The South San Joaquin Irrigation District has decided not to raise the reservoir outside of Modesto to summer levels, because of concern over water that would be lost to evaporation.
District Board Member Dave Kamper says the Stanislaus County Parks and Recreation Department could be hit particularly hard.
"Every drop of water is incredibly valuable this year, if we can save water, it's as much as 10,000 acre feet of water that can be saved," Kamper says.
The department has concessions at the reservoir and could lose two million dollars, if recreational activities are curtailed.
"They schedule the 4th of July event way ahead of time of course and some other events out there and it will be impossible for them to book them if they don't have the assurance there will be half way decent lake for poeple to play in and so they're in trouble no matter what," says Kamper.
The District also provides irrigation water for about 3,000 farmers, and drinking water for Tracy, Manteca, and Lathrop.
The U.S. Drought Center says the past week brought "widespread improvements" in drought conditions in northern California and Nevada.
California's energy grid manager says supply should be adequate for the summer, despite potential natural gas shortages in Southern California.
California water regulators will allow cities and water agencies to set their own conservation targets based on water supply.
Fire agencies are expected to continue prescribed burn operations this week in the Lake Tahoe Basin.
Severe and extreme drought were reduced slightly in California and 10 percent of the state is completely free of drought.