HomeMy WebLinkAboutStaff Report 2504-45253.Resolutions Amending 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 Approving the Updated Tier 2 Drought
Response Implementation Plan; CEQA Status: Not a Project ACTION 7:30PM –
8:15PM, Staff: Karla Dailey, Assistant Director of Utilities, Resource Management Division
Item No. 3. Page 1 of 11
Utilities Advisory Commission
Staff Report
From: Alan Kurotori, Director of Utilities
Lead Department: Utilities
Meeting Date: June 4, 2025
Report #: 2504-4525
TITLE
Resolutions Amending 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 Approving the Updated Tier 2 Drought Response Implementation
Plan; CEQA Status: Not a Project
RECOMMENDATION
Staff recommends the Utilities Advisory Commission recommend City Council approval of two
resolutions (1) amending 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 (Attachment A) and (2) approving the updated the Tier 2
Drought Response Implementation Plan (Attachment B).
EXECUTIVE SUMMARY
Staff recommends the Utilities Advisory Commission (UAC) recommend City Council (Council)
approve two Resolutions:
1. Amending 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 (WSA)(Attachment A). This amendment addresses 3 key
areas:
a. Minimum Purchase Requirements: Modifies Minimum Purchase requirements to
align with evolving water supply conditions.
b. Tier 1 Water Shortage Allocation Plan (Tier 1 Plan): Establishes a new method for
considering collective Wholesale Customer San Francisco Public Utility
Commission (SFPUC) purchases when determining how excess use charges will
be applied.
c. Updates: Revisions to address discrete issues that arose over the course of
implementing the WSA.
Item No. 3. Page 2 of 11
2. Approving an updated Tier 2 Drought Response Implementation Plan (Tier 2 Plan)
(Attachment B). The Tier 2 Plan provides the method for allocating water from the San
Francisco Regional Water System (RWS) among the Wholesale Customers during periods
of shortage caused by drought.
The proposed amendments to the Water Supply Agreement (WSA) include changes to
minimum purchase requirements, drought response plans, and administrative updates, with
limited financial and operational impacts on the City of Palo Alto. Overall, the amendments are
minor in cost and operational impact, with some potential benefits to Palo Alto in drought
scenarios.
•Minimum Purchase Quantities (MPQs): Adjustments to MPQs for four wholesale
customers will result in a modest increase in water rates—estimated at $0.007 to $0.04
per ccf (0.13%–0.72%)—shared across all wholesale and SFPUC retail customers. This
change addresses excess costs currently borne by some agencies, notably Mountain
View.
•Tier 1 Water Shortage Allocation Plan: The updated Tier 1 plan poses no risk to Palo
Alto and may provide benefits. If Palo Alto exceeds its drought allocation but overall
wholesale usage remains below limits, it will avoid excess use fees.
•General WSA Updates: Administrative in nature, these changes have no financial or
resource impact.
While the revised Tier 2 plan slightly increases water cutbacks for Palo Alto during droughts
(e.g., from 16% to 18% for a 20% system-wide reduction), it aligns with the City’s existing Water
Shortage Contingency Plan and will not alter customer restrictions.
Resolution Amending the Amended WSA
The proposed amendments to the WSA aim to adjust the minimum purchase requirements and
improve the Tier 1 Water Shortage Allocation Plan for the Wholesale Customers of the RWS, in
response to evolving water use patterns and regional needs.
The amendments revise the existing Minimum Purchase Quantities (MPQs) for the four Original
Minimum Purchase Customers (Alameda County Water District, and the Cities of Milpitas,
Mountain View, and Sunnyvale). The MPQs, initially based on 1980s water usage, will now be
recalculated to 80% of each customer’s average water use over the past four non-drought
years. Additionally, a 10-year review cycle will be established for ongoing adjustments. To
further account for fluctuations during drought periods, a temporary, one-year reduction in
MPQs will be applied during drought rebound years, based on the demand reduction observed.
Furthermore, collective water purchases from these customers will be considered together
when determining whether individual customers meet their MPRs, helping to avoid penalties
for minor shortfalls when the collective group meets its overall commitment.
The Tier 1 Water Shortage Allocation Plan has been updated to include a new “Tier 1 Family
Plan.” This ensures that during water shortages, if the Wholesale Customers collectively use
Item No. 3. Page 3 of 11
less than the allocation, no Wholesale Customer will be penalized. If the Wholesale Customers,
collectively, use more than the allocation, excess use charges will be applied proportionally to
those agencies exceeding their individual allocations, as is the case now.
Resolution Approving Updated the Tier 2 Drought Response Implementation Plan
BACKGROUND
Water Supply Agreement History
Item No. 3. Page 4 of 11
annual quantity of water from the San Francisco, referred to as a “Minimum Purchase
Requirement." Throughout 2017 and 2018, the WMR held multiple meetings during which the
agencies currently subject to Minimum Purchase Requirements (Original Minimum Purchase
Customers) and the other Wholesale Customers shared their interests and concerns regarding
changes to the Minimum Purchase Requirements and allowing transfers of minimum annual
purchase quantities.
Tier 2 Plan History and Negotiations and Development of Minimum Purchase Quantity Reset
Proposal
Item No. 3. Page 5 of 11
modeling expertise, met at least 62 times, most often for half-day, in-person meetings and
smaller virtual sub-group sessions, to negotiate the terms of the updated Tier 2 Plan.
Tier 1 Tier 2
Figure 1: Illustration of Tier 1 and Tier 2 Plans
Item No. 3. Page 6 of 11
ANALYSIS
Amendments to the Water Supply Agreement
Minimum Purchase Requirements
Item No. 3. Page 7 of 11
(MGD) and drought RWS purchases are 8 MGD, the Rebound Year minimum annual
purchase quantity will be set at 9 MGD.
1.3. Collective Minimum Annual Purchase Quantities Considered Before Application of
Imputed Sales
Existing Section 3.07 of the 2021 WSA provides that 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. This amendment provides that the
collective purchases from Original Minimum Purchase Customers will be considered
together before an individual Original Minimum Purchase Customer is required to pay
the difference between its metered water purchases and its Minimum Purchase
Requirement. If collective purchases are less than the sum of minimum annual
purchase quantities, payments to the SFPUC for an Original Minimum Purchase
Customer(s) who did not meet its Minimum Purchase Requirement will not be required.
If collective purchases are more than the sum of minimum annual purchase quantities,
payments to the SFPUC for an Original Minimum Purchase Customer(s) who did not
meet its Minimum Purchase Requirement will be proportionate to its share of total
under usage.
Tier 1 Water Shortage Allocation Plan
The Tier 1 Water Shortage Allocation Plan (“Tier 1 Plan” included as Attachment H of the WSA)
is the method and process for allocating water from the RWS between San Francisco retail
customers and the Wholesale Customers collectively during system-wide shortages caused by
drought of 20% or less. Section 3.11.C.3 of the WSA provides that the SFPUC will honor
allocations of water among the Wholesale Customers (“Tier 2 Allocations”) provided by
BAWSCA or if unanimously agreed to by all Wholesale Customers.
The Tier 1 and Tier 2 Plans were implemented for the first time during the 2021 to 2023
drought. During the 2014 to 2017 drought, the Tier 1 and Tier 2 Plans were superseded by
state-wide mandates from the Governor. During Tier 2 Plan negotiations, BAWSCA, the SFPUC,
and the Wholesale Customers agreed to update the Tier 1 Plan to add a new “Tier 1 Family
Plan.”
When the SFPUC declares a shortage emergency, it determines whether voluntary or
mandatory rationing is required. At the end of the 12-month drought period, each Wholesale
Customer’s purchases from the RWS are compared to their annual drought allocation. Excess
use charges are only applied during mandatory rationing periods.
The new Tier 1 Family Plan ensures that excess use charges are only applied when the collective
Wholesale Customer usage exceeds the Tier 1 allocation. If this occurs, excess use charges will
be proportionally applied to agencies that exceeded their individual Tier 2 Allocations. For
example, if the twenty-six Wholesale Customers collectively exceed the Tier 1 allocation by 2
Item No. 3. Page 8 of 11
MGD, and only two agencies exceed their Tier 2 Allocations by 3 MGD each, then these two
agencies will share the excess use charges proportionally.
General Updates to the WSA
Updated Tier 2 Drought Response Implementation Plan
Tier 2 Plan Update Process
Tier 2 Plan Policy Principles
•Policy Principle #1 - Provide sufficient water for the basic health and safety needs of
customers.
•Policy Principle #2 - Minimize economic and other adverse impacts of water shortages
on customers and the BAWSCA region.
•Policy Principle #3 - Provide predictability of drought allocations through consistent and
predetermined rules for calculation, while allowing for flexibility to respond to
unforeseen circumstances.
•Policy Principle #4 - Recognize benefits of, and avoid disincentives for, water use
efficiency and development of alternative water supply projects.
Tier 2 Plan Allocation Formula
Item No. 3. Page 9 of 11
The updated Tier 2 Plan establishes a sequential allocation formula to determine how the
available water from the RWS will be allocated among the individual Wholesale Customers.
The allocation formula can generally be described as follows:
•The Minimum and Maximum Cutback establish the upper and lower bounds for each
Wholesale Customer’s final allocation. The Minimum Cutback is equal to 1/3 of the
Overall Average Wholesale Customer Reduction, but no less than 5%. The Maximum
Cutback is equal to 1.5 times the Overall Average Wholesale Customer Reduction.
