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First Amended and Restated Contract for the Supply of Water
City of Renton
FIRST AMENDED AND RESTATED CONTRACT
BETWEEN
THE CITY OF SEATTLE AND
THE C ITY OF RENTON
FOR THE
SUPPLY OF WATER
DATE: _____________________________
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First Amended and Restated Contract for the Supply of Water
City of Renton
TABLE OF CONTENTS
Page(s)
FIRST AMENDED AND RESTATED CONTRACT BETWEEN THE CITY OF SEATTLE AND
THE CITY OF RENTON FOR THE SUPPLY OF WATER ........................................................... 1
RECITALS ....................................................................................................................................................................... 1
SECTION I. DEFINITIONS .......................................................................................................... 3
SECTION II. TERM OF CONTRACT AND GENERAL CONDITIONS .................................. 10
II.A. Term of Contract ...................................................................................................................................... 10
II.B. Agreement to Supply and Purchase Water ............................................................................................. 13
II.C. Continuity of Service within the Term of the Contract ......................................................................... 23
II.D. Water Quality ........................................................................................................................................... 25
II.E. Regional Water Conservation Program .................................................................................................. 32
II.F Cedar River Watershed Education Center and other facilities ............................................................ 34
SECTION III. CONDITIONS OF SERVICE ............................................................................. 35
III.A. Minimum Hydraulic Gradient and Flow Rates ..................................................................................... 35
III.B. Resale to Other Parties ............................................................................................................................. 37
III.C. Interconnection With Other Systems ...................................................................................................... 37
III.D. Development of Seattle Regional Water Supply System Infrastructure ............................................... 39
III.E. Metering Equipment ................................................................................................................................. 40
SECTION IV. COST OF WATER SUPPLY & TRANSMISSION ............................................... 41
IV.A. Rate-making and Cost-allocation Principles .......................................................................................... 41
IV.B. Ratemaking Framework .......................................................................................................................... 44
IV.C. Seattle Regional Water Supply System Cost Pools ............................................................................... 45
IV.D. Allocation of Costs and Revenues into Cost Pools .................................................................................. 50
IV.E Allocation of Cost Pools by Customer or Customer Class. ........................................................... 61
IV.F Elective Services ....................................................................................................................................... 65
IV.G Rate Setting, Adjustments and Special Charges .................................................................................... 65
IV.H. Cost Review and Truing Actual Costs and Actual Revenues ................................................................ 73
SECTION V. OPERATING BOARD ........................................................................................... 77
SECTION VI. PLANNING ........................................................................................................ 78
VI.A. Reporting of Planning Data ..................................................................................................................... 78
VI.B. Submittal of Water Utility Water System Plans ..................................................................................... 80
VI.C. Seattle as Water Planning Agency ........................................................................................................... 80
VI.D. Capital Improvement Plan ....................................................................................................................... 81
SECTION VII. PAYMENT ......................................................................................................... 83
VII.A. Collection of Money Due City .................................................................................................................. 83
VII.B. Penalties for Late Payment ...................................................................................................................... 83
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First Amended and Restated Contract for the Supply of Water
City of Renton
VII.C. Billing Disputes ......................................................................................................................................... 83
VII.D Availability of Records ............................................................................................................................. 84
SECTION VIII. CONTRACT AMENDMENTS .......................................................................... 84
SECTION IX. DISPUTE RESOLUTION .................................................................................. 84
IX.A. Operating Board Review .......................................................................................................................... 84
IX.B. Seattle Mayor Review ............................................................................................................................... 85
IX.C. Mediation ................................................................................................................................................... 85
IX.D. Resort to Litigation ................................................................................................................................... 86
IX.E. Efficiency of Review .................................................................................................................................. 86
SECTION X. MISCELLANEOUS ............................................................................................... 86
X.A. Notification ................................................................................................................................................ 86
X.B. Severability ................................................................................................................................................ 87
X.C. Consent ...................................................................................................................................................... 88
X.D. Emergency Situations ............................................................................................................................... 88
X.E. No Joint Venture - Individual Liability ................................................................................................... 88
X.F. Complete Agreement ................................................................................................................................ 88
X.G. Venue, Jurisdiction and Specific Performance ....................................................................................... 89
X.H. Default and Non-Waiver .......................................................................................................................... 89
X.I. Force Majeure ........................................................................................................................................... 89
X.J. Successors .................................................................................................................................................. 90
X.K. Exhibits ...................................................................................................................................................... 90
SIGNATURE PAGE ........................................................................................................................ 91
LIST OF EXHIBITS ........................................................................................................................ 92
EXHIBIT I ..................................................................................................................................................................... 93
PURCHASE COMMITMENT & EMERGENCY, INDEPENDENT AND PURCHASED SUPPLIES ............... 93
EXHIBIT II .................................................................................................................................................................... 99
SERVICE CONNECTIONS, MINIMUM HYDRAULIC GRADIENTS, AND FLOW RATES OF WATER
SUPPLIED ..................................................................................................................................................................... 99
EXHIBIT III ................................................................................................................................................................ 101
DEMAND CHARGE METHODOLOGY ................................................................................................................. 101
EXHIBIT IV ................................................................................................................................................................. 104
OPERATING BOARD STRUCTURE ...................................................................................................................... 104
EXHIBIT V .................................................................................................................................................................. 106
FACILITIES CHARGES ........................................................................................................................................... 106
EXHIBIT VI ................................................................................................................................................................. 108
REGIONAL FACILITIES ......................................................................................................................................... 108
EXHIBIT VII ............................................................................................................................................................... 112
SUBREGIONAL FACILITIES AND ALLOCATIONS .......................................................................................... 112
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First Amended and Restated Contract for the Supply of Water
City of Renton
EXHIBIT VIII ............................................................................................................................................................. 117
INDEX O&M COST CATEGORIES ........................................................................................................................ 117
EXHIBIT IX ................................................................................................................................................................. 119
STRANDED AND AVOIDED COSTS ...................................................................................................................... 119
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First Amended and Restated Contract for the Supply of Water
City of Renton
FIRST AMENDED AND RESTATED CONTRACT BETWEEN
THE CITY OF SEATTLE AND CITY OF RENTON FOR THE
SUPPLY OF WATER
THIS FIRST AMENDED AND RESTATED CONTRACT (“Contract”) is entered into
between the CITY OF SEATTLE (“Seattle”), a municipal corporation of the State of
Washington, and the CITY OF RENTON (“Water Utility”), a municipal corporation of the State
of Washington.
RECITALS
1. Seattle owns and operates a system for the supply, treatment, transmission, and
distribution of potable water and is authorized to sell and distribute water to its residents
and to other persons and customers located outside the corporate limits of Seattle.
2. Seattle's water system is integral to the health and welfare of the residents located within
the retail and wholesale water service areas shown in Seattle's Water System Plan. Seattle
intends to provide water from the system to meet the current and future needs of the
residents of the wholesale water service areas pursuant to long-term water supply
contracts.
3. In meeting this service commitment, Seattle must ensure that this role does not place
financial burdens on its retail customers for which they do not receive a corresponding
benefit.
4. This Contract and contracts of a similar nature with other Wholesale Customers of Seattle
located within Seattle’s wholesale water service area are intended to provide those
Wholesale Customers and Seattle with the assurance of a long-term service commitment
for reliable and sustainable high quality water supply and to describe the terms and
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First Amended and Restated Contract for the Supply of Water
City of Renton
conditions associated with that commitment.
5. Under this Contract, Seattle intends to provide wholesale water to Water Utility at an
equivalent Wholesale Level of Service with the same pricing and operational principles
as it provides itself.
6. Given the extensive growth of Seattle and the surrounding areas and the impacts upon
infrastructure and costs, this Contract is intended to provide sufficient water for growth.
As a general philosophy for cost sharing purposes, the parties desire to adopt the principle
that “growth should pay for growth.”
7. Seattle and Water Utility, together with other Wholesale Customers of Seattle, have
agreed to establish an Operating Board comprised of representatives from Seattle and
Wholesale Customers, along with an independent representative, all pledged to represent
the best interests of the region, to provide advice and direction in certain areas to the
Administrator of the Seattle Regional Water Supply System.
