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Home My WebLink AboutStaff Report 2509-5258CITY OF PALO ALTO CITY COUNCIL Monday, October 20, 2025 Council Chambers & Hybrid 5:30 PM Agenda Item A.Informational Report on the City of Palo Alto One Water Plan and Associated Letter from the Utilities Advisory Commission for Future Water Supply and Conservation Planning Purposes; CEQA Status – Not a Project City Council Staff Report From: City Manager Report Type: INFORMATION REPORTS Lead Department: Utilities Meeting Date: October 20, 2025 Report #:2509-5258 TITLE Informational Report on the City of Palo Alto One Water Plan and Associated Letter from the Utilities Advisory Commission for Future Water Supply and Conservation Planning Purposes; CEQA Status – Not a Project RECOMMENDATION This report is provided for information only and requires no Council action. This report was reviewed by both the City Council Climate Action & Sustainability Ad Hoc Committee and Utilities Advisory Commission. EXECUTIVE SUMMARY The One Water Plan 1 (OWP) presents a framework for evaluating water supply and water conservation alternative portfolios that may mitigate the impact of future water supply uncertainties such as severe multi-year drought, changes in climate, water demand, and regulations. Transmission of the report completes a key action in the Sustainability and Climate Action Plan (S/CAP) Update to develop a plan for implementing a One Water portfolio, a water supply plan that will analyze the City’s potential water supply priorities and conservation opportunities. Specifically, development of this report completed one goal and one key action in the Council-approved 2022 Sustainability and Climate Action Plan. • Goal: Develop a water supply portfolio which is resilient to droughts, changes in climate, and water demand and regulations, that supports our urban canopy. • Key Action W4: Develop a tool for dynamic water planning in the future. The Utilities Advisory Commission (UAC) unanimously voted to forward a letter to the City Council (Attachment A) offering additional context on water supply and conservation planning. The letter was intended to accompany the transmittal of the plan—not as a request for acceptance or approval, but for Council to receive it as informational. The Climate Action and Sustainability Committee (CASC) received both the report and the UAC letter for staff’s use as a 1 One Water Plan https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=c42ee7f3-8caf-4c48- 99e3-57bb8e437775 framework for evaluating future projects considering, where appropriate, the opinions expressed in the UAC’s letter. After discussing the plan and the UAC’s concerns, the CASC voted unanimously to receive the One Water Plan and forward for City Council information. OWP provides an adaptive tool to aid in evaluation of future projects or actions. Such future projects or actions may be implemented by Palo Alto or, more likely, through regional partnerships. One Water Plan Summary: The OWP compares potential water supply and conservation portfolios using the City’s weighted criteria, offering an initial analysis of alternatives and a framework to support future Council decisions on which project types to explore further. A key product of the OWP effort is the excel-based tool which may be used to adjust its overall water supply strategy as the future unfolds, conditions change, and uncertainties are resolved. Assumptions that may be adjusted in the tool include water demand, project costs, and expected supply reductions during droughts or other events. The weighting or scoring methodology may be modified as well. The OWP water supply and conservation options and the resulting portfolios that scored highest, given the rough cost estimates and evaluation criteria, include: • Portfolio A – Baseline: Existing potable water supply from the Hetch Hetchy Regional Water System (RWS); • Portfolio B: Baseline with enhanced water conservation; • Portfolio C: Baseline with enhanced conservation plus desalinization; • Portfolio D: Baseline with enhanced conservation plus groundwater; • Portfolio E: Baseline with enhanced conservation plus Palo Alto-operated Direct Potable Reuse (DPR); • Portfolio F: Baseline with enhanced conservation plus Palo Alto-operated Indirect Potable Reuse (IPR); and • Portfolio G: Baseline with enhanced conservation Regional DPR. Before the Council approves any water supply or conservation project, further project-specific studies and analyses will be required to assess the need for additional supplies or conservation, as well as to evaluate project feasibility, including detailed cost estimates and potential funding sources. To support this future evaluation and refinement, the One Water Plan (OWP) includes a comparative scoring of the portfolios. BACKGROUND In June 2022, Council approved a contract with Carollo Engineers to develop the OWP (Staﬀ Report 134342). City staﬀ from the Public Works and Utilities