While rowing out in the ocean, Mitch rescues an underwater photographer named Linda, floating on some wreckage. Linda's a somewhat disjointed, frantic story about something attacking her in an underwater cave that killed her partner and destroyed her boat is misconstrued by Kay Morgan, an ambitious, publicity-seeking newspaper reporter who creates a media frenzy by starting rumors about a "creature in the bay." The new lifeguard and prankster, Harvey Miller, benefits from the events by selling undersea creature T-shirts. Meanwhile, Shauni rescues a young girl from drowning and soon becomes compelled to save the girl, her brother, and their mother from their lives in the slums of South-Central L.A., much to Eddie's chagrin. Shauni also deals with her possessive father, who disapproves of her lifeguard job, but he has a change of heart after he learns more about what she does. Mitch pressures Captain Thorp to ask for funding for new advanced motorboats, called Scarabs, for the team.
Just when the media frenzy about the so-called "Creature in the Bay" subsides, the unseen sea monster attacks again by sinking a fishing trawler. Mitch and Devon Conner, a fellow lifeguard and environmental activist, suspect more about the mysterious attacks. At the same time, Kaye Morgan investigates an offshore oil company's rights for drilling and thinks there is a connection between the company and the creature in the bay. Meanwhile, Linda lusts after Mitch after having dinner at his house. Shauni tries to get Jordan and Tiana's mother to let them join a lifeguard youth group to keep Jordan off the streets, while she finally comes to terms with her stern father. Also, Captain Thorp finally gets the first "Scarab" motorboat for Baywatch and helps Mitch and Devon solve the mystery of the creature in the bay.
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