, the WMRs held multiple meetings during which
the agencies currently subject to Minimum Purchase Quantity requirements and the other
Wholesale Customers shared their interests and concerns regarding changes to the Minimum
Purchase Quantity requirements and allowing transfers of Minimum Purchase Quantities.
O. At the time the Amended and Restated Water Supply Agreement was
approved, the Parties expressed a collective interest in working together to develop a process
for the expedited and permanent transfer of Minimum Purchase Quantities.
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P. In 2019, the Wholesale Customers directed BAWSCA to draft a proposed
amendment to the Amended and Restated Water Supply Agreement to provide a procedure
for expedited and permanent transfers of Minimum Purchase Quantities that safeguards the
financial and water supply interests of Wholesale Customers not participating in such
transfers.
Q. The Parties recognize that, both before and after the most recent statewide
drought, after meeting drought-related conservation mandates, several BAWSCA member
agencies were unable to meet their respective Minimum Purchase requirements described in
Article 3.07 of the Amended and Restated Water Supply Agreement, which requires payment
for water up to the required Minimum Purchase level even if such water is not delivered and
used.
R. Several of the Wholesale Customers with Minimum Purchase requirements
might be interested in transferring a portion of their Minimum Purchase Quantity within their
respective ISGs to reduce the financial obligation to pay for imputed sales for Minimum
Purchase water that is not used.
S. With its Alternative Water Supply Program, the SFPUC is in the early stages of
planning for fourteen projects to support the Wholesale and Retail Customers' ability to
respond to climate change and address future water supply challenges and vulnerabilities,
such as regulatory changes, earthquakes, disasters, emergencies, and increases in population
and employment.
T. The City of San Jose (San Jose) and the City of Santa Clara (Santa Clara) are
temporary, interruptible Wholesale Customers of the SFPUC Regional Water System and both
cities wish to become permanent Wholesale Customers.
U. Pursuant to Section 4.06 of the Amended and Restated Water Supply
Agreement, by December 31, 2028, San Francisco must complete any necessary California
Environmental Quality Act (CEQA) review and must decide whether or not to make San Jose
and Santa Clara permanent Wholesale Customers of the Regional Water System with a
combined Individual Supply Guarantee (ISG) of 9 million gallons per day (MGD) allocated
equally between the two cities, as well as how much water in excess of 9 MGD it will supply
to San Jose and Santa Clara.
V. Section 4.06 of the Amended and Restated Water Supply Agreement provides:
"San Francisco will make San Jose and Santa Clara permanent customers only if, and to the
extent that, San Francisco determines that Regional Water System long term water supplies
are available."
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W. According to SFPUC's December 2021 Alternative Water Supply Planning
Quarterly Update (Quarterly Update), "[f]or San Jose and Santa Clara to become permanent
customers of the SFPUC, an additional 9 MGD of new, year-round supplies would be needed
to meet historic demand levels and up to 15.5 MGD would be needed to meet planned
demand through 2045."
X. According to its December Quarterly Update, SFPUC is planning with the
“intention to be able to make San Jose and Santa Clara permanent customers,” but is
prioritizing instream flow obligations to meet existing permanent customer demands,
including drought supplies.
Y. SFPUC has budgeted $298.3 million over the next ten years to fund water
supply projects.
Z. SFPUC, San Jose, Santa Clara, and BAWSCA are actively working together to
consider water supply projects that may offer potential sources of supply to support San Jose
and Santa Clara as permanent Wholesale Customers.
AA. BAWSCA and SFPUC have identified intra-system water transfers as one
potential solution to long term water reliability needs among the Wholesale Customers.
BB. A Minimum Purchase Customer might be more inclined to transfer a portion
of its ISG to another Wholesale Customer under Section 3.04 of the Amended and Restated
Water Supply Agreement if it was able to include a simultaneous transfer of a portion of its
Minimum Purchase requirement and the associated financial obligation.
CC. Allowing simplified permanent intra-system transfers of portions of Minimum
Purchase Quantity and ISG will facilitate the development of new water supplies by SFPUC
that are necessary to support San Jose and Santa Clara as permanent Wholesale Customers.
