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This paper develops and applies an economically driven simulation model for California's Friant-Kern system, a region characterized by diverse water sources employed predominantly for commercial irrigated agriculture, with significant local water trading activity. The economic-engineering simulation approach highlights the importance of representing user economic decisions for water systems in a context of complex physical and infrastructure systems dominated by economic water uses. The model simulates how water users conserve, select supplies and make water exchange and market decisions in response to water costs and availability, and provides estimates of economic and operational impacts of alternative policies for the Friant-Kern system. Results show that high surface water prices cause farmers to pump more groundwater, disturbing an existing conjunctive use system and aggravating regional groundwater overdraft. CE Database subject headings: Water management: Simulation; Agriculture: Economic factors.

This paper presents results of a large-scale economic-engineering optimization model of California's water supply system. The results of this 4-year effort illustrate the value of optimization modeling for providing integrated information needed to manage a complex multipurpose water system. This information includes economic benefits of flexible operations, economic valuation of capacity expansion opportunities, estimating user willingness to pay for additional water, economic opportunity costs of environmental flows, and identification of promising conjunctive use and water transfer opportunities. The limitations of such modeling also are discussed. Overall, the results suggest improvements to system operation and water allocations with a statewide expected value potentially as high as $1.3 billion/year. Significant improvements in performance appear possible through water transfers and exchanges, conjunctive use, and various operational changes to increase flexibility. These changes also greatly reduce costs to agricultural and urban users of accommodating environmental requirements. Model results also suggest benefits for expanding selected conveyance and storage facilities. CE Database subject headings: Optimization; California; Water supply; Water shortage.