DEPARTMENT Water Enterprise AGENDA NO. 9
MEETING DATE February 27, 2024
AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
Approve Second Amendment: Regular Calendar
Project Manager: Angela Cheung
Approve Second Amendment to Agreement with Santa Clara Valley Water District for Long- Term Operation and Maintenance of Intertie
Summary of
Proposed
Commission Action:
Approve the Second Amendment to the Agreement between the San Francisco Public Utilities Commission and Santa Clara Valley Water District for Long -
Term Operation and Maintenance of the Intertie
located in Milpitas subject to Board of Supervisors approval under San Francisco Charter Section 9.118.
Background: The San Francisco Public Utilities Commission (SFPUC) owns and operates the Regional Water System that spans from Tuolumne County to the City and County of San Francisco, and it delivers potable water to whol esale customers in the East and South Bay, as well as retail customers in San Francisco . The Santa Clara Valley Water District (District) owns and operates a wholesale water system in San ta Clara County. The two agencies’ systems come within a thousand feet of one another in the City of Milpitas.
O
n January 25, 2000, by Resolution No. 00- 0033, this Commission approved two agreements between the SFPUC and the District: (1) the agreement to develop an Intertie Facility that would serve as an interconnection of the two water supply systems ; and (2) the agreement for the long-term operation and maintenance of the Intertie Facility (O&M Agreement). On July 24, 2000, the San Francisco Board of Supervisors, by Resolution No. 641- 00, approved both agreements pursuant to San Francisco Charter Section 9.118.
C
ompleted in 2000, the Intertie Facility consists of a pump station, interconnecting piping, and other ancillary systems capable of delivering up to 40 million gallons a day of potable water in both directions. Since its completion, the SFPUC and the District have used the Intertie more than 30 times for emergencies or for planned work on critical facilities that would otherwise be difficult to remove from service without the availability of an alternate water supply.
The O &M Agreement , as originally approved, allowed either the SFPUC or the District to operate the Intertie , and it designated the SFPUC as the party having primary responsibilit y for routine Agreement: Second Amendment to Agreement with Santa Clara Valley Water District Commission Meeting Date: February 27, 2024
Page: 2
maintenance, replacement, and repair of the Intertie. In practice, the District has been the sole operating party of the Intertie because the operation of the Intertie impacts the District’s system more than it impacts the SFPUC’s.
On December 9, 2008, by Resolution No. 08- 0223, this Commission approved the F irst Amendment to the O&M Agreement which the San Francisco Board of Super visors then approved on February 24, 2009, by Resolution No. 60-09. The First Amendment provided, in part, that the parties would jointly designate one of them as the “O&M Party” wi th primary responsibility for routine operation, maintenance, replacement, and repair of the Intertie, and it initially designated the District as the O&M Party from March 2, 2009 until at least December 31, 2013. The parties selected the District as the O&M Party during this time period because the implementation of the SFPUC ’s Water System Improvement Program (WSIP) placed high burdens on the SFPUC’s operations and maintenance staff while different parts of the Regional Water System were being taken out of service for rehabilitation or replacement. In addition, the parties recognized that the Intertie may be more efficiently operated and maintained by the District because the District’s operations and maintenance staff are located in a facility near the Intertie while SFPUC staff travel from either Millbrae or Sunol to perform work on the Intertie.
Before December 31, 2013, the parties agreed to designate the SFPUC as the O&M Party starting on January 1, 2014, pursuant to the O&M Agreement, as amended . T he City has accordingly remained the O&M Party since that date. Both parties now recognize that the SFPUC’s operations and maintenance staff continue to experience high burdens with the completion of WSIP and the facilities it has added to the Regional Water System. Both parties also agree that the Intertie may be more efficiently op erated and maintained by the District, given its proximity to the Intertie and the impact of the Intertie’s operation on the District’s system.
Description of the
Proposed Second
Amendment:
The Second Amendment will re-designate the District as the O&M Party from July 1, 2024 through June 30, 2029, and provides that both parties will determine by March 1, 2029, by mutual written agreement, which of them shall be designated the O&M Party as of July 1, 2029. The parties may change this designation again by mutual written agreement no more frequently than once every five years.
