Laserfiche WebLink
<br />APPENDIX II <br /> <br />APPENDIX II <br /> <br />WATER RATE-SETTING POLICY <br />ISSUES <br /> <br />Rolling repayment <br /> <br />One major difference between the proposed rate-setting <br />policy and past policies is that rOlling repayment has been <br />abandoned. No longer will customers' repayment period be <br />extended each time a new facility is added to the CVP. From now <br />on, major new facilities that are completed and placed in service <br />will be repaid within separate 50-year periods. <br /> <br />All facilities already in service will have to be paid off <br />by 2030--50 years after the most recent major facility, New <br />Melones Dam, was placed in service. The IG, in the previously <br />mentioned reports, recommended that each completed facility be <br />removed from rolling repayment and repaid within 50 years after <br />being placed in service. For example, Shasta Dam, placed in <br />service in 1945, would have to be repaid by 1995. The proposed <br />policies do not require that facilities placed in service prior <br />to 1980 be repaid within 50 years. <br /> <br />The effects of not requiring each facility to be repaid <br />within 50 years of completion are that <br /> <br />I <br /> <br />--unpaid irrigation investments remain outstanding <br />and interest free and <br /> <br />y <br /> <br />--unpaid M&I investments remain outstanding at low <br />interest rates. <br /> <br />, <br />~ <br />~ <br />, <br /> <br />Long-term rates <br /> <br />~ <br />, <br />r <br />~ <br />,. <br />~ <br /> <br />Until 1970, the Bureau generally executed water service <br />contracts for periods of up to 40 years at fixed rates set long <br />before final costs were known. In the 1970's, new contracts were <br />to be written with rates that could be adjusted every 5 years to <br />reflect updated costs and expenses. However, according to the IG <br />reviews, many of these contracts limited the potential for <br />adjustment, and rates continued to be based on old cost and <br />pricing data. <br /> <br />~ <br /> <br />p <br /> <br />According to a Bureau Regional Repayment Specialist, the few <br />long-term contracts that have been written in the 1980's have <br />provided for annual rate adjustment to keep pace with changes in <br />costs. Contracts negotiated under the new proposed policies <br />would be adjustable annually to reflect changes in project costs <br />and OM&R expenses. <br /> <br />~ <br />~ <br />* <br />. <br />~ <br />~ <br />~ <br /> <br />Ability to pay <br /> <br />The IG, in the previously mentioned 1978 report, cited <br />irrigation water rates on the basis of irrigators' ability to pay <br />as a factor in repayment difficulties. According to Bureau <br /> <br />29 <br />