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Page 4 of 8 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org Purchase Customers”) may purchase water from sources other than from San Francisco, but they are each obligated to purchase a specific minimum annual quantity of water from San Francisco, referred to as a “Minimum Purchase Requirement." If a Minimum Purchase Customer does not meet its Minimum Purchase Requirement in a particular fiscal year, it must pay San Francisco for the difference between its metered water purchases during the fiscal year and its minimum annual purchase quantity. It is assumed that the Minimum Purchase Requirements were originally designed to prevent four specific multi-source agencies from shifting from the RWS to other imported water sources. However, changed conditions, including recurring droughts, improved water use efficiency, and investments in local supplies have reduced demand on the RWS. Despite these improvements, the RWS remains vulnerable to severe droughts, prompting the San Francisco Public Utilities Commission (SFPUC) to invest in alternative water supplies. The Minimum Purchase Customers are well-positioned to develop their own local, drought- resilient supplies, which would reduce the regional dry-year supply gap, improving reliability of the RWS for all users. These amendments may reduce a perceived disincentive to improve efficiency and develop alternative supplies. i. Reduction of Minimum Annual Purchase Quantities (MPQ) MPQs set in the 1984 Settlement Agreement and Master Water Sales Contract (1984 Contract) were calculated based on 80% of each of the four Original Minimum Purchase Customer’s purchases from the RWS in the 1980s. The MPQs were later reduced by 5% as part of the 2009 WSA. Upon adoption of this amendment, the minimum annual purchase quantities of the Original Minimum Purchase Customers will be reset to 80% of each of the Minimum Purchase Customer’s average purchases from the most recent four non-drought years and the amendment will establish a continuing, periodic review of the minimum annual purchase quantities on a 10-year schedule. ii. Rebound Year Minimum Annual Purchase Quantity Existing Section 3.07.C of the 2021 WSA provides that Minimum Purchase Requirements will be waived during drought, other period of water shortage on the RWS, or if the Governor declares a state of emergency that impacts water supply use or deliveries from the RWS. Minimum Purchase Requirements are reinstated in the first year immediately following a drought. However, water use does not rebound to pre-drought levels for several years, depending on the level of conservation achieved. The amendment provides a temporary, one-year reduction in the minimum annual purchase quantities equal to half of the demand reduction from pre-drought levels to allow for drought rebound. For example, if a Minimum Purchase Customer’s pre-drought use and minimum annual purchase quantity are 10 million gallons per day (MGD) and drought RWS purchases are 8 MGD, the Rebound Year minimum annual purchase quantity will be set at 9 MGD. iii. 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 7.N. - Page 4 of 70 288