8. Pursuant to Section II.A.4.a, Seattle, Water Utility and the other Wholesale Customers
have undertaken a review of the Contract and have mutually agreed to amend certain
terms and conditions of the Contract to update and clarify obligations of the parties and
to strengthen the partnership, resiliency and sustainability of the Seattle Regional Water
Supply System.
NOW, THEREFORE, in consideration of mutual covenants herein, the parties mutually
agree as follows:
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First Amended and Restated Contract for the Supply of Water
City of Renton
SECTION I. DEFINITIONS
For the purposes of this Contract, the following terms have been defined as:
“Administrator” - The General Manager of Seattle Public Utilities or any other title given to that
person who maintains the executive authority to operate and manage the Seattle Regional Water
Supply System.
“Alternate Supply(ies)” – The Emergency, Independent and Purchased Supplies, if any, available
to Water Utility.
“Annual O&M Costs” – The annual total O&M Costs included in each cost pool as determined
in Section IV.D.3.
“Automatically Allowed Reduction” – The purchase reduction amount automatically allowed as
defined in Section II.B.5.d.viii.
“Avoided Costs” – The proportional share of the projected capital and operating cost of the next
planned source of supply of the Seattle Regional Water Supply System represented by the size
of a Wholesale Customer's qualifying reduction in demand, as more particularly defined in
Section II.B.5 and Exhibit IX.
“Block Purchase Contract” – A contract in which Seattle sells a fixed quantity of water to a
block wholesale customer on a take or pay basis.
“Customer-driven Demand Fluctuations” – Demand fluctuations that are out of Seattle or Water
Utility’s control and result from retail customer discretion or behavior, such as weather or
economic-related demand, use of efficient fixtures, use of reuse water alternatives or
redevelopment of property, etc.
“Eastern Subregional Facilities” – Certain subregional transmission facilities used, in part, to
serve those Wholesale Customers in the Eastern Subregion as more particularly described in
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First Amended and Restated Contract for the Supply of Water
City of Renton
Section I of Exhibit VII.
“Emergency Supply(ies)” – Water supplies that Water Utility receives or purchases from another
water purveyor to use on an emergency or temporary basis as specifically identified in Section I
of Exhibit I. Emergency Supplies do not include Independent or Purchased Supplies, or periodic
or intermittent water supplies used for peak or seasonal demand or other domestic demand.
“Existing Regional Facilities” – Components of the Seattle Regional Water Supply System
which consist of supply and transmission resources and facilities that Seattle exclusively owns
and operates; related deferred costs; and facilities owned by others for which Seattle has entered
into an agreement to use, all of which are used to produce, treat and convey water to the Seattle
Retail Distribution System, Water Utility, other Wholesale Customers, and block or other
wholesale customers as set forth in Section I of Exhibit VI. This does not include New Supply,
New Transmission or Subregional Facilities.
“Facilities Charges” – Facilities Charges (FCs) are the product of the Equivalent Residential
Unit (ERU) Charge and the ERU Factor, as further described in Section IV.D.2.c. and Exhibit
V. FCs are only as described in this Contract.
“Firm Yield” - Firm yield is the amount of water that Seattle is able to supply system-wide as
published in the Seattle Water System Plan.
“Full Requirements Contract” – A contract in which Seattle supplies a Wholesale Customer
with its Full Water Requirements.
“Full Water Requirements” – All of the water, except for Emergency Supplies, if any, that
Water Utility needs to meet the demand of its present and future retail water customers within its
retail distribution service area, as shown in Water Utility’s water system plan in effect on the
Effective Date of this Contract, as may be amended according to the provisions of this Contract.
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First Amended and Restated Contract for the Supply of Water
City of Renton
“Independent Supply(ies)” – Water supplies that are owned and operated by Water Utility
pursuant to existing or transferred water rights, claims or permits as specifically identified in
Section II of Exhibit I or new water supplies acquired by Water Utility through a merger with
another water purveyor not supplied by Seattle water. Independent Supplies do not include
Emergency or Purchased Supplies.
“Index O&M Costs” – The portion of O&M Costs used to support the Seattle Regional Water
Supply System only, except those identified as Non-Index O&M Costs, as more particularly
described by the O&M Cost categories specified in Exhibit VIII.
“Infrastructure Adder” – 1.5% that is added as a component of the Rate of Return on Investment
to the Net Book Value of facilities recognized under the Utility Basis.
“Mixed-use Assets” – Capitalized facilities or assets that are shared between or used to support
both the Seattle Retail Distribution System and the Seattle Regional Water Supply System.
“Mixed-use O&M Costs” –The portion of O&M Costs that are shared between or used to support
both the Seattle Retail Distribution System and the Seattle Regional Water Supply System.
“New Supply Facilities” – New resources and facilities developed after January 1, 2002, or
portions of rehabilitated or replaced Existing Regional Facilities as may be allocated by the
Operating Board, that expand the supply capacity of the Seattle Regional Water Supply System
as set forth in Section II of Exhibit VI. This does not include Existing Regional, New
Transmission or Subregional Facilities.
“New Transmission Facilities” – New resources and facilities developed after January 1, 2002,
or portions of rehabilitated or replaced Existing Regional Facilities as may be allocated by the
Operating Board, that expand the transmission capacity of the Seattle Regional Water Supply
System as set forth in Section III of Exhibit VI. This does not include Existing Regional, New
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First Amended and Restated Contract for the Supply of Water
City of Renton
Supply or Subregional Facilities.
“Non-index O&M Costs” – A portion of O&M Costs to support the Seattle Regional Water
Supply System only, but not included in the Index O&M Costs because they are nonrecurring or
other special circumstances, as determined by Seattle, which may include, but are not limited to
pre-or post-capital expenses claims or net disposition costs.
“Operating Board” – A board of representatives established by Section V of this Contract and
having the specific roles and limited authorities as more particularly set forth throughout this
Contract.
“O&M Costs” - The fully loaded costs of labor (i.e. all wages and fringe benefits); costs of
materials, supplies, and equipment; and other direct or indirect costs or expenses that are not
capitalized; or portions thereof, required or expended to operate, maintain, repair and support the
Seattle Regional Water Supply System and the Seattle Retail Distribution System in good
working order consistent with all applicable local, state and federal laws, policies and standards
and to meet the obligations of this Contract.
“Partial Requirements Contract” - A contract in which Seattle supplies a Wholesale Customer
with its Partial Water Requirements during the Contract term.
"Partial Water Requirements" – All of the water that is over and above the aggregate amount
of Water Utility’s Independent and Purchased Supplies that Water Utility needs to meet the
demand of its present and future retail water customers within its service area as shown in Water
Utility’s water system plan in effect on the Effective Date of this Contract, as may be amended
according to the provisions of this Contract.
“Purchase Commitment” – Water Utility’s Full or Partial Water Requirements, as appropriate,
as specified in Exhibit I.
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First Amended and Restated Contract for the Supply of Water
City of Renton
“Purchased Supplies” – Water supplies Water Utility purchases from another water purveyor to
meet the demand of its present or future retail water customers as specifically identified in Section
III of Exhibit I.
“Qualified Partial Requirements Contract ” - A contract in which Seattle supplies a Wholesale
Customer with its future partial or full requirements during the Contract term- following a
customer's demand reduction due to Purchased Supplies.
“Qualified Partial Water Requirements” – Water Utility’s Partial Water Requirements less the
amount of a new Purchased Supply that becomes effective pursuant to a reduction of Water
Utility’s Purchase Commitment under Section II.B.5.
"Rate of Return on Investment" - Seattle’s Average Cost of Debt plus the Infrastructure Adder.
“Regional Facilities” – All of the Existing Regional, New Supply and New Transmission
Facilities.
“Regional Water Conservation Program” - A regional program, implemented collaboratively
between Seattle and Wholesale Customers, to help retail customers use water efficiently, defer
development of new supply resources and meet applicable regulations and agreements as more
particularly described in Section II.E.
“Renton Subregional Facilities” - Certain subregional transmission facilities used, in part, to
serve those Wholesale Customers in the Renton Subregion as more particularly described in
Section III of Exhibit VII.
Seattle Average Cost of Debt (“ACOD”) – The weighted average interest rate on Seattle’s water
system debt outstanding over the course of a calendar year calculated at the end of each calendar
year during the term of this Contract.