•Each Wholesale Customer is allocated water on a residential per capita basis based on
the State Indoor Water Use Efficiency Standard1 and the portion of each Wholesale
Customer’s water demand met by the RWS.
•Each Wholesale Customer is allocated water based on its estimated non-residential
indoor use by applying a cutback factor equal to half of the Overall Average Wholesale
Customer Reduction to each Wholesale Customer’s estimated non-residential indoor
demand, also known as Base Period purchase, from the RWS.
•Each Wholesale Customer is allocated water based on its estimated seasonal purchases
from the RWS.
•Remaining water is allocated to bring each Wholesale Customer’s final allocation as
close to its “Target Allocation” as possible, while ensuring that each Wholesale
Customer’s final allocation is between the Minimum and Maximum Cutback bounds.
The Target Allocation is based on a weighted share of (1) the Wholesale Customer’s
Base Period purchases from the RWS and (2) its ISG.
Tier 2 Plan Term
FISCAL/RESOURCE IMPACT
Amendments to the Water Supply Agreement
Minimum Purchase Requirements
1 SB 1157 (Hertzberg), signed into law in September 2022, established the standard for efficient indoor residential
water use be 47 gallons per capita per day, lowering to 42 GPCD in 2030.
Item No. 3. Page 10 of 11
in alternative supplies. This is particularly true for Palo Alto’s neighbor, Mountain View, which
has paid more than $11 million in penalties over the past several years.
Tier 1 Water Shortage Allocation Plan
General Updates to the WSA
Updated Tier 2 Drought Response Implementation Plan
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
Item No. 3. Page 11 of 11
Response Implementation Plan 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)).
ALTERNATIVE ACTIONS
ATTACHMENTS
AUTHOR/TITLE:
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 1
6056955; 21502307.7
RESOLUTION NO. _______
Resolution of the 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; and
B. The San Francisco Public Utilities Commission (SFPUC) 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”); and
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); and
D. In April 2003, water supply agencies in Alameda, San Mateo and Santa Clara
Counties (collectively referred to as the Wholesale Customers) established the Bay Area Water
Supply and Conservation Agency (BAWSCA), as authorized by Water Code Sections 81300 et
seq.; and
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; and
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
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 2
6056955; 21502307.7
Agreement to address a number of substantive issues and these negotiations resulted in the
Parties' adoption of the Amended and Restated Water Supply Agreement in 2018 authorized by
SFPUC Resolution No. 18-0212, dated December 11, 2018; and
G. On March 4, 2019 this Council, by Resolution No. 9821 approved the Amended and
Restated Water Supply Agreement (2018 WSA); and
H. Pursuant to WSA Section 3.07, four Wholesale Customers (Alameda County Water
District and the Cities of Milpitas, Mountain View, and Sunnyvale, collectively, the “Original
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;” and
I. Historically, 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 WSA Attachment E; and
J. Some Original Minimum Purchase Customers pay the SFPUC for water that is not
delivered due to either insufficient potable demand within their service area or conservation
efforts during drought rationing; and
K. As part of the 2018 negotiations, the Wholesale Customers and the SFPUC resolved
to work promptly to identify a resolution to this as part of a future contract amendment; and
L. In 2019, the Wholesale Customers directed BAWSCA to draft a proposed
amendment to the 2018 WSA to provide a procedure for expedited and permanent transfers of
minimum annual purchase quantities that safeguards the financial and water supply interests of
Wholesale Customers not participating in such transfers and these negotiations resulted in the
Parties' adoption of the Amended and Restated Water Supply Agreement in 2021, authorized
by SFPUC Resolution No. 21-009, dated January 26, 2021; and
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 3
6056955; 21502307.7
M. On April 4, 2022 this Council by Resolution No. 10024 approved the Amended and
Restated Water Supply Agreement (2021 WSA); and
N. The 2021 WSA provided a significant, but incomplete solution to address the
Original Minimum Purchase Customer’s concerns with the minimum purchase quantities
through a transfer process; and
O. 2021 WSA Section 3.11.C. provides that the SFPUC may reduce the amount of
water available to the Wholesale Customers in response to a drought; and
P. 2021 WSA Section 3.11.C. provides that the Tier 1 Shortage Plan (Attachment H to
the WSA) will be used, during system-wide shortages of 20% or less, to allocate water from the
Regional Water System between Retail and Wholesale Customers; and
Q. 2021 WSA Section 3.11.C. further provides that the SFPUC will honor allocations of
water among the Wholesale Customers (Tier 2 Allocations) unanimously agreed to by all
Wholesale Customers or provided by BAWSCA; and
R. In 2021, the SFPUC and BAWSCA implemented the Tier 1 and Tier 2 Plans for the
first time; and
S. Throughout 2022 and 2024, the Wholesale Customers convened at least once per
month, most often for half-day in-person workshops, to negotiate an update to the method for
sharing water made available from the SFPUC during shortages caused by drought (Tier 2 Plan);
and
T. Each Wholesale Customer appointed a lead negotiator to represent the interests of
its agency in the negotiations; and
U. During the Tier 2 Plan negotiations, the Original Minimum Purchase Customers
renewed discussions among the Wholesale Customers to identify a comprehensive and final
solution to concerns about the minimum purchase quantities; and
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 4
6056955; 21502307.7
V. During the Tier 2 Plan negotiations, the Wholesale Customers identified, and the
SFPUC agreed to, changes to the Tier 1 Plan that would facilitate agreement on the updated
Tier 2 Plan; and
W. In June 2023, following several years of discussions regarding the Minimum
Purchase Requirements, the SFPUC proposed amending the 2021 WSA to reset the existing
minimum annual purchase quantities to align with current water consumption trends, while
protecting investment in the RWS; and
X. In 2024, the SFPUC, the Original Minimum Purchase Customers, and BAWSCA held
multiple meetings to identify amendments that would address challenges related to the
Minimum Purchase Requirements; and
Y. Once the SFPUC and the Original Minimum Purchase Customers discussed
amendments to the Minimum Purchase Requirements, the Original Minimum Purchase
Customers presented proposals to the broader Wholesale Customer group to secure their
support; and
Z. In 2024, the Wholesale Customers came to a final agreement on a package that
includes an updated Tier 2 Plan, amendments to the minimum purchase quantity requirements,
and amendments to the Tier 1 Plan; and
AA. With its Alternative Water Supply Program, the SFPUC is in the early stages of
planning for 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; and
BB. The Original Minimum Purchase Customers are particularly well-suited to develop
local, drought resilient supplies, which improve the reliability of the San Francisco Regional
Water System (RWS) for all users; and
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 5
6056955; 21502307.7
CC. Under 2021 WSA Section 3.06.D, the Parties agree that they will diligently apply
their best efforts to use both surface water and groundwater sources located within their
respective service areas and available recycled water to the maximum feasible extent, taking
into account the environmental impacts, the public health effects, and the effects on supply
reliability of such use, as well as the cost of developing such sources; and
DD. Each Wholesale Customer recognizes the importance of local water supplies in
improving regional water supply reliability and commits to develop and use available local
water supplies within their service areas, consistent with Section 3.06.D of the WSA; and
EE. The City of Mountain View approved a Recycled Water Feasibility Study Update
Draft Report on March 22, 2022 with seven staff recommendations, including: (1) working with
the City of Palo Alto and the Santa Clara Valley Water District on the first phase of an advanced
water purification system to improve recycled water quality, (2) planning and siting a recycled
water storage reservoir in the City of Mountain View’s North Bayshore Area to improve system
performance and reliability, and (3) building-out the recycled water distribution system to serve
all of North Bayshore and a portion of NASA Ames; and
FF. The City of Sunnyvale approved an updated Recycled Water Master Plan on
September 24, 2024 and directed staff to look into expanding the recycled water system, which
currently includes 22 miles of recycled water pipelines, two recycled water pump stations, and
a recycled water storage tank with a 2.5-million-gallon capacity; and
GG. The City of Milpitas continues to promote the use of recycled water to existing and
new customers along the recycled water pipeline within the city, and has committed to
developing local groundwater supplies to help meet projected long term water demand; and
HH. Since 1995, the Alameda County Water District has invested over $300 million in
water supply reliability initiatives to enhance local water supplies and reduce its dependence on
imported supplies, including water conservation, conjunctive use groundwater management,
brackish groundwater desalination, and groundwater banking; and
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 6
6056955; 21502307.7
II. As of January 2025, the SFPUC has budgeted $298.3 million over the next ten years
to fund water supply projects; and
JJ. The Parties now desire to approve an amendment to the 2021 WSA to reduce the
minimum annual purchase quantities to 80% of average purchases from the most recent four
(4) non-drought years and establish a continuing, periodic review of the minimum annual
purchase quantities on a 10-year schedule; and
KK. The amendment will also establish a Rebound Year minimum annual purchase
quantity calculation for the first year following a waiver of the Minimum Purchase
Requirements; and
LL. The amendment further provides that Imputed Sales will not apply to an Original
Minimum Purchase Customer that does not meet its individual Minimum Purchase
Requirements if the collective SFPUC purchases from all Original Minimum Purchase Customers
are equal to or greater than the total collective minimum annual purchase quantity; and
MM. The Parties also desire to adopt an amendment to the Tier 1 Plan to provide that
excess use charges will not apply to Wholesale Customers that exceed their individual annual
shortage allocation if the Wholesale Customers’ collective SFPUC purchases are less than the
total Tier 1 allocation; and
NN. The amendment further provides that if the collective Wholesale Customers’
SFPUC purchases exceed total Tier 1 allocation, excess use charges will be applied to each
Wholesale Customer that exceeded its individual annual allocation, proportional to the
collective Wholesale Customer's overuse of the total Tier 1 allocation; and
OO. The Parties also desire to adopt an amendment to the 2021 WSA to include the
following substantive modifications:
a) update references in Section 2.03.C regarding BAWSCA’s authority to amend
attachments;
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 7
6056955; 21502307.7
b) extend the timing of the completion of the WSIP to reflect the currently adopted
program completion date (Section 3.09);
c) correct a reference to a SFPUC resolution number in Section 9.07;
d) update “Imputed Sales” definition in Attachment A to reference Attachment E;
e) update “Level of Service Goals and Objectives” definition in Attachment A to reflect
updated and expanded Level of Service Goals and Objectives adopted by the SFPUC
in November 2023; and
PP. The SFPUC approved these amendments and authorized the execution of a 2025
Amended and Restated Water Supply Agreement incorporating these amendments on May 13,
2025 pursuant to SFPUC Resolution No. 25-####; and
QQ. 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)); and
The Council of the City of Palo Alto does hereby RESOLVE as follows:
Section 1. The Council approves the revisions included in the attached Exhibit A,
approves those revisions to be incorporated into a revised WSA titled the "2025 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 as of 2025
(2025 Amended and Restated Water Supply Agreement).
