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<br />" <br /> <br />Section 9(c)(2) of the Reclamation Project Act of 1939 provides <br />that M&I water service contracts', "shall be for such periods, not <br />to exceed forty years, and at such rates, as in the Secretary's <br />judgment will produce revenue at least sufficient to cover an <br />appropriate share of the annual operation and maintenance costs <br />and an appropriate share of such fixed charges as the Secretary <br />deems proper." The minimum rate established is based primarily on <br />the cost of facilities with some adjustment to reflect a buildup <br />of water use, so that revenues earned throughout the payout period <br />will fully repay the costs, including interest associated with the <br />M&I function. The maximum rate is established by the cost of <br />water from the most likely alternative source available to the <br />contractor. <br /> <br />The appropriate share of OH&R and facilities costs are nonnally <br />determined by use of the Separable Cost Remaining Benefits (SCRB) <br />method of distributing total project costs. Such factors as favorable <br />interest rates, time frame, public risk ass~~ptions. and other factors <br />do not necessarily reflect the rate that prospective industrial water <br />users should bear. \o.'e have estal>lished the rates of $9 and $11 per <br />acre'-foc>t of water for Yellowtail and Boysen facilities of t:hc Pick- <br />RIoan Hissnuri Basin Program on the basis of the above premises. <br />These rates ere in accordance >lith current policies and compatible <br />with enhancing the financial position of the Pick-Sloan,Missouri <br />Basin Program. No difficulty was experienced in negotiating these <br />option contracts. NEd water from the more limited supply at Keyhole <br />Reservoir l.'as priced at $20.00 per acre-foot to an energy company <br />who 'evinced willingness to accept this charge. <br /> <br />I <br /> <br />I"here hen<;fits and p.'l)'ment capacIties differ as between a municipal <br />contractol' and an industrial contractor, basic authority allows a <br />distinction between ti:e water-service charge to the. municipal <br />contractor allJ the ,,'atel'-service charge to the industrial contractor; <br />but the conventional contractu"l rcquirements should be much the <br />same for both types of contractors. <br /> <br />2 <br />