BILL ANALYSIS
AB 1823
Page A
Date of Hearing: April 22, 2002
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
AB 1823 (Papan) - As Amended: April 16, 2002
SUBJECT : Regional water systems.
SUMMARY : Requires San Francisco to adopt a capital improvement
program and an emergency response plan for the Hetch Hetchy
Project, orders an audit of the system, and imposes other
requirements. Specifically, this bill :
1)Requires San Francisco to adopt the capital improvement
projects program identified in an August 2001 report prepared
by the San Francisco Public Utilities Commission (SFPUC) no
later than February 1, 2003, and submit a copy of the report
to the Department of Health Services (DHS) by March 1, 2003.
2)Requires the program to include a financing plan, and a
schedule of completion of design, award of contract, and
commencement and completion of each project, and that the
schedule call for projects representing at least 50% of the
total cost to be completed by 2010 and for 100% of the program
to be completed by 2015.
3)Lists projects that must be completed and the date by which
each must be done.
4)Requires San Francisco to adhere to the schedule and annually
report to the Legislature on the progress made on each
project.
5)Requires San Francisco to consult with emergency services
authorities in Alameda, Santa Clara, and San Mateo Counties,
prepare an emergency response plan describing how water
service would be restored in the system service after an
earthquake or other catastrophe, submit a draft plan to the
state Office of Emergency Services (OES) by July 1, 2003, and
adopt the plan by September 1, 2003.
6)Requires a regional wholesale water supplier to equitably
distribute available water to all of its customers in the
event of an earthquake or other catastrophe, without regard to
a customer's location.
AB 1823
Page B
7)Requires a regional wholesale water supplier to report each
February 1 to the Legislature and DHS on progress made during
the previous year in securing supplemental water sources for
dry years.
8)Requires San Francisco to operate reservoirs in Tuolomne and
Stanislaus Counties such that water delivery is the first
priority and hydroelectric power generation is second.
9)Requires San Francisco to submit its plan of operations to DHS
by February 1, 2004, and provides for DHS review of San
Francisco's operations plan, allowing DHS to order changes
that it deems necessary.
10)Requires San Francisco to comply with DHS orders concerning
operations of the system, unless the Secretary of the
Interior, in writing, notifies the city that doing so would
violate the Raker Act.<1>
11)Directs a regional wholesale water supplier to make regional
facilities available to convey water, secured by wholesale
customers, to those customers when shortage conditions exist,
or would exist in absence of a transfer.
12)Requires DHS to conduct an audit of San Francisco's system
maintenance efforts during 2003, and every other year
thereafter until 2009, and report to the Legislature
concerning:
a) Adequacy of San Francisco's procedures and resources for
identifying maintenance that is necessary, the planning,
budgeting, scheduling, completing and recordkeeping of the
maintenance.
b) An inspection of major system facilities to determine
general condition maintenance adequacy.
13)Requires DHS to conduct an audit of other regional water
systems operated by regional wholesale water suppliers, and to
report its findings to the Legislature by February 1, 2006.
14)Provides that the cost allocation formula and cost sharing
---------------------------
<1> Enacted in 1913, [H.R. 7207, 63rd Cong. ch. 4, 38 Stat.
242]
AB 1823
Page C
provisions contained in the master water sales contract
between San Francisco and its customers shall remain in effect
unless or until the parties amend the contract or enter into a
new agreement.
15)Provides that if the public agency wholesale customers form a
special district to own and operate the water project, and the
governing board of the special district reflects the
proportionate use of water delivered by the system within its
service area, the obligations imposed by this bill shall apply
to the district. In that event, San Francisco is relieved of
all obligations upon transfer of ownership and control to the
district.
16)Permits any wholesale customer of the system to enforce the
provisions of this bill .
17)Appoints DHS to ensure that the system complies with this
bill and with federal and state safe drinking water laws.
18)Authorizes any special district, that includes some or all of
the system's wholesale customers, to receive state funds for
seismic risk protection regardless of whether or not San
Francisco is a member of the special district.
19)Requires a regional wholesale water supplier to reimburse the
state for costs incurred in carrying out the provisions of
this bill.
20)States that nothing in this bill affects the rights and
obligations that may exist between San Francisco, the Modesto
Irrigation District, and the Turlock Irrigation District as
provided in law or contract.
21)Contains a severability clause.