“Seattle’s Cash Pool Rate” - The interest rate earned by the Seattle Water Fund for cash deposited
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First Amended and Restated Contract for the Supply of Water
City of Renton
in the City of Seattle’s cash pool.
“Seattle Retail Distribution System” – Seattle’s retail water distribution system consisting of its
retail customers within the Seattle retail water service area as defined in its Water System Plan,
and including storage facilities, distribution mains, pumps, disinfection facilities, retail service
connections, and all other facilities not included in the Seattle Regional Water Supply System.
"Seattle Regional Water Supply System" - Seattle's regional water supply system consisting
generally of water rights (including permits and claims), real property rights, dams, impounded
water, supply and transmission mains, pumps, treatment facilities, Subregional Facilities, Service
Connections and all other resources and facilities utilized in producing, treating and conveying
water up to but not including the Seattle Retail Distribution System, and through to the end of the
Service Connections of the Water Utility and other Wholesale Customers, and block or other
wholesale customers.
“Seattle’s Service Area Boundary” - Seattle’s then current designated place of use of Seattle’s
water certificates, permits, claims or service area under Seattle’s approved Water System Plan.
“Seattle Water Enterprise Fund” - A public utility enterprise fund of the City of Seattle
established to account for activities of the water system operated by Seattle.
"Seattle Water System Plan" - Seattle's 2019 Water System Plan, dated August 2019, and
amendments and updates thereto, prepared by Seattle to comply with the requirements of WAC
246-290-100, and successor regulations, including each successive Water System Plan issued
approximately every 10 years.
"Service Connection” - The Seattle-owned and operated metered delivery locations as specified
in Exhibit II, beginning at the outlet from the regional supply pipeline (which may be a
subregional pipeline) to the end of the Seattle-owned vault, or the first isolation valve downstream
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First Amended and Restated Contract for the Supply of Water
City of Renton
of the vault; including the water meter and associated appurtenances through which Seattle
delivers water at a defined level of service from the Seattle Regional Water Supply System to a
Wholesale Customer's retail distribution water system.
“Southwest Subregional Facilities” - Certain subregional transmission facilities used, in part, to
serve those Wholesale Customers in the Southwest Subregion, as more particularly described in
Section II of Exhibit VII.
“Stranded Costs” – Those portions of infrastructure costs that Seattle has incurred and fixed
operations costs committed for the Seattle Regional Water Supply System, but not yet recovered
through rates and charges, at the time a Wholesale Customer reduces or terminates its Purchase
Commitment, that other Wholesale Customers, including Seattle, would have to pay due to the
loss of expected revenue resulting from that Wholesale Customer’s reduction or termination as
more particularly described in Exhibit IX.
“Subregional Facilities” – All of the Eastern, Southwestern and Renton Subregional Facilities, or
other subregions, if any, that may be added during the term of this Contract.
“Wholesale Customer” – Those water utilities who purchase water from Seattle under a Full or
Partial Requirements Contract for the purposes of reselling to their retail customers.
“Wholesale Level of Service” – Water delivered by Seattle to the Service Connection(s) in
accordance with the conditions listed in Exhibit II and this Contract intended for Wholesale
Customers’ distribution to their retail customers through their own distribution systems. Except
as may be specifically provided in this Contract, Seattle is not responsible for, and Wholesale
Level of Service does not include, compliance with Department of Health (“DOH”) standards,
including fire flow, emergency back-up and water quality within Water Utility’s retail service
area or distribution system.
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First Amended and Restated Contract for the Supply of Water
City of Renton
SECTION II. TERM OF CONTRACT AND GENERAL CONDITIONS
II.A. Term of Contract
1. Term. This First Amended and Restated Contract shall be in effect beginning at 12:01
AM on the Effective Date and shall remain in effect until 12:00 AM on January 1, 2062
(“Contract Term”).
2. Effective Date. This First Amended and Restated Contract shall be effective on January
1, 2026 (“Effective Date”).
3. Review of the Contract Term. The parties acknowledge and agree that it is desirable to
manage the expiration or extension of this Contract Term prior to expiration, and therefore
agree that the Contract Term in Section II.A.1 shall be automatically extended for an
additional ten (10) years (“Extension”) on January 1, 2032, and every ten (10) years
thereafter (“Extension Date”). The Water Utility may opt out of such extension of the
Contract Term by providing written notice to Seattle prior to the Extension Date. If
Water Utility opts out of the Extension, Seattle shall plan to supply water to Water Utility
for only the remaining Contract Term and shall plan for Water Utility to not purchase
any water supplies from Seattle as of the expiration of such Contract Term.
4. Periodic Review and Right to Change Certain Terms and Conditions. The parties may
review and change certain terms and conditions governing the sale of water under this
Contract by January 1, 2042 (“1st Review”), and January 1, 2062 (“2nd Review”), and
by January 1 every 20 years thereafter during the term of this Contract or as soon as
practicable after the respective January 1, as follows.
a. Mutual Agreement. On or before January 1, 2041, and then again on or before
January 1, 2061, and every 20 years thereafter, respectively, Seattle, Water Utility
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First Amended and Restated Contract for the Supply of Water
City of Renton
or any Wholesale Customer may provide the other party and Wholesale
Customers with a written proposal to amend the Contract terms. All parties,
including Seattle, Water Utility, and other Wholesale Customers, shall consider
the proposal(s), if any. If the parties mutually agree to the proposal(s), or as
negotiated, prior to January 1, 2042 or January 1, 2062, or every 20 years
thereafter, respectively, or a date later than January 1 as may be mutually and
reasonably agreed to by the parties to continue negotiations, a written amendment
to this Contract shall be approved and executed by both parties and this Contract
shall be amended accordingly.
b. Seattle's Right to Amend. If the parties are unable to mutually agree on a proposal
by Seattle pursuant to subsection II.A.4.a above within the one-year period
associated with the 1st Review, or mutually agreed later date, Seattle may
propose in writing its desired amendment to the Operating Board by March 31,
2042, or by 90 days past the expiration of a mutually agreed later date. The
Operating Board shall review and recommend revisions, if any, to the proposed
amendment. Seattle and the Operating Board shall use reasonable efforts to
resolve any concerns in the proposal. After 90 days from Seattle's written
proposal to the Operating Board, Seattle may propose its desired amendment to
the Seattle City Council. If the Operating Board does not agree with Seattle’s
proposal, it may submit a revised proposal to the Seattle City Council within 90
days of Seattle’s submission of its proposal to the Seattle City Council. After
receiving the Operating Board’s alternate proposal, or after the lapse of the 90
day period for the Operating Board to make an alternate proposal, the Seattle City
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First Amended and Restated Contract for the Supply of Water
City of Renton
Council may then deny both proposals or approve one of them and issue an
amendment to this Contract, which shall be in effect for the remaining term of
the Contract from the date of issuance, unless later amended pursuant to this
subsection II.A.4, or by mutual agreement. Seattle shall not have the right to
unilaterally amend the Contract after the First Review period and all subsequent
Contract amendments must be mutually agreed to by Seattle and Water Utility.
c. Limitation on Seattle's Right to Amend. Notwithstanding subsection II.A.4.b
above, Seattle shall not have the right to amend the Contract under that provision
in a manner to: (i) reduce its obligation to provide the Full or Partial Water
Requirements of Water Utility, as appropriate; (ii) cease to provide wholesale
water to Water Utility at an equivalent Wholesale Level of Service as it provides
to itself; (iii) charge a higher wholesale rate for water supply and transmission to
Water Utility than that charged to the Seattle Retail Distribution System,; (iv)
reduce its water quality obligations for the Seattle Regional Water Supply
System; (v) change the methodology for calculating Rate of Return on
Investment; (vi) restrict Water Utility's right to terminate or reduce its Purchase
Commitment,; (vii) disband or significantly reduce the powers of the Operating
Board; (viii) amend any Contract provision that will apply only to Water Utility;
ix) change the definition of the Seattle Regional Water Supply System; (x)
extend or expand its contractual rights to any portion of Water Utility’s retail
water distribution systems; (xi) include taxes or surcharges beyond what the
water rate setting industry would consider normal in wholesale rates or that are
not in accordance with applicable laws and regulations; (xii) amend any Contract
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First Amended and Restated Contract for the Supply of Water
City of Renton
provision relating to Seattle's obligation to approve Water Utility's proposal to
introduce Alternate Supplies into Water Utility's retail distribution system as
provided in Section II.D.9; (xiii) change the criteria for approval of Alternate
Supplies.
d. Intent. The purpose and intent of the provisions allowing Seattle a limited right
to amend the Contract as provided in Section II.A.4.b-c. are to provide Seattle
with flexibility to administer numerous Full and Partial Requirements Contracts
in a consistent manner when changes to the Contract are desired by Seattle but
are not approved by the Operating Board and/or all of the Wholesale Customers
as well as to make reasonable changes in response to changing conditions, laws,
and regulations over the course of this long-term Contract. Any proposed
amendments to the Contract are subject to the procedures and limitations
provided in Section II.A.4.b-c. When Seattle no longer has this limited right to
amend, Wholesale Customers may agree to different contract terms which could
necessitate the creation of separate Full and Partial Requirements Customer
Classes each with their own Wholesale Statements and administered according
to each Class’s agreed-to contract terms.