The Second Amendment will designate the O&M Party as the party having primary re sponsibility for maintaining and obtaining all permits and preparing annual reports or plans as necessary to compl y with current or future applicable local, state, or federal regulations for operation of the Intertie facilities.
Agreement: Second Amendment to Agreement with Santa Clara Valley Water District Commission Meeting Date: February 27, 2024
Page: 3
The Second Amendment will also assign the c osts associated with operating the Intertie for delivery of “ reimbursement water” to the party that delivers that water. The original O&M Agreement assumed both parties would use the Intertie equally and assigned operating costs by the di rection of flow, t o be borne by the party receiving water. The SFPUC has , however, transferred water to the Distri ct on more occasions over the years and then incurred additional costs when it receive d that volume of water back from the District as reimbursement. By allowin g the party requesting water to incur both the costs of the initial water transfer and the cos ts of the reimbursement of the water in return, the Intertie water transfer costs would become cost neutral for both parties.
Finally, the S econd Amendment revi ses the terms for the annual reconciliation of water supplied through the Intertie.
Parties to Agreement: San Francisco Public Utilities Commission and Santa Clara Valley Water District
Amendment Purpose: Modify roles and responsibil ities for the long-term operations and maintenance of
the Intertie facility
Location: Milpitas, California
Commencement
Date:
Upon final signature execution by SFPUC
and District
Budget & Costs: The Second Amendment will have little to no financial impact on SFPUC funds or budget. M aintenance costs for the Intertie are shared equally between the parties. Funds will continue to be available from current and future appropriations to the Water Enterprise’s operating budget.
Schedule: The Second Amendment will take effect following approval by this Commission and the Board of Supervisors under San Francisco Charter Section 9.118, as well as the approval of the District.
Environmental
Review:
Approval of the Second Amendment to the O&M Agreement does not constitute a “project” un der the California Environmental Quality Act (CEQA) Guidelines Section 15378 because the Amendment is an organizational or administrative gove rnmental activity that will not result in direct or indirect physical changes in the environment, is a continuing administrative and maintenance activity, and is a government fiscal activity that does not involve a commitment to a specific project which may result in a potentially significant physical impact on the environment.
Attachment: 1. Second Amendment to Agreement
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO.
WHEREAS, On December 21, 1999, by Resolution No. 00-0033, the San Francisco Public Utiliti es Commission (SFPUC) and the Santa Clara Valley Water Distr ict (District) entered into an agreement to develop an interconnection of their respective water supply systems (Intertie) which was then approved by the San Francisco Board of Supervisors (Resolution No. 641-00, dated July 24, 2000) and the Santa Clara Va lley Water District Board of Directors (December 21, 1999); and
WHEREAS, On December 21, 1999, the SFPUC and the District also entered into the Agreement for Long Term Operation and Maintenance of the Intertie (O &M Agreement), as authorized by Commission Resolution No. 00-0033, dated January 25, 2000; S an Francisco Board of Supervisors Resolution No. 641-00, dated July 24, 2000; and Santa Clara Valley Water District Board of Directors approved motion, dated December 21, 1999; and
WHEREAS, Section 3 of the O&M Agreement provided, in part, that “[e]ither Party may operate the physical works of the Intertie … for the delivery of water with the concu rrence of the other Party,” and Section 4 of the Agreement provided, in part, that “[t]he City shall have primary responsibility for routine maintenance, replacement and repair of the physical works of the Shared Project Facilities,” or Intertie, as define d in the Agr eement; and
