NEGOTIATING NEGOTIATING WHOLESALE WATER WHOLESALE WATER SUPPLY AGREEMENTS SUPPLY AGREEMENTS Presented by Presented by DAMON R. TALLEY, KRWA General Counsel DAMON R. TALLEY, KRWA General Counsel GERALD E. WUETCHER, PSC Attorney* GERALD E. WUETCHER, PSC Attorney* At At WATER PERSONNEL TRAINING SEMINAR WATER PERSONNEL TRAINING SEMINAR PUBLIC SERVICE COMMISSION PUBLIC SERVICE COMMISSION December 10, 2008 December 10, 2008 * None of the views expressed in this document necessarily reflect the views of the Kentucky Public Service Commission or any other official or employee of the Kentucky Public Service Commission.
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NEGOTIATING WHOLESALE WATER SUPPLY AGREEMENTS Presented by DAMON R. TALLEY, KRWA General Counsel GERALD E. WUETCHER, PSC Attorney* At WATER PERSONNEL.
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NEGOTIATING NEGOTIATING WHOLESALE WATER WHOLESALE WATER SUPPLY AGREEMENTSSUPPLY AGREEMENTS
Presented byPresented byDAMON R. TALLEY, KRWA General CounselDAMON R. TALLEY, KRWA General Counsel
GERALD E. WUETCHER, PSC Attorney*GERALD E. WUETCHER, PSC Attorney*AtAt
WATER PERSONNEL TRAINING SEMINARWATER PERSONNEL TRAINING SEMINARPUBLIC SERVICE COMMISSIONPUBLIC SERVICE COMMISSION
December 10, 2008December 10, 2008* None of the views expressed in this document necessarily reflect the views of the Kentucky Public Service Commission or any other official or employee of the Kentucky Public Service Commission.
PREPARING THE PREPARING THE SOILSOIL
GUIDING PRINCIPLESGUIDING PRINCIPLES
SPECIFIC CONTRACT SPECIFIC CONTRACT PROVISIONS PROVISIONS
QUESTIONSQUESTIONS
“Give me six hours to chop down a tree and I will spend the first four sharpening the
axe.”
PREPARING THE SOIL
Ratchet Down the RhetoricRatchet Down the Rhetoric
Separate the BullsSeparate the Bulls
Shuttle DiplomacyShuttle Diplomacy
““Cooling-Off” PeriodCooling-Off” Period
GUIDINGGUIDING PRINCIPLESPRINCIPLES
ExampleExample
Be Up FrontBe Up Front
No SecretsNo Secrets
No SubsidyNo Subsidy
PerceptionPerception
RealityReality
Fundamental FairnessFundamental Fairness
CommunicateCommunicate
CommunicateCommunicate
CommunicateCommunicate
Share InformationShare Information
No SurprisesNo Surprises
Example:Example: HCWD No. 2 HCWD No. 2
& City of Elizabethtown& City of Elizabethtown
Be CreativeBe Creative
SPECIFIC CONTRACT SPECIFIC CONTRACT PROVISIONSPROVISIONS
Critical if Seller is expanding Critical if Seller is expanding facilities to benefit Buyerfacilities to benefit Buyer
Quantity . . . Quantity . . .
InitialInitial
Method for Calculating Future Method for Calculating Future Rate AdjustmentsRate Adjustments
RatesRates
Initial RateInitial RateDon’t pull it out of the airDon’t pull it out of the air
Needs to be Cost-basedNeeds to be Cost-based
Why?Why?PSC won’t approve itPSC won’t approve it
KIA Grant/Loan AgreementsKIA Grant/Loan Agreements
Basis for future rate adjustmentsBasis for future rate adjustments
RatesRates
Rate Adjustment ProvisionsRate Adjustment ProvisionsGood for Buyer:Good for Buyer:
Can’t raise wholesale rate without Can’t raise wholesale rate without raising retail ratesraising retail rates
Amount of wholesale rate Amount of wholesale rate increase cannot exceed the increase cannot exceed the amount of retail rate increaseamount of retail rate increase
Great protection .. . But PSC Great protection .. . But PSC won’t approvewon’t approve
RatesRates
Contract Formula or MethodologyContract Formula or MethodologyWhat is the “Rate”?What is the “Rate”?
Formula Formula
oror
Calculated amount Calculated amount (e.g. $2.00 per 1,000 (e.g. $2.00 per 1,000
gallons)gallons)
Rates . . . AdjustmentRates . . . Adjustment
Frequency:Frequency:
Review and calculate annuallyReview and calculate annually