22)Makes legislative findings and declarations, including:
a) Over two-thirds of the people who depend on the system
live outside San Francisco, as well as most of the system's
industrial, commercial, institutional and governmental
users.
b) The system is old and not designed to current seismic
standards, and engineering investigations have disclosed
AB 1823
Page D
that the system is at risk of catastrophic failure in a
major earthquake.
c) The system is not subject to California Public Utilities
Commission (PUC) oversight, and the majority of those who
rely on the system do not have the right to vote for the
elected officials in San Francisco who manage the system.
d) Neighboring counties are disadvantaged when it comes to
protecting themselves against exposure to severe water
shortages which discourages industrial development.
e) The state has concerns for the safety, health and
economic security of the region that warrant San Francisco
to take timely steps to safeguard all those who live in
areas dependent on the system -- concerns it has with any
similar water system.
EXISTING LAW granted, pursuant to the federal Raker Act, certain
rights-of-way in Yosemite National Park and Stanislaus National
Forest for, among other things, constructing, operating, and
maintaining aqueducts, canals, ditches, etc., for conveying
water for domestic purposes and uses.
Granted those rights to the city and county of San Francisco and
"such other municipalities or water district or water districts
as may, with the consent of the city and county of San Francisco
or in accordance with the laws of the State of California,
hereafter participate in or succeed to the beneficial rights and
privileges" granted by the federal law.
FISCAL EFFECT : Unknown.
COMMENTS :
The City and County of San Francisco operates a water and
hydroelectric power system that supplies drinking water to
approximately 2.4 million customers in four Bay Area counties.
In 1913, Congress enacted legislation granting San Francisco use
of federal lands in the Sierra Nevada, including Hetch Hetchy
Valley in Yosemite National Park for domestic water development
and hydroelectric power generation. This system is commonly
known as the Hetch Hetchy Project, and has been conveying water
to the Bay Area since the 1930s.
AB 1823
Page E
Although nearly two-thirds of the 2.4 million customers served
by the system live outside San Francisco in San Mateo, Alameda
and Santa Clara Counties, the system is governed exclusively by
SFPUC, a non-elected body whose commissioners are appointed by
the Mayor of San Francisco. Because SFPUC is a charter-city
department, PUC does not regulate it.
With the right to operate the system comes the responsibility to
maintain it. San Francisco first began studying the reliability
of the system in 1994. As of the year 2000, the city had
completed two of three planned phases of the study. That same
year, the California State Auditor issued a report entitled:
San Francisco Public Utilities Commission: Its Slow Pace for
Assessing Weaknesses in Its Water Delivery System and for
Completing Capital Projects Increases the Risk of Service
Disruptions and Water Shortages. Among other things, the
Auditor concluded:
1)SFPUC has been slow to assess its water delivery system and
has made little progress in completing capital improvements;
2)SFPUC has known since 1994 that it needed to identify
additional water sources, but it did not begin to develop a
water supply plan until 1996;
3)Factors that have contributed to SFPUC's slow pace include:
shortages of project managers, out-of-date procedures,
inadequate tracking systems, and insufficiently trained
project managers;
4)Success of SFPUC's capital improvements program was uncertain
because of delays in developing and implementing plans.
In January 2000 SFPUC issued its own report on system
reliability. The report concluded that in the event of a major
earthquake, the supply of drinking water to system customers
could be cut off for up to 60 days.
In August 2001 the staff of SFPUC issued a report outlining a
$4.3 billion capital improvement program. Neither SFPUC nor the
San Francisco Board of Supervisors has formally adopted the
program. Both entities may act in May or June, but the general
manager of SFPUC acknowledged at a March 26, 2002 regional water
conference that city voters were suffering "sticker shock" over
AB 1823
Page F
a proposed $4.6 billion revamp of the water system.<2> SFPUC is
nearly unique among water agencies in that it must obtain voter
approval to issue revenue bonds.
Rights and Responsibilities
San Francisco contends that altering the governance of the
system, as proposed in this bill, violates the Raker Act, the
federal law granting right-of-way rights to San Francisco. But
the author of this bill obtained a Legislative Counsel opinion
concluding that:
"[t]he Legislature may validly enact a statute
facilitating the formation of a single authority
between any of the participating 29 local water
agencies and the City and County of San
Francisco to provide for the governance and
mutual capitalization of the regional Hetch
Hetchy water delivery system . . ."