DD. The Parties have developed a process to allow for the transfer of a Wholesale
Customer's Minimum Purchase Quantity in conjunction with an ISG transfer pursuant to
Section 3.04, which ensures that such transfers will not result in new or different risks to the
water supply and financial interests of Wholesale Customers not participating in a transfer.
EE. The Parties agree that the total aggregate amount of Minimum Purchase
Quantity that may be transferred by all of the Wholesale Customers subject to Minimum
Purchase requirements as first specified in Attachment E of the Amended and Restated Water
Supply Agreement, over the course of one or multiple transfers, is limited to 6 MGD.
FF. If demand for Minimum Purchase Quantity transfers exceeds 6 MGD in the
future, the Parties agree to consider further amending Section 3.04 of the Amended and
Restated Water Supply Agreement to increase the total aggregate cap on the amount of
Minimum Purchase Quantity that may be transferred.
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GG. A proposed transfer that does not meet the requirements of Section 3.04 of
the Amended and Restated Water Supply Agreement, as amended by this Resolution, may be
presented as an amendment to the Amended and Restated Water Supply Agreement
pursuant to Section 2.03 of the Amended and Restated Water Supply Agreement.
HH. The Parties agree to consider a proposal by the City of Mountain View
(Mountain View) and the City of East Palo Alto (East Palo Alto) to amend the Amended and
Restated Water Supply Agreement to allow for the conversion of Mountain View's 2017 sale
of 1 MGD of ISG to East Palo Alto into a transfer of 1 MGD of Mountain View's ISG that includes
Minimum Purchase Quantity to East Palo Alto, over a period of time, and in a manner that
protects the other Wholesale Customers' financial and water supply interests.
II. If such a conversion is approved by the Parties, the 1 MGD of Mountain View's
Minimum Purchase Quantity would be counted towards the total aggregate 6 MGD cap on
Minimum Purchase Quantity transfers.
JJ. The Parties now desire to adopt an amendment to the Amended and Restated
Water Supply Agreement to permit Wholesale Customers with an ISG to transfer, or accept a
transfer, of both a portion of a Wholesale Customer's ISG and its Minimum Purchase Quantity.
KK. An updated Amended and Restated Water Supply Agreement, reflecting this
amendment, in the form negotiated by BAWSCA (2021 Amended and Restated Water Supply
Agreement), was presented to and approved by SFPUC on January 26, 2021 pursuant to
SFPUC Resolution No. 21-0009.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council approves the modifications included in the attached "2021
Amended and Restated Water Supply Agreement Between the City and County of San
Francisco Wholesale Customers in Alameda County, San Mateo County, and Santa Clara
County" dated January 2021 (2021 Amended and Restated Water Supply Agreement).
SECTION 2. The City Manager is authorized and directed to sign the 2021
Amended and Restated Water Supply Agreement, in the form previously approved by the
San Francisco Public Utilities Commission and attached hereto.
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5.a
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* NOT YET APPROVED* Attachment A
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SECTION 3. The Council finds that the amendment considered now is not a
"project" for the purposes of CEQA as it involves an administrative activity that does not
result in a direct change to the environment (see 14 CCR Section 15378(b)(5)), and would not
result in a direct or reasonably foreseeable indirect physical change in the environment (see
14 CCR Section 15060(c)(2)).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
5.a
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*NOT YET APPROVED* Attachment B
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6055601
RESOLUTION NO. _____
Resolution Of The Council Of The City Of Palo Alto Approving A
Minimum Purchase Transfer From
The City Of Mountain View To The City Of East Palo Alto
R E C I T A L S
A. The City and County of San Francisco ("San Francisco") Public Utilities
Commission ("SFPUC" or "Commission") operates the Regional Water System, which delivers
water to water supply agencies in Alameda, San Mateo, and Santa Clara Counties (collectively,
“the Parties”).
B. In April 2003, water supply agencies in Alameda, San Mateo and Santa Clara
Counties (collectively, the "Wholesale Customers") established the Bay Area Water Supply and
Conservation Agency ("BAWSCA"), as authorized by Water Code Section 81300 et seq.
C. In November of 2018, San Francisco and the Wholesale Customers (the
"Parties") entered into the Amended and Restated Water Supply Agreement ("WSA").
