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<br />issue that will be determined between the District and the Windy Gap participant (Le., <br />the District will allow borrowing only up to the amount of water guaranteed through an <br />available back-up supply). The guidelines should state that it is advisable for parties to <br />include language in their contracts that expressly recognizes this requirement, to avoid <br />misunderstandings between contracting parties. <br /> <br />The full number of units covered may be transferred to the buyer in any year in <br />which the contract is invoked to repay a water debt to the C-BT Project, even if only a <br />portion of the water is needed to cover the debt. In that event, the quantity of water <br />above the amount needed to repay the debt will be credited to the Windy Gap <br />participant's account and may be used to cover future borrowing. <br /> <br />Contract duration <br /> <br />The District's interest in the duration of interruptible supply contracts is that the <br />water subject to the contract and used as back-up supply for borrowing of C-BT waters <br />by the Windy Gap participant be available when the water must be repaid. This would <br />typically be done in a year when payback was determined to be necessary in order to <br />make full deliveries to C-BT allottees. However, the water could be repaid in a different <br />year and credited to the account of the Windy Gap borrower. <br /> <br />Thus, the District's guidelines for interruptible contracts should provide that the <br />parties may agree to any contract duration they wish. If, in the last year of the contract, <br />the buyer has an outstanding water debt to the C-BT Project due to in-lieu deliveries, the <br />contract will be invoked and the water transferred unless the buyer furnishes adequate <br />assurance of continuing back-up supply. That supply may be in the form of an extension <br />of the original interruptible contract, a new interruptible contract with a different seller, <br />or other collateral deemed acceptable pursuant to the Operating Criteria. <br /> <br />Date for notice that the contract will be invoked and the water transferred <br /> <br />The determination that in-lieu deliveries to Windy Gap must be repaid to the <br />C-BT Project is made at the time the quota for that year's C-BT deliveries is set, on the <br />second Friday in April. Therefore, for interruptible supply contracts used as back-up <br />supply for borrowing by Windy Gap, notice that the option will be exercised and the <br />water transferred must be permitted at that time. The District's guidelines should <br />require that all contracts provide for notice of exercise upon the setting of the C-BT <br />quota in April. The parties may provide for earlier notice as long as exercise in April is <br />not precluded.7 <br /> <br />7 For example, the parties might agree that the buyer could give notice of <br />exercise in January, at a lower price to reflect the buyer's assumption of the risk that <br />conditions in April could make invocation of the contract unnecessary. Such a contract <br />provision would be acceptable as long as exercise of the option remains available in <br />April. A contract requirinl!: exercise in January, so that failure to invoke the contract at <br />the time would preclude exercise in April, would be unacceptable. <br /> <br />23 <br />