//
//
//
//
NOT YET APPROVED
Resolution Amending the Water Supply Agreement 8
6056955; 21502307.7
Section 2. The City Manager is authorized and directed to execute the 2025
Amended and Restated Water Supply Agreement, when final execution copies are prepared
and distributed by BAWSCA.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
Attachment:
Exhibit A: Redline and clean excerpts showing changes to Sections 2.03, 3.07, 3.09, 9.07, Attachment A,
Attachment E and Attachment H of the Amended and Restated Water Supply Agreement.
NOT YET APPROVED
Resolution Approving Tier 2 Drought Response Implementation Plan 1
6056956 21488606.4
RESOLUTION NO. ________
Resolution of the Council of the City of Palo Alto Approving Tier 2 Drought Response
Implementation Plan Pursuant to Section 3.11.C of the Amended and Restated Water Supply
Agreement
R E C I T A L S
A. The City of Palo Alto is one of twenty-six (26) agencies in San Mateo, Santa Clara
and Alameda Counties (Wholesale Customers) which purchase water from the City and County
of San Francisco (San Francisco) pursuant to a Water Supply Agreement entered into in 2009,
and recently amended in 2018, 2021 and 2025 (the Agreement or WSA). Collectively these 26
agencies are referred to in the Agreement as Wholesale Customers; and
B. Section 3.11 of the Agreement addresses situations when insufficient water is
available in the San Francisco Regional Water System (RWS) to meet the full demands of all
users. Section 3.11.C provides that during periods of water shortage caused by drought, the
San Francisco Public Utilities Commission (SFPUC) will allocate available water between its retail
customers and the Wholesale Customers collectively, in accordance with a schedule contained
in the Water Shortage Allocation Plan set forth in Attachment H to the Agreement (Tier 1 Plan);
and
C. Section 3.11.C authorizes the Wholesale Customers to adopt a Drought
Allocation Plan, including a methodology for allocating the available water among the individual
Wholesale Customers (Tier 2 Plan). The WSA also commits the SFPUC to honor allocations of
water unanimously agreed to by all Wholesale Customers or, if unanimous agreement cannot
be achieved, water allocations that have been adopted by the Board of Directors of the Bay
Area Water Supply and Conservation Agency (BAWSCA). The Agreement also provides that the
SFPUC can allocate water supplies as necessary during a water shortage emergency if no agreed
upon plan for water allocation has been adopted by the 26 Wholesale Customers or the
BAWSCA Board of Directors; and
D. Commencing in January 2022, representatives appointed by the managers of
each of the Wholesale Customers began meeting monthly to develop a set of principles to serve
as guidelines for an equitable allocation methodology, and to develop formulas and
procedures, in order to implement those principles. These discussions, and supporting
technical analyses, have been conducted with the assistance of BAWSCA; and
E. The Tier 2 Plan, attached to this resolution as Exhibit A, has been endorsed by all
of the Wholesale Customer representatives who participated in the formulation process and
they have each recommended that it be formally adopted by the governing body of their
respective agencies; and
F. The Tier 2 Plan allocates the collective Wholesale Customer share of RWS supply
made available by the SFPUC among each of the 26 Wholesale Customers through December
31, 2034 and is coordinated with the term of the Agreement, and extension and renewal terms.
NOT YET APPROVED
Resolution Approving Tier 2 Drought Response Implementation Plan 2
6056956 21488606.4
The Council of the City of Palo Alto does hereby RESOLVE as follows:
Section 1. The Tier 2 Drought Response Implementation Plan, as attached as Exhibit A
(Tier 2 Plan), is approved.
Section 2. This approval is conditioned upon all of the other twenty-five Wholesale
Customers approving the Tier 2 Plan, such approvals being evidenced through adoption of
similar resolutions or, in the case of private-sector organizations, by other equivalently binding
written commitments signed by an executive officer acting within the scope of delegated
authority, and all such approvals occurring on or before December 31, 2025.
Section 3. If such resolutions or binding commitments are not adopted by that date, this
resolution will automatically expire and be of no further effect after December 31, 2025, unless
it has been extended prior thereto by further action of this [Council, Board, etc.].
Section 4. The Council finds that adoption of this resolution is categorically exempt from
the California Environmental Quality Act as an action taken by a regulatory agency for the
protection of natural resources (CEQA Guidelines Section 15307), and an as action taken by a
regulatory agency for protection of the environment (CEQA Guidelines Section 15308).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
Attachment: Exhibit A. Tier 2 Drought Response Plan and Example Tier 2 Plan Excel-Based Model
1
Redline Comparing 2021 Amended and Restated Water Supply Agreement and 2025 Proposed
Amendments: Section 3.07
21706153.3
3.07. Restrictions on Purchases of Water from Others; Minimum Annual Purchases
A. Each Wholesale Customer (except for Alameda County Water District and the cities
of Milpitas, Mountain View and Sunnyvale) agrees that it will not contract for, purchase or receive,
with or without compensation, directly or indirectly, from any person, corporation, governmental
agency or other entity, any water for delivery or use within its service area without the prior written
consent of San Francisco.
B. The prohibition in subsection A does not apply to:
1. recycled water;
2. water necessary on an emergency and temporary basis, provided that the
Wholesale Customer promptly gives San Francisco notice of the nature of the emergency, the
amount of water that has been or is to be purchased, and the expected duration of the emergency;
or
3.water in excess of a Wholesale Customer’s Individual Supply Guarantee.
C.Minimum Annual Purchase Quantities. Alameda County Water District and the
cities of Milpitas, Mountain View and Sunnyvale may purchase water from sources other than San
Francisco, provided that San Francisco shall require that each purchase a minimum annual
quantity of water from San Francisco. These Minimum Annual Purchase Quantities are set out in
Attachment E and shall also be included in the Individual Water Sales Contracts between San
Francisco and each of these four Wholesale Customers (collectively referred to as the Original
Minimum Purchase Customers). Pursuant to Section 3.04, certain Wholesale Customers may also
be required to purchase Temporary Modified Minimum Annual Purchase Quantities, set out in
Attachment E-1, from San Francisco. Attachment E will be updated pursuant to Section 3.04 to
reflect any reduction in existing Minimum Annual Purchase Quantities and any addition of new
Minimum Annual Purchase Quantities when Temporary Modified Minimum Annual Purchase
Quantities expire and are removed from Attachment E-1; Individual Water Sales Contracts
between San Francisco and any Wholesale Customers who are participants in a transfer under
Section 3.04 will similarly be amended, as necessary.
1. Annual Notice. 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 Minimum Annual Purchase Quantity, or a Temporary Modified
Minimum Annual Purchase Quantity with a copy to BAWSCA. The notice will include: (1
2
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(a) the quantity of water delivered to theeach of those Wholesale CustomerCustomers
individually and all of the Original Minimum Purchase Customers collectively during the
previous fiscal year; (
2
(b) each Wholesale Customer’s individual Minimum Annual Purchase Quantity or
Temporary Modified Minimum Annual Purchase Quantity (as adjusted for a Rebound Year,
if applicable, under Section 3.07.C.2);
) whether or not the Wholesale Customer met its minimum annual purchase requirement
under this section; (3
(c) whether or not each Wholesale Customer met its individual Minimum Annual Purchase
Quantity or Temporary Modified Minimum Annual Purchase Quantity (as adjusted for a
Rebound Year, if applicable);
(d) whether or not the Original Minimum Purchase Customers collectively purchased a
volume of water from San Francisco that is equal to or greater than the sum of their four
Minimum Annual Purchase Quantities (as adjusted for a Rebound Year, if applicable);
(e) any Imputed Sales charged to the Wholesale Customer;Customers; and (4
(f) the status of any Temporary Modified Minimum Annual Purchase QuantityQuantities of
the Wholesale Customer, if applicable. Customers.