Departments closely collaborated and worked with the consulting team to develop the attached OWP. One of the City Council’s priorities for 2024 was Climate Change and Natural Environment – Protection and Adaptation. The attached OWP fulfills a key action in the City’s Sustainability and Climate Action Plan (S/CAP) and identifies an evaluation framework for water supply and conservation projects as well as possible project alternatives for meeting the community’s water needs in the future. Palo Alto’s Sustainability and Climate Action Plan (S/CAP) was completed in 2023, and it includes two water-specific goals: 1. Reduce Palo Alto’s potable water consumption by 30% compared to a 1990 baseline (subject to refinement based on forthcoming California water efficiency standards expected in 2025). 2. Develop a water supply portfolio which is resilient to droughts, changes in climate, and water demand and regulations, that supports the City’s urban canopy. Two of the key actions supporting these goals are satisfied by the OWP: 1) Develop and implement projects that result from a “One Water” portfolio of alternative water supply and water conservation options for Palo Alto, including but not limited to: stormwater, recycled water, on-site-reuse, conservation and groundwater, and 2) develop a tool for dynamic water planning in the future. “One Water" is an integrated approach to water management that views all forms of water – imported water, groundwater, wastewater, stormwater, water conservation and efficiency and more-- as interconnected resources. The primary purpose of the OWP for the City of Palo Alto is to provide a 20-year adaptable roadmap of prioritized alternatives, organized into water supply portfolios, and a project evaluation tool, to guide decision-making around the City’s water supply and conservation goals. ANALYSIS The OWP provides a comprehensive list of water supply and water conservation options (“options”) considered, including input from stakeholders. The list of 27 options was sorted into three “buckets”. Bucket 1 - Ongoing or Already Planned • Planned/ongoing conservation • Advanced metering program • Distribution system water loss reduction 2 Staff Report 13434 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=81683 Bucket 2 - Not Currently Feasible (due to cost or lack of partnership interest) • Indirect potable reuse at Lake Lagunita (groundwater recharge using puriﬁed water) • Blackwater capture and reuse • Valley water treated water via a new pipeline • Interagency transfer agreements • Tuolumne River purchases • Atmospheric water generators • Local surface water reservoir • Temporary dewatering sites (basement construction) • Permanent dewatering (as a way to increase the volume of other reuse options) Bucket 3 – Selected to be Included in the Screening Process • Regional Water System supply (current potable water supply) • Enhanced conservation • Next-level enhanced conservation • Groundwater • City park irrigation with groundwater • Direct potable reuse of puriﬁed water via a Palo Alto facility • Direct potable reuse of puriﬁed water via a Palo Alto facility and utilizing the new salt removal equipment at the Regional Water Quality Control Plant • Direct potable reuse of puriﬁed water via a regional facility • Indirect potable reuse via groundwater injection of puriﬁed water • Expanded distribution of non-potable water (recycled water to Stanford Research Park and customers in the foothills) • Greywater capture and reuse • Residential rainwater capture • Green Stormwater Infrastructure • Multi-source storage including stormwater detention • Desalination of bay water The OWP analyzed this initial list of options in a high-level pre-screening process that resulted in 15 remaining options. The One Water Plan (OWP) applied three initial screening criteria to the 15 options, narrowing the list to nine. For these nine options, the OWP developed planning- level cost estimates and conducted a comprehensive evaluation using four criteria, which included unit cost and several non-cost factors. The OWP then assembled seven water supply and water conservation portfolios (“Portfolios”) named Portfolio A through Portfolio G that include groups of top scoring options. The following is a list and a brief description of the seven portfolios. Portfolio Descriptions • Portfolio A – Baseline: Portfolio A represents the baseline portfolio which is the City’s existing potable water supply from the Hetch Hetchy Regional Water System (RWS) and serves as the benchmark for comparing other potential portfolios. • Portfolio B – Enhanced Conservation Phase 1 and 2: Portfolio B builds on Portfolio A with the addition of Enhanced Conservation Phase 1 and Phase 2, each encompassing a series of targeted water conservation measures. Enhanced Conservation Phase 1 includes measures that are easier and less costly to implement while Enhanced Conservation Phase 2 consists of more challenging and more costly