25C - AGMT - WATER PURCHASE ORDER

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11/18/2014 Board Meeting 8 -1 Attachment 1, Page I of 2 Purchase Order for System Water to be Provided by the Metropolitan Water District of Southern California Key Terms Term: • 10 years, effective January 1, 2015 through December 31, 2024 Base Period: • For purposes of determining their Tier 1 maximum, member agencies can choose between the current Revised Base Firm Demand, which is the highest fiscal year sales during the 13 -year period of FY 1990 through FY 2002, OR the highest year in the most recent 12 -year period of FY 2003 through FY 2014. Both calculations include Interim Agricultural Water Program, Seasonal Storage Service —Long, Cyclic and Replenishment Program sales. • Member agencies executing Purchase Orders will have a Tier 1 Maximum based on 90% of the respective base period peak year they choose. • If a member agency opts to use the original 13 -year period for their Purchase Order, their commitment will be 60% of the 2003 Initial Base Firm Demand (same as current Purchase Order). • If a member agency opts to use the more recent 12 -year period for their Purchase Order, their commitment will be 60% of the highest year in the most recent 12 -year period. • Member agencies who do not execute a Purchase Order will have their Tier 1 limit set at 60% of the Revised Base Firm Demand (same as current Purchase Order). • The calculation of the rolling average for purposes of resetting the Tier 1 maximum will exclude Water Supply Allocation Plan years and will use a 5 -year period. Once the Tier 1 Maximum resets, this reset will not go down. Tier 2 Applicability: • Tier 2 should only be applied to a member agency if its cumulative sales for the term of the Purchase Order exceed its cumulative Tier 1 Maximum, consistent with the methodology currently utilized to satisfy the 60 percent Purchase Order commitment. • Member agencies with Tier 2 obligations may choose: To have the obligation calculated at the end of the 10 -year term and pay any Tier 2 obligations at that time, based on the average of the difference between the Tier 1 and Tier 2 Supply Rates over the 10 -year term. To pay any Tier 2 obligations as they are incurred, with a true -up at the end of the 10 -year period. If, after Year 5, a Purchaser has accrued a Tier 2 obligation (purchases exceed the Tier 1 Maximum annualized * 5), the Purchaser will begin paying any future Tier 2 obligation annually. Any outstanding Tier 2 obligation owing from the initial 5 -year period can be amortized over the next 5 calendar years or paid at termination of the Purchase Order. 25C -16