C.2. Waiver and Rebound Year. The minimum annual purchase requirements set
out in Attachments E and E-1 will be waived during a Drought or other period of water shortage if
the water San Francisco makes available to these Wholesale Customers is less than itstheir
Minimum Annual Purchase QuantityQuantities or Temporary Modified Minimum Annual Purchase
Quantities, and may be waived during a state of emergency declared by the Governor of California
that impacts water supply use or deliveries from the Regional Water System. Once the waiver is
no longer in effect, each of the minimum annual purchase requirements set out in Attachments E
and E-1 shall be temporarily set, for one full fiscal year (referred to as the Rebound Year), to the
midpoint between (1) the Wholesale Customer’s actual San Francisco purchases for the final year
in which the waiver was in effect, up to a maximum of the Customer’s Minimum Annual Purchase
Quantity or Temporary Modified Minimum Annual Purchase Quantity, and (2) the Wholesale
Customer’s Minimum Annual Purchase Quantity or Temporary Modified Minimum Annual
Purchase Quantity set out in Attachment E or Attachment E-1, as applicable. Any fiscal year in
which a Wholesale Customer meets its Rebound Year-adjusted Temporary Modified Minimum
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Annual Purchase Quantity, but not its standard Temporary Modified Minimum Annual Purchase
Quantity, will not count as a fiscal year in which the Wholesale Customer has met or exceeded its
Temporary Modified Minimum Purchase Quantity for the purposes of Section 3.04.C(4)(a).
D. Minimum Annual Purchase Quantity Reset. As shown on Attachment E, in Fiscal
Year 2025-26, the Parties reset the then-existing Minimum Annual Purchase Quantities of the
Original Minimum Purchase Customers to 80% of the average San Francisco purchases of each
Customer over the four most recent non-drought years preceding Fiscal Year 2024-25, effective
for Fiscal Year 2024-25. If the Parties extend the Term of this Agreement beyond June 30, 2034
pursuant to Section 2.02, the Parties will review the Minimum Annual Purchase Quantities of the
Original Minimum Purchase Customers again ten years after the Fiscal Year 2025-26 reset. If the
Original Minimum Purchase Customers, or San Francisco, want to propose a reset of the Minimum
Annual Purchase Quantities for Fiscal Year 2035-36, they will provide written notice on or before
June 30, 2034. The Parties will meet and confer promptly to evaluate written reset proposals. By
November 30, 2035, if the Parties have come to an agreement, the SFPUC will calculate the
revised Minimum Annual Purchase Quantities based on the agreed upon methodology and provide
written notice to the Original Minimum Purchase Customers and BAWSCA. The Original Minimum
Purchase Customers will have at least 15 business days to review and meet and confer with the
SFPUC with any questions or concerns before the revised quantities are finalized. If the Parties
are unable to come to an agreement, the then-existing Minimum Annual Purchase Quantities will
remain unchanged. Any changes to the Minimum Annual Purchase Quantities under this Section
3.07.D will be reflected in a revised Attachment E approved with the written concurrence of San
Francisco and BAWSCA in accordance with Section 2.03.C. The Parties intend to include a
continuing, periodic review of the Minimum Annual Purchase Quantities on a ten-year schedule in
the successor to this Agreement.
E. Collective Minimum Annual Purchase Quantities Considered Before Application of
Imputed Sales. Imputed Sales will not apply to any of the individual Original Minimum Purchase
Customers in a particular fiscal year if those Customers have collectively purchased a volume of
water from San Francisco that is equal to or greater than the sum of their four Minimum Annual
Purchase Quantities shown in Attachment E (or adjusted for a Rebound Year pursuant to Section
3.07.C.2, if applicable). If the Original Minimum Purchase Customers do not collectively purchase
that sum, any Original Minimum Purchase Customer that has not met its standard or Rebound
Year-adjusted Minimum Annual Purchase Quantity will be responsible for Imputed Sales
proportional to its share of the difference between that sum and the Original Minimum Purchase
Customers’ total purchases from San Francisco. Examples of this calculation are contained in
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Attachment E-3.
21702335.2
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Proposed Amendments: Sections 2.03, 3.09, and 9.07, and Attachment A Definitions
2.03. Amendments.
C.Amendments to Attachments. The following attachments may be amended with the
written concurrence of San Francisco and BAWSCA on behalf of the Wholesale Customers:
Attachment Name
C Individual Supply Guarantees (amendments reflecting Section
3.04 transfers only)
E Minimum Annual Purchase Quantities (amendments reflecting
Section 3.04 transfers and Section 3.07 resets only)
E-1 Temporary Modified Minimum Annual Purchase Quantities
G Water Quality Notification and Communications Plan
(as may be amended)
J Water Use Measurement and Tabulation
L-1 Identification of WSIP Projects as Regional/Retail
N-1 Balancing Account/Rate Setting Calculation Table
N-2 Wholesale Revenue Requirement Schedules
N-3 Schedule of Projected Water Sales, Wholesale Revenue
Requirement and Wholesale Rates
P Management Representation Letter
R Classification of Existing System Assets (subject to Section
5.11)
Amendments to these attachments shall be approved on behalf of San Francisco by the
Commission and on behalf of BAWSCA by its Board of Directors, unless the Commission by
resolution delegates such authority to the General Manager of the SFPUC or the Board of
Directors by resolution delegates such authority to the General Manager/CEO of BAWSCA.
21702335.2
3.09. Completion of WSIP
San Francisco will complete construction of the physical facilities in the WSIP by
DecemberJune 30, 20212032. The SFPUC agrees to provide for full public review and
comment by local and state interests of any proposed changes that delay previously adopted
project completion dates or that delete projects. The SFPUC shall meet and consult with
BAWSCA before proposing to the Commission any changes in the scope of WSIP projects
which reduce their capacity or ability to achieve adopted Level of Service Goals and Objectives.
The SFPUC retains discretion to determine whether to approve the physical facilities in the
WSIP until after it completes the CEQA process as set forth in Section 4.07.
9.07. City of Brisbane, Guadalupe Valley Municipal Improvement District, Town of
Hillsborough
A. The parties acknowledge that San Francisco has heretofore provided certain
quantities of water to the City of Brisbane (“Brisbane”), Guadalupe Valley Municipal
Improvement District (“Guadalupe”) and the Town of Hillsborough (“Hillsborough”) at specified
rates or without charge pursuant to obligations arising out of agreements between the
predecessors of San Francisco and these parties, which agreements are referred to in judicial
orders, resolutions of the SFPUC and/or the 1960 contracts between San Francisco and
Brisbane, Guadalupe and Hillsborough. The parties intend to continue those arrangements and
accordingly agree as follows:
1. Nothing in this Agreement is intended to alter, amend or modify the terms
of SFPUC Resolution No. 74-06530053 or the indenture of July 18, 1908 between the
Guadalupe Development Company and the Spring Valley Water Company.
2. Nothing in this Agreement is intended to alter, amend or modify the
Findings of Fact and Conclusions of Law and Judgment dated May 25, 1961 in that certain
action entitled City and County of San Francisco v. Town of Hillsborough in the Superior Court
of the State of California in and for the County of Marin, No. 23282, as modified by the
Satisfaction of Judgment filed October 23, 1961 and the Compromise and Release between
Hillsborough and San Francisco dated August 22, 1961. The rights and obligations of
Hillsborough under these documents shall continue as therein set forth.
3. Nothing in this Agreement is intended to affect or prejudice any claims,
rights or remedies of Guadalupe or of Crocker Estate Company, a corporation, or of Crocker
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21702335.2
Land Company, a corporation, or of San Francisco, or of their successors and assigns,
respectively, with respect to or arising out of that certain deed dated May 22, 1884, from
Charles Crocker to Spring Valley Water Works, a corporation, recorded on May 24, 1884, in
Book 37 of Deeds at page 356, Records of San Mateo County, California, as amended by that
certain Deed of Exchange of Easements in Real Property and Agreement for Trade in
Connection Therewith, dated July 29, 1954, recorded on August 4, 1954, in Book 2628, at page
298, Official Records of said San Mateo County, or with respect to or arising out of that certain
action involving the validity or enforceability of certain provisions of said deed entitled City and
County of San Francisco v. Crocker Estate Company, in the Superior Court of the State of
California in and for the County of Marin, No. 23281.
Attachment A - Definitions
“Imputed Sales” apply when a Wholesale Customer does not meet the minimum annual
purchase requirements of Section 3.07.C, as shown on Attachment E and Attachment E-1,
except in fiscal years in which a waiver of these requirements is in effect. Imputed Sales are
calculated as the difference between (1) a Wholesale Customer’s metered water purchases
during a fiscal year, from July 1 to June 30, and (2) the larger of (a) or (b) as follows: (a) the
Wholesale Customer’s Minimum Annual Purchase Quantity, as specified in Attachment E and
may be adjusted pursuant to Section 3.07.C.2, or (b) the Wholesale Customer’s Temporary
Modified Minimum Annual Purchase Quantity, as specified in Attachment E-1. and may be
adjusted pursuant to Section 3.07.C.2. If a Wholesale Customer has more than one Temporary
Modified Minimum Annual Purchase Quantity, the largest quantity is used for calculating
Imputed Sales. Imputed Sales are considered wholesale water usage for the purposes of
calculating the Proportional Annual Use, and any fees charged for Imputed Sales are
considered wholesale revenues.
“Level of Service Goals and Objectives” refers to the “Phased WSIP Goals and Objectives”
adopted by the Commission in Resolution No. 08-0200 dated October 30, 2008 as part of the
approval of the WSIP, as updated and expanded by the "2023 Amended and Updated Water
Enterprise Level of Service Goals and Objectives," adopted by the Commission in Resolution
No. 23-0210 dated November 28, 2023, and any amendments that may be adopted by the
Commission.