D. The Parties have identified intra-system water transfers as one potential
solution to long-term water reliability needs among the Wholesale Customers.
E. In 2017, the City of Mountain View ("Mountain View") and the City of East Palo
Alto ("East Palo Alto") were interested in transferring 1.0 million gallons per day ("MGD") of
Mountain View's Minimum Annual Purchase Quantity (“Minimum Purchase”) to East Palo Alto,
however, at the time, there was no procedure in the WSA to effectuate such a transfer without
amending the WSA.
F. In 2017, Mountain View and East Palo Alto executed a water rights transfer
agreement in which East Palo Alto agreed to pay Mountain View $5 Million for the permanent
transfer of all rights, title, interest to 1.0 MGD of Mountain View’s Individual Supply Guarantee
(ISG) to East Palo Alto.
G. In August 2018, BAWSCA and San Francisco provided the Wholesale Customers
a revised Attachment C to the Water Supply Agreement reflecting the updated ISG amounts
for Mountain View and East Palo Alto, as a result of the 1.0 MGD transfer of ISG from Mountain
View to East Palo Alto.
H. Mountain View continues to be subject to a Minimum Purchase of 8.93 MGD
and the financial obligation of paying for imputed sales for the portion of Minimum Purchase
that it does not use.
I. In 2020, Mountain View and East Palo Alto began discussing a possible future
transfer of a portion of Mountain View's Minimum Purchase to East Palo Alto.
5.b
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*NOT YET APPROVED* Attachment B
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6055601
J. On January 26, 2021, the SFPUC adopted the 2021 Amended and Restated
Water Supply Agreement ("2021 WSA"), which includes a new procedure by which Wholesale
Customers with ISGs may participate in permanent expedited transfers of a portion of
Minimum Purchase and ISG, without creating new or different risks to the water supply and
financial interests of Wholesale Customers not participating in such transfers.
K. The 2021 WSA has been or will be presented to the governing body of each
Wholesale Customer, and if approved, will permit Wholesale Customers with an ISG to transfer
and accept a portion of another Wholesale Customer’s Minimum Purchase, if certain
requirements are satisfied; and
L. On April 20, 2021, East Palo Alto approved the conversion of the 1.0 MGD of
Mountain View's ISG sold to East Palo Alto in 2017 into a paired transfer of 1.0 MGD of ISG
plus up to 1.0 MGD of Mountain View's Minimum Purchase to East Palo Alto, in increments of
0.25 MGD or other amount, subject to the City Council’s approval of an agreement for each
incremental transfer and the approval of the Wholesale Customers and San Francisco.
M. On June 8, 2021, Mountain View approved the conversion of the 1.0 MGD of
Mountain View's ISG sold to East Palo Alto in 2017 into a paired transfer of 1.0 MGD of ISG
plus up to 1.0 MGD of Mountain View's Minimum Purchase to East Palo Alto, in increments of
0.25 MGD, subject to the City Council’s approval of an agreement for each incremental transfer
and the approval of the Wholesale Customers and San Francisco.
N. East Palo Alto and Mountain View are authorized and prepared to execute a
negotiated agreement memorializing the terms and conditions of a 0.25 MGD transfer of
Mountain View's Minimum Purchase to East Palo Alto.
O. As noted below, one of the conditions of the negotiated agreement between
Mountain View and East Palo Alto is that, in exchange for the 0.25 MGD of Minimum Purchase
transfer, Mountain View will provide East Palo Alto with an immediate Right-of-First Refusal
for drought water transfers at the same volume as the Minimum Purchase transfer, pursuant
to Appendix H of the 2021 WSA.
P. In conjunction with consideration of the 2021 WSA, East Palo Alto and
Mountain View propose the Wholesale Customers and San Francisco approve, in advance, the
terms and conditions for converting up to 1.0 MGD of Mountain View's ISG purchased by East
Palo Alto in 2017 into a transfer of 1.0 MGD of Mountain View's Minimum Purchase to East
Palo Alto, in 0.25 MGD increments, if Mountain View and East Palo Alto mutually agree to such
incremental transfers in the future and provided the conditions outlined below are met.
