History

History of Wholesale Customers’ Relationship with the Regional Water System

1. Early Support for the Raker Act (1914)

Several Bay Area cities and water agencies urged Congress to pass the Raker Act, the 1914 law authored by U.S. Rep. John E. Raker of Manteca that allowed federal lands in the Sierra Nevada, including Hetch Hetchy Valley in the Yosemite National Park, to be used for a water system. Burlingame, Daly City, Hayward, Menlo Park, Palo Alto, Redwood City, San Mateo and the Alameda County Water District were among the Bay Area communities whose support for San Francisco was influential in persuading Congress to pass the controversial Act, and President Woodrow Wilson to sign it.

2. Contractual Commitments Support New Don Pedro Reservoir Construction; Bay Area Water Users Association (BAWUA) Formed (Early 1960s)

In the early 1960s, San Francisco was considering a major expansion of its water system, to be made possible through construction of New Don Pedro Reservoir, a large reservoir in the Sierra foothills,  that would be jointly owned with the Modesto Irrigation District and the Turlock Irrigation District. At about the same time, the California Department of Water Resources was planning the extension of the State Water Project into the Bay Area by means of the South Bay Aqueduct. In order to make the revenue bonds for New Don Pedro marketable, San Francisco had to demonstrate a firm customer base outside the City itself. It was at this point that wholesale customers first signed long term contracts (20 years in most cases) with San Francisco. By so doing, most chose to rely on San Francisco rather than the State Water Project for their long term water future, although Alameda County Water District entered into contracts with both suppliers.

It was during this period that the Bay Area Water Users Association (BAWUA) was formed as an unincorporated association. In 1974 it secured tax-exempt status under Section 501(c)(4) of the tax code, and in 1991 it was reorganized as a California nonprofit mutual benefit corporation. For over 25 years, its membership has included all agencies now represented on BAWSCA’s board of directors.

3. The Wholesale Customers Win a Legal Challenge to San Francisco Rate Discrimination (1974-1977)

In 1974, the San Francisco Board of Supervisors rejected a SFPUC proposal for a uniform 17 percent rate increase for both in-city retail and outside wholesale customers and ordered the SFPUC to impose a differential increase: 21 percent for wholesale customers and only 14 percent for San Francisco retail customers.

By this point, wholesale customers had in place an informal but effective organization to represent their collective water interests – the Bay Area Water Users Association.

BAWUA was able to finance a lawsuit brought in federal district court by the City of Palo Alto and several other representative plaintiffs challenging the legality of the rate increase under the Raker Act. The wholesale customers won an injunction against the rate increase from the district court and San Francisco appealed. The U.S. Ninth Circuit Court of Appeal affirmed, holding that the “Bay Cities,” as it referred to the plaintiffs, were co-grantees along with San Francisco in the rights granted under the Raker Act. (City of Palo Alto v. City and County of San Francisco (CA 9 1977) 548 F. 2d 1374.)

4. Long Term Settlement Agreement and Master Water Sales Contract Settles the Rate Lawsuit (1984)

Settlement of lawsuit brought by City of Palo Alto against the City and County of San Francisco resulted in negotiation and adoption in 1984 of 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” (Master Contract). The Master Contract put in place a comprehensive method for allocating the costs of the water system between San Francisco and wholesale customers. Its goal is to ensure that wholesale customers pay no more in water rates than their fair share of the wholesale water system. Thus, all costs associated solely with the Hetch Hetchy electric power operations are the responsibility of San Francisco. Similarly, all costs of San Francisco in-city facilities and programs are allocated exclusively to the San Francisco retail customers. Costs of the wholesale system are distributed between San Francisco and wholesale customers based on relative usage – e.g., approximately one-third to San Francisco and two-thirds to the wholesale customers because wholesale customers account for nearly two-thirds of water use. The Master Contract expired in June 2009.

