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12/06/2010 Step 1f: Calculate the Base /Seasonal Allocation Cutback Percentage for each agency by dividing its Base /Seasonal Allocation by the agency's Total Production, and - Step 1g: Calculate the Base /Seasonal Purchase Cutback Percentage by multiplying the Base /Seasonal Allocation Cutback percentage times the lesser of: (a) the immediately preceding SFPUC purchases or (b) ISG, adjusting the Seasonal percentage above until the total reduction equals the Overall Average Wholesale Customer Reduction. Additionally, adjustments to the Base Component for Stanford University will be made to remove that two week time period that the University is completely closed during the winter break per policy set by the University President as long as that policy remains in place. This adjustment will be removed at such time as the seasonal closure policy is terminated by Stanford University. Section 2.2.2 Step Two: First Adjustment for San Tose and Santa Clara The resulting Base/ Seasonal Purchase Cutback Percentage in Section 2.2.1 for San Jose and Santa Clara will be compared to the highest Base /Seasonal Purchase Cutback percentage of the other Wholesale Customers. If both San Jose's and Santa Clara's percentage reductions are larger than the highest percentage reduction among any other Wholesale Customers, the Base /Seasonal Purchase Cutback percentage established under Section 2.2.1 will remain unchanged. If either San Jose's percentage cutback or Santa Clara's percentage cutback, or both, is smaller than the highest Base /Seasonal Purchase Cutback percentage of other Wholesale Customers, the Base /Seasonal Allocation (in mgd) of San Jose or Santa Clara, or both, will be reduced so that the percentage cutback of each is no smaller than that of the Wholesale Customers' otherwise highest percentage cutback. The amount of shortage allocation (in mgd) removed from San Jose and /or Santa Clara will be reallocated among the remaining Wholesale Customers in proportion to the Base /Seasonal Allocation of each. Section 2.2.3 Step Three: Determination of Weighted Purchase Cutback For Each Wholesale Customer Each agency's weighted allocation is calculated by multiplying its Adjusted Base /Seasonal Allocation in Section 2.2.2 by 66.66% and its .Fixed Component by 33.33 %. The Fixed Component is (i) the Wholesale Customer's ISG provided for in the Agreement, or (ii) in the case of Hayward, 25.11 mgd, or (iii) in the case of San Jose and Santa Clara, consistent with the limit on purchases from SFPUC set forth in Section 4.05 of the Agreement, e. g., 4.5 mgd each. The amount of the Fixed Component for each Wholesale Customer is shown on Table 1. Section 2.2.4 Step Four: Second Adjustment for San Tose and Santa Clara The resulting Weighted Allocations for San Jose and Santa Clara will be compared to the highest Weighted Purchase Cutback, shown as a percentage, of the other Wholesale Customers. If both San Jose's and Santa Clara's percentage cutback is larger than the highest percentage cutback among other Wholesale Customers, the Weighted Purchase Cutbacks established under Section 2.2.3 will remain unchanged. If either San Jose's -3- 2560014.1 #15067 MUFF # 802