II.B. Agreement to Supply and Purchase Water
1. Full or Partial Requirements Commitment. Seattle shall supply, and Water Utility shall
purchase, Water Utility’s Full or Partial Water Requirements as specified in Exhibit I, for
the term of this Contract, unless amended pursuant to the provisions below.
2. Expansions in Water Utility’s Service Area. Seattle shall supply the Full or Partial Water
Requirements, as appropriate, if Water Utility acquires additional service area that is: 1)
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First Amended and Restated Contract for the Supply of Water
City of Renton
located outside of the service area as defined in Water Utility’s Water System Plan in
effect on the Effective Date of this Contract and 2) which is not already served with water
from the Seattle Regional Water Supply System, subject to a) the availability of water in
the Seattle Regional Water Supply System as reasonably determined by Seattle; b) the
limitation of Seattle’s Service Area Boundary; and c) Water Utility’s payment of
Facilities Charges (“FCs”) for the retail service connections in that additional service area
in accordance with Section IV.D. The parties will cooperate to amend, by letter agreement
Exhibits I and II, as appropriate, for the limited purpose of documenting the changed
circumstances resulting from acquiring the additional service area.
3. Contractions in Water Utility’s Service Area. In the event Water Utility’s entire service
area and service responsibilities, or portion thereof, are assumed by or are transferred to
another utility or utilities, then this Contract shall become null and void at the time, and
to the extent, the assumption or transfer becomes effective; provided, however, 1) this
Contract will remain in full force and effect for Water Utility’s remaining service area,
if any; and 2) if the transferee of the service area is a Wholesale Customer, Seattle shall
provide water to the transferee according to the terms of the transferee's water supply
contract with Seattle. Seattle, Water Utility and the transferee Wholesale Customer will
cooperate to amend, by letter agreement Exhibits I and II, as appropriate, for the limited
purpose of documenting the changed circumstances resulting from the transfer. If the
transferee is not a Wholesale Customer, then Seattle may offer the transferee a water
supply contract for the transferred service area subject to terms and conditions as Seattle
shall determine.
4. Annexation by Seattle. If Water Utility’s entire service area, or a portion thereof, is
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First Amended and Restated Contract for the Supply of Water
City of Renton
annexed to Seattle, then this Contract shall become null and void to the extent of the
annexation and upon the effective date of Seattle's assumption of Water Utility's water
system or a portion thereof. In the event Water Utility has remaining service area after the
assumption, this Contract will remain in full force and effect for the remaining service
area, and Seattle and Water Utility will cooperate to amend, by letter agreement Exhibits
I and II, as appropriate, for the limited purpose of documenting the changed circumstances
resulting from the annexation of a portion of Water Utility’s service area.
5. Water Utility’s Right to Terminate or Reduce Purchase Commitment. Water Utility may
terminate or reduce its Purchase Commitment subject to the terms and conditions set forth
below.
a. Notice Required:
i. Timing: Water Utility must submit 5 years’ advance written notice (“Notice
Period”) to Seattle indicating its desire to terminate or reduce its Purchase
Commitment (“Notice”), except as provided below.
(a) If Seattle amends the terms and conditions of this Contract pursuant to
Section II.A.4.b above, Water Utility must submit 1 years’ advance
written notice to Seattle to terminate its Purchase Commitment within
1 year of the effective date of the amendment.
(b) Any notice previously issued by Water Utility to Seattle prior to
December 31, 2022 in accordance with the terms and conditions of
the Contract then in existence shall be effective to terminate or reduce
Water Utility’s Purchase Commitment under the Contract. All such
notices will be described in Exhibit I.
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First Amended and Restated Contract for the Supply of Water
City of Renton
ii. Contents of Notice: The Notice shall include the following:
(a) A resolution of Water Utility’s governing body approving the Notice
and acknowledging Water Utility is subject to the relevant conditions
in Section II.B.5.c.
(b) A description of the relevant information, including but not limited to:
a description of any new Alternate Supply consistent with the
information in Exhibit I; the scope (e.g. termination or reduction,
amount); and brief description of actions necessary to put the proposed
Alternate Supply into use (e.g. regulatory approvals, capital projects,
water quality analysis, contract approvals, etc.) or that it is terminating
based on Section II.B.5.a.i.(a) above.
(c) Except for a termination pursuant to Section II.B.5.a.i.(a) above, Water
Utility may include a request for a Notice Period shorter than 5 years,
which request shall include a justification.
(d) Water Utility will provide additional information upon reasonable
request by Seattle or the Operating Board.
iii. Pre-Notice Request for Calculation of Stranded Costs: Water Utility shall
have the right to request Seattle to perform a calculation of Stranded Costs
that would be incurred by Water Utility if it issues a Notice to terminate or
reduce its Purchase Commitment (“Pre-Notice Request”). A Pre-Notice
Request shall be made by Water Utility in writing and shall include the
amount of the reduction in its Purchase Commitment and the anticipated
effective date of such reduction. Seattle shall respond to Water Utility’s
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Pre-Notice Request by providing a written estimate to Water Utility within
thirty (30) days (“Pre-Notice Calculation Estimate”). Water Utility agrees
to provide Seattle with additional information requested by Seattle that is
necessary to allow Seattle to perform the Pre-Notice Calculation Estimate.
The Pre-Notice Calculation Estimate will not be binding on either party and
will be based on Stranded Cost only; any Avoided Cost calculation will not
be included. The Pre-Notice Calculation Estimate shall be completed as
described in Exhibit IX, will be based on the current asset schedule, and
will not include any changes that occur or information that becomes known
between the estimate and the Notice.
b. Effective Date: The termination or reduction will become effective 5 years from the
date of the Notice, or 1 year in the case of a termination under Section II.B.5.a.i.(a).
Alternatively, if Water Utility requested, and the Operating Board approved a shorter
notice period, the termination or reduction will become effective upon the date
approved by the Operating Board. In either case, Water Utility must meet the relevant
conditions in Section II.B.5.c. below for the termination or reduction to become
effective. Additionally, upon Operating Board approval, the parties may mutually
agree in writing to extend the 5-year or approved shorter Notice Period for a
reasonable and specific amount of time to allow Water Utility additional time to meet
the relevant conditions or complete actions to put the Alternate Supply into use. The
Operating Board may approve a shorter or extended notice period upon a
determination that it is in the best interests of the Seattle Regional Water Supply
System. Water Utility may rescind its Notice in writing any time prior to the effective
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City of Renton
date. For any notice other than those provided under Section II.B.5.a.i.(b), if Water
Utility has not met the conditions by the effective date, the Notice will be rescinded
automatically. In either case, when a Notice is rescinded, the Contract will remain in
full force and effect.
c. Conditions/Effect of Termination or Reduction:
i. Termination: Water Utility will be subject to the following conditions if it
terminates its Purchase Commitment in its entirety:
(a) Water Utility will lose representation or membership on the Operating
Board upon the date of the Notice.
(b) This Contract will terminate in its entirety as of the effective date of
the Notice as specified in Section II.B.5.b above.
(c) Water Utility will pay the full costs for Seattle to decommission Water
Utility’s Service Connections as listed in Exhibit II. This obligation
will survive the termination of the Contract.