5.b
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*NOT YET APPROVED* Attachment B
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6055601
Q. If up to 1.0 MGD of Mountain View's ISG purchased by East Palo Alto in 2017 is
converted into a transfer of up to 1.0 MGD of Mountain View's Minimum Purchase to East Palo
Alto, up to 1.0 MGD of Minimum Purchase, in 0.25 MGD increments, will be counted towards
the total Minimum Purchase that may be transferred pursuant to Section 3.04.C.1 of the 2021
WSA.
R. This parallel action continues to require the calculation of a Temporary
Modified Minimum Annual Purchase Quantity, set out in Attachment E-1 in the 2021 WSA;
however, the transferor, Mountain View, is responsible for the imputed sales associated with
transfers to East Palo Alto up to 1.0 MGD, until the terms and conditions outlined below are
satisfied.
S. In accordance with the water transfer provisions of the 2021 WSA, Mountain
View and East Palo Alto will coordinate with San Francisco and BAWSCA to document
Temporary Modified Minimum Annual Purchase Quantities to be included on Attachment E-1,
transferred Minimum Annual Purchase Quantities to be included on Attachment E, when
timely, and amendments to each cities' Individual Water Sales Contract with San Francisco.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council approves, in advance, the conversion of up to 1.0 MGD of
Mountain View's ISG, sold to East Palo Alto in 2017 into a transfer of 1.0 MGD of Mountain
View's ISG, plus up to 1.0 MGD of Mountain View’s Minimum Purchase, to East Palo Alto, in
0.25 MGD increments, if all of the following terms and conditions are satisfied:
a. Mountain View will transfer up to 1.0 MGD of its Minimum Purchase to
East Palo Alto, in increments of 0.25 MGD, subject to the Mountain View
City Council's and the East Palo Alto City Council's approval of an
agreement for each incremental transfer.
b. For each incremental transfer, a Temporary Modified Minimum Annual
Purchase Quantity will be calculated for East Palo Alto that is equal to
the City's five-year average water use from the SFPUC for the most
recent non-drought years prior to the 2017 ISG purchase, plus the
incremental transfer amount(s).
c. For each incremental transfer, Mountain View will maintain, and be
responsible for paying any imputed sales for, its Minimum Purchase
requirement in effect at that time, as set forth in Attachment E of the
WSA, including up to 1.0 MGD ISG transfer to East Palo Alto, until East
Palo Alto's water use meets the Temporary Modified Minimum Annual
Purchase Quantity for three consecutive years.
5.b
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*NOT YET APPROVED* Attachment B
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6055601
d. East Palo Alto will not be required to pay imputed sales associated with
the Temporary Modified Minimum Annual Purchase Quantity for any
incremental transfer of the 1.0 MGD of Mountain View's Minimum
Purchase requirement.
e. For each incremental transfer, once East Palo Alto has met the
Temporary Modified Minimum Annual Purchase Quantity for three
consecutive years, the incremental portion of Mountain View's
Minimum Purchase transferred to East Palo Alto will become East Palo
Alto's Minimum Purchase, and Mountain View's Minimum Purchase will
be reduced by an equivalent amount. East Palo Alto's new Minimum
Purchase will be included in Attachment E and both cities' Individual
Water Sales Contracts will be updated to reflect this transfer.
f. With exception of the incremental transfers that are the subject of this
resolution and the agreement between East Palo Alto and Mountain
View described herein, any additional transfers of Minimum Purchase,
either from another Wholesale Customer or from Mountain View in
excess of the 1.0 MGD, are subject to Section 3.04 of the 2021 WSA.
