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Page 2 of 19 21418818.2 4. Plan Policy Principles The Wholesale Customers collectively developed four policy principles (the “Policy Principles”) to guide the development and performance of the Tier 2 Plan. The Tier 2 Plan and associated Tier 2 Plan Allocation Model were developed in consideration of these policy principles, with the intent to abide by each policy principle while minimizing conflicts between policy principles. The policy principles are summarized below and implemented in Attachment B, Tier 2 Plan Data Sources and Calculations. 1.Policy Principle #1 - Provide sufficient water for the basic health and safety needs of customers. 2.Policy Principle #2 - Minimize economic and other adverse impacts of water shortages on customers and the BAWSCA region. 3.Policy Principle #3 - Provide predictability of drought allocations through consistent and predetermined rules for calculation, while allowing for flexibility to respond to unforeseen circumstances. 4.Policy Principle #4 - Recognize benefits of, and avoid disincentives for, water use efficiency and development of alternative water supply projects. 5.Allocation Formula Guided by the Policy Principles, the Wholesale Customers developed a specific formula for apportioning the Overall Wholesale Customer Allocation among the individual Wholesale Customers. The Tier 2 Allocation Model requires several inputs to calculate each Wholesale Customer’s allocation. First, Base Period data are collected to be used as inputs in the Tier 2 formula. Next each Wholesale Customer’s allocation is calculated in five steps. Base Period Calculations The Base Period in the Tier 2 Plan is defined as the average of each Wholesale Customer’s two years with the highest volumes of SFPUC purchases from the previous three non-Drought years. A non-Drought year is defined as a full fiscal year (July 1 through June 30) in which the SFPUC has not declared a water shortage emergency, as defined in the WSA. BAWSCA’s Annual Survey, which compiles and publishes data self-reported by the Wholesale Customers, is the primary source for model inputs. Tier 2 Plan Allocation Formula Inputs •Population: Each Wholesale Customer’s population as reported in the most recently published Annual Survey and is not tied to Drought or non-Drought year status. •Base Period SFPUC Purchases: The average of each Wholesale Customer’s two years with the highest volumes of SFPUC purchases from the previous three non- Drought years. •Base Period Total Potable Water Production: Total potable production as reported in the Annual Survey. ATTY/RESO.0092/CC RESO APPROVING TIER 2 DROUGHT RESPONSE IMPLEMENTATION PLAN (WATER SUPPLY AGREEMENT) - EXHIBIT A REV: 08-18-25 MI Page 4 of 21