(d) Water Utility will pay, or receive credit, as the case may be, for its
proportional share of any deficit or surplus running balances in any
cost pool as of the end of the year of the Effective Date, which shall be
prorated by Water Utility’s share of total demand (e.g. flow) since the
most recent year the running balances were zero.
(e) Water Utility will pay the Final Net Stranded Cost Payment, or receive
the Final Net Billing Credit, as described below in Section II.B.5.c.ii
(e)(i) as determined by Seattle pursuant to Exhibit IX.
(f) Seattle, in its sole discretion, may offer Water Utility a new water
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City of Renton
supply contract if Water Utility wants to purchase water from the
Seattle Regional Water Supply System again in the future, however
any new contract will be subject to: i) Seattle’s determination of the
availability of water; ii) no guarantee of a Full or Partial Requirements
Contract; and iii) terms and conditions as Seattle may require,
including but not limited to, special charges and rates, provided the
terms and conditions are consistent with the Ratemaking Principles in
this Contract.
ii. Reduction: Water Utility will be subject to the following conditions if it
reduces its Purchase Commitment in part:
(a) The parties will cooperate to amend, by letter agreement, Exhibits I
and II, as appropriate, for the limited purpose of documenting the
reduction in Water Utility’s Purchase Commitment, the new Alternate
Supply, and the amount and effective date of any Purchase
Commitment reductions. Water Utility’s Full or Partial Requirements
Contract may be converted to a Partial Water Requirements or
Qualified Partial Water Requirements Contract, as the case may be,
consistent with this Section II.B.5.c.
(b) Water Utility will pay the full costs for Seattle to decommission Water
Utility’s Service Connections listed in Exhibit II or add new Service
Connections, if appropriate.
(c) Water Utility will pay the Final Net Stranded Cost Payment, or will
receive the Final Net Billing Credit, as described below in
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II.B.5.c.ii(e)(i), if applicable, as determined by Seattle pursuant to
Exhibit IX, unless Water Utility provided Seattle with written notice
of its intention to reduce its purchase commitment between January 1,
2009 and December 31, 2022.
(d) Will receive a Facilities Charge Allowance pursuant to Section
IV.D.2.c.
(e) For reductions related to the use of new or increased production of
Independent Supplies only, Water Utility:
(i) May be eligible for an Avoided Cost offset to Stranded Costs
(or if the offset is large enough, a Net Billing Credit) as
determined by Seattle pursuant to Exhibit IX and if Seattle
determines the Independent Supply:
1. Will be used entirely within Water Utility’s retail
distribution system;
2. Results in Avoided Costs of future supply for the Seattle
Regional Water Supply System; and
3. Meets all applicable eligibility criteria that Seattle may
develop in consultation with the Operating Board to
ensure the offset (or Net Billing Credit) is only applicable
to independent supplies that provide reliable, high-
quality water, which criteria will include, but not be
limited to operational reliability, water quality, and
environmental impact.
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(f) For reductions related to the use of new or increased Purchased
Supplies, Water Utility:
(i) Will be converted to a Qualified Partial Requirements Contract.
If Water Utility loses its Purchased Supply, in whole or in part,
and wants to purchase additional water from the Seattle
Regional Water Supply System to replace the lost Purchased
Supply, the purchase may be subject to: availability of water as
determined by Seattle; or terms and conditions such as special
charges to convert back to a Full or Partial Requirements
Contract, provided the terms and conditions are consistent with
the Ratemaking Principles in this Contract.
(ii) May not use Purchased Supplies in a manner that will have
adverse impacts on the Seattle Regional Water Supply
System due to constraints or other terms and conditions in the
contract for the Purchased Supply. Seattle, in consultation
with the Operating Board, reserves the right to require terms
and conditions to protect against adverse impacts or
constraints, such as prohibiting impacts to seasonal shaping
or peak demands or waiving rights under Section II.C.2.
(iii) Exhibit I will be updated by Seattle whenever Water Utility
or other Wholesale Customer terminates or reduces
purchases pursuant to this section and such update will be
provided to all Wholesale Customers and the Operating
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City of Renton
Board.
d. Not Considered Reduction: For the purposes of this Section II.B.5, reductions under
the following circumstances are not considered a reduction of Water Utility’s
Purchase Commitment and this Section II.B.5 will not apply:
i. The use of Emergency Supplies listed in Section I of Exhibit I;
ii. Customer-driven Demand Fluctuations;
iii. Participation in the Regional Water Conservation Program;
iv. Participation in Regional Shortage Management Contingency Plan or similar
plans requiring restrictions on water deliveries.
v. Contraction of Water Utility’s service area pursuant to Sections II.B.3 and 4
above.
vi. Acquisition of additional Independent Supplies through a merger or
acquisition of another water purveyor that is not currently a customer of
Seattle.
vii. Reductions defined in any notice previously issued by Water Utility to Seattle
prior to December 31, 2022 in accordance with the terms and conditions of
the Contract then in effect.
viii. Reductions in demand, or portions thereof, that result in aggregate reductions
under this Contract for Water Utility that are equal to or less than the
Automatically Allowed Reduction applicable to Water Utility, which shall be
equal to 5.0% of Water Utility’s average purchases from Seattle for the five
most recent calendar years at the time of Water Utility’s initial Purchase
Commitment Reduction as described in Exhibit I.
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City of Renton
ix. Demand fluctuations that are out of Seattle or Water Utility’s control and
result from new laws or regulations, including legal rulings, that require the
use of reuse water by Water Utility.
6. New or Extended Water Supply Contracts. The full terms and conditions of any new,
amended, or extended water supply contracts, along with Seattle’s analysis and
explanation of the same, will be submitted to the Operating Board for review and
comment prior to adoption.
II.C. Continuity of Service within the Term of the Contract
1. Parity of Service. Seattle shall provide wholesale water to Water Utility at an equivalent
Wholesale Level of Service that it provides to the Seattle Retail Distribution System.
2. Emergency and Water Shortage Contingency Planning. Seattle shall adopt, as part of its
Water System Plan, emergency plans to provide for water supply in the event of drought
or disaster. It is recognized by both parties that Seattle may adopt plans to manage
emergencies or water shortages that are implemented on a regional basis in order to meet
an emergency condition or a water shortage that impacts the Seattle Regional Water
Supply System and may offer trainings or coordinate emergency preparedness activities
amongst water utilities within the Seattle Regional Water Supply System. Seattle will
follow the Seattle Water Shortage Contingency Plan or any other emergency plan in effect
as of the effective date of this Contract, and as may be added or amended from time to
time. The Operating Board may review and recommend revisions to any amended water
shortage contingency plans or other relevant emergency plan before Seattle adopts the
plan. Restrictions placed on water deliveries under any adopted plan will be applied
consistently to Water Utility, other Wholesale Customers, and the Seattle Retail
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First Amended and Restated Contract for the Supply of Water
City of Renton
Distribution System. Water Utility shall assist with and support all procedures or
emergency plans, including cooperating with restrictions on water deliveries, that are
implemented under Seattle’s then current Water Shortage Contingency Plan, or another
adopted emergency plan that impacts the Seattle Regional Water Supply System. Water
Utility is responsible for adopting its own plans for emergencies or water shortages from
Alternate Supplies or within its retail distribution system. Seattle may offer assistance or
coordinate with Water Utility to make mutual aid plans together, including via WA
WARN or other platform as mutually agreed.
3. Other Emergencies or Interruptions to Service. It is recognized by both parties that Seattle
may temporarily interrupt or reduce deliveries of water or revise conditions of service
(e.g. minimum hydraulic gradient) (collectively “Temporary Interruptions”), to Water
Utility if Seattle determines that Temporary Interruptions are necessary or reasonable in
case of system emergencies or in order to conduct necessary operations and maintenance,
including but not limited to, installing equipment, making repairs, replacements,
investigations and inspections or performing other maintenance work on the Seattle
Regional Water Supply System. Except in cases of emergency, and in order that Water
Utility's operations will not be unreasonably interrupted, Seattle shall give Water Utility
and the Operating Board reasonable notice of any Temporary Interruptions, the reasons
for and the probable duration. Seattle shall use its best efforts to minimize Temporary
Interruptions to Water Utility.
