United States Department ofthe Interior

%AUop~U

June 9, 1997

U.S. Fish and Wildlife Service U.S.Bureau ofReclamation

Region 1 Mid-Pacific Region

911 N.E. 11thAvenue 2800 Cottage Way

Portland OR 97232-4181 Sacramento CA 95825-1898

Dear Interested Party:

Subject: Central Valley Project Improvement Act Administrative Proposal on

Urban Water SupplyReliability

In September 1995, the Department ofthe Interior (Interior) invited the public to identify

concerns they had regarding implementationofthe Central ValleyProject Improvement Act

(CVPIA). To facilitate public input and discussion, representatives ofInterior held a series of

public meetings between September 1995 and April 1996. During thesemeetings, 12 major

areas ofconcern were identified, andindividuals volunteered to form work teams and discuss

the specific issues pertainingto those areas. In April 1996, Interior committed to the

preparation ofan Administrative Proposal for eachofthe 12 areas ofconcern to address the

principal issuesraised by stakeholders during the public forum and work team meetings.

To that end, Interior circulated the draft Administrative Proposal on Urban Water Supply.

Reliability on June 14, 1996, forreview by interested parties, and received written comments

from 7 parties. Enclosed isthe final Administrative Proposal on Urban Water Supply

Reliability which has been revised to reflect key comments received, as well as previously

raised concerns.

We would like to extend our appreciation to all those who participated in our public process to

find ways to resolve this and other CVPIA implementation issues. Completion ofthis and other

final proposals will not end the need forstakeholder involvement in the implementation ofthe

CVPIA. We look forward to working with you and othermembers ofthe public in the future as

we implement the CVPIA.
Copies ofthis final proposal can be accessed on the Mid-Pacific Region’s homepage at

http:/wwiv.nip.usbr.goV or can be obtained bycalling Ms. Alisha Sterud at 916/979-2435

(TDD 916/979-2310).

Michael J.

Regional etor

U.S. Fish d Wildlife Service

Region 1

Enclosure

Roger K.

Regional Director

U.S. Bureau ofReclamation

Mid-Pacific Region

-I
CVPIA ADMINISTRATiVE URBANWATER5~J~pJJy

PROPOSAL RELIABILITY

INTRODUCTION

In September 1995, the Department ofthe Interior (Interior) invited thepublic to identify any

concerns they had regardingimplementationofthe CentralValleyProject Improvement Act

(CVPIA) (ITitle XXXIV ofPublicLaw 102-575). Tofacilitate public inputand discussinn,

representatives ofInteriorheld a seriesofpublicmeetings between September 1995 and April 1996. Duringthesemeetings, 12 major areasofconcern were identified,’ andindividuals

volunteered to formworkteams anddiscuss thespecific issues pertaining to those areas. In

April 1996, Interiorcommitted to preparationof“Administrative Proposals” on each ofthe

12 areas ofconcern, addressingthe principal issues raised by stakeholders during thepublic

forumandwork teammeetings. .Tothat end, Interior circulated adraftAdministrative Proposal

on UrbanWater SupplyReliability on June 14, 1996, forreview by interestedparties. Written

comments on the draft proposalwere received from seven parties. This Administrative Proposal

on UrbanWater SupplyReliability has been revisedto reflectthe key comme,~ts received~onthe

draft proposal as well aspreviously raised concerns. Responses to specific comments are

provided in the attached appendix.

BACKGROUND

In Januaxy 1993, Central Valley Project (GyP) urban contractors met with Reclamation to

discuss the impacts ofthe 4 previous years ofdrought on urban communities and to relay their

concern that urban contractors needed areliable contractwatersupplyfor future drought

contingency planning. Additionally, the droughthighlighted the different Municipal and

Industrial (M&I) contractshortage provisions2 that exist among M&I contractors andthe

potential inequities that could exist whenCVP water is allocated using such shortage provisions.

The urban contractors also pointed out that one ofthe purposes ofthe CVPIA isto achieve a

reasonable balanceamong competing demands forthe use ofCVP water including M&l needs.

