At its meeting on June 19, 2003, the BAWSCA board of directors directed its Acting Chief Executive Officer to pursue 10 strategic challenges facing the organization.

1. The regional water system must be rebuilt adequately, cost effectively and promptly. BAWSCA can help by closely monitoring full implementation of AB 1823 and completion of San Francisco’s capital improvement program.

The decisions made by San Francisco as it rebuilds the system can affect the time and cost required to fix the system, water supplies, drought reliability and other issues.

BAWSCA participates in project planning to ensure that projects for fixing the system address members’ needs, and provide thrifty solutions to the problems.

Permitting and CEQA documents for regional projects should reflect local input and decisions on land use planning, water demand projections and water management. BAWSCA has helped define the process being used, and facilitate communication between San Francisco and BAWSCA agencies.

This work with San Francisco will necessarily continue for the 10- to 15-year duration of San Francisco’s Capital Improvement Program.

2. The $2.9 billion cost for improvements to the regional water system should be fairly allocated between San Francisco retail and wholesale customers.

The basic cost allocation principles embedded in the 1984 Master Contract expire in 2009. The majority of the debt used to fund regional system improvements will be incurred after 2009. Repayment obligations will extend for decades.

Approximately two-thirds of the $2.9 billion in cost is for regional projects, which will be allocated to and paid for by the wholesale customers (BAWSCA agencies).

Before planning and design go too far, written agreement(s) stating how costs will be allocated should be negotiated and executed. The new provisions can be incorporated into joint financing agreements, within a new Master Contract or into other legally binding agreements. BAWSCA can negotiate these provisions on behalf of its agencies.

3. Future water needs for Alameda, San Mateo and Santa Clara customers must be met reliably.

AB 1823 contains two key requirements: (1) the Hetch Hetchy system is operated to produce water as a first priority, with electric power as a byproduct, and (2) following an earthquake or other major disaster, the regional system should be operated to deliver water throughout the service area, without regard to political boundaries, to the extent feasible. These provisions are critically important for the existing 1.7 million people and businesses. A commitment to provide these operational protections to the water customers in the region should continue even after AB 1823 sunsets in 2010.

As the regional water system is rebuilt, capacity could be added to make the system more reliable and provide water for planned growth that cannot be met through conservation, recycling, desalination or other cost-effective solutions.

The capital improvement program is designed to rebuild the system, but its implementation may not address the region’s future needs. A cooperative working relationship exists with San Francisco, but there is no written commitment that San Francisco will help meet future water needs. An agreement should be pursued so BAWSCA agencies know what to expect for their participation and investment.

4. Customers in the three counties must receive adequate water supplies during droughts.

Since 1988, the service area population has increased over 15 percent. Water demands have only now returned to pre-drought levels, largely due to conservation measures. Water supply curtailments due to drought would have a greater impact today than during the drought of the late 1980s and early 1990s.

Although SFPUC resolutions in 1988 and 2000 recognized the need to negotiate and execute dry-year water contracts to lessen the impacts of drought, no additional supplies have as yet been secured.

In fact, available supplies have decreased. Under an order from the State of California, San Francisco reduced the operating storage of its largest Bay Area reservoir (Calaveras) to one-third of its capacity. The state determined that the dam could collapse during an earthquake due to irregularities during construction.

AB 1823 requires San Francisco to submit an annual report on progress made in acquiring drought supplies. The initial report in February 2003 noted no new supplies had yet been secured. In the event that San Francisco makes unsatisfactory progress, BAWSCA should consider whether to acquire supplies for use during droughts and to negotiate agreements with San Francisco to wheel the water to its agencies through the Hetch Hetchy system. AB 1823 provides that existing water wheeling statutes apply to the San Francisco system.

BAWSCA administers these water shortage agreements. When water must be rationed, agreements with San Francisco and between BAWSCA agencies ensure that the agencies are not penalized for conservation, recycling and other actions.

5. Communities should be prepared to cope with long term water outages.

Until the regional water system is rebuilt, communities face the possibility of long term water outages following a major earthquake or other disaster. Plans for restoring water supplies from the regional system are being prepared in compliance with provisions of AB 1823. BAWSCA coordinated its agencies’ involvement in this process.