4. Waiver of Charges. If Temporary Interruptions require that Water Utility draw water
supply in a manner that would potentially subject Water Utility to demand charges under
Section IV.G.5.a, Seattle shall waive the demand charges during the period of the
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City of Renton
Temporary Interruption.
II.D. Water Quality
1. Seattle Regional Water Supply System. Seattle shall be responsible for water quality
within the Seattle Regional Water Supply System. Seattle and Water Utility shall work
collaboratively to address water quality concerns raised by Water Utility. The Water
Utility may request Operating Board review of any water quality concerns that it believes
are not reasonably resolved by Seattle. Seattle shall construct, operate and maintain water
quality treatment and other facilities and programs and use its best efforts to carry out its
water quality responsibilities to deliver safe, high-quality water in the most cost-effective
manner for the region.
2. Applicable Standards. Seattle shall at all times during the term of this Contract deliver
water through the end of the Service Connection(s) that meets or exceeds all applicable
Federal and State regulations as may be amended from time to time. The parties
acknowledge and agree that a minor regulatory violation (e.g. missed sample collection)
is not considered a default of Seattle’s water quality obligations under this Section II.D
except to the extent it is significant in duration and risk to public health and Seattle has
not made good faith efforts to correct the violation consistent with the applicable
regulations.
3. System-wide Water Quality Program. Seattle, in consultation with the Operating Board,
may develop and implement a system-wide water quality program, portions of which will
guide its obligations for water quality within the Seattle Regional Water Supply System
under this Section II.D consistent with applicable regulatory requirements, industry
standards and operational needs. The system-wide program may include, but not be
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First Amended and Restated Contract for the Supply of Water
City of Renton
limited to objectives, policies and procedures, and roles and responsibilities for water
quality treatment, regulatory and non-regulatory monitoring, reporting, water quality
incident response, cross-connection control, and best or adaptive management practices.
Seattle will allocate these program costs to the appropriate cost pools as provided in
Section IV.
4. Role of Operating Board. The Operating Board may:
a. review and recommend revisions to the relevant portions of Seattle’s system-wide
water quality program related to the Seattle Regional Water Supply System or obligations
under this Contract;
b. recommend best or adaptive water quality management practices for the Seattle
Regional Water Supply System;
c. approve allowances for flushing when Seattle or Operating Board determines flushing
is the best available option to maintain or improve regional water quality;
d. review and recommend revisions to the water quality criteria Seattle adopts and applies
prior to: (1) approving the introduction of a new water source into the Seattle Regional
Water Supply System or into Water Utility’s retail distribution system if the new water
source will be mixed with water from the Seattle Regional Water Supply System under
Section II.D.9 and Seattle can establish that the revisions to the water quality criteria are
related to the Seattle Regional Water Supply System, or (2) determining whether a new or
increased Independent Supply may be eligible for an offset or Billing Credit under Section
II.B.5.c.ii;
e. approve any changes to the water quality obligations under this Section II.D upon
recommendation by Seattle, resulting from changes in regulatory requirements during the
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First Amended and Restated Contract for the Supply of Water
City of Renton
term of this Contract. The parties will amend this Section II.D by letter agreement in the
event the Operating Board approves changes to the water quality obligations under this
subsection; and
f. establish a technical subcommittee(s) to assist in its roles under this Section II.D.4.
5. Distribution Systems. Water Utility shall be responsible for compliance with all
applicable federal, state, and local water quality laws and regulations with in its retail
distribution system. Seattle is not responsible for water quality compliance for water from
Alternate Supplies.
6. Monitoring. Monitoring generally consists of sample collection, testing and reporting.
Seattle is responsible for water quality monitoring for the Seattle Regional Water Supply
System and Water Utility is responsible for water quality monitoring for its retail
distribution system. Notwithstanding the foregoing, the parties acknowledge and agree that
it is in the best interests of the region for Seattle to perform certain monitoring
responsibilities as described below within those Wholesale Customers’ retail distribution
systems that have not opted out of the monitoring services as described below and to
include the costs of such monitoring services in the appropriate cost pools under Section
IV of this Contract. Seattle will not monitor the water within a Wholesale Customer’s
retail distribution system that opts out of monitoring services. A Wholesale Customer
that elects to opt out of Seattle’s monitoring services shall submit a written notice to
Seattle of its election to opt out of these monitoring services. Water Utility may contract
with Seattle to perform water quality monitoring and reporting services that are in addition
to Seattle’s obligations under this Section II.D as an elective service under Section IV.F.
of this Contract. Specific monitoring procedures for Rules identified in the Federal Safe
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City of Renton
Drinking Water Act (40 CFR 141) and Chapter 246-290 WAC are described below:
a. Surface Water Treatment Rule (“SWTR”) and Groundwater Rule (“GWR”).
Seattle shall perform all monitoring for the water sources it owns in the Seattle
Regional Water Supply System, and any chlorine residual sample collection and
testing in Water Utility’s distribution system, which is done in conjunction with
Seattle’s TCR monitoring consistent with Section II.D.6.c below. Seattle will
report SWTR and GWR results to WA DOH and chlorine residual data to Water
Utility. Water Utility is responsible for any applicable monitoring for its
Independent or other Alternate Supplies and any other chlorine residual
monitoring within its retail distribution system required under the SWTR.
b. Lead and Copper Rule (“LCR”). Seattle shall perform monitoring within retail
distribution systems for Wholesale Customers who hold Full Requirements
Contracts under a regional LCR program. If Water Utility is a holder of a Full
Requirements Contract, Water Utility is responsible for coordinating the location
and collection of samples and reporting results to property owners as part of the
regional LCR program. If Water Utility is a holder of a Partial Requirements
Contract, Water Utility is responsible for all monitoring for LCR within its retail
distribution system. In that case, Water Utility may elect to use the Seattle WQ
Lab to test any LCR samples it collects as an Elective Service pursuant to Section
IV.F.
c. Total Coliform Rule (“TCR”). Seattle shall perform all routine sample collection
and testing within Water Utility’s retail distribution system, unless Water Utility
notifies Seattle in writing that it will be responsible for all routine TCR
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First Amended and Restated Contract for the Supply of Water
City of Renton
monitoring within its retail distribution system. When Seattle performs routine
TCR monitoring, Seattle shall report results to Water Utility and WA DOH, and
Water Utility shall verify number and location for routine sample collection.
Water Utility is responsible for performing any repeat sample collection, testing,
and required reporting to WA DOH. Water Utility may elect to use the Seattle
WQ Lab to test any samples it collects as an Elective Service under Section IV.F
and Seattle will report results to Water Utility and WA DOH.
d. Disinfection By-Products Rule (“DBP”). Seattle shall perform all routine sample
collection at designated sample stands and testing of those samples within Water
Utility’s retail distribution system unless Water Utility notifies Seattle in writing
that it will be responsible for all DBP monitoring within its retail distribution
system. When Seattle performs routine DBP monitoring, Seattle shall report
results to Water Utility and WA DOH, and Water Utility shall verify number and
location for sample collection. Water Utility is responsible for any routine sample
collection at sites that are not designated sample stands and any additional sample
collection, testing of samples it collects, and required reporting to WA DOH.
Water Utility may elect to use the Seattle WQ Lab to test any samples it collects
as an Elective Service under Section IV.F and Seattle will report results to Water
Utility and WA DOH.
e. Unregulated Contaminant Monitoring Rule (“UCMR”). Seattle shall perform all
applicable monitoring required under the UCMR within the Seattle Regional
Water Supply System. Water Utility will be responsible for all applicable
monitoring required under the UCMR within its retail distribution system. Upon
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City of Renton
recommendation by Seattle, the Operating Board may approve an alternate
allocation of monitoring responsibilities under the UCMR when it is in the best
interests of the Seattle Regional Water Supply System. The costs of any
monitoring Seattle performs within the Seattle Regional Water Supply System or
as approved by the Operating Board will be allocated to the appropriate cost pool
under Section IV of this Contract.
f. Other Monitoring. Seattle shall perform any other regulatory or non-regulatory
monitoring within the Seattle Regional Water Supply System it deems necessary
to ensure safe, high quality water; including but not limited to, other source and
miscellaneous monitoring; taste and odor sampling; and emerging contaminants.
