SunnyvaleRTC

November 9, 2004

SUBJECT: Approval of a “Best Estimate of Water Purchases From the San Francisco Public Utilities Commission (SFPUC) for Planning Purposes"

REPORT IN BRIEF

The City annually purchases approximately 45% of its water from the San Francisco Public Utilities Commission (SFPUC). The SFPUC is preparing a Programmatic Environmental Impact Report (PEIR) for the construction and repairs that have been identified through the SFPUC’s Capital Improvement Program (CIP) as necessary for the Hetch-Hetchy regional water supply system. In order to complete the PEIR, and to prepare a design for improvements to the Hetch-Hetchy system, the SFPUC must identify what the regional water demand will be into the future. SFPUC is requesting that all SFPUC water customers estimate future demand for input into the total demand required for the PEIR of the CIP. City staff has worked with SFPUC, and with the City’s 20-year water forecast, to make a recommendation of probable future water demand and purchase requirements.

Council is being requested to approve the report of estimated future water purchases and the submittal of the information to SFPUC.

BACKGROUND

In May of 2002, the SFPUC approved the CIP and Long Range Financial plan which identified construction and repairs that are necessary to maintain the integrity of the Hetch-Hetchy regional water supply system. The work outlined in the CIP, estimated to cost in excess of $2.6 billion, will be completed over the next 15 years. As part of the process, the SFPUC is preparing the PEIR for the construction and repairs that have been identified through the SFPUC’s CIP. In order to complete the PEIR, and to prepare a design for improvements to the Hetch-Hetchy system, the SFPUC must identify what the regional water demand will be into the future. They are using a planning period from the present to 2030. Staff has worked with SFPUC, and with the Bay Area Water Supply and Conservation Agency (BAWSCA), in responding to the requests for water use projection for Sunnyvale. The process has included looking at a number of water conservation measures that could be considered, and possibly implemented, in order to limit the future water demand. Much of the work is technical in nature, involves population projections by another agency (Association of Bay Area Governments – ABAG), and is consistent with the 20-year forecast prepared each year by staff as part of the water utility rate setting process in late spring.

EXISTING POLICY

Water Resources Sub-element

Policy 3.1A.1 – Contract for water supplies based on projected reasonable demands.

Policy 3.1A.2 – Purchase potable water utilizing the most cost-effective sources, subject to contractual requirements with our suppliers.

Policy 3.1D.1 – Provide for an on-going potable water conservation program.

Policy 3.1D.3 – Expand opportunities for reclaimed water use consistent with ecology needs of the Bay and/or diminished potable water supplies.

DISCUSSION

The planning period of the SFPUC study is beyond the City’s current 20-year forecast. The water demand projected is consistent with the projected annual increase, extended out another six (6) years (to the year 2030). This information is brought to Council for review and approval, due to the statement of estimated future purchases, which may affect future rates. A more precise estimate of required water will be important when the current contract expires in 2009 and a new contract is signed. This current exercise, while important, is not binding, and is only intended to provide the best estimate possible at this time for future demand and the proper design of the CIP projects, including analysis through the PEIR.

SFPUC has worked with Sunnyvale and other jurisdictions to consider what water conservation efforts might be attempted over that period to help reduce the demand. The SFPUC consultant used the population projection figures of the Association of Bay Area Governments (ABAG) to project future water demand. They then proposed that the suburban agencies consider conservation practices that could reduce the total water demand in the future. The aim for each suburban agency (including Sunnyvale) is to be as realistic as possible about future water demand, and to propose at least a few conservation practices that can help to cut back on the total water required. Sunnyvale is in a unique position when considering future needs, and many aspects have been considered, including the City’s ability to continue to expand the recycled water system.

1. SFPUC has identified, based upon criteria agreed to between SFPUC staff and Sunnyvale staff, that the Sunnyvale water demand in 2030 will be approximately 26.8 MGD (million gallons per day.) Recent water purchases have totaled 22.9 MGD in 2002-03 and 22.8 MGD in 2003-04.