As a resultofthis meeting, Reclamation undertook development ofaCVP M&I Water Shortage

Policy. The goal ofthe M&I Water Shortage Policy was to develop a CVP-wide M&I water

shortage provision that eventually wouldbe negotiated with all CVP M&I contractors and

incorporated into their contracts, provide a minlinum level ofwatersupply that, in combination

The 12 areas ofconcern are the following: conservation, contracting, Anadromous Fish

Restoration Plan (AFRP), management ofSection 3406(b)(2) water, Restoration Fund, urban

reliability, transfers, refuge supply, San JoaquinRiver, Trinity River, Stanislaus River, and the

stakeholder process.

2 CVP M&I contractual shortage provisions range from those that are silent on the issue

of apportionment ofGyP watersupply between agricultural and M&I contractorsto those calling

for agricultural contractorsto have their water supplyreduced by 25 percent ofcontractsupply

before any watershortage can be imposed on M&I contractors.

1 June 9, 1997
9

cvpxA ADMINISTRATIVE URBANWATER SUPPLY

PROPOSAL . . . RELIABILITY

withM&I contractors droughtwaterconservation measures, would sustain urban areas during

droughtsituations, and lastly provide sufficient information to urbancontractors for use in

developmentoffuture drought contingency planning. This proposalis notintendedto adversely

impact fulfillmentofthe environmental requirementsoftheCVPIA.

The Draft M&I Water Shortage Policywas releasedto all interested parties, organizations,

contractors, and agencies for commenton February 17, 1994w This draftinterimpolicy

identifiedthree levels ofWatersupply: aregulatory level wherethe minimumwatersupply.

would be the greater of75 percent ofcontractentitlement or 85 percent ofhistoric usage; a

hydrologic shortage with aminimumlevel of75 percent ofhistoric use; and finally, apublic

health and safetywatersupply level thatwould be triggeredwhenCVP watersupplieswere

severely constrained. After revi~wing comments, ReclamationadoPted the draft as an interim

policy on whichto base contract amendments,pending completion ofongoingstudies associated

with the CVP yield and the Prograniniatic Environmental Impact Statement (PEIS) required

under Section 3409 ofthe CVPIA.

On October 12, 1995, California State Senate Bill 1011 (California Act) was signedinto law.

.The California Acthighlighted the concerns ofthe CVP urbancontractors by emphasizing the

critical importanceofurbanwater supply reliability by requiring urban suppliers to prepare a

watershortage contingency analysis detailing specific actions they musttake duringwater

shortages. It also requires urban watersuppliersto accomplish an assessmentofthe reliability of

its waterservice to its customers.

Actual M&I deliveries in 1994 were approximately 336,000 acre-feet (19 percent) oftotal CVP

water deliveries ofapproximately 1,759,000 acre-feet. Projebted M&I demand in the year 2022

is approximately 683,000 acre-feet, whichtranslates into 18 percent ofprojected total deliveries

of 3,859,000 acre-feet3.

~ Actual deliveries and projected demands were obtained from the 1996 CVP Irrigation

and M&I ratesetting books. Total deliveries include only those amounts ofCVP water made

available for M&I and agricultural uses and excludes deliveries ofbase supplies under

Sacramento Riversettlement contracts, GyP water delivered underthe Exchange contracts, and

CVP water delivered under Friant Division contracts.

2 June9, 1997
CVPIA PROPOSAL ADMINISTRATIVE URBAN WATER RELIABILITY SUPPL

SUMMARY OFISSUES

The Urban Water SupplyReliabilityWork Teamidentified 13 issues.’ Interiorconsidered 3 of

the 13 issues as keyissues whichthisadministrative paperaddresses. The three issues are

(1) whatminimum level.ofreli~bilityshould be provided to urbanwatercontractors, (2)Mw

should other watersupplies developed by acontractorbe consideredfprotected in urbanshortage

allocations, and(3) what should be thereliability ofwater converted or transferredfrom

irrigation to M&I use? Eachofthe keyissues is discussedbelow.

DISCUSSION OF ISSUES AND INTERIORPROPOSALS

What Minimum Level ofReliability Should Be Provided to Urban Water Contractors?