measures. Table 1 shows the difference between conservation measures already planned for implementation and the Enhanced Conservation measures contemplated in this OWP. Table 1: Ongoing and Planned Conservation versus Enhanced Conservation Phases 1 and 2 Each portfolio C through G includes Enhanced Conservation Phase 1 and Phase 2 measures, plus one local water supply infrastructure project, with the remainder of the water supplied by the RWS. • Portfolio C adds a Bay Water Desalination plant that would supply 4,480 acre feet per year of water during a normal year. • Portfolio D adds groundwater. Under this portfolio, the City would equip two of the existing emergency groundwater supply wells with treatment facilities and convert these from emergency supply to regular potable use. The wells would provide 2,250 acre feet (af) per year of water supply during a normal year. Notably, Valley Water’s 10-year projection anticipates that the groundwater production charge will more than double from the 2023 rate of $1,724/af to $4,147/af by 2032, reflecting approximately 9.5 percent annual escalation. Valley Water expects this increase to primarily pay for critical capital program needs including water treatment plant upgrades and dam seismic retrofit work. For reference, SFPUC’s expected rate in 2032, assumed in the OWP, is $2,630/af. • Portfolio E adds a Palo Alto Direct Potable Reuse (DPR) facility that would supply 4,723 acre feet per year of water during a normal year. • Portfolio F adds a Palo Alto Indirect Potable Reuse (IPR) water puriﬁcation facility with groundwater injection wells. This Indirect Potable Reuse facility would supply 5,150 acre feet per year of water supply during a normal year. • Portfolio G adds a Regional DPR water puriﬁcation facility constructed by Valley Water and located in Palo Alto instead of a dedicated Palo Alto DPR facility. The estimated water supply from this facility for Palo Alto is 1,769 acre feet per year during a normal year. Figure 1 illustrates the water supply and demand for each portfolio during a normal year in 2045. Figure 1: Normal Year Supply and Demand Analysis by Portfolio in 2045 The OWP calculates a weighted average unit cost for each portfolio considering the volume of supply from each water supply source during a normal year. Table 1 shows the weighted average unit cost for each portfolio in 2023 dollars and 2045 dollars. The cost estimates are planning-level or order-of- magnitude cost estimates with a typical estimating accuracy of -50% to +100% due to limited level of project information often coupled with significant uncertainties at this planning stage. The weighted average unit costs are calculated based upon these cost estimates and are not rounded for consistency across the OWP and appendices. Table 2 – Estimated Weighted Average Unit Cost of Water for Portfolio A through Portfolio G Portfolio Name Est. Weighted Avg Unit Cost ($/Acre Foot) 2023 Dollars 2045 Dollars Portfolio A – Baseline $2,210 $4,088 Portfolio B – Enhanced Conservation Phase 1 and 2 $2,075 $3,093 Portfolio C – Enhanced Conservation Phase 1 and 2 with Bay Water Desalination $3,854 $6,663 Portfolio D – Enhanced Conservation Phase 1 and 2 with Groundwater $2,556 $5,330 Portfolio E – Enhanced Conservation Phase 1 and 2 with Palo Alto DPR $2,645 $4,938 Portfolio F – Enhanced Conservation Phase 1 and 2 with Palo Alto IPR $3,323 $6,440 Portfolio G – Enhanced Conservation Phase 1 and 2 with Regional DPR $2,355 $4,552 Eﬄuent Transfer Agreement In 2019, Council approved an Eﬄuent Transfer Agreement with Valley Water and the City of Mountain View Staﬀ Report #10627.3 This 76-year agreement enables an eﬄuent transfer from the Regional Water Quality Control Plant (RWQCP) to Valley Water to be reused in Santa Clara County, likely south of Mountain View. Valley Water has the option to exercise an eﬄuent transfer within 13 years. A Council study session with Valley Water on September 12, 2022 provides updated information Staﬀ Report #14650.4 The governing bodies of Palo Alto, Mountain View and Valley Water have established policy goals for long-term sustainability, including expanding use of recycled water. The RWQCP is a local source of drought-proof, sustainable water. This agreement aims to promote regional collaboration to advance resilient water reuse programs in Santa Clara County. Some of the OWP portfolios depend on Valley Water not exercising the effluent transfer option, which would ensure there is sufficient treated effluent volume available for constructing local reuse facilities in Palo Alto. Those portfolios are Portfolio E – Enhanced Conservation Phase 1 and 2 with Palo Alto DPR, and Portfolio F – Enhanced Conservation Phase 1 and 2 with Palo Alto IPR. Portfolio G is only feasible if Valley Water exercises the eﬄuent transfer option and decides to build a Regional DPR facility located in Palo Alto. Figure 2 summarizes the dependencies of OWP portfolios on the eﬄuent transfer decision. Weighted