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EXHIBIT D <br />ANNUALIZED REPLACEMENT COMPONENT <br />1. The Annualized Replacement Component shall be computed using incurred costs for the <br />following: <br />a. Replacement cost of major Project parts costing more than the following amount <br />per unit: <br />$100,000 x (ENRCCI / 6,694) <br />where ENRCCI is the Engineering News Record Construction Cost Index for Los <br />Angeles area for July of each applicable Fiscal Year. ENRCCI for July 1998'is 6,694. <br />b. Salvage value of replaced'parts shall be a negative replacement cost. , <br />c. All contributions as outlined in Section 5.3 of this Agreement including but not <br />limited to payments from IRWD to OCWD for wheeling water through the <br />Project, shall be treated as negative replacement cost values for the purpose of <br />computing the Annualized Replacement Component. <br />2. Costs of the following items shall not be used to calculate the Annualized Replacement <br />Component: <br />a. .Replacement of any facilities beyond the Project's points of connection. <br />b. Any capital or operation and maintenance cost as previously defined in Exhibits B <br />and C, Annualized Capital Component and Operation and Maintenance <br />Component, respectively. <br />C. Reserve funds. <br />d. Intertie pipeline between the Irvine Ranch Water District Reclamation <br />Project/Green Acres Project. <br />3. The Annualized Replacement Cost (ARCost) shall be calculated Using the same <br />procedure as for capital amortization (ACCost) in Exhibit B except that: <br />• For membrane replacement, n is the number of years the replaced membranes were in <br />service; for all other replacement costs, n is 25 years. <br />• i is the interest rate in the Fiscal Year of replacement established in Section 3e of <br />Exhibit B. <br />• P is the actual costs of replacement in the Fiscal Year, subject to the adjustments cited <br />in Section 5 of Exhibit B. <br />4. The Annualized Replacement Component (ARCom) for each replacement occurrence in <br />dollars per acre-foot shall be calculated using the following procedure: <br />ARCom = ARCost / [(Deliveries to OCSD) + (Allowable Yield)] <br />Agreement 22156 -21- <br />