While the water systems are being repaired following a disaster, the lack of water for as long as 60 days will seriously threaten health, safety, employment and the economy.

BAWSCA should see that communities, offices of emergency services and other relevant parties develop crisis management plans to cope with such an event. This is a responsible action to take in the face of a recognized risk with such significant impacts. Political leadership, organizational responsibility, and potential litigation strongly indicate the need for action by BAWSCA before a human disaster occurs.

6. BAWSCA should encourage implementation of cost effective water conservation and recycling programs.

Water agencies must make maximum use of available supplies. This effort will extend the short time before the regional water system reaches capacity. Demonstrating responsible and efficient use of existing supplies is also necessary to obtain approval of project permits and secure prompt implementation of critical repairs to the water system.

BAWSCA could maintain and expand assistance in cost effective water conservation programs, and pursue programs to encourage and facilitate water recycling and groundwater conjunctive use.

Beginning in 2004, BAWSCA will administer its share of a regional conservation grant awarded by the California Department of Water Resources Office of Water Use Efficiency to help expand washing machine rebate programs.

7. Drinking water quality regulations should apply to water provided by the regional water system.

Under existing law, each BAWSCA agency must comply with state and federal drinking water quality regulations. San Francisco should continue to protect the purity of Hetch Hetchy water and commit to provide its wholesale customers with water that meets Environmental Protection Agency and state drinking water standards. San Francisco should reverse its position that drinking water standards are not applicable to the water it sells to wholesale customers.

One provision in AB 1823 states:

“...the State Department of Health Services shall ensure that the Bay Area regional water system is operated in compliance with the California Safe Drinking Water Act and the guidelines established by the United States Environmental Protection Agency for the purposes of administering the comparable provisions of the federal Safe Drinking Water Act.” (Section 73510).

This provision will sunset when AB 1823 sunsets in 2010. BAWSCA should clarify state regulations, or secure a written commitment from San Francisco to ensure BAWSCA agencies’ expectations for purchased water quality are consistent with enforceable contracts or regulations.

8. The current Master Contract with San Francisco must be properly implemented.

Wholesale water rates are currently set in accordance with the 1984 Settlement Agreement and Master Sales Water Contract (Master Contract) between San Francisco and each of the wholesale customers.

BAWSCA assumes the former role of the Bay Area Water Users Association to monitor rates and charges imposed by San Francisco and to ensure San Francisco complies with all of the provisions of the Master Contract. In the last four years, over $7.2 million in excessive charges were identified and corrected. BAWSCA will continue to review annual contract compliance audits and submit issues to the City of San Francisco for review and correction, and for the auditor’s attention.

9. A new and fair Master Contract with San Francisco must be negotiated promptly to meet a 2009 deadline.

The Master Contract expires in 2009. A new contract will need to be negotiated in a manner that represents the collective interests of wholesale customers, while respecting their individual interests.

The existing Master Contract is a “water sales contract” and primarily addresses issues of fair rates (e.g., cost allocation, accounting standards, compliance audits, dispute resolution, etc.). A “water service contract” would also specify what services are to be provided in return for fair compensation (e.g., enforceable commitments to provide for future needs, deliver water that satisfies drinking water quality regulations, and other desired services).

BAWSCA is uniquely positioned to negotiate the future contract with San Francisco.

10. Continuing support of BAWSCA’s allies must be maintained to protect the health, safety and economic well being of the 1.7 million people, businesses and community organizations that depend on the regional water system.

BAWSCA’s political, community and private support comes from those who supported AB 2058, the enabling legislation that “leveled the playing field.” It was supported by an overwhelming, bi-partisan majority of legislators, county supervisors, city councils and the media. It also drew support from community and business organizations, such as chambers of commerce, the Silicon Valley Manufacturing Group and labor unions.

These groups expect BAWSCA to ensure that the system gets rebuilt and that the power granted to the agency by the Legislature is wisely used. BAWSCA must stay in close touch with its allies to get their advice, ideas and continuing support. If the regional system is not rebuilt promptly and if related issues are not resolved to the satisfaction of water users in the three counties, it may be necessary to return to the Legislature.