SAN FRANCISCO—Since the beginning of the year, enough water has spilled out of California’s rain-swollen Lake Oroville to meet the demands of roughly 14 million people for a year. With no place to store the excess, much of it ended up flowing out to sea.

It wasn’t just last month’s dramatic near-disaster at Lake Oroville’s dam that is to blame for the water loss. After years of drought, months of rains are exposing a major weakness in California’s water system: lack of storage.

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