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21715759.2
ATTACHMENT E
MINIMUM ANNUAL PURCHASE QUANTITIES
(Section 3.07.C)
AGENCY MINIMUM ANNUAL PURCHASE QUANTITY
(IN MGD)1
Alameda County Water District 7.6486.682
City of Milpitas 5.3414.371
City of Mountain View 8.9306.047
City of Sunnyvale 8.9307.412
1 In Fiscal Year (FY) 2025-26, the then-existing Minimum Annual Purchase Quantities for Alameda County Water
District and the Cities of Milpitas, Mountain View, and Sunnyvale were reset to 80% of each of those four customers’
average San Francisco purchases over the four non-drought years preceding FY 2024-25 (FY 2017-18, FY 2018-19,
FY 2019-20, and FY 2020-21), effective FY 2024-25. Prior to this reset, from the effective date of this Agreement
(July 1, 2009) through FY 2023-24, those four customers had the following Minimum Annual Purchase Quantities:
1. Alameda County Water District: 7.648 MGD
2. City of Milpitas: 5.341 MGD
3. City of Mountain View: 8.930 MGD
4. City of Sunnyvale: 8.930 MGD
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Amendment Attachment E
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ATTACHMENT H
WATER SHORTAGE ALLOCATION PLAN
This Interim Water Shortage Allocation Plan (“Plan"), also known as the Tier 1 Shortage Plan, describes
the method for allocating water between the San Francisco Public Utilities Commission (“SFPUC"), on
the one hand, and the Wholesale Customers collectively, on the other, during shortages caused by
drought. The Plan also implements a method for allocating water among the individual Wholesale
Customers, known as the Tier 2 Drought Response Implementation Plan (“Tier 2 Plan”), which has
separately been adopted by the Wholesale Customers and does not include the SFPUC. The Plan includes
provisions for transfers, banking, and excess use charges. The Plan applies only when the SFPUC
determines that a system-wide water shortage due to drought exists, and all references to “shortages” and
“water shortages” are to be so understood. This Plan was initially adopted pursuant to Section 7.03(a) of
the 1984 Settlement Agreement and Master Water Sales Contract and has been incorporated and updated
to correspond to the terminology used in the June 2009 Water Supply Agreement between the City and
County of San Francisco and Wholesale Customers in Alameda County, San Mateo County and Santa
Clara County (“Agreement”), as amended and restated from time to time.
SECTION 1. SHORTAGE CONDITIONS
1.1. Projected Available SFPUC Water Supply. The SFPUC shall make an annual determination as to
whether or not a shortage condition exists. The determination of projected available water supply shall
consider, among other things, stored water, projected runoff, water acquired by the SFPUC from non-
SFPUC sources, inactive storage, reservoir losses, allowance for carryover storage, and water bank
balances, if any, described in Section 3.
1.2 Projected SFPUC Customer Purchases. The SFPUC will utilize purchase data, including volumes
of water purchased by the Wholesale Customers and by Retail Customers (as those terms are used in the
Agreement) in the year immediately prior to the drought, along with other available relevant information,
as a basis for determining projected system-wide water purchases from the SFPUC for the upcoming
year.Supply Year (defined as the period from July 1 through June 30).
1.3. Shortage Conditions. The SFPUC will compare the projected available water supply (Section 1.1)
with projected system-wide water purchases (Section 1.2). A shortage condition exists if the SFPUC
determines that the projected available water supply is less than projected system-wide water purchases in
the upcoming Supply Year (defined as the period from July 1 through June 30).. When a shortage
condition exists, SFPUC will determine whether voluntary or mandatory actions will be required to
reduce purchases of SFPUC water to required levels.
1.3.1 Voluntary Response. If the SFPUC determines that voluntary actions will be sufficient to
accomplish the necessary reduction in water use throughout its service area, the SFPUC and the
Wholesale Customers will make good faith efforts to reduce their water purchases to stay within their
annual shortageTier 1 and Tier 2 allocations as applicable (see Section 2 of this Attachment H) and
associated monthly water use budgets. The SFPUC will not impose excess use charges during periods of
voluntary rationing, but may suspend the prospective accumulation of water bank credits, or impose a
ceiling on further accumulation of bank credits, consistent with Section 3.2.1 of this Plan.
1.3.2 Mandatory Response. If the SFPUC determines that mandatory actions will be required to
accomplish the necessary reduction in water use in the SFPUC service area, the SFPUC may implement
excess use charges as set forth in Section 4 of this Plan.
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1.4. Period of Shortage. A shortage period commences when the SFPUC determines that a water
shortage exists, as set forth in a declaration of water shortage emergency issued by the SFPUC pursuant to
California Water Code Sections 350 et seq. Termination of the water shortage emergency will be
declared by resolution of the SFPUC.
SECTION 2. SHORTAGE ALLOCATIONS
2.1. Annual Tier 1 Allocations between the SFPUC and the Wholesale Customers. The annual water
supply available during shortages will be allocated between the SFPUC and the collective Wholesale
Customers as follows:
Level of System Wide
Reduction in Water Use
Required
Share of Available Water
SFPUC Share Wholesale Customers Share
5% or less
6% through 10%
11% through 15%
16% through 20%
35.5%
36.0%
37.0%
37.5%
64.5%
64.0%
63.0%
62.5%
This Plan refers to the SFPUC’s and Wholesale Customers’ respective shares of available water so
established as the SFPUC’s and Wholesale Customers’ Tier 1 allocations. The water allocated to the
SFPUC shall correspond to the total allocation for all Retail Customers. In the event that the SFPUC
share of the available water supply in the above table results in Retail Customers having a positive
allocation (i.e., a supply of additional water rather than a required percentage reduction in water use), the
SFPUC’s percentage share of the available water supply in the table shall be reduced to eliminate any
positive allocation to Retail Customers, with a corresponding increase in the percentage share of the
available water supply allocated to the Wholesale Customers. For any level of required reduction in
system-wide water use during shortages, the SFPUC shall require Retail Customers to conserve a
minimum of 5%, with any resulting reallocated supply credited to storage for inclusion in calculation of
projected available water SFPUC water supply in a subsequent year (Section 1.1).
The parties agree to reevaluate the percentages of the available water supply allocated to Retail and
Wholesale Customers by May 1, 2028.
2.2 Annual Tier 2 Allocations among the Wholesale Customers. The annual water supply allocated to
the Wholesale Customers collectively during system wide shortages of 20 percent or less (i.e., the
Wholesale Customers’ Tier 1 allocation) will be apportioned among them based on a methodology,
known as the Tier 2 Plan, that has been separately adopted by all of the Wholesale Customers, and not the
SFPUC, as described in Section 3.11(C) of the Agreement. In any year for which the methodology must
be applied, the Bay Area Water Supply and Conservation Agency (“BAWSCA”) will calculate each
Wholesale Customer’s individual percentage share of the amount of water allocated to the Wholesale
Customers collectively pursuant to Section 2.1. Following the declaration or reconfirmation of a water
shortage emergency by the SFPUC, BAWSCA will deliver to the SFPUC General Manager a list, signed
by the President of BAWSCA’s Board of Directors and its General Manager, showing each Wholesale
Customer together with its percentage share and stating that the list has been prepared in accordance with
the methodology adopted by the Wholesale Customers. The SFPUC shall allocate water to each
Wholesale Customer, as specified in the list. The shortage allocations so established (known as Tier 2
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21606945.9
allocations) may be transferred as provided in Section 2.5 of this Plan. If BAWSCA or all Wholesale
Customers do not provide the SFPUC with individual allocations, the SFPUC may make a final allocation
decision after first meeting and discussing allocations with BAWSCA and the Wholesale Customers.
The Tier 2 Plan methodology adopted by the Wholesale Customers utilizes the rolling average of each
individual Wholesale Customer’s purchases from the SFPUC during the three immediately preceding
Supply Years. The SFPUC agrees to provide BAWSCA by November 1 of each year a list showing the
amount of water purchased by each Wholesale Customer during the immediately preceding Supply Year.
The list will be prepared using Customer Service Bureau report MGT440 (or comparable official record
in use at the time), adjusted as required for any reporting errors or omissions, and will be transmitted by
the SFPUC General Manager or his designee.
2.3. Limited Applicability of Plan to System Wide Shortages Greater Than Twenty Percent. The
Tier 1 allocations of water between the SFPUC and the Wholesale Customers collectively, provided for in
Section 2.1, apply only to shortages of 20 percent or less. The SFPUC and Wholesale Customers
recognize the possibility of a drought occurring which could create system-wide shortages greater than 20
percent despite actions taken by the SFPUC aimed at reducing the probability and severity of water
shortages in the SFPUC service area. If the SFPUC determines that a system wide water shortage greater
than 20 percent exists, the SFPUC and the Wholesale Customers agree to meet within 10 days and discuss
whether a change is required to the allocation set forth in Section 2.1 in order to mitigate undue hardships
that might otherwise be experienced by individual Wholesale Customers or Retail Customers. Following
these discussions, the Tier 1 water allocations set forth in Section 2.1 of this Plan, or a modified version
thereof, may be adopted by mutual written consent of the SFPUC and the Wholesale Customers. If the
SFPUC and Wholesale Customers meet and cannot agree on an appropriate Tier 1 allocation within 30
days of the SFPUC’s determination of water shortage greater than 20 percent, then (1) the provisions of
Section 3.11(C) of the Agreement will apply, unless (2) all of the Wholesale Customers direct in writing
that a Tier 2 allocation methodology agreed to by them be used to apportion the water to be made
available to the Wholesale Customers collectively, in lieu of the provisions of Section 3.11(C).