WHEREAS, On March 2, 2009, the SFPUC and the District entered into the First Amendment to the O&M Agreement (First Amendment), as authorized by Commission Resolution No. 08-0223, dated December 9, 2008; and San Francisco Board of Supervisors Resolution No. 60- 09, dated February 24, 2009; and
WHEREAS, The First Amendment amended Section 4 of the O&M Agreement, in part, to provide that “[t]he Parties shall jointly designate one of them to have primary responsibility for routine operation, maintenance, replacement, an d repair of th e physical works of the Shared Project Facilities” – the newly defined “O&M Party” – and to designate the District as the O&M Party until at least December 31, 2013, without modifying either Party’s ability to operate the Intertie under Section 3 of the Agreement; and
WHEREAS, The First Amendment also amended Section 15 of the Agreement to provide that the O&M Party, rather than th e SFPUC, shall have lead responsibility for reconciliation of joint costs associated with the Intertie; and
WHEREAS, Before December 31, 2013, the Parties agreed to jointly designate the SFPUC the O&M Party starting on January 1, 2014, pursuant to Section 4 of the Agreement, as amended, and the SFPUC has, in accordance, remained the O&M Party since that date; and
WHEREAS, The SFPUC a nd the District now agree that the Intertie may be more efficiently operated and maintained by the District, given its proxi mity to the Intertie and the impact of the Intertie’s operation on the District’s system, and the Dis trict should thus be the O&M Party; and
WHEREAS, Approval of the Second Amendment to the O&M Agreement does not constitute a “project” under the California Environmental Quality Act (CEQA) Guidelines Section 15378 because the Amendment is an organizational o r adminis trative governmental activity that will not result in direct or indirect phy sical changes in the environment, is a continuing administrative and maintenance activity, and is a government fiscal activity that does not involve a commitment to a specific project which may result in a potentially significant physical impact on the environment; and
WHEREAS, The SFPUC and the District propose to amend the Agreement again in order to re-designate the District as the O&M Party from July 1, 2024 through June 30, 2029, with the SFPUC an d the D istrict meeting and conferring before the end of this five -year period to determine, by mutual written agreement, which of them shall be the O&M Party beyond June 30, 2029, under Section 4 of the Agreement (Second Amendment); and
WHEREAS, The Second Amend ment would also (1) designate the O&M Party wit h primary responsibility for maintenance of operating permits and preparation of annual reports or plans under Section 5 of the Agreement; ( 2) provide that all costs associated with the operation of the Intertie to deliver “reimbursement water” shall be borne by the Party delivering that water under Section 14 of the Agreement; and ( 3) revise the terms for the annual r econciliation of water supplied through the Intertie under Section 17 of the Agreement; now, therefore, be it
RESOLVED, That this Commission hereby approves the Second Amendment to the Agreement between the San Francisco Public Utilities Commission and the Santa Clara Valley Water District for Long -Term Operation and Maintenance of the Intertie , subject to Board of Supervisors approval under Charter Section 9.118.
I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting of February 27, 2024.
Secretary, Public Utilities Commission
Second Amendment to Agreement between
City and County of San Francisco Public Utilities Commission and Santa Clara Valley Water District for
Long-Term Operation and Maintenance of the Intertie
THIS SECOND AMENDMENT (“Second Amendment”) is made in the State of California on this _______ day of _________, 2024, between the City and County of San Francisco, acting by and through its Public Utilities Commission (“City”), and the Santa Clara Valley Water District (“District”), which are herein referred to collectively as “Parties” and individually as “Party.”