Evaluation Criteria Portfolio Scores Unit cost was only one of several evaluation criteria used. The One Water Plan (OWP) also scored the options based on factors such as reliability, environmental beneﬁts, and ease of implementation. Table 2 presents the rankings for each portfolio, reﬂecting the weighted results 3 Staff Report 10627 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/year-archive/2019/id-10627-mini-packet-11182019.pdf?t=60382.02 4Staff Report 14650 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82012 of both cost and non-cost criteria. If Valley Water does not exercise its option to transfer a portion of RWQCP treated eﬄuent, the most cost eﬀective and beneﬁcial option to add to the enhanced water conservation options is the Palo Alto DPR Facility, in Portfolio E. This portfolio’s overall weighted criteria score is 3.43, the highest score of any portfolio, as shown in Table 2. If Valley Water exercises its option to transfer a portion of RWQCP treated eﬄuent, the most cost- eﬀective and beneﬁcial option to add to the enhanced water conservation options is the Regional DPR facility as combined in Portfolio G. The overall weighted criteria score of this portfolio is 3.06 as shown in Table 2. The baseline portfolio scores the lowest of all the portfolios using the weighted criteria Table 3 - Evaluation Results - Weighted Criteria Scores By Portfolio Weight Baseline Conservation Phase 1 and 2 Conservation with Bay Water Desalination Conservation with Groundwater Conservation with Palo Alto DPR Conservation with Palo Alto IPR Conservation with Regional DPR Portfolio Weighted Unit Cost in 2045 ($/AF) - - $4,088 $3,903 $6,663 $5,330 $4,938 $6,440 $4,552 Year - - 2025 2025 2035 2025/2030 2035 2030 2040 Unit Cost 20% 0.95 1.00 0.20 0.59 0.70 0.26 0.81 Reliability 35% 0.35 0.60 1.43 0.85 1.39 1.37 0.90 Benefits Efficient Use of Water Tuolumne Ease of Implementation Implementation Timeline Acceptance Total 100% 2.55 2.91 2.91 2.78 3.43 2.99 3.06 Notes: (1) Based on estimated year 2045. (2) Portfolio G (Enhanced Conservation with Regional DPR) assumes that Valley Water does exercise its option to transfer a portion of RWQCP treated effluent (selected “Yes” in the Tool). All other portfolios assume that Valley Water does not exercise its option (selected “No” in the Tool). (3) The weighted criteria scores are normalized to a scale of 1-5. Portfolio Evaluation Summary Figure 2 compares the portfolios’ dependency on the Valley Water Transfer option decision. Figure 2. Portfolio Results and Dependence on Valley Water Option to Transfer Decision Sensitivity Analysis The One Water Plan (OWP) includes a sensitivity analysis to assess how the findings might change under different weightings of the evaluation criteria. The flexibility of the tool enables staff to perform additional sensitivity analyses to assess how findings change as cutback and demand assumptions are adjusted in the future. Key findings from the sensitivity analysis are: • Portfolio E (Enhanced Conservation + Palo Alto DPR) is the top-performing option if Valley Water does not exercise its effluent transfer option, even when evaluation criteria weights (cost, reliability, etc.) are adjusted. The only exception is when unit cost is heavily prioritized, in which case Portfolio B (Enhanced Conservation only) ranks highest. • If Valley Water does exercise the effluent transfer option, Portfolio G (Enhanced Conservation + Regional DPR) becomes the highest-scoring infrastructure portfolio. However, Portfolio B or Portfolio C (with Bay Water Desalination) may outperform it depending on how cost or reliability are weighted. Events that May Trigger Revisiting One Water Planning in the Future While staff is not recommending any action or decision at this time, revisiting the One Water planning framework may be appropriate in the future. Some of the conditions that may warrant a re-evaluation of the City’s water supply portfolio include the following. • 2027: SFPUC updated Alternative Water Supply Plan • 2032: Valley Water decision regarding option to transfer effluent from RWQCP for south Santa Clara County uses • State decision regarding Bay Delta Plan implementation • Other events or conditions affecting water supply reliability or cost • New water supply technologies or regional partnership opportunities FISCAL/RESOURCE IMPACT This report is informational only with no financial resource impact . The OWP, cost estimates, and Evaluation Tool along with considerations raised in the UAC’s letter provide an adaptable roadmap for the City’s water strategy. To illustrate the potential rate impacts for water utility customers stemming from the various portfolios in the OWP, staff utilized the projected weighted unit costs for each portfolio in FY 2045 as the basis for Palo Alto's water purchase costs. This was coupled with an assumed average annual rate increase of 6% for the distribution system. All other assumptions are the same as outlined in