Water Utility will be responsible for any additional regulatory or non-regulatory
monitoring within its retail distribution system.
7. Water Quality Reporting to Regulatory Agencies and Retail Customers (Consumer
Confidence Reports). Each Wholesale Customer, including Water Utility, and Seattle, at
its sole cost, is responsible for periodic water quality notifications and reporting to its
respective retail customers and regulatory agencies as required by law. Seattle shall
provide Water Utility all relevant water quality monitoring data consistent with its
responsibilities in Section II.D.6 above in a timely manner so that Water Utility may
incorporate the water quality data in its required notifications or reports and Seattle may
offer public notification assistance, training, or other public notification resources to
Water Utility.
8. Flushing. Water Utility shall be solely responsible for flushing water mains within its
retail distribution system. Flushing allowances will be provided by Seattle when Seattle
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City of Renton
or the Operating Board determine flushing is the best available option to maintain or
improve regional water quality.
9. New Water Sources. To ensure public health and regional reliability, the parties agree
that blending of water supplies is a matter of regional importance to be managed with the
cooperation of the Water Utility, the Operating Board, and Seattle. Therefore, before
Water Utility may introduce a new Alternate Supply into its retail distribution system that
will mix with water from the Seattle Regional Water Supply System, Seattle must approve
the Alternate Supply in writing as a compatible source after an evaluation using customary
and reasonable water quality criteria developed in consultation with the Operating Board
from time to time. Seattle is required to approve the proposed Alternate Supply when
the evaluation establishes that the proposed Alternate Supply meets the following
criteria: 1) satisfactory results from a blending study to determine the compatibility of the
new Alternate Supply with existing sources already in the Seattle Regional Water Supply
System or Water Utility’s retail distribution system; 2) the appropriate method and level
of treatment and the probable distribution area of the new Alternate Supply within Water
Utility’s retail distribution system; and 3) satisfactory evidence that Water Utility has
obtained all necessary and appropriate regulatory permits, reviews, agreements and
approvals for rights to and operational use of the Alternate Supply. The requirements
under this Section II.D.9 are in addition to any other requirements, e.g. Section II.B.5,
under this Contract to add a new Alternate Supply.
10. Transfers Outside Water Utility’s Retail Distribution System. If Water Utility has
approval pursuant to Section III.B and transfers water from the Seattle Regional Water
Supply System through its retail distribution system to the distribution system of another
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City of Renton
water utility, Water Utility, the other water utility, or both, shall be fully responsible for
meeting all applicable water quality standards related to the transfer of such water
between their respective systems. Seattle will not be responsible for water quality for
water transferred outside of Water Utility’s retail distribution system.
II.E. Regional Water Conservation Program
The parties acknowledge and agree that conservation is an important ongoing tool to manage water
supply resources and that a regional program, implemented collaboratively between Seattle and
Wholesale Customers, to assist retail customers in using water efficiently will help defer
development of New Supply Facilities and meet applicable regulations and agreements including,
but not limited to, Washington State’s Municipal Water Law (Chapter 90.03 RCW, as may be
amended from time to time) and associated Water Use Efficiently (WUE) Rule (WAC 246-290
Part 8, as amended from time to time), Seattle’s 2000 Cedar River Habitat Conservation Plan
(HCP) and the 2006 Muckleshoot Indian Tribe (MIT) Settlement Agreement. As a condition of
service under this Contract, Water Utility agrees to participate in the Regional Water
Conservation Program (“Program”), as it may be amended from time to time during the term of
this Contract, consistent with the Program guidelines below.
1. Program Elements. The Regional Water Conservation Program generally consists of the
adoption of a regional WUE goal, good faith participation by all Wholesale Customers
and Seattle, measurement of performance toward the regional WUE goal on a regional
basis, and a combination of measures such as education, technical assistance and
financial incentives to achieve the regional WUE goal.
2. Role of Operating Board. The Operating Board will approve the regional WUE goal
subject to the additional approval under Section II.E.5 below and the total Program
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First Amended and Restated Contract for the Supply of Water
City of Renton
budget subject to further approval by Seattle City Council, and set the strategic priorities
for the Program consistent with any applicable requirements from regulations,
agreements or orders. The Operating Board will also determine the cost recovery
mechanism for the infrastructure costs of the Program, i.e. New Supply Rates or FCs,
pursuant to Section IV.C.2.b. The Operating Board may also establish and provide
strategic direction to a technical subcommittee of the Operating Board, the Conservation
Technical Forum (“CTF”), comprised of program level staff from each Wholesale
Customer and Seattle.
3. Role of Conservation Technical Forum. The CTF participates in designing the Regional
Water Conservation Program, consistent with the strategic direction from the Operating
Board, and may include review or generation of proposed Program elements or
measures.
4. Role of Seattle. Seattle will administer the Regional Water Conservation Program,
consistent with the approved regional WUE goal and total Program Budget, Program
priorities and in consultation with the CTF. Administration includes, but is not limited
to: staffing, including any consultants, to implement the Program; maintaining the
Program website; maintaining a system to accept, process, and pay rebates; providing
technical assistance to retail customers; developing template education and outreach
materials for Wholesale Customers and Seattle to use in their retail distribution service
areas (“Program materials”); coordinating certain regional marketing efforts with CTF;
and providing each Wholesale Customer, including Water Utility, information related to
achievement of the regional WUE goal and Program activity level within their respective
retail distribution service areas.
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City of Renton
5. Role of Wholesale Customers. At their own cost and expense, Seattle and each
Wholesale Customer, including Water Utility, is responsible for marketing the Program
using the Program materials within their retail service area that are in addition to any
regional marketing efforts coordinated with CTF; adopting the regional WUE goal by
their governing body; any required reporting of the regional WUE goal and performance
to the State and their respective retail customers; and data collection as needed to track
the regional WUE goal in their respective retail distribution systems.
6. Conservation in Addition to the Regional Program. Water Utility may elect to implement
its own water conservation program or measures, in addition to the Regional Water
Conservation Program, at its own discretion and its sole cost.
7. Postponing the Need for New Supply Facilities. In order to avoid the necessity of
developing or acquiring New Supply Facilities for as long as reasonably practicable, any
water saved through the Regional Water Conservation Program shall be dedicated first
to the municipal water supply purposes of the Seattle Regional Water Supply System
before any other use of such water may be undertaken.
8. Responding to changes in Conservation Program requirements. The parties acknowledge
and agree that changes in conservation regulation, agreements, and other conservation
requirements may occur from time to time. Upon Seattle’s request, Water Utility will
cooperate to amend, by letter agreement, this Contract as appropriate, for the limited
purpose of documenting adjustments to the Regional Water Conservation Program or
documenting other conservation activities resulting from such changed circumstances.
II.F Cedar River Watershed Education Center and Other Facilities
Water Utility may use the Cedar River Watershed Education Center up to two times per year
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City of Renton
without charge, subject to availability. Water Utility may request occasional guided tours of the
Cedar River Watershed or other facilities in the regional system. Water Utility may coordinate
any use under this provision with the Wholesale Contracts Manager.
SECTION III. CONDITIONS OF SERVICE
III.A. Minimum Hydraulic Gradient and Flow Rates
1. Initial Minimum and Flow Rates. Seattle shall operate and maintain the Regional
Facilities, and Subregional Facilities, if applicable, as necessary to maintain the minimum
hydraulic gradients at each Service Connection as long as Water Utility does not exceed
the flow rates at each Service Connection that are allocated from and based on maximum
day demand, both of which are more specifically described in Exhibit II for each Service
Connection. Seattle and Water Utility will include this information in their respective
water system plans. Seattle, in consultation with the Operating Board, may increase the
flow rates in Exhibit II from time to time based on updated average daily demand
projections subject to transmission system capacity. Water Utility shall use best efforts to
operate and maintain its retail distribution system in a manner consistent with the flow
rates described in Exhibit II. Water Utility may use all or some of the flow rates allocated
to each Service Connection on any other Service Connection that is located on the same
Pipeline Segment Number, but in that case, the minimum hydraulic gradients are not
guaranteed. Water Utility shall avoid taking water from a Service Connection in a manner
that exceeds the flow rates for that Service Connection (or the aggregate flow rate for the
Service Connections on the same Pipeline Segment Number) or take the flow at a rate
faster than 24 hours, e.g. excessive intraday peaking, which could impact Regional
Facilities or other Wholesale Customers downstream or upstream of Water Utility’s
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City of Renton
Service Connections. Upon notice by Seattle, Water Utility shall immediately reduce
water deliveries at the Service Connection to no more than the flow rates for a Service
Connection (or aggregate on same Pipeline Segment Number) in Exhibit II. In the event
that Water Utility does not reduce deliveries as required under this provision, Seattle may
install and operate flow restricting devices at the Service Connection(s), at Water Utility’s
expense. Water Utility shall maintain sufficient storage in its retail distribution system to
manage peak demands in excess of the flow rates in Exhibit II and may be subject to the
Demand Charges pursuant to Section IV.G.5.a. if storage is insufficient. The parties will
amend Exhibit II by letter agreement to reflect any modifications pursuant to this Section
III.A.1.