Stakeiwlder Views. Urbancotitractors believe that a reliable water supply is neededto sustain.

the urban economy and support urban populations. Additionally, urban contractors believe that

long-term infrastructure andland use planning, aswell as manufacturing, commercial, or

residential capital investment, cannot be supported by short-term administrative policies

affecting thereliabilityofurban watersupplies. The urban contractors support their positionby

stating that: M&I contractors pay higherrates for CVP waterthan agricultural contractors; urban

areas have moregross regionalproduct th~.n agriculturalservice areas; agriculturalareas have

greater ability to tolerateand adjust for watershortages (urban areas can reduceuse during water

shortages, butthe flexibility to reduce wateruse past a certain pointis severely limited); and

lastly, urban areas needto know the reliability ofCV? supplies in orderto determinethe

investment neededto firm up supplies ofwater aspart oftheir drought contingency planning

process.

Agricultural contractors believe thatthe CV? already isoverly constrainedand thatthe guarantee

ofany minimum level ofreliability to one class ofCV? urban contractors will impact

agricultural waterservice users and should require areallocation ofGVP costs. Agricultural

contractors believe that urban contractorsshould firm up their reliability through voluntary water

transfers. Agricultural contractors believe the GVPIAgave M&I contractors access to -

agricultural water and that any additional reliability should be through awilling buyerand seller

arrangement. Additionally, agricultural interests argue that “fairness” dictates that giving

preference to urban contractorsin the delivery ofCVP water is notjustifiable given the

‘ Attachment A contains a listofissues identified by the Urban Water Supply Reliability•

Team.

3 June 9, 1997
CVPIA ADMINISTRATIVE URBAN WATER SUPPLY

PROPOSAL . RELIABILITY

demands5 that have already beenplaced on theCV? watersupply by the CV?IA, Endangered

SpeciesAct of 1973 (ESA), and Bay-Delta. Furthermore, agricultural interests believe that ifa

preference is gWen to urbancontractorsin waterallocations during drought years, then

~agriculturalinterestssho•uld be compensated. Lastly, ifapreference is givento urban contractors

because they arepaying ahigher costfor the water, thenthere may be some agricultural -

contractors with particularly hi~,hvalue crops thatmay want to paymore for greater watersupply

reliabilityfromthe CV?.

InteriorResponse. Reclamation’s experience from the last droughtwhere M&I contractors

submitted numerous requestsfor hardship andcritical needs water because reduced water

allocations didnot meet theirminimum watersupply needs demonstrated thaturban contractors

need aminimum level ofwatersupply reliability. Reclamation, however, believes that scarce

watersupplies available duringbelownormal type wateryears require more stringent measures

to ensure that available water isprudently and Wiselyused. The most important measure isthat

urban contractors who receivethis minimum level ofreliability must be implementing significant

waterconservation practices.

Reclamationproposes to simplify andclarify the Draft M&I Water Shortage Policy thatwas

released for comment in February 1994 by reducing thepolicy from three levels to two. One

level will showthe minimumlevel ofreliabilityto be 75 percent ofhistoric use adjusted for

growth’ and adjusted for quantities ofwater associatedwith the implementation ofany

extraordinary waterconservation action and/or practice.7 The second levelwill reflect apublic

health and safety level. This shortage policy wouldgive urban interests the information they

need for water operation planning and yet give Reclamationthe flexibility to operate and manage

theCV? during times orwatershortage.

~ Agricultural interestsreference Section 3406(b)(2), refuge watersupplies andTrinity

Riverflows; ESArequirements on pumping, temperature control, and gate closures; Bay/Delta

Accord requirementsfor increased outfiowand restricted pumping; Folsom Reservoir

reoperation, new demands on the system by new contracts or contractors that have not exercised

their contractto date (Public Law 101-514 contracts, East BayMunicipal Utility District -

(EBMUD]).

6 “Adjusted for growth” refers to aprocess whereby Reclamation reviews historical

deliveryrecords for past waterusage and allows contractorsto provide documentation to support

any increasesin the historical record baseline populations/industry. It would be capped at the

level offull contractual amounts.