the OWP. This analysis does not take into consideration other unexpected costs that may impact the cost of water and does not consider sensitivities to demand changes. This analysis is for illustration purposes only, and provides an approximation of the relative rate impact of different portfolio average unit costs (from Table 1) under the assumptions stated in the OWP. For reference, under Palo Alto’s current rates in FY 2025, a residential monthly bill at 9 CCF of water usage costs $113.47. Also shown is the capital cost associated with each portfolio. Table 4 – Residential Monthly Bills in FY 2045 for Each OWP Portfolio This analysis indicates that the difference in residential bills across the portfolios relative to the baseline Portfolio A ranges from negative 1% for the least expensive Portfolio B (Enhanced Conservation Phase 1 and 2) to 17% for the most expensive Portfolio C – Enhanced Conservation with Bay Water Desalination. Note that capital costs are planning level and actual costs are -50% to +100% of estimated. STAKEHOLDER ENGAGEMENT The following is a timeline of public meetings and community workshops on the OWP to date: - July 7, 2021 - the Utilities Advisory Commission (UAC) reviewed a draft objectives, scope, and community engagement plan for the OWP (Staﬀ Report #12332)5 - November 2021 - Palo Alto Utilities Department in collaboration with the Public Works Department issued OWP Request For Proposals - June 2022 - Council approved the contract with Carollo Engineers to develop the OWP (Staﬀ Report 13434)6 - September 28, 2022 - First Community Workshop, Community Needs and Priorities7 - December 6, 2022 - Second Community Workshop Exploring Water Supply and Water Conservation Options8 - February 1, 2023 - staﬀ provided an update to the UAC on the development of the OWP (Staﬀ Report 14974)9 - June 3, 2024 - staﬀ provided an update to the UAC on the OWP background, goals, approach, overview and initial results (Staﬀ Report 2404-2968)10 - January 7, 2025 – staﬀ provided the ﬁnal One Water Plan to the UAC (Staﬀ Report 2407- 3234)11 - September 19, 2025 – the CASC received the final One Water Plan and the related letter from the UAC (Staff Report 2505-469712) Utilities Advisory Commission Review: At the UAC meeting on November 6, 2024, the SFPUC (Palo Alto’s water supplier) through its Assistant General Manager of the Water Enterprise, Steve Ritchie, provided an overview of the RWS and SFPUC’s planning eﬀorts including drought planning and Alternative Water Supply Program. At the same UAC meeting, the Bay Area Water 5 Staff Report 12332: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes-2021/07-07-2021- special/id-12332-item-1.pdf 6 Staff Report 13434: https://www.cityofpaloalto.org/files/assets/public/v/11/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2022/20220620/20220620pccsm-amended-final-final.pdf 7 Presentation and results from the live polling: https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/water-drought/stakeholder-mtg-1-community- meeting.pdf 8 Slides: https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/water-drought/stakeholder-workshop- 2_community.pdf Recording: https://youtu.be/YEguKgxzRNY 9 Staff Report 14974: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes-reports/agendas- minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes-2023/02-feb-2023/02- 01-2023-uac-agenda-and-packet.pdf 10 Staff Report 2404-2968 https://www.cityofpaloalto.org/files/assets/public/v/2/agendas-minutes- reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes- 2024/06-jun-2024/06-03-2024-packet-v2.pdf 11 Staﬀ Report 2407-3234 https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=5b035426-3a84- 4050-84eb-a2d44ebdb28f 12 Staﬀ Report 2505-4697 https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=dd0a3d30- 3782-42d4-b2df-20a7389a196f Supply and Conservation Agency (BAWSCA), through its CEO/General Manager, Nicole Sandkulla, also presented additional information on water supply, water conservation and reliability regionally, pertaining to the 26 wholesale customers (including Palo Alto) of the SFPUC comprising BAWSCA’s membership. This provides additional regional context for the Palo Alto OWP, which focuses on the local area within the Palo Alto city limits. At the January 7, 2025 UAC meeting, staff recommended that the UAC advise the City Council to accept the One Water Plan. The UAC did not take any action. The UAC expressed a desire to provide additional information to the City Council regarding water supply and conservation planning. As a result, as discussed by the Commission, three commissioners (Gupta, Mauter and Phillips) were appointed to draft the letter for the full Commission’s consideration. The letter contents fall into three main categories. First, it outlines concerns about the portfolio scoring methodology. Second, it questions the worst-case water supply shortage scenario which was provided by the SFPUC, the City’s water supplier and the