RECITALS
WHEREAS, On December 21, 1999, the Parties entered into the Agreement for Development of an Intertie Facility, which enabled the Parties to develop an interconnection of their respective water supply systems (“Intertie”), as authorized by San Francisco Public Utilities Commission Resolution No. 00-0033, dated January 25, 2000; San Francisco Board of Supervisors Resolution No. 641-00, dated July 24, 2000; and Santa Clara Valley Water District Board of Directors approved motion, dated December 21, 1999; and
WHEREAS, On December 21, 1999, the Parties also entered into the Agreement for Long Term Operation and Maintenance of the Intertie (“Agreement”), as authorized by San Francisco Public Utilities Commission Resolution No. 00-0033, dated January 25, 2000; San Francisco Board of Supervisors Resolution No. 641-00, dated July 24, 2000; and Santa Clara Valley Water District Board of Directors approved motion, dated December 21, 1999; and
WHEREAS, Section 3 of the Agreement provided, in part, that “[e]ither Party may operate the physical works of the Intertie … for the delivery of water with the concurrence of the other Party,” and Section 4 of the Agreement provided, in part, that “[t]he City shall have primary responsibility for routine maintenance, replacement and repair of the physical works of the Shared Project Facilities,” or Intertie, as defined in the Agreement; and
WHEREAS, On March 2, 2009, the Parties entered into the First Amendment to the Agreement (“First Amendment”), as authorized by San Francisco Public Utilities Commission Resolution No. 08-0223, dated December 9, 2008; and San Francisco Board of Supervisors Resolution No. 60-09, dated February 24, 2009; and
WHEREAS, The First Amendment amended Section 4 of the Agreement, in part, to provide that “[t]he Parties shall jointly designate one of them to have primary responsibility for routine operation, maintenance, replacement, and repair of the physical works of the Shared Project Facilities” – the newly defined “O&M Party” – and to designate the District as the O&M Party until at least December 31, 2013, without modifying either Party’s ability to operate the Intertie under Section 3 of the Agreement; and
WHEREAS, The First Amendment also amended Section 15 of the Agreement to provide that the O&M Party, rather than the City, shall have lead responsibility for reconciliation of joint costs associated with the Intertie; and
WHEREAS, Before December 31, 2013, the Parties agreed to jointly designate the City as the O&M Party starting on January 1, 2014, pursuant to Section 4 of the Agreement, as amended, and the City has, in accordance, remained the O&M Party since that date; and
WHEREAS, The Parties now agree that the Intertie may be more efficiently operated and maintained by the District, given its proximity to the Intertie and the impact of the Intertie’s operation on the District’s system, and the District should thus be the O&M Party; and
WHEREAS, The Parties desire to amend the Agreement again on the terms and conditions set forth herein in order to (1) designate the District as the O&M Party from July 1, 2024 through June 30, 2029, with the Parties meeting and conferring before the end of this five- year period to determine, by mutual written agreement, which of them shall be the O&M Party beyond June 30, 2029, under Section 4 of the Agreement; (2) designate the O&M Party with primary responsibility for maintenance of operating permits and preparation of annual reports or plans under Section 5 of the Agreement; (3) provide that all costs associated with the operation of the Intertie to deliver “reimbursement water” shall be borne by the Party delivering that water under Section 14 of the Agreement; and (4) revise the terms for the annual reconciliation of water supplied through the Intertie under Section 17 of the Agreement.
NOW, THEREFORE, in consideration of the promises and conditions set forth herein, the Parties agree as follows:
Article 1 Definitions
The following definitions shall apply to this Amendment:
1.1 Agreement. The term “Agreement” shall mean the Agreement for Long Term Operation and Maintenance of the Intertie dated December 21, 1999 between the City and the District, as amended by the First Amendment dated March 2, 2009.
1.2 Other Terms. Terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Agreement.
Article 2 Modifications of Scope to the Agreement
The Agreement is hereby modified as follows:
2.1 Maintenance, Replacement and Repair of the Intertie. Section 4 of the Agreement, entitled “Maintenance, Replacement and Repair of the Intertie,” currently reads as follows:
The Parties shall jointly designate one of them to have primary responsibility for routine operation, maintenance, replacement and repair of the physical works of the Shared Project Facilities (“the O&M Party”). It is the Parties intent that the District shall be designated as the O&M Party until at least December 31, 2013. If mutually agreed, accomplishment of operation, maintenance, replacement and repair of physical works of the Shared Project Facilities may be contracted to a third party, with responsibility for contract administration by the City or the District as may be agreed. Routine operation, maintenance, replacement and repair of each Party’s Separate Facilities such as water treatment facilities, shall be the sole responsibility of each respective Party. The Parties shall establish and agree upon an annual plan and budget for operation, maintenance, repair, replacement or capital improvements during the Annual Meeting. Such plan shall include a contingency fund. The District or the City may repair or replace any of the physical works of the Shared Project Facilities, as consistent with the annual plan and budget, or as mutually agreed by the Parties.
Any fences and access gates to the Intertie shall be kept in good repair. Such gates shall be kept closed and locked except when in actual use. The Parties shall provide each other with a key to each lockable gate to the Intertie.
