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<br />- Examole of the oricimz formula: <br /> <br />MWD untreated water rate <br /> <br />$349/AF <br /> <br />Other MWD charges <br /> <br />+51 <br /> <br />MWD "full rate" <br /> <br />400 <br /> <br />BASE wheeling rate <br /> <br />-68.50 <br /> <br />331.50 <br /> <br />25 percent discount (year I) <br /> <br />-82.87 <br /> <br />Base price <br /> <br />$248.63/AF <br /> <br />c) Although the agreement uses a specific assumed wheeling rate in order to determine the <br />price of the conserved water, the agreement recognizes that the actual wheeling rate could be <br />different. The pricing formula provides for lID and the Authority to equally share the amount, if <br />any, that the actual wheeling rate varies from the base wheeling rate, subject to a ceiling as to <br />what will be paid by lID and the Authority. <br /> <br />- In the example above, if the actual wheeling rate is $78.50 per acre foot and the base <br />wheeling rate is $68.50 per acre foot, lID and the Authority would split the $10 difference, <br />making the base price $243.63 per acre foot. However, in regard to lID's and the Authority's <br />responsibility, there is a cap on the amount the actual wheeling rate may exceed the base wheeling <br />rate. <br /> <br />8. Shortal!e oremium <br /> <br />In addition to the base price, the Authority will make additional payments to lID when the <br />Authority declares a shortage or imposes mandatory rationing or conservation, 2) the State of <br />California declares a critically dry condition for the state water project, or 3) the Secretary <br />declares a shortage for the lower Colorado River. <br /> <br />Comment: Given the limited water supplies available to the Authority, the reliability of lID's <br />senior water rights is a point of significant value in this transaction. In times of water shortage, the <br />reliability of lID's water rights has even more value to the Authority, and that fact is reflected in <br />the agreement. <br /> <br />9. Price redetermination <br /> <br />a) The price redetermination process cannot be engaged prior to year 10 of the transfer <br />agreement. After that time, either lID or the Authority may request the commencement of the <br />price redetermination process only if certain conditions are satisfied; for example: I) the water <br />market in California has matured to the extent that there are sufficient eligible transactions which <br />may be used as comparables, and 2) at least ten years has passed since the last redetermination or <br /> <br />1494 <br /> <br />-5- <br />