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Drought and Resources Management Plans. Possible causes of water supply deficits are droughts, failures of major water transmission facilities and other adverse events. MWD's current approach to managing water shortages has evolved from its experiences during the droughts of 1976 -77 and 1987 -92 into the Water Surplus and Drought Management Plan ( "WSDM Plan "). The WSDM Plan splits resource actions into two major categories: Surplus Actions and Shortage Actions. The Surplus Actions store surplus water, first inside then outside the region. The Shortage Actions of the WSDM Plan are split into three subcategories: Shortage, Severe Shortage and Extreme Shortage. Each category has associated actions that could be taken as a part of the response to prevailing shortage conditions. Conservation and water efficiency programs are part of MWD's resource management strategy through all categories. MWD's plan for allocation of water supplies in the event of shortage allocates MWD's water supplies among its member agencies, based on the principles contained in the WSDM Plan, to reduce water use and drawdowns from water storage reserves. MWD's member agencies and retail water suppliers in MWD's service area also have the ability to implement water conservation and allocation programs, and some of the retail suppliers in MWD's service area have initiated conservation measures. The success of conservation measures in conjunction with the Water Supply Allocation Plan is evidenced as a contributing factor in the lower than budgeted water sales during fiscal years 2009 -10, 2010 -11 and 2011 -12. Legislation approved in November 2009 sets a statewide conservation target for urban per capita water use of 20 percent reductions by 2020 (with credits for existing conservation) at the retail level, providing an additional catalyst for conservation by member agencies and retail suppliers. MWD's water sales projections incorporate an estimate of conservation savings that will reduce retail demands. Current projections include an estimate of additional water use efficiency savings that would result from local agencies reducing their per capita water use in response to the 20 percent by 2020 conservation savings goals required by recent legislation as well as an estimate of additional conservation that would have to occur to reach MWD's IRP goal of reducing overall regional per capita water use by 20 percent by 2020. MWD's Water Supply Allocation Plan provides a formula for equitable distribution of available water supplies in case of extreme water shortages within MWD's service area. Delivery within a member agency of more than its allocated amount of MWD supplies will subject the member agency to a penalty of one to four times MWD's full service rate for untreated Tier 2 water, depending on how much the member agency's water use for the twelve -month period beginning on July 1 exceeds its allocated amount. Any penalties collected may be rebated to the member agency that paid them to fund water management projects. The Water Supply Allocation Plan was approved by the Board in February 2008. On April 14, 2009, MWD's Board adopted a resolution declaring a regional water shortage and implementing the Water Supply Allocation Plan, effective July 1, 2009. The Board set the "Regional Shortage Level" at Water Supply Allocation Plan Level 2, which required reduction of regional water use by approximately 10 percent and resulted in a total allocation of about 2.09 million acre -feet of MWD water in fiscal year 2009 -10. On April 13, 2010, the Board adopted a resolution recognizing the continuing regional water shortage and again setting the Regional Shortage Level at Water Supply Allocation Plan Level 2, which sustained the regional water use reduction of approximately 10 percent. Due to improved hydrologic and storage conditions, on April 12, 2011, the Board terminated implementation of the 2010 -11 Water Supply Allocation Plan, restoring imported water deliveries to member agencies without risk of allocation penalties. Following Board - directed review of the Water Supply Allocation Plan three years after its approval, on September 13, 2011, the Board approved adjustments to the formula for calculating member agency supply allocations for any future implementation of the Water Supply Allocation Plan. Although the Act gives each of MWD's member agencies a preferential entitlement to purchase a portion of the water served by MWD, historically, these rights have not been used in allocating MWD's water. MWD's member agencies and retail water suppliers in MWD's service area also may implement water conservation and allocation programs within their respective service territories in times of shortage.