2. SFPUC has also identified, based upon consideration with City staff of available, likely conservation programs (many already in place), that Sunnyvale should be able to reduce the future demand by an amount between 0.6 and 1.6 MGD.

3. Sunnyvale only purchases approximately 45% of our water from SFPUC. This is due to having additional sources of water available: purchase from Santa Clara Valley Water District (SCVWD), groundwater from City wells, and disinfected, tertiary recycled water available from our Water Pollution Control Plant (for non-potable use).

4. The most recent 20-year Water Forecast, considered with the adoption of water rates in April 2004, already considered cutting back on SFPUC water as it becomes more expensive, and after our current contract expires in 2009. Decreasing the purchases from SFPUC would be balanced by increased purchases from SCVWD, and by increases in our use of groundwater from City wells.

5. Any “commitment” of where we will purchase water in the future has risk. The coming CIP for SFPUC will result in higher rates, but SCVWD has also embarked on projects that may result in the raising of their rates as well. SCVWD may also be affected by uncontrolled increases in the cost of water from the federal or state water projects. Groundwater can be affected by drought conditions that could limit our well pumping capacities. Recycled water will continue to be available, and may have even greater distribution in the next two decades, making more potable water available for potable uses.

In light of concerns about how supplies can vary, it is reasonable to keep as many options open and not overly restrict what decisions would be most advantageous in the future. Therefore, the analysis that has been performed, estimates that our purchases in the future will continue to be approximately 45% of the Projected Water Demand amount. Of the total water demand of 26.8 MGD in 2030, less an agreed minimum savings through conservation of 0.7 MGD, (for a total of 26.1 MGD), 45% would be 12.1 MGD. Currently the City commits to purchasing a minimum of about 9.4 MGD per year.

Agreeing to an estimated future demand of 12.1 MGD per year in 2030 does not commit the City to that amount. However, it requests that level of supply be available for us to purchase. This appears to be a conservative estimate that would allow the City the greatest flexibility to choose between water sources in the future. Therefore staff recommends approving this estimated future demand amount.

FISCAL IMPACT

A significant portion (65%) of the Water Supply and Distribution Fund’s expenditure budget is the cost of purchased water. The cost of purchased water has been rising and all projections from our suppliers indicate a continuation of that trend in the coming years. The City’s water utility is operated as an enterprise fund, designed to recover the costs of providing water service through service and connection charges. The City’s 20 year water forecast is prepared annually and incorporated into the Water Supply and Distribution Twenty Year Resource Allocation Plan. Through long term planning, the City attempts to keep utility rates as stable as possible while maintaining high quality and efficient services.

Pricing projections from our suppliers have been historically unreliable. The best protection against a sudden increase in the cost of water from any one source is to continue to maintain a diversity of sources with as much flexibility as possible for adjusting purchase levels each year and reviewing and making necessary adjustments to our utility rates each year.

Conclusion

SFPUC requires that the City of Sunnyvale state how much water we expect to purchase annually from them through the year 2030. Staff has been involved with SFPUC, BAWSCA and conservation specialists to perform joint analysis of future water demands by Sunnyvale and other BAWSCA agencies. The result of 12.1 MGD (13,500 AF) is consistent with current and projected trends in population growth, water demand, conservation, and available sources. It is also conservative enough to allow the City to obtain the best deal possible for
high quality water at a fair price.

PUBLIC CONTACT

Public Contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and City Clerk’s Office

ALTERNATIVES

1. Approve the report of estimated future water purchases and the submittal of the information to SFPUC.

2. Approve the report with certain revisions.

3. Request additional information be researched and reported back to Council at a future meeting prior to approving the report.

RECOMMENDATION

Staff recommends Alternative 1: Approve the report of estimated future water purchases and the submittal of the information to SFPUC.

Reviewed by:

Marvin A. Rose
Director
Public Works

Prepared by: James G. Craig, Superintendent of Field Services

Approved by:

Amy Chan

City Manager