owner and operator of the Regional Water System. Third, the letter promotes regional collaboration, a practice that staff routinely engages in as part of their ongoing responsibilities. At the March 5, 2025, UAC meeting, the commission voted unanimously to send the letter (Attachment A) to Council. Climate Action & Sustainability Ad Hoc Committee: On September 19, 2025, staff recommended the CASC receive both the report and the UAC letter for staff’s use as a framework for evaluating future projects if so directed by Council, considering, where appropriate, the opinions expressed in the UAC’s letter. After discussing the Plan and the UAC’s concerns, the CASC voted unanimously to receive the One Water Plan. Potential future direction to staff related to the OWP will require separate Council action. ENVIRONMENTAL REVIEW The informational report including the OWP and UAC letter on water supply and conservation planning is not a project requiring California Environmental Quality Act review, because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. Any future proposals to implement the OWP would be subject to CEQA analysis at that time. ATTACHMENTS/LINKS Attachment A: UAC letter to Council Link: One Water Plan https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=c42ee7f3-8caf- 4c48-99e3-57bb8e437775 APPROVED BY: Alan Kurotori, Director of Utilities Staff: Karla Dailey, Assistant Director of Utilities, Resource Management Memorandum: One Water Plan Review and Recommendations March 5, 2025 Page 1 of 4 8 0 9 0 MEMORANDUM TO: City Council, City of Palo Alto FROM: Utilities Advisory Commission DATE: March 5, 2025 SUBJECT:One Water Plan Review and Recommendations The Utilities Advisory Commission (UAC) has completed its review of the One Water Plan (OWP) and recommends against acceptance of the plan at this time. The following sections outline our key concerns and recommendations for moving forward. The UAC’s decision not to approve the study, despite acknowledging the considerable staff time and resources invested, stems from fundamental concerns about its analytical framework. Specifically, the methodology and assumptions used in the plan could lead to potentially misleading conclusions about Palo Alto’s water security options. The UAC is happy to meet with Council to discuss its concerns in more detail, which are various. However, to help guide future water planning efforts, this memo focuses on our most critical concerns, which we believe must be addressed to develop a robust and actionable water security framework for Palo Alto: (1) the premise of the report and its recommendations relies on a 50% cut back scenario that seems highly unlikely and must be validated, particularly by engagement with BAWSCA and SFPUC; and (2) the conclusions are based on a weighted scoring scheme that is potentially misleading—instead, the underlying metrics, such as dollar cost per acre-foot, should be directly presented to decision-makers. In addition, the UAC provides several strategic recommendations for the city’s future planning efforts. Staff has reviewed this letter and agrees that investments in local water supply alternatives are not prudent nor recommended at this time. Staff agrees that evolving demand projects and SFPUC supply reliability assessments will be critical for continued water planning efforts and that regional partnership may, indeed, prove to be most cost-effective if water supply reliability becomes an issue. The tool developed as part of the OWP effort may be modified in subsequent analysis to address the UAC’s concerns regarding the scoring methodology. REPORT ISSUES In this memo, the UAC focuses on two critical issues with the OWP report: (1) the 50% cutback scenario underlies the premise and recommendations of the report, but this scenario seems unlikely and should be validated before using it for water supply planning; and (2) the weighted scoring scheme for the alternatives is potentially misleading. First, the OWP report plans for a case in which there is a 50% reduction in regional water supply, and it uses this scenario as a key metric in its portfolio evaluation.1 This assumption warrants further scrutiny 1 E.g., OWP Report at ES-8 (“Reliability is scored based on results of the dry year supply analysis for each portfolio using the supply gap expressed in afy during a 50 percent reduction in water deliveries to Memorandum: One Water Plan Review and Recommendations March 5, 2025 Page 2 of 4 8 0 9 0 and validation, particularly concerning demand across the broader system, implementation of Bay Delta Plan regulations, and policy and management decisions about storage. Members of the public have noted that historical analysis of Tuolumne River flows over the past 1100 years using tree ring data suggests that the level of drought and demand growth that would require this level of cutback is extremely improbable. During the recent 2001-2022 California mega-drought, SFPUC was able to add to its