5. Wholesale Customers Intervene in Federal Energy Regulatory Commission (FERC) Proceeding to Support San Francisco and Protect Water Supply for Region (1992-1996)

In 1992, FERC began proceedings to evaluate how much more water should be released from New Don Pedro Reservoir to support salmon in the lower Tuolumne River. The amount of new fish releases, and the allocation of responsibility for them, as between San Francisco and the irrigation districts (MID and TID), could have had a dramatic adverse effect on water supply reliability in the Bay Area.

BAWUA intervened on behalf of San Francisco and was successful in persuading FERC to prepare a full EIR on fish releases, taking into account their impact on Bay Area water supplies during dry years. The FERC proceedings concluded with a larger amount of water released for salmon, and with the irrigation districts agreeing to assume responsibility for making those releases in exchange for annual payments from San Francisco. BAWUA is a signatory to a multi-agency agreement to promote restoration of naturally occurring salmon, and participates on the Tuolumne River Technical Advisory Committee created by that agreement. BAWUA and the SFPUC have a side agreement related to implementation of the FERC agreement.

6. Wholesale Customers Take Part in SFPUC Major Planning/Engineering Efforts (1994-2000)

BAWUA sought and obtained the right to participate in SFPUC-sponsored engineering and planning efforts aimed at improving system reliability and meeting future water needs.

The Facilities Reliability Program was initiated in 1994 to assess the risk of damage to critical water supply facilities in the event of a natural disaster including earthquakes. In 1996, a joint BAWUA/SFPUC working group recommended safety-related capital improvements and San Francisco voters approved $157 million in revenue bonds the following year to build them. In 2000, the working group recommended more substantial seismic safety improvements after the Facilities Reliability Study revealed that a major earthquake could cause massive damage to the water system, with water service outages of up to 60 days.

The Water Supply Master Plan, begun in 1997, was conducted by San Francisco with oversight by a joint SFPUC/BAWUA Steering Committee.  The Plan, completed in 2000, consolidated BAWUA agencies’ projected water demands to 2050 and described strategies for increasing the system’s ability to reliably meet the increased demand.

7. First Plan for Coping with Drought Adopted (2001)

The 1984 Master Contract does not address how water will be allocated between San Francisco and its wholesale customers when a drought makes rationing necessary. After protracted negotiations between BAWUA and SFPUC staff, SFPUC adopted the agreed upon Water Shortage Allocation Plan in 2001. A separate but parallel process led to unanimous agreement among all BAWUA members on a similar plan to redistribute the wholesale customers’ allocation among BAWUA members. The wholesale plan also allows for “banking” of water by agencies that use less than their allocation and for transfers of banked water between BAWUA members.

8. SFPUC’s Capital Improvement Program, Financing Plan and Long Term Strategic Plan Adopted (2002).

For the first time in its history, the SFPUC developed and adopted a multiyear capital improvement program (CIP), a long term financing plan and a long term strategic plan for the water system. The wholesale customers contributed to the development and content of all three documents. Drafts of the documents were presented to the Commission in February 2001, and were adopted in revised form in May 2002.

9. State Legislature Intervenes to Improve Bay Area Water Supply Situation (2002)

The State Legislature passed three bills in 2002, each aimed at solving a different aspect of water supply problems confronting communities in the Bay Area dependent on the regional water system.
 

• AB 1823 (Papan) requires San Francisco to adopt and implement a capital improvement program for the San Francisco Regional Water System  to complete high-priority projects and to submit progress reports to the Joint Legislative Audit Committee, the California Seismic Safety Commission and the Department of Health Services, among other requirements.  AB 1923 provides a process, established by the State Legislature, to ensure that the system is rebuilt as soon as possible to protect the health, safety and economic well-being of the 2.4 million residents, businesses and community organization in Alameda, San Mateo, San Francisco and Santa Clara counties who depend on the system. 
   

• SB 1870 (Speier) created the San Francisco Regional Water System Financing Authority (RFA).  The RFA is a regional organization to raise money, if needed, to help rebuild the San Francisco Regional Water System.  The RFA meets on a regular basis, typically in January and July of each year and coincident with meetings of the BAWSCA board of directors.
   

• AB 2058 (Papan) enabled the formation of the Bay Area Water Supply and Conservation Agency (BAWSCA).