The provisions of this Plan relating to transfers (in Section 2.5), banking (in Section 3), and excess use
charges (in Section 4) shall continue to apply during system-wide shortages greater than 20 percent.
2.4. Monthly Water Budgets. Within 10 days after adopting a declaration of water shortage emergency,
the SFPUC will determine the amount of Tier 1 water allocated to the Wholesale Customers collectively
pursuant to Section 2.1. The SFPUC General Manager, using the Tier 2 allocation percentages shown on
the list delivered by BAWSCA pursuant to Section 2.2, will calculate each Wholesale Customer’s
individual annual Tier 2 allocation. The SFPUC General Manager, or his designee, will then provide
each Wholesale Customer with a proposed schedule of monthly water budgets based on the pattern of
monthly water purchases during the Supply Year immediately preceding the declaration of shortage (the
“Default Schedule”). Each Wholesale Customer may, within two weeks of receiving its Default
Schedule, provide the SFPUC with an alternative monthly water budget that reschedules its annual Tier 2
shortage allocation over the course of the succeeding Supply Year. If a Wholesale Customer does not
deliver an alternative monthly water budget to the SFPUC within two weeks of its receipt of the Default
Schedule, then its monthly budget for the ensuing Supply Year shall be the Default Schedule proposed by
the SFPUC.
Monthly Wholesale Customer water budgets will be derived from annual Tier 2 allocations for purposes
of accounting for excess use. Monthly Wholesale Customer water budgets shall be adjusted during the
year to account for transfers of shortage allocation under Section 2.5 and transfers of banked water under
Section 3.4.
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2.5. Transfers of Shortage Allocations. Voluntary transfers of shortage allocations between the SFPUC
and any Wholesale Customers, and between any Wholesale Customers, will be permitted using the same
procedure as that for transfers of banked water set forth in Section 3.4. The SFPUC and BAWSCA shall
be notified of each transfer. Transfers of shortage allocations shall be deemed to be an emergency
transfer and shall become effective on the third business day after notice of the transfer has been delivered
to the SFPUC. Transfers of shortage allocations shall be in compliance with Section 3.05 of the
Agreement. The transferring parties will meet with the SFPUC, if requested, to discuss any effect the
transfer may have on its operations.
SECTION 3. SHORTAGE WATER BANKING
3.1. Water Bank Accounts. The SFPUC shall create a water bank account for itself and each Wholesale
Customer during shortages in conjunction with its resale customer billing process. Bank accounts will
account for amounts of water that are either saved or used in excess of the shortage allocation for each
agency; the accounts are not used for tracking billings and payments. When a shortage period is in effect
(as defined in Section 1.4), the following provisions for bank credits, debits, and transfers shall be in
force. A statement of bank balance for each Wholesale Customer will be included with the SFPUC’s
monthly water bills.
3.2. Bank Account Credits. Each month, monthly purchases will be compared to the monthly budget
for that month. Any unused shortage allocation by an agency will be credited to that agency’s water bank
account. Credits will accumulate during the entire shortage period, subject to potential restrictions
imposed pursuant to Section 3.2.1. Credits remaining at the end of the shortage period will be zeroed out;
no financial or other credit shall be granted for banked water.
3.2.1. Maximum Balances. The SFPUC may suspend the prospective accumulation of credits in all
accounts. Alternatively, the SFPUC may impose a ceiling on further accumulation of credits in water
bank balances based on a uniform ratio of the bank balance to the annual water allocation. In making a
decision to suspend the prospective accumulation of water bank credits, the SFPUC shall consider the
available water supply as set forth in Section 1.1 of this Plan and other reasonable, relevant factors.
3.3. Account Debits. Each month, monthly purchases will be compared to the budget for that month.
Purchases in excess of monthly budgets will be debited against an agency’s water bank account. Bank
debits remaining at the end of the fiscal year will be subject to excess use charges (see Section 4).
3.4. Transfers of Banked Water. In addition to the transfers of shortage allocations provided for in
Section 2.5, voluntary transfers of banked water will also be permitted between the SFPUC and any
Wholesale Customer, and among the Wholesale Customers. The volume of transferred water will be
credited to the transferee’s water bank account and debited against the transferor’s water bank account.
The transferring parties must notify the SFPUC and BAWSCA of each transfer in writing (so that
adjustments can be made to bank accounts), and will meet with the SFPUC, if requested, to discuss any
affect the transfer may have on SFPUC operations. Transfers of banked water shall be deemed to be an
emergency transfer and shall become effective on the third business day after notice of the transfer has
been delivered to the SFPUC. If the SFPUC incurs extraordinary costs in implementing transfers, it will
give written notice to the transferring parties within ten (10) business days after receipt of notice of the
transfer. Extraordinary costs means additional costs directly attributable to accommodating transfers and
which are not incurred in non-drought years nor simply as a result of the shortage condition itself.
Extraordinary costs shall be calculated in accordance with the procedures in the Agreement and shall be
subject to the disclosure and auditing requirements in the Agreement. In the case of transfers between
Wholesale Customers, such extraordinary costs shall be considered to be expenses chargeable solely to
individual Wholesale Customers and shall be borne equally by the parties to the transfer. In the case of
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transfers between the SFPUC and a Wholesale Customer, the SFPUC’s share of any extraordinary
transfer costs shall not be added to the Wholesale Revenue Requirement.
3.4.1. Transfer Limitations. The agency transferring banked water will be allowed to transfer no more
than the accumulated balance in its bank. Transfers of estimated prospective banked credits and the
“overdrafting” of accounts shall not be permitted. The price of transfer water originally derived from the
SFPUC system is to be determined by the transferring parties and is not specified herein. Transfers of
banked water shall be in compliance with Section 3.05 of the Agreement.
SECTION 4. WHOLESALE EXCESS USE CHARGES
4.1. Amount of Excess Use Charges. Monthly excess use charges shall be determined by the SFPUC at
the time of the declared water shortage consistent with the calendar in Section 6 and in accordance with
Section 6.03 of the Agreement. The excess use charges will be in the form of multipliers applied to the
rate in effect at the time the excess use occurs. The same excess use charge multipliers shall apply to the
Wholesale Customers and all Retail Customers. The excess use charge multipliers apply only to the
charges for water delivered at the rate in effect at the time the excess use occurred.
4.2 Monitoring Suburban Water Use. During periods of voluntary rationing, water usage greater than
a customer’s allocation (as determined in Section 2) will be indicated on each SFPUC monthly water bill.
During periods of mandatory rationing, monthly and cumulative water usage greater than a Wholesale
Customer’s shortage allocation and the associated excess use charges will be indicated on each SFPUC
monthly water bill.
4.3. Suburban Excess Use Charge Payments. An annual reconciliation will be made of monthly
excess use charges according to the calendar in Section 6. Annual excess use charges will be calculated
by comparing total annual purchases for each Wholesale Customer with its annual shortage allocation (as
adjusted for transfers of shortage allocations and banked water, if any). Excess use charge payments by
those Wholesale Customers with net excess use will be paid according to the calendar in Section 6. The
SFPUC may dedicate excess use charges paid by Wholesale Customers toward the purchase of water
from the State Drought Water Bank or other willing sellers in order to provide additional water to the
Wholesale Customers. Excess use charges paid by the Wholesale Customers constitute Wholesale
Customer revenue and shall be included within the SFPUC's annual Wholesale Revenue Requirement
calculation.
4.4. Tier 1 Family Plan. During periods of mandatory rationing, the SFPUC will not assess excess use
charges on any of the Wholesale Customers if the Wholesale Customers’ collective cumulative purchases
over the course of the Supply Year are less than the Wholesale Customers’ Tier 1 allocation, as set forth
in Section 2.1. If the Wholesale Customers’ collective cumulative purchases exceed the Wholesale
Customers’ Tier 1 allocation, the SFPUC shall assess excess use charges on each individual Wholesale
Customer that exceeded its individual Tier 2 allocation (established in accordance with Section 2.2) over
the course of the Supply Year in proportion to each individual Wholesale Customer’s share of the
collective Wholesale Customers’ purchases that exceeded the Wholesale Customers’ Tier 1 allocation.
SECTION 5. GENERAL PROVISIONS GOVERNING WATER SHORTAGE
ALLOCATION PLAN
5.1. Construction of Terms. This Plan is for the sole benefit of the parties and shall not be construed as
granting rights to any person other than the parties or imposing obligations on a party to any person other
than another party.
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Amendments
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5.2. Governing Law. This Plan is made under and shall be governed by the laws of the State of
California.
5.3. Effect on Agreement. This Plan describes the method for allocating water between the SFPUC and
the collective Wholesale Customers during system-wide water shortages of 20 percent or less. This Plan
also provides for the SFPUC to allocate water among the Wholesale Customers in accordance with
directions provided by the Wholesale Customers through BAWSCA under Section 2.2, and to implement
a program by which such allocations may be voluntarily transferred among the Wholesale Customers.
The provisions of this Plan are intended to implement Section 3.11(C) of the Agreement and do not
affect, change or modify any other section, term or condition of the Agreement.
5.4. Inapplicability of Plan to Allocation of SFPUC System Water During Non-Shortage Periods.
The SFPUC’s agreement in this Plan to a respective share of SFPUC system water during years of
shortage shall not be construed to provide a basis for the allocation of water between the SFPUC and the
Wholesale Customers when no water shortage emergency exists.