The crux of the matter is how "grantee" is defined in the
federal legislation granting water and electricity development
and conveyance rights. In the law, grantee includes "the city
and county of San Francisco and such other municipalities or
water district or water districts as may, with the consent of
the city and county of San Francisco or in accordance with the
laws of the State of California, hereafter participate in or
succeed to the beneficial rights and privileges granted by this
[Raker] Act." Proponents believe that the language of the Raker
Act allows other municipalities or water districts to be full
grantees, along with San Francisco.
This bill does not enact a statute setting up a single authority
to change the governance [i.e., the grantee status], but it does
specify that any change in governance or ownership will transfer
the duties under this bill to such an entity, should it be
created. [See AB 2058 (Papan)]
If the controversial ownership and governance issues are set
aside, the language in the Raker Act does appear to allow the
state to enact laws allowing other entities or governments to
"participate in" the benefits that flow from the grant of water
---------------------------
<2> Mr. Pat Martel also told the conference that San Francisco
strongly opposed legislation by Peninsula legislators to address
the problem.
AB 1823
Page G
conveyance rights to San Francisco.
The Raker Act clearly permits San Francisco, and its neighboring
water districts and municipalities, could consent to allow its
neighbors to participate in some of the maintenance and
operations decisions and plans, and participate in the financial
responsibilities.
Under either state law or by consent, San Francisco could retain
all rights as grantee, but allow others to "participate in" the
benefits and the responsibilities [in accordance with the laws
of the state]. This may obviate the need to open the issue of
whether the law allows other entities to be regarded as grantees
on equal par with San Francisco. Such a mutually beneficial
arrangement could be reached by state law, contract or
memorandum of understanding, the latter requiring a meeting of
the minds that appears in the distance at this point.
It should be noted that the Raker Act appears not to grant water
rights, but instead a right to develop electricity and water
supplies, and build a water conveyance system.
San Francisco contends that passage of this bill will send a
message to the San Francisco electorate that it need not pass
the large bond issue because the state will handle this issue.
Proponents counter that, despite warnings concerning the system
given nearly eight years ago, drift and delay has continued.
Sponsors note that there remains no adopted capital improvement
plan, the facilities have deteriorated to the point that an
earthquake of predictable magnitude would leave the system
without water for 30 to 60 days, and that, alarmingly, San
Francisco has been ordered by the California Division of Safety
of Dams to virtually empty Calaveras reservoir in Alameda County
because of concerns that the dam would fail during an
earthquake.
SFPUC officials have also stated that this bill and its
companion measures raise a host of governance issues. Sponsors
counter that all major urban water systems in the state --
except San Francisco -- are either subject to oversight by PUC
(in the case of investor-owned utilities) or subject to control
at the ballot box by their customers (in the case of
municipalities and special districts). Thus, according to
sponsors, San Francisco is, insofar as a majority of its
AB 1823
Page H
customers are concerned, an unregulated monopoly.
Related legislation
This bill is one of three bills dealing with the Hetch Hetchy
Project. AB 2058 (Papan), which authorizes creation of a Bay
Area Water Supply and Conservation Agency by public entities
that purchase water from San Francisco, passed the Assembly
Local Government Committee (11-0) on April 15, 2002. SB 1870
(Speier), which creates a financing authority among the same
public entities that would issue revenue bonds to pay their
share of maintenance and upgrade costs, passed the Senate Local
Government Committee (4-1) on April 8, 2002.
The most recently amended version of this bill removes sections
that would have required the Department of Water Resources to
assume control of the system if San Francisco failed or refused
to comply with this bill's provisions, denied state funds to San
Francisco for the system until it joined regional special
district, and would have given PUC rate-setting authority if San
Francisco failed to renew or extend its master water sale
contract with wholesale customers by a date certain.
REGISTERED SUPPORT / OPPOSITION :
Support
San Francisco Bay Area Water User's Association [Sponsor]
Alameda County Water District
CA Water Service Company
City of Brisbane
City of Burlingame
City of East Palo Alto
City of Hillsborough
City of Menlo Park
City of Millbrae
City of Milpitas
City of Mountain View
City of Palo Alto
City of San Bruno
City of Santa Clara
Stanford University
City Sunnyvale
Coastside County Water District
County of Santa Clara
AB 1823
Page I
Los Trancos County Water District
Estero Municipal Improvement District
Purissima Hills Water District
Redwood City/San Carlos/Belmont Leadership Class 2002
Silicon Valley Manufacturing Group
Vista Verde Community Association
Mid-Peninsula Water District
Westborough Water District
Opposition
City and County of San Francisco
Sierra Club
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083