//
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*NOT YET APPROVED* Attachment B
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6055601
//
SECTION 2. The Council finds that approval of a Minimum Purchase transfer from
the City of Mountain View to the City to East Palo Alto is not a "project" for the purposes of
CEQA as it involves an administrative activity that does not result in a direct change to the
environment (see 14 CCR Section 15378(b)(5)), and would not result in a direct or reasonably
foreseeable indirect physical change in the environment (see 14 CCR Section 15060(c)(2)).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
5.b
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March 02, 2022 www.cityofpaloalto.org
MINIMUM PURCHASE AMENDMENT AND MOUNTAIN VIEW –EAST PALO ALTO MINIMUM PURCHASE TRANSFER
Staff: Karla Dailey and Lisa Bilir
.CITY OF
-PALO ALTO
5.c
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AGENDA
•Overview of amendments to Water Supply Agreement with
San Francisco
•#1 Paired Transfer of Minimum Purchase and Individual
Supply Guarantee
•#2 Separate Proposed Minimum Purchase Obligation
Transfer Between Two Wholesale Customers
•Adoption Process
~CITY OF
~PALO ALTO
5.c
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3
KEY PARAMETERS OF WSA AMENDMENT #1
•Allows for the paired transfer of Minimum Purchase and
Individual Supply Guarantee (ISG)
•Minimum Purchases can be transferred to Wholesale
Customers that have an ISG
•Transfers limited to 6 mgd total and 50% of original
Minimum Purchase for each Minimum Purchase Agency
•Palo Alto’s Financial Interests Protected:
•Transferee subject to a Temporary Modified Minimum Purchase Quantity
(TMMPQ) based on most-recent 5 non-drought year purchases from RWS
•Transferee will secure a new Permanent Minimum Purchase after
purchasing TMMPQ for 3 consecutive years
•MV/EPA agreement requires WSA amendment approval by Wholesale
Customers and SFPUC
~CITY OF
~PALO ALTO
5.c
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FINANCIAL AND WATER SUPPLY PROTECTIONS
•Palo Alto is not a participant in a current or future paired
transfer of ISG and Minimum Purchase
•This amendment will not result in any new or different
financial risks to Palo Alto
•Water Supply Protections
•Supply Assurance remains unchanged at 184 mgd
•Minimum Purchase transfers must be permanent
•Transfers limited to 6 mgd cumulative and 50% of original Minimum
Purchase for each Minimum Purchase Agency
•Not applicable to the 2017 Palo Alto/East Palo Alto ISG
transfer
~CITY OF
~PALO ALTO
5.c
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BENEFITS OF PROPOSED WSA AMENDMENT
•Removes existing barrier to water transfers among the
BAWSCA agencies
•Water transfers between BAWSCA agencies offer potential cost-effective
water supply to meet needs for new development within service area
•Transferring water to promote efficient use is consistent with State law
•State and environmental agencies support this concept
•SFPUC has indicated that removing this barrier to potential transfers will
make it easier for them to develop other new supplies as necessary
•Removes existing barrier for a Minimum Purchase Agency to
reduce its Minimum Purchase obligation with a transfer
•Protects existing rights and obligations for all, including non-
participating agencies
•Other benefit: Increased purchases from RWS reduce unit
costs for all BAWSCA agencies
~CITY OF
~PALO ALTO
5.c
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SEPARATE MIN. PURCHASE OBLIGATION TRANSFER
•In 2017, MV transferred 1.0 mgd of ISG to EPA
•MV and EPA request a parallel action to the Proposed WSA
Amendment
•Allow the parties to convert the 1.0 mgd ISG sold to EPA
into a transfer of up to 1.0 mgd of MV’s Minimum
Purchase plus ISG, in 0.25 mgd increments
•Proposal mimics expedited process to protect others’
interest
•MV and EPA ask that this separate amendment be acted on
in parallel with larger Proposed WSA Amendment
~CITY OF
~PALO ALTO
5.c
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WSA Amendment Adoption Process
•On January 26, 2021, SFPUC approved the Amended and Restated WSA,
pending approval by the requisite number of Wholesale Customers
•MV/EPA agreement requires WSA amendment approval by Wholesale
Customers and SFPUC
•BAWSCA is recommending adoption by all member agencies by June 2022
•Individual member agencies considering action at this time
~CITY OF
~PALO ALTO
5.c
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8
Recommended Motion
Staff recommends the UAC recommend that the City Council adopt two
resolutions:
1) Approving the attached “2021 Amended and Restated Water Supply
Agreement Between the City and County of San Francisco Wholesale
Customers in Alameda County, San Mateo County, and Santa Clara County”
and authorizing the City Manager to execute such Agreement when final
execution copies are prepared and distributed by the Bay Area Water Supply
and Conservation Agency (BAWSCA);
2) Approving a Minimum Purchase Transfer from the City of Mountain View to
the City of East Palo Alto.
~CITY OF
~PALO ALTO
5.c
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