5.5. Termination. This Plan shall expire at the end of the Term of the Agreement... The SFPUC and the
Wholesale Customers can mutually agree to revise or terminate this Plan prior to that date due to changes
in the water delivery capability of the SFPUC system, the acquisition of new water supplies, and other
factors affecting the availability of water from the SFPUC system during times of shortage.
SECTION 5. ALLOCATION CALENDAR
6.1. Annual Schedule. The annual schedule for the shortage allocation process is shown below. This
schedule may be changed by the SFPUC to facilitate implementation.
6.1.1
In All Years Target Dates
1.SFPUC delivers list of annual purchases by each Wholesale
Customer during the immediately preceding Supply Year
November 1
2.SFPUC meets with the Wholesale Customers and presents water
supply forecast for the following Supply Year
February
3.SFPUC issues initial estimate of available water supply February 1
4.SFPUC announces potential first year of drought (if applicable)February 1
5.SFPUC and Wholesale Customers meet upon request to exchange
information concerning water availability and projected system-
wide purchases
February 1-May 31
6.SFPUC issues revised estimate of available water supply, and
confirms continued potential shortage conditions, if applicable
March 1
7.SFPUC issues final estimate of available water supply April 15th or sooner if adequate
snow course measurement data
is available to form a robust
estimate on available water
supply for the coming year.
8.SFPUC determines amount of water available to Wholesale
Customers collectively
April 15th or sooner if adequate
snow course measurement data
is available to form a robust
estimate on available water
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Amendments
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21606945.9
supply for the coming year.
In Drought Years Target Dates
9.SFPUC formally declares the existence of water shortage
emergency (or end of water shortage emergency, if applicable)
under Water Code Sections 350 et. seq.
April 15-30
10.SFPUC declares the need for a voluntary or mandatory response April 15-30
11.BAWSCA submits calculation to SFPUC of individual Wholesale
Customers’ percentage shares of water allocated to Wholesale
Customers collectively
April 15- 30
12.SFPUC determines individual shortage allocations, based on
BAWSCA’s submittal of individual agency percentage shares to
SFPUC, and monthly water budgets (Default Schedule)
April 25—May 10
13.Wholesale Customers submit alternative monthly water budgets
(optional)
May 8-May 24
14.Final drought shortage allocations are issued for the Supply Year
beginning July 1 through June 30
June 1
15.Monthly water budgets become effective July 1
16.Excess use charges indicated on monthly Suburban bills August 1 (of the beginning
year) through June 30 (of the
succeeding year)
17.Excess use charges paid by Wholesale Customers for prior year August of the succeeding year
3.07. Restrictions on Purchases of Water from Others; Minimum Annual Purchases
A. Each Wholesale Customer (except for Alameda County Water District and the cities
of Milpitas, Mountain View and Sunnyvale) agrees that it will not contract for, purchase or receive,
B.The prohibition in subsection A does not apply to:
1.recycled water;
water necessary on an emergency and temporary basis, provided that the
Wholesale Customer promptly gives San Francisco notice of the nature of the emergency, the
amount of water that has been or is to be purchased, and the expected duration of the emergency;
3.water in excess of a Wholesale Customer’s Individual Supply Guarantee.
C.Minimum Annual Purchase Quantities. Alameda County Water District and the
cities of Milpitas, Mountain View and Sunnyvale may purchase water from sources other than San
1.Annual Notice. After the end of each fiscal year, the SFPUC will send a
written notice to each Wholesale Customer with a Minimum Annual Purchase Quantity, or a
21645394.91
(a) the quantity of water delivered to each of those Wholesale Customers individually and
(b) each Wholesale Customer’s individual Minimum Annual Purchase Quantity or
(c) whether or not each Wholesale Customer met its individual Minimum Annual Purchase
(d) whether or not the Original Minimum Purchase Customers collectively purchased a
(e) any Imputed Sales charged to the Wholesale Customers; and
(f) the status of any Temporary Modified Minimum Annual Purchase Quantities of the
2.Waiver and Rebound Year. The minimum annual purchase requirements set
out in Attachments E and E-1 will be waived during a Drought or other period of water shortage if
D.Minimum Annual Purchase Quantity Reset. As shown on Attachment E, in Fiscal
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Year 2025-26, the Parties reset the then-existing Minimum Annual Purchase Quantities of the
E.Collective Minimum Annual Purchase Quantities Considered Before Application of
Imputed Sales. Imputed Sales will not apply to any of the individual Original Minimum Purchase
21645394.93
Proposed 2025 Amended and Restated Water Supply Agreement: Sections 2.03, 3.09, and
2.03. Amendments.
C. Amendments to Attachments. The following attachments may be amended with the
written concurrence of San Francisco and BAWSCA on behalf of the Wholesale Customers:
Attachment Name
Individual Supply Guarantees (amendments reflecting Section
E Minimum Annual Purchase Quantities (amendments reflecting
E-1 Temporary Modified Minimum Annual Purchase Quantities
Water Quality Notification and Communications Plan
J Water Use Measurement and Tabulation
L-1 Identification of WSIP Projects as Regional/Retail
Schedule of Projected Water Sales, Wholesale Revenue
P Management Representation Letter
Classification of Existing System Assets (subject to Section
Amendments to these attachments shall be approved on behalf of San Francisco by the
21428629.4
3.09. Completion of WSIP
San Francisco will complete construction of the physical facilities in the WSIP by June
30, 2032. The SFPUC agrees to provide for full public review and comment by local and state
9.07. City of Brisbane, Guadalupe Valley Municipal Improvement District, Town of
A.The parties acknowledge that San Francisco has heretofore provided certain
quantities of water to the City of Brisbane (“Brisbane”), Guadalupe Valley Municipal
1.Nothing in this Agreement is intended to alter, amend or modify the terms
of SFPUC Resolution No. 74-0053 or the indenture of July 18, 1908 between the Guadalupe
2.Nothing in this Agreement is intended to alter, amend or modify the
Findings of Fact and Conclusions of Law and Judgment dated May 25, 1961 in that certain
3.Nothing in this Agreement is intended to affect or prejudice any claims,
rights or remedies of Guadalupe or of Crocker Estate Company, a corporation, or of Crocker
21428629.4
Land Company, a corporation, or of San Francisco, or of their successors and assigns,
Attachment A - Definitions
“Imputed Sales” apply when a Wholesale Customer does not meet the minimum annual
“Level of Service Goals and Objectives” refers to the “Phased WSIP Goals and Objectives”
21428629.4
ATTACHMENT E
MINIMUM ANNUAL PURCHASE QUANTITIES
AGENCY MINIMUM ANNUAL PURCHASE QUANTITY
(IN MGD)1
Alameda County Water District 6.682
City of Mountain View
1 In Fiscal Year (FY) 2025-26, the then-existing Minimum Annual Purchase Quantities for Alameda County Water
2. City of Milpitas: 5.341 MGD
21464591.6
ATTACHMENT E-3
21464584.11
ATTACHMENT E-3
Illustrations of Imputed Sales Considering Collective Regional Water System Use
Scenario 1: Collective Purchases Equal to or Greater Than Sum of MAPQs1 (No Imputed Sales)2
E = (D[LINE #]
A B C D A5)
RWS
Over
MAPQ
(mgd)
RWS
Under
MAPQ
(mgd)
Proportion of
RWS3
Use
(mgd)
Line
Wholesale Customer MAPQ
1 Alameda County Water District 6.682 7.682
3.871
5.047
7.912
24.512
1.00 N/A
N/A
2
5
City of Milpitas
Total
4.371
6.047
7.412
24.512
-0.50
0.50
1.50 -1.50
Scenario 2: Collective Purchases Less Than Sum of MAPQs (by 1.0 mgd) (Imputed Sales)4
E = (D[LINE #]
A B C D
RWS
Over
MAPQ
(mgd)
RWS Proportion of
RWS
Use
(mgd)
Under
Line
Wholesale Customer MAPQ
1 Alameda County Water District 6.682 7.182
3.871
4.547
7.912
23.512
0.50 N/A
-0.25
-0.75
N/A
2
5
City of Milpitas
Total
4.371
6.047
7.412
24.512
-0.50
-1.50
0.50
1.00 -2.00 -1.0
1 Minimum Annual Purchase Quantity (MAPQ)
2 In Scenario 1, the Original Minimum Purchase Customers’ collective purchases from San Francisco in a particular
3 Regional Water System (RWS)
4 In Scenario 2, the Original Minimum Purchase Customers’ collective purchases from San Francisco in a particular
21464584.11
Scenario 3: Collective Purchases Equal to or Greater Than Sum of MAPQs – with Rebound Year-Adjusted MAPQs (No Imputed Sales)5
C = A -
((A[LINE #] -G = (F[LINE #] /
A B B[LINE #]) / 2)D E F F5) × (D5 - C5)
RWS Over
Rebound
Year-
Adjusted
MAPQ (mgd) MAPQ (mgd)
RWS Under Proportion of
Use Under
Total Rebound
Year-Adjusted
MAPQ (mgd)
RWS Use Rebound
in Waiver’s Year-Adjusted RWS Use Adjusted
Line #Wholesale Customer MAPQ MAPQ (mgd)
1 Alameda County Water District 6.682 5.682 6.182 7.512 1.33 N/A
N/A
2
5
City of Milpitas
Total
4.371
6.047
7.412
24.512
3.371
5.047
6.412
20.512
3.871
5.547
6.912
22.512
3.591
4.847
7.782
23.732
-0.28
-0.70
0.87
2.20 -0.98
5 In Scenario 3, the Original Minimum Purchase Customers’ collective purchases from San Francisco in a particular fiscal year (Line 5D) are greater than the sum
21464584.11
ATTACHMENT H
WATER SHORTAGE ALLOCATION PLAN
This Water Shortage Allocation Plan (“Plan”), also known as the Tier 1 Shortage Plan, describes the
SECTION 1. SHORTAGE CONDITIONS
1.1. Projected Available SFPUC Water Supply. The SFPUC shall make an annual determination as to
1.2 Projected SFPUC Customer Purchases. The SFPUC will utilize purchase data, including volumes
1.3. Shortage Conditions. The SFPUC will compare the projected available water supply (Section 1.1)
1.3.1 Voluntary Response. If the SFPUC determines that voluntary actions will be sufficient to
1.3.2 Mandatory Response. If the SFPUC determines that mandatory actions will be required to
1.4. Period of Shortage. A shortage period commences when the SFPUC determines that a water
1
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California Water Code Sections 350 et seq. Termination of the water shortage emergency will be
SECTION 2. SHORTAGE ALLOCATIONS
2.1. Annual Tier 1 Allocations between the SFPUC and the Wholesale Customers. The annual water
Level of System Wide Share of Available Water
SFPUC Share Wholesale Customers Share
5% or less 35.5%64.5%
6% through 10%
This Plan refers to the SFPUC’s and Wholesale Customers’ respective shares of available water so
The parties agree to reevaluate the percentages of the available water supply allocated to Retail and
2.2 Annual Tier 2 Allocations among the Wholesale Customers. The annual water supply allocated to
2
21606945.9
The Tier 2 Plan methodology adopted by the Wholesale Customers utilizes the rolling average of each
2.3. Limited Applicability of Plan to System Wide Shortages Greater Than Twenty Percent. The
The provisions of this Plan relating to transfers (in Section 2.5), banking (in Section 3), and excess use
2.4. Monthly Water Budgets. Within 10 days after adopting a declaration of water shortage emergency,
Monthly Wholesale Customer water budgets will be derived from annual Tier 2 allocations for purposes
2.5. Transfers of Shortage Allocations. Voluntary transfers of shortage allocations between the SFPUC
3
21606945.9
Agreement. The transferring parties will meet with the SFPUC, if requested, to discuss any effect the
