Agenda - 02-03-2004-6d - Laserfiche WebLink

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5 KEY PRINCIPLES TO BE INCLUDED IN THE LETTER OF UNDERSTANDING BETWEEN OWASA AND THE UNIVERSITY FOR THE PLANNED WATER RECLAMATION AND REUSE SYSTEM The Letter of Understanding would be an agreement under which OWASA and the University would commit to move forward with plans and final arrangements for the development, operation, maintenance, and financing of the proposed water reclamation and reuse system. Based on discussions by the OWASA Board of Directors and the University, the key guiding principles in the Letter of Understanding are expected to include the following: • The reclaimed water system would be financially self-supporting Consistent with the requirements of the Agreements of Sale and Purchase between OWASA, the Towns of Chapel Hill and Carrboro, and the University, the reclaimed water rates, fees, and charges would fully recover all of OWASA's costs associated with constructing, operating, maintaining, and managing the water reclamation and reuse system. In other words, reclaimed water rates would reflect the true "cost- of-service" for the reclaimed water system, and the University would pay its full and fair share of the cost of reclaimed water service. • The University would commit to using reclaimed water rather than potable water in specified amounts and at specified facilities on the main campus. • OWASA would commit to providing reclaimed water of acceptable quality and in the specified amounts needed at the targeted demand centers on the main campus. • The initial reclaimed water system will be designed and constructed to have excess capacity available to serve non-University customers where practical to do so in the future. OWASA will have sole authority to approve extensions of and connections to the reclaimed water system. • OWASA will determine the rates, fees, and charges for reclaimed water service, • Both parties would work together to complete the planned system on or before July 1, 2007, SOME RELATED FINANCIAL ISSUES AND IMPLICATIONS OF WATER REUSE • By substituting reclaimed water to meet demands previously met with potable water, OWASA's potable water sales volumes, and therefore potable water revenues, will initially decline. This is likely to require an offsetting increase in the potable water rates charged to all water customers, including the University which is OWASA's largest customer. • Based on a preliminary analysis, the initial projected effect on potable water revenues could be the equivalent of about an 8 to 9 percent increase above the current effective potable water rate, or a 3 to 4 percent increase in the combined monthly water and sewer bill for a typical residential customer of OWASA. That is about $1.80 per month more for the typical single family residential customer • The effect on potable water, system revenues and rates will depend on several factors, including the reclaimed water and potable water demand levels, the portion of General and Administrative expenses recovered through reclaimed water rates and fees, and the amount of Federal and State grant funds that may be received for the project,. • Although potable water rates may need to be increased as a result of water reuse or other large-scale water conservation measures, those rate increases must be weighed against the many important benefits that water reuse has to offer all OWASA customers. One important benefit is that through water reuse, OWASA expects that future potable water rates would be lower than they would be without reuse.