reservoirs in 15 of the 22 years due to its robust water rights. Second, the Long Term Vulnerability Assessment (LTVA) cosponsored by the SFPUC found no drought in 25,000 years of stochastic modeling that approached the severity of the design drought scenario, and the assessment found no clear adverse impacts from climate change through 2070. Third, the longest historical drought (1471-1483) would have left 40% of system storage remaining at current demand levels. Fourth, probability analysis suggests the design drought scenario has an exceptionally rare return period—potentially one in several hundred thousand years. The UAC also has concerns with the demand forecasts, noting that BAWSCA’s forecasts have consistently over- estimated future regional water demand, often by substantial amounts. Given that this 50% cut back assumption during drought drives many of the report’s conclusions about needed infrastructure investments and policy changes, a validated and nuanced analysis of potential supply scenarios informed by better planning targets from BAWSCA and SFPUC would significantly strengthen the plan’s utility for decision-making.2 While we understand Staff’s desire to ensure planning processes align with SFPUC’s policies and forecasts, the 50% cutback scenario should not be used in the City’s planning framework without further validation. We recommend that the City engage with SFPUC and BAWSCA to refine supply and demand projections so that Palo Alto’s water planning incorporates realistic cutback assumptions. Better cutback assumptions will provide actional guidance for both near-term and long-term decision-making. Second, the OWP’s evaluation methodology also raises significant technical concerns about how different water supply options are compared and ranked. The plan uses a weighting scheme that normalizes various criteria (like unit cost, reliability, and environmental benefits) to a 1-5 scale and then applies weighted scoring to compare portfolios. This approach, however, violates the Independence of Irrelevant Alternatives principle—meaning that the relative ranking between two options can change based solely on the characteristics of an unrelated third option, even when nothing about the two options being compared has changed. For example, changes in the cost of one portfolio could artificially alter the scoring and perceived relative merits of other portfolios, even though their underlying costs and benefits remain exactly the same. Instead of using this potentially misleading scoring system, we recommend that future evaluations present the actual underlying metrics (such as dollar cost per acre-foot) directly to decision- makers, allowing for transparent analysis of tradeoffs between different options. * * * Palo Alto from the RWS.”), at 2-8 (“Based upon the City’s forecasted water demand presented in the City’s 2020 UWMP and projections of water supply availability provided by SFPUC at the time, the City anticipates the need to implement water use reductions of approximately 50 percent from pre-drought usage levels in dry years post Bay-Delta Plan implementation.”). Memorandum: One Water Plan Review and Recommendations March 5, 2025 Page 3 of 4 8 0 9 0 Overall, while the OWP found that some alternatives were infeasible, helping save the city analysis time in the future, adopting the OWP appears premature given current regional developments. SFPUC is just beginning its own alternative water supply planning process, with a focus on purified water projects. SFPUC’s recently approved 10-year capital improvement plan includes $260 million for alternative water supply programs within its $3.16 billion total budget, and much of this planning remains in early stages. Furthermore, public comment indicates that even under a worst-case scenario combining the Bay-Delta Plan flows with the worst recorded drought, SFPUC could manage without requiring rationing or new water supplies, which requires further study. More fundamentally, as highlighted in recent Commission discussions, while no investments are being recommended at this time, Palo Alto should avoid rushing into major alternative water supply planning and investments without first having robust data, transparent and robust modeling, and clear understanding of assumptions. This is particularly important given historical patterns of overestimating water demand and the need to carefully evaluate the policy, affordability, and regional growth implications of various supply options. The city should instead focus on supporting and engaging with regional efforts through SFPUC and BAWSCA to comprehensively assess future water supply needs and approaches. STRATEGIC CONSIDERATIONS Memorandum: One Water Plan Review and Recommendations March 5, 2025 Page 4 of 4 8 0 9 0 lower. This creates a challenging communication issue, as customers find it counterintuitive that rates continue to rise faster than inflation despite increased conservation efforts. C ONCLUSION