Proposed Water Supply Agreement
(WSA) Contract Amendment
Regarding the Minimum Purchase
Quantity (MPQ)
December 2024
What is the Minimum Purchase Requirement?
As early as the 1960s, four agencies with access to sources of supply not available to either San Francisco or the other Wholesale Customers were required to purchase a “minimum annual quantity of water” from the San Francisco Regional Water System (RWS).
The Minimum Purchase requirement guarantees an ongoing
financial stake in the RWS and provides year-to-year financial stability for the RWS.
To encourage water conservation during droughts, MPQs are waived.
Proposed Amendment
The proposed amendment has three
components:
1. MPQ Reset
MPQ reset at 80% of average SFPUC use
from previous four non-drought years.
Review every 10 years.
2. MPQ Family Plan
Imputed sales will only be applied if the
Minimum Purchase Agencies collectively
use less than the sum of MPQ.
3. Drought Rebound
One-year drought rebound MPQ set at the
mid-point between drought use and MPQ.
10 MGD
8 MGD 9 MGD
0 2
4 6
8 10
12 MPQ Drought
SFPUC Use
1-Yr Drought
Rebound MPQ
MGD
Example 1-Yr Drought Rebound
Policy Considerations Driving the Minimum
Purchase Amendment
Acknowledge MPQ agencies' efforts toward permanent
conservation and recycled water, while protecting the RWS from supply shifting based on cost.
Reflect a realistic demand recovery period after droughts. Ensure cost impacts are shared between SF Retail and
Wholesale Customers.
Establish a process to prevent the current issues from recurring.
Why is the Minimum Purchase Amendment
Needed?
The Minimum Purchase Quantities (MPQs) are no longer
achieving their intended purpose given today’s conditions. Droughts, investments in water use efficiency, and
development of local supplies have reduced demand on the RWS.
The RWS is currently subject to severe drought and the SFPUC is investigating alternatives.
MPQ agencies are well situated to develop local, drought resilient supplies, which improves reliability of the RWS for all users.
Current MPQs disincentivize investments in local supplies. 0 2
4 6
8 10
ACWD Milpitas Mountain
View
Sunnyvale
7.65 5.34
8.93 8.93
6.68 4.37
6.05 7.41
MGD
Current and Proposed MPQs
Current MPQ Proposed MPQ
How does the Minimum Purchase Agencies’
SFPUC use today compare to MPQs set in the
1980s?
Long-term investments in recycled water and water
use efficiency have lowered demand on the RWS.
Reductions in water use in response to SFPUC and
state mandates for wise water use during droughts
often persist for several years after restrictions are
lifted. While MPQs are waived during droughts, they
are reinstated immediately afterward, even though
demand may take several years to rebound to pre-
drought levels.
During the four non-drought years between the 2015-
17 and the 2021-23 drought, the Minimum Purchase
Agencies’ collectively RWS purchases were at or
below the total MPQ in all but one year.
More specifically, Mountain View’s total water use from
all potable supplies was below its MPQ in eight of the
last 11 years (i.e., Mountain View doesn’t have the
demand in its service area to use the minimum amount
of water it’s required to purchase from the RWS).
What are the key Protections for the
Wholesale Customer Provided by the
Proposed Amendment?
Maintains purpose of the Minimum Purchase
requirement:
Ensures that Minimum Purchase Agencies don’t
shift purchases away from the RWS.
Improves the reliability of the RWS for all users:
Allows Minimum Purchase Agencies to develop
local supplies, reducing demand on the RWS.
Extends duration that the 184 MGD Supply
Assurance will meet Wholesale Customer
demand.
Cost shared proportionately between San
Francisco and Wholesale Customers.
Enhances future stability of the WSA:
Aligns intent of different sections of the WSA
regarding development of local supplies while
maintaining financial stability of the RWS.
What are the impacts to the WSA?
Cost Analysis
Given proportional allocation of costs based on
purchases from the RWS, future analysis is imprecise
(i.e., unit cost of water is based on variables that are hard to predict, such as total purchases).
Based on historical analysis, the cost increase of the
amendment, in non-drought years, may be between
$0.007 to $0.040 per ccf (0.13% to 0.72%). There is
no impact in drought years.
Benefits Analysis
Removes barrier for MPQ agencies to develop
drought-resistant local supplies, which improves
reliability of the RWS and benefits all RWS users.
Ensures agencies are not charged for unused water.
Why is this Minimum Purchase amendment
moving forward with the Tier 2 Plan?
The updated Tier 2 Plan imposes higher drought
cutbacks on Minimum Purchase Agencies, further
reducing RWS use below their MPQs and increasing
the risk of paying for unused water once the drought
restrictions are lifted. The proposed WSA
amendment addresses this issue and other long-
standing concerns raised by the Minimum Purchase
Agencies.
0 5
10 15
20 25
30 35MGD
Collective MPQ vs. SFPUC Use
SFPUC Use Drought Year Current MPQ
0 2
4 6
8 10
12MGD
Mountain View Total Water Use
SFPUC SCVWD Wells
Recycled MPQ