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<br />APPENDIX II <br /> <br />APPENDIX II <br /> <br />M&I rate for repayment of San Felipe cannot <br />capital cost increases until 2008 (20 years <br />deliveries of M&I water). <br /> <br />be adjusted for <br />after the first <br /> <br />We performed a rough analysis of San Felipe's impact on its <br />customers, assuming they would fully repay San Felipe's costs by <br />2037 (50 years after it is placed in service). If the irrigation <br />rate were adjusted in 1996, we estimate that irrigation customers <br />would have to pay about $45 per acre-foot. If the M&I rate were <br />adjusted in 2008, M&I customers would have to pay about $200 to <br />$275, assuming interest rates applied to M&I deficits of 7.5 <br />percent to 10 percent.5 To these amounts would be added a share <br />of overall CVP costs. Data were not readily available to compute <br />what these costs would be in those years. <br /> <br />CONTINGENCIES MAY AFFECT REPAYMENT <br /> <br />Several contingencies whose outcome is unknown were not <br />discussed in the proposal but could affect repayment. Although <br />we did not estimate their financial impact, we feel these issues <br />warrant mentioning. <br /> <br />Disputed contract <br /> <br />Irrigation revenues could increase appreciably and M&I <br />revenues could increase somewhat if an ongoing water service <br />contract dispute between the United States and a major water <br />customer is decided in the government's favor. Otherwise, the <br />customer's water service rates would remain where they are now <br />until 2008. According to a regional Interior solicitor, the <br />Bureau is negotiating a settlement with the customer at this <br />time. <br /> <br />~ <br /> <br />Contracts for additional water <br /> <br />r <br />~ <br />r <br />f. <br />~ <br />" <br />~ <br />? <br />~ <br />~ <br />~ <br />~ <br />~ <br />~ <br />t <br /> <br />Irrigation and M&I revenues could be increased if the Bureau <br />is able to sell additional water supplies. Until recently, this <br />possibility seemed remote because of a long-standing stalemate <br /> <br />SThe existing rate of $43 is insufficient to cover the annual <br />interest requirements on the $214 million capital investment. <br />If the resulting annual operating deficits accrued interest at <br />7.5 percent or 10 percent, the accumulated deficits at the end <br />of 2007 would be $166 million or $224 million, respectively. <br />The M&I customers would then have only 30 years to repay (with <br />interest) the original capital investment plus the accumulated <br />deficit. <br /> <br />~. <br />~1 <br /> <br />, . <br />~ <br /> <br />33 <br />