California Code, Water Code - WAT § 12944.7

(a) Notwithstanding any other provision of law, except as specified in subdivision (b), any public agency that has executed a contract with the state for a water supply pursuant to Section 12937 may sell any water available to that agency directly to any ultimate water consumer within the agency.

(b) Notwithstanding subdivision (a), if the principal act of the public agency restricts the agency to the wholesale distribution of water, the right to sell water directly to consumers may be exercised by the agency only pursuant to written contract with (1) a wholesaler, if any exists, to which the water would otherwise be sold and (2) a public entity water purveyor, if any exists, serving water at retail within the area in which the consumer is located or a water corporation, if any exists, subject to regulation by the Public Utilities Commission and serving water at retail within the area in which the consumer is located.