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<br />..J_ <br /> <br />, , <br />',.\ <br /> <br />Agricultural users expressed this unease to the district's representatives, and <br />requested assistance in this regard. They tended to see the municipal users who are <br />potential buyers under these contracts as having the expertise to make price/value <br />determinations, or the financial wherewithal to retain that expertise. Individual sellers <br />are unlikely to be able to hire economists to perform the necessary calculations for them. <br />There was discussion of ways to address this perceived imbalance in information. One <br />option is development of a computer model, available to all parties, that would' allow a <br />potential seller to determine the value of his or her water and whether an interruptible <br />supply contract would be appropriate in the context of a particular agricultural operation. <br /> <br />This discomfort as to ascertaining the value of water under interruptible supply <br />agreements manifested itself in regard to the means of developing prices under these <br />contracts. In presentations to the public, District representatives spoke primarily in terms <br />of setting price through a bidding process. However, because they are unsure of the <br />value of their water in the context of interruptible contracts, potential sellers on the <br />whole seemed averse to having to make firm bids without some indication of buyer <br />willingness to pay. Instead, they prefer that potential buyers make the first offer as to <br />price, with the final price to be fixed through a negotiating process. <br /> <br />In fact, this may be the majority view on the part of potential buyers as well as <br />sellers. The written survey distributed last summer asked whether price should be <br />determined by a buyer's fixed offer, bidding, or an initial buyer's offer followed by <br />negotiations. The overwhelming majority of agricultural respondents preferred the last of <br />these options, as did five of eight of the municipal respondents. Smaller numbers of each <br />group preferred a bidding process. None of the survey respondents wanted to determine <br />price through a fixed offer promulgated by the buyer. ' <br /> <br />Many of the comments received indicated some level of continuing lack of <br />awareness on the part of agricultural water users as to the nature of payment received <br />under interruptible supply contracts, as well as misunderstanding of how the value of <br />water subject to such a contract would be determined. For example, some agricultural <br />water users wondered if they would be at a disadvantage in entering into interruptible <br />agreements if they grow low-value crops. In fact, these users will be able to make water <br />available at a more attractive price to the seller because the value of the crop foregone is <br />lower. Thus, they will be in a better position to sell water under an interruptible contract <br />than farmers growing crops with a higher market value. <br /> <br />Another example is furnished by the comments received that expressed the idea <br />that "money won't water crops", demonstrating that some respondents did not understand <br />that they would be compensated for water transferred under an interruptible supply <br /> <br />using the water. Variable costs connected directly to production need not be <br />compensated if they can be avoided; any such costs that cannot reasonably be avoided <br />prior to notice being given that the option will be exercised should also be covered by the <br />payment made under an interruptible supply contract. In the real world, the price that a <br />seller may find acceptable in order to transfer water may vary from this theoretical price. <br /> <br />10 <br />