Such section is hereby amended in its entirety to read as follows:
One Party to this Agreement shall have primary responsibility for routine operation, maintenance, replacement and repair of the physical works of the Shared Project Facilities (“the O&M Party”). Following the Parties’ joint designation of the District as the O&M Party between March 2, 2009 and December 31, 2013, and the City as the O&M Party starting on January 1, 2014, the Parties agree that the District shall be designated the O&M Party starting on July 1, 2024, and shall remain the O&M Party through June 30, 2029.
If mutually agreed, accomplishment of operation, maintenance, replacement and repair of physical works of the Shared Project Facilities may be contracted to a third party, with responsibility for contract administration by the City or the District as may be agreed. Routine operation, maintenance, replacement and repair of each Party’s Separate Facilities, such as water treatment facilities, shall be the sole responsibility of each respective Party. The Parties shall establish and agree upon an annual plan and budget for operation, maintenance, repair, replacement or capital improvements during the Annual Meeting. Such plan shall include a contingency fund. The District or the City may repair or replace any of the physical works of the Shared Project Facilities, as consistent with the annual plan and budget, or as mutually agreed by the Parties.
By March 1, 2029, the Parties shall meet and confer to decide which of them shall be designated the O&M Party as of July 1, 2029 and shall memorialize this designation in writing, signed by their General Manager and Chief Executive Officer, or the designees of their General Manager and Chief Executive Officer, by May 31, 2029. The Parties may change the O&M Party designation again at a future date, but no more frequently than once every five years, if mutually agreed and memorialized in writing as provided in the foregoing sentence.
Any fences and access gates to the Intertie shall be kept in good repair. Such gates shall be kept closed and locked except when in actual use. The Parties shall provide each other with a key to each lockable gate to the Intertie.
2.2 Maintenance of Operating Permits. Section 5 of the Agreement, entitled “Maintenance of Operating Permits,” currently reads as follows:
The City shall have primary responsibility for maintaining and obtaining all permits and preparing annual reports or plans as necessary to comply with current or future applicable local, state, or federal regulations for operation of the Intertie facilities, including those necessary for Separate Facilities. Such permits may include, but are not limited to Hazardous Material Business or Management Plans, Annual Certification, Hazardous Material Storage Permits, Hazardous Materials Waste Generation Permit, or Spill Prevention Control and Countermeasures Plan. District shall provide timely response for requested information relative to it’s Separate Facilities.
Such section is hereby amended in its entirety to read as follows:
The O&M Party shall have primary responsibility for maintaining and obtaining all permits and preparing annual reports or plans as necessary to comply with current or future applicable local, state, or federal regulations for operation of the Intertie facilities, including those necessary for Separate Facilities. Such permits may include, but are not limited to, Santa Clara County Department of Environmental Health permit, Hazardous Waste Generator Permit, Bay Area Air Quality Management District – Permit to Operate (generators), Milpitas Fire Department – Fire Code permit, Hazardous Materials Business Plan, Spill Prevention Control and Countermeasure Plan, and/or Operations Plan. The City shall provide timely response for requested information relative to its Separate Facilities.
2.3 Separate Costs of the Intertie. Section 14 of the Agreement, entitled “Separate Costs of the Intertie,” currently reads as follows:
All costs associated with the operation of the Intertie to transfer water between the Parties shall be borne by the Party receiving water. Such costs include, but are not limited to, labor and materials required for operation of each Party’s water treatment facilities, additional local site operation staff or staff visits by the receiving Party, or additional maintenance staff or staff visits by the receiving Party which are in excess of the mutually agreed routine maintenance schedule.
Such section is hereby amended in its entirety to read as follows:
All costs associated with the operation of the Intertie to transfer water between the Parties for the purposes of an Emergency or Critical Work shall be borne by the Party receiving the water for that Emergency or Critical Work. Such costs include, but are not limited to, labor and materials required for operation of each Party’s water treatment facilities, additional local site operation staff or staff visits, or additional maintenance staff or staff visits which are in excess of the mutually agreed routine maintenance schedule. After such a transfer, all costs associated with the operation of the Intertie to enable the Party that had received water during the Emergency or Critical Work to then deliver “reimbursement water” to the other Party, pursuant to Section 17 of this Agreement, shall be borne by the Party delivering the “reimbursement water.” Such costs include, but are not limited to, labor and materials required for operation of each Party’s water treatment facilities, additional local site operation staff or staff visits, or additional maintenance staff or staff visits which are in excess of the mutually agreed routine maintenance schedule.