SECTION 3. SHORTAGE WATER BANKING
3.1. Water Bank Accounts. The SFPUC shall create a water bank account for itself and each Wholesale
3.2. Bank Account Credits. Each month, monthly purchases will be compared to the monthly budget
3.2.1. Maximum Balances. The SFPUC may suspend the prospective accumulation of credits in all
3.3. Account Debits. Each month, monthly purchases will be compared to the budget for that month.
.
3.4. Transfers of Banked Water. In addition to the transfers of shortage allocations provided for in
3.4.1. Transfer Limitations. The agency transferring banked water will be allowed to transfer no more
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21606945.9
SECTION 4. WHOLESALE EXCESS USE CHARGES
4.1. Amount of Excess Use Charges. Monthly excess use charges shall be determined by the SFPUC at
4.2 Monitoring Suburban Water Use. During periods of voluntary rationing, water usage greater than
4.3. Suburban Excess Use Charge Payments. An annual reconciliation will be made of monthly
4.4. Tier 1 Family Plan. During periods of mandatory rationing, the SFPUC will not assess excess use
SECTION 5. GENERAL PROVISIONS GOVERNING WATER SHORTAGE
5.1. Construction of Terms. This Plan is for the sole benefit of the parties and shall not be construed as
5.2. Governing Law. This Plan is made under and shall be governed by the laws of the State of
5.3. Effect on Agreement. This Plan describes the method for allocating water between the SFPUC and
5
21606945.9
5.4. Inapplicability of Plan to Allocation of SFPUC System Water During Non-Shortage Periods.
The SFPUC’s agreement in this Plan to a respective share of SFPUC system water during years of
shortage shall not be construed to provide a basis for the allocation of water between the SFPUC and the
Wholesale Customers when no water shortage emergency exists.
5.5. Termination. This Plan shall expire at the end of the Term of the Agreement. The SFPUC and the
SECTION 6. ALLOCATION CALENDAR
6.1. Annual Schedule. The annual schedule for the shortage allocation process is shown below. This
6.1.1
In All Years Target Dates
1. SFPUC delivers list of annual purchases by each Wholesale November 1
2. SFPUC meets with the Wholesale Customers and presents water February
3. SFPUC issues initial estimate of available water supply February 1
4. SFPUC announces potential first year of drought (if applicable)February 1
5. SFPUC and Wholesale Customers meet upon request to exchange February 1-May 31
6. SFPUC issues revised estimate of available water supply, and March 1
7. SFPUC issues final estimate of available water supply April 15th or sooner if adequate
8. SFPUC determines amount of water available to Wholesale April 15th or sooner if adequate
In Drought Years Target Dates
9. SFPUC formally declares the existence of water shortage April 15-30
10. SFPUC declares the need for a voluntary or mandatory response April 15-30
11. BAWSCA submits calculation to SFPUC of individual Wholesale
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21606945.9
12. SFPUC determines individual shortage allocations, based on April 25—May 10
13. Wholesale Customers submit alternative monthly water budgets May 8-May 24
14. Final drought shortage allocations are issued for the Supply Year
15. Monthly water budgets become effective July 1
16. Excess use charges indicated on monthly Suburban bills August 1 (of the beginning
17. Excess use charges paid by Wholesale Customers for prior year August of the succeeding year
7
21606945.9
June 4, 2025 www.cityofpaloalto.org
Recommendation to Approve Resolutions Amending the Water Supply Agreement and Approving the Updated Tier 2 Drought Allocation Implementation Plan
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Agenda
•Overview of the Water Supply Agreement between San Francisco and the Wholesale Customers (WSA)
•Proposed Amendments to the WSA
•Minimum Purchase Requirement Modifications
•Tier 1 Water Shortage Allocation Plan Modification (How water is allocated between San Francisco and the Wholesale Customers)
•Proposed Tier 2 Drought Allocation Implementation Plan (How water is allocated among the Wholesale Customers)
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Key Elements of the Water Supply
Agreement Between San Francisco and the
Wholesale Customers (WSA)
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Proposed Amendment to the
Water Supply Agreement (WSA)
Modifies Minimum Purchase Requirement
(Section 3.07c)
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Intended to ensure Wholesale Customers with access to other
purchased water do not shift purchases away from the
Regional Water System causing rates to increase
Applies to cities of Mountain View, Milpitas, Sunnyvale and
Alameda County Water Agency
Minimum purchase quantities (MPQs) assigned in 1984
Settlement Agreement based on actual water purchase
volumes
MPQs last adjusted as part of 2009 WSA
MPQ does not apply during droughts
Minimum Purchase Requirement
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Minimum Purchase Amendment has Three
Simple Elements
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Minimum Purchase Requirement
Amendment Impacts
$0.007 to $0.040 per ccf cost increase (0.13% to 0.72% rate increase) shared by All BAWSCA Agencies and SFPUC Retail Customers
Considerations
•Removes disincentive for RWQCP partner Mountain View to expand recycled water distribution which helps meet discharge requirements
•May delay regional alternative water supply projects (partially paid for by Palo Alto)
• Ensuring our neighbors aren't charged for unused water exhibits good regional citizenship
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Proposed Amendment to the
Water Supply Agreement (WSA)
Modifies Tier 1 Water Shortage
Allocation Plan
(Attachment H in the WSA)
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Shortages on the Regional Water System
(RWS) are Governed by Two Plans
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Tier 1 Family Plan
•New element agreed to by SFPUC
•In mandatory cutback conditions, excess use
charges will not be applied if the Wholesale
Customers collectively are below the Tier 1
allocation
•If not collectively below Tier 1 allocation, excess
use charges will be applied proportional to each
agency’s share of over-usage (no change from
current)
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Proposed Updated Tier 2
Drought Allocation
Implementation Plan
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Applies during water supply shortages
Current formula expired in 2019
Series of 1-year extensions
Tier 2
Negotiated among the agencies
BAWSCA Board is default decision maker
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Tier 2 Policy Principles
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Palo Alto Customer Will Experience Same
Water Use Restrictions with New Tier 2 Plan
Notes: Actual Cutbacks May Vary ≈ +/- 2%;
Water Shortage Stage II: 11% - 20%, Stage III: 21% - 30%
Wholesale
Customer Cutback Palo Alto Cutback and Water Shortage Stage
20%Old Formula: 16%
New Formula: 18%
25%Old Formula: 22%
New Formula: 28%
Stage II – moderate shortage (e.g., application of potable water
to driveways and sidewalks prohibited)
Stage III – severe shortage (e.g., restricts watering days of the week)
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The Utilities Advisory Commission recommends Council
approve two resolutions amending the Amended and
Restated Water Supply Agreement Between the City of County
of San Francisco and Wholesale Customers in Alameda County,
San Mateo County, and Santa Clara County and Approving an
updated Tier 2 Drought Response Implementation Plan
Alternatives re Tier 2:
If Palo Alto (or any BAWSCA member agency) does not approve the proposed plan, BAWSCA
Board could approve a new Tier 2 formula
If BAWSCA Board takes no action or cannot agree, SFPUC will determine a Tier 2 formula
Recommended Motion