~ An extraordinary Water conservation action or practice is considered to be any

conservation action or practice implemented by an urban contractorthat is more stringent than

required by Reclamation’s “Criteria for Evaluating the Adequacy ofAll Water Conservation

Plans” dated September 30, 1996, as amended, supplemented, orreplaced.

4 June 9, 1997
CYPIA ADMINISTRATIVE URBAN WATER SUPPLY

PROPOSAL . RELIABILITY

Once adopted, Reclamation proposes.to implementsuchanM&T Water Shortage Policy in a way

thatminimizes impactsto agricultural contractors. An analysiswill be done to quantify any

~ impacts andexplorepossiblemitigation measures before this policyis finalized. This policy, as

modified, will continue to be only an interimpolicyuntil ongoing studies associatedwith the

CV? yield andthe PETS required under Section3409 ofthe CYPIA are completed. Once ~uch

studies andthe PETS are completed,the goal istomodify theM&I WaterShortage Policy again,

ifnecessary, make it available for public reviewandcomment, completeany additional

applicable environmental requirements, andultimatelyadopt afinal policy.

HowShould OtherWater SuppliesDevelopedby a ContractorBe ConsideredlProtected In

Urban ShortageAllocations?

Stakekolder Views. Some CV? contractorshave anumber ofsources ofwater supply. Others

rely entirely on theCV? for watersupply. In making allocations to M&I contractors during

shortage years,should Reclamation take into accountthe availability ofthese othersupplies?

Should thereliability ofCVPwatersupply givento a contractorwho relies solely on theCV?be

greater thanthe reliability ofCVP watersupply given to acontractor who has developed other

watersupplies? Additionally,should the CVP provide a level ofreliabilityto M&I contractors

who have othersources ofsupply when the result wouldbe reduced deliveries to agricultural

contractors?

Urban contractorsand otherinterests believethatthe availability ofother Water supplies should

not be taken into account by Reclamationin making allocationsto M&I contractors. Aecording

to urban contractors, additional investments in alternativeor supplemental sources ofsupply

were notintended to increase the yield ofthe CV?, but to minimize current and future shortages

within thecontractor’s service area. Urban contractors believe that even ifthe shortages are

limited to 25 percentofsupply, some urbanpopulations will nottolerate the mandatory

rationing, conservation, and economicdisruption that may be required to achieve a25-percent

reduction in wateruse. Urbanconttactors further state thatby including avaflablesupplies from

athersources, Reclamationwould substantially diminishthe value ofexisting investments and

deterthe development ofnew sources ofsupply. There wouldbe no incentive for contractorsto

develop long-termwater lransfers, water banldngprograms, or other projectsthatincrease the

availability ofdry year supplies. Lastly, urban interests contend that all M&I contractors are

allocatedCV? costs on an equal basis and, therefore, it would be inequitableto create differences

in the allocation ofbenefits. However, urban contractors alsorecognize that there may be times

when watersupply conditions are so critical that all sources ofsupplymust be taken into account

when making CV? allocations~ such as when theCV? cannotdeliver a minimum supply to the

wildlife refuges or when deliveries to agriculture are so low that maintenance oftrees and vines

is injeopardy.

Other urban contractors state that they do not have the financial resources to develop alternative

sources ofsupply, and they need greater protection in shortage situations.

5 Jun&9, 1997
CVPIA ADMINISTRATIVE URBAN WATER SUPPLY

PROPOSAL - RELIABILITY

Agricultural contractors are concerned that limited CVP watersupplies may be given to anM&I

contractorthathas the resources andcapability ofdeveloping its own reliability. They question

the wisdomofgiving such M&I contractorsthis benefit atthe expense ofotherCV? contractors.

InteriorResponse. Reclamationstrongly encourages all ofits contractors to develop -

supplemental sources ofwatersupply. It isnot Reclamation’s intentto penalize any contractor

who has asupplemental sourceofwatersupply when calculating theminimum level ofwater

supplyduring watershortages. The decision ofwhetherReclamation will consider othersources

ofwatersupply availableto its M&I contractors dependson the overall water yeartype and CV?

system operational constraints. For example, in previousyears ofcritical water availability,

Reclamation has askedM&I contractorsto identify the minimumamount they needto•

supplement theirothersources ofwatersupply. Under such situations, thewater allocation may

drop below 75 percent ofhistoric usage to some M&I contractors.

