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REQUEST FOR <br />COUNCIL ACTION <br />CITY COUNCIL MEETING DATE: <br />NOVEMBER 19, 2012 <br />TITLE: <br />PURCHASE ORDER EXTENSION <br />WITH METROPOLITAN WATER <br />DISTRICT FOR IMPORTED WATER <br />PURCHASE <br /> <br />r <br />CITY MANAG <br />RECOMMENDED ACTION <br />CLERK OF COUNCIL USE ONLY: <br />APPROVED <br />? As Recommended <br />? As Amended <br />? Ordinance on 1" Reading <br />? Ordinance on 2Id Reading <br />? Implementing Resolution <br />? Set Public Hearing For_ <br />CONTINUED TO <br />FILE NUMBER <br />Authorize the City Manager and Clerk of the Council to execute the attached purchase order <br />(Exhibit 1) for a two-year extension between the Metropolitan Water District of Southern California <br />and the City of Santa Ana to obtain imported water, subject to nonsubstantive changes approved <br />by the City Manager and City Attorney. <br />DISCUSSION <br />At its October 9, 2012, meeting, the Metropolitan Water District (MWD) Board approved to amend <br />and restate existing purchase orders for two years, to December 31, 2014, with no changes in the <br />terms and conditions. Most significantly, the two-tier rate structure that was established in 2003 <br />will remain the same. Member agencies have the opportunity to extend their purchase orders, <br />guaranteeing a minimum quantity of water over a two-year period from January 1, 2013, through <br />December 31, 2014. Each member agency's minimum quantity of water is based on its highest <br />year's firm demand (base demand) since FY 1989-90 and will not change. For Santa Ana, the <br />base demand will remain at 13,476 acre-feet (AF) per year. <br />Without a purchase order extension, a member agency can purchase up to 60 percent of its base <br />demand (for Santa Ana this would be 8,086 AF) each year at MWD's Tier 1 rate of $847 per AF <br />for CY 2013. All additional water purchases would be charged at MWD's Tier 2 rate of $997 per <br />AF for CY 2013, and would be subject to the availability of Tier 2 water supplies. By extending the <br />purchase order, a member agency can purchase up to 90 percent of its base demand (for Santa <br />Ana this would be 12,129 AF) each year at the Tier 1 rate. <br />In the original purchase orders, agencies were committed to purchasing a 10-year minimum on a <br />"take or pay" basis. "Take or pay" means that if the City purchased less than the purchase order <br />commitment during the 10-year period, it would still be required to pay for the unused quantity of <br />water. For Santa Ana, the 10-year commitment is to purchase 79,029 AF, which meets its <br />purchase order commitment. <br />25N-1