Negotiating wholesale water supply agreements
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NEGOTIATING WHOLESALE WATER SUPPLY AGREEMENTS PowerPoint PPT Presentation


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NEGOTIATING WHOLESALE WATER SUPPLY AGREEMENTS. Presented by DAMON R. TALLEY, KRWA General Counsel GERALD E. WUETCHER, PSC Attorney* At WATER PERSONNEL TRAINING SEMINAR PUBLIC SERVICE COMMISSION December 10, 2008.

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NEGOTIATING WHOLESALE WATER SUPPLY AGREEMENTS

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NEGOTIATING WHOLESALE WATER SUPPLY AGREEMENTS

Presented by

DAMON R. TALLEY, KRWA General Counsel

GERALD E. WUETCHER, PSC Attorney*

At

WATER PERSONNEL TRAINING SEMINAR

PUBLIC SERVICE COMMISSION

December 10, 2008

* None of the views expressed in this document necessarily reflect the views of the Kentucky Public Service Commission or any other official or employee of the Kentucky Public Service Commission.


  • PREPARING THE SOIL

  • GUIDING PRINCIPLES

  • SPECIFIC CONTRACT PROVISIONS

  • QUESTIONS


PREPARING THE SOIL

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”


Ratchet Down the Rhetoric


Separate the Bulls


Shuttle Diplomacy


“Cooling-Off” Period


GUIDINGPRINCIPLES


No Secrets

  • Example

  • Be Up Front


Fundamental Fairness

  • No Subsidy

  • Perception

  • Reality


No Surprises

  • Communicate

    • Communicate

      • Communicate

  • Share Information


Be Creative

  • Example:HCWD No. 2

    & City of Elizabethtown


SPECIFIC CONTRACT PROVISIONS

  • Hot Topics

  • Not Exhaustive List


Master Meter

  • Ownership

  • Control

  • Access

    Continued


Master MeterCont.

  • Testing

    • Who Pays?

    • Advance Notice

    • Both Parties Present

    • Share Test Results

  • Maintenance

  • Replacement


Automatic Rate Adjustment Mechanism

  • CPI

    • Great:City’s Retail Rates

    • Bad:Wholesale Customers

  • KRA Withdrawal Fees


Automatic Rate Adjustment Mechanism

  • Formula

    • Cost of Service Study

    • Allocated Costs

    • Streamlines PSC Approval

    • Use Readily Available Information


Quantity

  • Don’t Say:

    • Seller agrees to supply all of Buyer’s requirements

    • Buyer agrees to buy all its water from seller

  • Do Say:

    • Specify maximum quantity


Quantity . . . Maximum

  • Good:Monthly Amount (30,000,000)

  • Better:Daily Amount (1,000,000)

  • Best:Gallons per Minute (700 GPM)

  • Perfect:GPM at each delivery point


Quantity . . . Maximum

  • Enforcement

    • Problem

    • GPM at each delivery point

    • Charge Penalty:10% up to 25%

    • Buffer (e.g. 10% Over Maximum)

    • Seller can waive

  • Seller not obligated to furnish extra water


Quantity . . .

  • Minimum Purchase Requirement

  • Take Or Pay Provision

    • Seller:Desirable

    • Buyer:Undesirable except . . .

  • Critical if Seller is expanding facilities to benefit Buyer


Rates

  • Initial

  • Method for Calculating Future Rate Adjustments


Rates

  • Initial Rate

    • Don’t pull it out of the air

    • Needs to be Cost-based

    • Why?

      • PSC won’t approve it

      • KIA Grant/Loan Agreements

      • Basis for future rate adjustments


Rates

  • Rate Adjustment Provisions

    • Good for Buyer:

      • Can’t raise wholesale rate without raising retail rates

      • Amount of wholesale rate increase cannot exceed the amount of retail rate increase

    • Great protection .. . But PSC won’t approve


Rates . . . Adjustment

  • Contract Formula or Methodology

    • What is the “Rate”?

      • Formula

        or

      • Calculated amount (e.g. $2.00 per 1,000 gallons)


Rates . . . Adjustment

  • Frequency:

    • Review and calculate annually

    • Adjust as necessary


Access to Records

  • Guiding Principle: Share Information

    • Provide information voluntarily

  • Avoids suspicion

  • Buyer can gain access by other means:

    • Open Records Request

    • FOIA (Federal Law)

    • PSC Data Request


Curtailment of Service

  • Termination

  • Drought

  • Coordinate Conservation Measures

  • Water Shortage Response Plans


Advance Notice of Rate Adjustments

  • Why?

    • Buyer needs time to adjust its rates

      • Public Utility: File PWA with PSC

      • Municipality: Utility Commission/City Council Approval

  • How much Time: 60 days

  • Coordinate Implementation


Water Quality

  • Consecutive Systems

    • Monitoring

    • Customer Notification

  • Disinfection By-Products (DBP)

    • Stage 1 Rule:401 KAR 8:510

    • Stage 2 Rule:(Approval Pending)


RD Form Contract

  • Checklist

  • Borrower / Buyer must pledge contract to RD


Dispute Resolution

  • Independent Third Party Review

  • Mediation

  • Arbitration

  • PSC will decide


Many Other Issues . . .


Questions


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