2.4 Annual Reconciliation of Water Supplied Through the Intertie. Section 17 of the Agreement, entitled “Annual Reconciliation of Water Supplied Through the Intertie,” currently reads as follows:
The Parties shall maintain accurate records of quantities of water supplied and received through the Intertie. The Parties shall reconcile deliveries and receipts of water during any given year against any existing carryover balance from the previous year during the Annual Meeting provided for in this Agreement. A Party who holds a credit after the annual reconciliation may (1) carry the credit forward subject to the annual reconciliation; or (2) request “reimbursement water” under a schedule and in a manner agreed to by the Parties. Notwithstanding the foregoing, a Party may not carry a credit beyond ten consecutive years without the agreement of the other Party. If the Party owing “reimbursement water” does not agree to carry forward a credit beyond ten years, then that Party shall pay for the credit water at the other Party’s current wholesale rate for potable water. The District’s wholesale rate shall be the sum of the “Zone 5 Basic Wateruser Charge” and the “Treated Water Surcharge” rates in effect at the time of exchange. The City’s wholesale rate shall be the “Schedule W25 – Resale Use With Long Term Contract” rate in effect at the time of exchange, except that the monthly service charge shall not apply.
Such section is hereby amended in its entirety to read as follows:
The Parties shall maintain accurate records of quantities of water supplied and received through the Intertie. The Parties shall reconcile deliveries and receipts of water during any given Fiscal Year against any existing carryover balance from the previous Fiscal Year during the Annual Meeting provided for in this Agreement. A Party who holds a credit after the annual reconciliation (i.e., is owed water by the other Party due to deliveries that it made to that other Party during the previous Fiscal Year(s)) may (1) carry the credit forward into the next Fiscal Year subject to the next annual reconciliation; or (2) request from the other Party a delivery of the same quantity of water that it is owed (“reimbursement water”) under a schedule and in a manner agreed to by the Parties.
Notwithstanding the foregoing, a credit for water may not be carried forward for more than five (5) consecutive Fiscal Years without the agreement of both of the Parties.
If both Parties do not agree to carry it forward more than five (5) consecutive Fiscal Years, the Party who holds the credit may request from the other Party a financial payment for the quantity of water that it is owed (rather than a delivery of that quantity of water under a schedule and in a manner agreed to by the Parties, which would be the default), notwithstanding the provision in Section 16 of this Agreement regarding the Parties’ intent that water supplied through the Intertie shall be reimbursed with water received through the Intertie. If such a request is made, the other Party shall pay for the credit water at the other Party’s current wholesale rate for potable water. The District’s wholesale rate shall be the sum of the “Zone 2 Basic Water User Charge” and the “Treated Water Surcharge” rates in effect at the time of exchange. The City’s wholesale rate shall be the “Schedule W-25 – Wholesale Use With Long-Term Contract” rate in effect at the time of exchange, except that the monthly service charge shall not apply.
The payment shall be made within ninety (90) days of the request of the Party who holds the credit.
Article 3 Effective Date
Each of the modifications set forth in Article 2 shall be effective on and after the date of this Amendment, subject to the approval of the San Francisco Public Utilities Commission, San Francisco Board of Supervisors, and Santa Clara Valley Water District Board of Directors.
Article 4 Legal Effect
Except as expressly modified by this Amendment, all of the terms and conditions of the Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the City and the District have executed this Second Amendment as of the date first referenced above.
SANTA CLARA VALLEY WATER DISTRICT
By: ________________________________________________
Rick Callender Date
Chief Executive Officer
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
By: ________________________________________________
Dennis J. Herrera Date
General Manager
Authorized by SFPUC Resolution No. ______
Date
Approved by Board of Supervisors Resolution No.
Date
APPROVED AS TO FORM:
David Chiu
City Attorney
By: __________________________________________
Deputy City Attorney