The availability ofother watersupplies is part ofthe decisionmaking process. By basing the

allocation on 75 percent of“historic use,” we partly incorporate theimpact ofother water

supplies. However, Reclamationwill need to work with the contractors with diversified water

supplies on a contractor-by-contractor basis to ensure that Reclamation!s policy does not

encourage water use simply to increase the amount calculated asan urban contractor’s historic

use for purposes ofhaving alarger allocation during critical wateryears. As part ofthe historic

use calculation for watershortage allocations, Reclamationwould be willing to adjust the

calculated urbancontractor’s historic use quantityWan urban contractor could demonstratethatit

used its supplemental watersupplies first before using CV? watersupplies. The use of

supplemental watersupplies benefits the CV? during all water year types.

Reclamation recognizesthat M&I contractorsneed a minimum level ofreliability andyet that

level should notbe so high that it becomes adisincentive to M&I contractorsto firm up other

sources ofwatersupplies. Reclamation isworking with CV? contractors south ofthe

Sacramento-San Joaquin Delta on adraft reallocation agreementthrough whichM&T contractors

are attemptingto firmup supplies in dry years. Additionally, to encourage otherM&I

contractorsto firm up theirexisting supplies, Reclamation couldpropose a two-tier level of

reliability. The firsttier wouldbe given to M&I contractors as a minimum reliability level

regardless ofothersupplies. The second tierwould be ahigher percentage, butwould require an

M&I contractor to pay a charge for this additional level ofreliability. In essence, the CV? could

be the “other source ofsupply” for some M&I contractors. The two-tier level ofreliabilitymay

be explored in future discussions. Such discussions will be open to the public and we will also

One urban contractor asked what would be the water allocation to an urban contractor

who has not used CVP water in the pastbut may needto obtain CVP water during a watershort

year. Reclamation recognizesthat thisis a legitimate concern and Reclamation has worked in

the past with such contractors andwill work in the future with such contractors in allocatihg a

watersupply.

6 June 9, 1997
CVPIA ADMINISTRATIVE - URBAN WATER SUPPLY

PROPOSAL RELIABILITY

seek public comments on anytwo-tier proposal. The Urban Water Supply Reliability Work

Team will also be notified offuture discussions on this approach and be given an opportunityto

participate in future meetings.

What Should Be theReliability ofWater Converted orTransferred from Irrigation tu

M&I Use?

Stakeholder View. Agricultural interests believe that the watershortage criteriawhich applies to

agricultural waterconverted to M&I waterthrough contractassignment orwatertransfers should

not change because ofsuch conversion or water transfer. Ifurbanwatersupply reliability is

applied when wateris converted ortransferred to M&I, other agricultural contractors will be

impacted negatively.

Some urban interests generally agree. Other urban contractors believe that the reliability

associated with the conversion ofwater from agriculture to M&1 use could be permittedprovided

thatthe changes occurred over a specific number ofyears. Water supply contracts could be

renegotiated for increased reliability from such conversions. Additionally, urban interests

believe that increased reliability could be earned by water supplycontractors with a proven

history ofefficient conservation.

InteriorResponse. Interior believes that the draft M&I Water Shortage Policy, once finalized,

should apply only to that portion ofCV? water used historically for M&I purposes and identified

as projected M&I demand as ofSeptember 30, 1994. September 1994 was selected because it

was the end ofthe fiscal year in which the draft M&I Water Shortage Policy was released for

comment. As such, Reclamation agrees with maintaining the same watershortage criteria as was

applicable to the water before the transfer or conversion occurred on all actions after

September 30, 1994. However, an urban contractor could request that a permanent conversion

from an agricultural shortage to an M&I waterreliability shortage be authorized, provided that

there are no adverse impacts to agricultural or other urban water supplies.

7 June 9, 1997