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<br />there have been numerous recent transactions upon which a redetermination judgment may be <br />made. <br /> <br />b) The agreement provides for the adjustment of comparable transaction prices based upon <br />factors such as water reliability, water quality, and location. <br /> <br />Comment: As with the justification for the base price, the parties have different perspectives <br />in regard to what may occur in the future with the cost of obtaining water and how the water <br />market will develop within California. lID believes that high-priority water will remain in <br />relatively short supply and that demand will grow. The Authority, on the other hand, anticipates <br />that technological changes could suppress water prices, and the overall cost of obtaining water <br />could go down. Because of these different perspectives, lID and the Authority have agreed to <br />price redetermination provisions which will allow for the base price to periodically adjust to <br />market conditions in the future. It is expected that reliance on the redetermination process will <br />grow over time with the development of the California water market. <br /> <br />10. Shorta!!e sharin!! <br /> <br />a) In light of the senior position of lID's water rights compared to other entitlements within <br />the lower basin of California, Arizona, and Nevada, it is unlikely that lID's water rights would be <br />affected, even under shortage conditions, anytime in the foreseeable future. Nevertheless, since <br />the reliability of the water transferred to the Authority is grounded in lID's senior water rights, the <br />agreement addresses what will happen if a shortage on the river ever impacts lID's rights. <br /> <br />b) The agreement provides that lID and the Authority will share, on a pro-rata basis, any <br />reductions in water available to lID as a result of a shortage declaration by the Secretary of the <br />Interior. For example, if a shortage declaration resulted in a 100,000 acre feet reduction in the <br />amount of water available to lID, that reduction would be shared by lID and the Authority. If the <br />transfer agreement resulted in a transfer of the full 200,000 acre feet to the Authority, the <br />Authority would be responsible for 6,500 acre feet of the cut-back, and lID would be responsible <br />for 93,500 acre feet of the cut-back (assuming an overall entitlement to lID of 3.1 million acre <br />feet). <br /> <br />c) If a shortage condition affects both parties, the agreement provides for the parties to meet <br />and confer regarding the possibility of negotiating a supplemental transfer agreement between lID <br />and the Authority, so that the Authority may obtain a means by which to maintain its full supply of <br />water. The tenns and conditions of any supplemental transfer agreement would be negotiated at <br />that time. <br /> <br />d) If a supplemental agreement is not entered into, the agreement provides that the Authority <br />will have a right of first refusal as to any transferred water offered by lID to third parties during <br />the shortage. Also, if supplemental water is not available from lID, and lID has not offered <br />transfer water to others, the Authority is allowed to mitigate its shortage situation by entering into <br />an agreement with a third party for a replacement supply of water. If that action is taken, the <br />agreement provides that lID will share in the cost of providing that mitigation water source for <br /> <br />1493 <br /> <br />-6- <br />