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<br />000677 <br /> <br />3/13/00 USSR Staff Draft <br /> <br />B. Cost-based rates - This approach should also be considered in develOping a <br />negotiating position. Application of this app~ is consistent with existing <br />Reclamation practices and is based on recovering the capital CX>St associated with the <br />water conversion or transfer. Such rates are likely to be appropriate in circumstances <br />where repayment of contraCtual obligations bas not been completed. In 'situations <br />where the contractual obligations have been fulfiUed or where there are othec 1'e8SODS <br />for selecting an alternative cost based method, there are a number of cost based <br />approaches available including: <br /> <br />(1) Cummt cost basis - This method would determine a price for tnmsfened project <br />water by using the replacement cost of existing facilities. The share orthe original <br />capital costs associated With converted project water would be indexed to obtain a <br />current cost equivalent amount. That coSt would then be divided by the amount of <br />project water )>eing converted to arrive at a capital cost (fixed charge) per acre-fooL <br /> <br />.. (2) All~ cost at current interest rate - This metboddoes not use ~n& but. <br />retains the original project construction cost. It fixes the principal8D1OUllt at the date of <br />the proposed transfer, as the remAining unpaid capital-cost which would be allocated to <br />the M&I pwpose based on the amount of project water' being converted aud amortizes <br />it over the remaining repayment periOd at a curient iotelest nde. <br /> <br />(3) Reallocation of project costs - This method would establish a rate by realJnI"2';~ <br />the unpaid balance for the entire project to reflect current project water usage, and <br />utilizing current interest rates. See 5 below for more details on this approach. <br /> <br />2. Negotiated prices - In many cases, the price utilized in the traosfero wiD be a <br />negotiated price. Some of the variables that influence or may be considered in negotiating the <br />contract include length of contract term, type of contract, otla benefits that might accrue to the <br />Federal government as a result of the conversion or transfer, and Federal share of the revenues. <br /> <br />3. Revenue sharing - Reclamation's policy is that when a 1raDSfer of project water <br />occurs, even on paid out projeCts, there is at cost involved. Tbe Federal Government is justified in <br />charging for the use of project water even if the amount received does not equate to the full value <br />of the cost to the government in providing the service. Therefore, in some situations it is - <br />appropriate for the Federal Government to ~hare in a portion of the gains received by a project <br />contractor or end user when they transfer project water to another entity. Conversely, there may <br />be some situations where the Federal government chooses to forego any revenues beyond what it <br />would have received under existing authorities. All potential revenue sharing situations are case- <br />specific and any sharing will be determined by negotiation between the entities involved. <br /> <br />4. Cost reallocation - For large, permanent transfers of project water, it is appl\lpllate <br />to eval\l8te whether the capital costs for construction should be reallocated from irrigation to <br /> <br />2 <br />