DWR has done substantial planning to improve the water supply reliability of the SWP. Since the mid-1980s, DWR has employed the water service reliability planning approach in the economic analyses of SWP supply augmentation programs. For this purpose, the Economic Risk Model, an urban water management simulation model, was used to identify least-cost plans by combining information about the costs and effectiveness of both contingency and long-term water management options with a method of estimating the economic costs and losses due to shortages.
For a proposed addition to the SWP, local urban water management options were first evaluated using the principle of least-cost planning to identify the optimal service area water management strategy without the proposed addition in question. The costs and losses associated with that strategy were then compared to the strategy identified as optimal under conditions with the proposed SWP additions in place. In this way, the benefits of having the proposed SWP facility in place were identified and then compared to the respective costs of those facilities.
Economic losses due to shortages were based on a contingent-value survey done for MWDSC for the SWRCB's Bay-Delta hearing process. The model was run with an SWP delivery capability sequence produced by DWR's Planning Simulation Model for each planning scenario. Weather-related changes in year-to-year urban water demand were also simulated by the ERM. The model produced "snapshots" of reliability-related costs and losses for selected future years over the planning horizon.
Using this approach, the potential contributions of all feasible local urban demand management and local supply augmentation options were explicitly taken into account on a "level playing field" in the process of estimating the benefits of the proposed SWP facilities. Local options that were the true alternatives to the proposed SWP facilities were discovered by eliminating as alternatives those local options that would be used under the least-cost planning principle irrespective of the existence of the proposed facilities. The total benefits of the proposed addition to the SWP were the avoided costs of the urban water management alternatives displaced and the reduction in costs and losses associated with a higher level of M&I water service reliability.
Under provisions of the SWP water supply contracts, when shortages in water supply occur, SWP shall reduce the water delivery to agricultural uses "not to exceed 50 percent in any one year or a total of 100 hundred percent in any series of seven consecutive years." The reductions in deliveries allowable under this provision will be made before any reduction is made in deliveries for urban uses. Increases in water demand in SWP service areas and increased environmental water demand in the Delta, as a result of actions to protect listed species, would result in more frequent and severe shortages in both future urban and agricultural supplies until new programs are implemented to augment SWP supplies.