2. Modifications. If Seattle proposes a capital improvement project that would result in
needing to modify the minimum hydraulic gradient and the corresponding flow rates at
one or more Service Connections, Seattle may modify the minimum hydraulic gradient
and corresponding flow rates described in Exhibit II if Seattle finds, and the Operating
Board concurs, that Seattle’s proposed capital improvement project would benefit the
Seattle Regional Water Supply System and that it is feasible from an economic, land use
and engineering perspective for Water Utility to adapt to the modification at its expense.
Seattle may make these modifications only once during any fifteen (15) year period
provided that four (4) years advance written notice is given to Water Utility unless a
shorter notice is approved by the Operating Board. The parties will amend Exhibit II by
letter agreement to reflect any modifications pursuant to this Section III.A.2.
3. New or Changed Service Connections. Seattle, in consultation with the Operating Board,
and Water Utility may mutually agree, to new or relocated Service Connections or
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City of Renton
adjustments to the minimum hydraulic gradients and corresponding flow rates. The
parties will amend Exhibit II by letter agreement to reflect any changes under this
provision. Any costs associated with a new or changed Service Connection will be
allocated consistent with Section IV.C.1.c.
III.B. Resale to Other Parties
Water Utility may sell, or supply for emergency purposes, water supplied by Seattle to other
water utilities located outside of Water Utility's existing or future retail service area and within
Seattle’s Service Area Boundary, or to Seattle’s other Wholesale Customers, block customers or
retail customers, only upon the prior written consent of Seattle (or oral, in case of emergency),
which consent may include any terms and conditions or limitations Seattle may require.
Agreements for resale or emergency supply of water by Water Utility listed in Sections I or IV
of Exhibit I, as appropriate, are hereby approved by Seattle subject to whatever written terms,
conditions and limitations that Seattle has imposed on such resale or emergency supply.
III.C. Interconnection With Other Systems
1. Prohibition on Interconnection. Water Utility shall not interconnect any part of its retail
distribution system supplied with water from Seattle with other water systems
without the prior written approval of Seattle, in consultation with the Operating Board,
or, in case of emergency, upon oral approval by Seattle, which shall not be unreasonably
withheld. Any such interconnection also shall be subject to the approval of the
Washington State Department of Health and the installation of a meter. The
interconnecting systems must be in compliance with all applicable laws and
regulations including the requirement that they have a valid operating permit issued
by the Washington State Department of Health. The parties will revise Exhibit I by letter
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agreement to include any interconnections approved under this Section III.C.1.
2. Requests by Seattle to Interconnect. Seattle may request that Water Utility interconnect
its retail distribution system to the distribution system of an adjacent Wholesale
Customer for the purposes of wheeling water from the Seattle Regional Water Supply
System through Water Utility’s retail distribution system to the adjacent Wholesale
Customer, provided that the adjacent Wholesale Customer has agreed to be subject to the
provisions of Section III.C.2.b below. Water Utility shall comply with that request
subject to the terms and conditions set forth below.
a. Requirement for Interconnection. If Water Utility does not consent to Seattle's
request for interconnection, Seattle may submit its request to the Operating Board.
Water Utility may present the reasons it does not consent to the interconnection to
the Operating Board, and may include alternatives for consideration to serve the
adjacent Wholesale Customer. The Operating Board shall consider the matter.
Upon (a) a written finding by the Operating Board that the proposed
interconnection with an adjacent Wholesale Customer for wheeling purposes is
feasible taking into account Water Utility's capabilities, limitations, and
obligations, (b) a written finding by the Operating Board that such interconnection
benefits the Seattle Regional Water Supply System and (c) a written demand of
the Operating Board that Water Utility carry out the interconnection, Water Utility
shall be required to interconnect its facilities to the adjacent Wholesale Customer
for the purposes of wheeling water to that Wholesale Customer through its retail
distribution system, provided that the adjacent Wholesale Customer has agreed to
be subject to the provisions of Section III.C.2.b below.
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b. Payment and Indemnity. Seattle will require that the adjacent Wholesale
Customer agree: 1) to perform or cause to perform the interconnection, at adjacent
Wholesale Customer’s cost, in a location and according to specifications and a
schedule acceptable to Seattle and Water Utility that do not unduly disrupt Water
Utility’s operations; 2) pay Water Utility its actual costs incurred to review,
inspect and accept the installation of the interconnection; 3) pay Water Utility a
reasonable rate or charge for the cost of wheeling the water to the adjacent
Wholesale Customer as determined by the Water Utility; and 4) indemnify Water
Utility from any liability that may result from operating the interconnection to
deliver water to the adjacent Wholesale Customer. The Operating Board may
adopt a standard methodology based on industry standards for calculating costs
that ensures that Water Utility is fairly compensated for wheeling water through
its retail distribution system. The adjacent Wholesale Customer may request
review of Water Utility's wheeling rate by the Operating Board. The Operating
Board shall have the authority to revise any rate that it determines is in excess of
the Water Utility's full costs of owning, operating, maintaining, repairing and
replacing and supporting the water facilities necessary to wheel water to the
adjacent Wholesale Customer.
III.D. Development of Seattle Regional Water Supply System Infrastructure
Final decisions and authority to approve construction of capital infrastructure related to the Seattle
Regional Water Supply System shall rest with the Seattle City Council. Capital construction
activities include, but are not limited to installations, renewals, replacements, upgrades,
expansions, and any other costs included in Seattle’s Capital Improvement Plan as more
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City of Renton
particularly described in Section VI.D.
III.E. Metering Equipment
1. Service Connection Meters. Seattle shall own and perform reading, testing, cleaning,
routine maintenance and recalibration on the meters within each Service Connection to
measure the amount of water delivered to Water Utility through the Service Connection
pursuant to this Contract. Seattle shall perform all other work on the Service Connections
including major maintenance, repairs, and replacements, at Water Utility’s expense
regardless of the cause, provided that the cause is consistent with AWWA and safety
standards and practices (e.g. major maintenance, repairs and replacements) except to the
extent the costs are a result of 1) Seattle’s negligence, or 2) a meter failure within 5 years
of the original installation; in which for both cases, the costs shall be allocated to the
Existing Regional System Cost Pool. Water Utility shall operate and maintain its retail
distribution system in a manner that the water flowing through the Service Connection
meter operates within the normal operating range for the meter as specified by the
manufacturer. In the event Seattle fails to conduct routine maintenance on the meters,
including vault structures, Water Utility may notify Seattle of its failure and request that
Seattle conduct the necessary and appropriate maintenance within a period of 90 days.
Water Utility may in its discretion install additional water meters within Water Utility's
water system to measure the supply of water from Seattle under this Contract. In the
event of a discrepancy in meter readings, the parties will work in good faith to resolve
the discrepancy.
2. Deliveries to Seattle. Until such time as Seattle determines it to be economical to install
metering devices to measure the amount of water delivered from the Seattle Regional
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Water Supply System to the Seattle Retail Distribution System, the amount of water
delivered to the Seattle Retail Distribution System shall be measured indirectly by
subtracting the metered water delivered to all of Seattle’s Wholesale Customers and
other wholesale customers, e.g. block contract holders, from 98% of the total amount of
water exiting Seattle’s sources of supply as measured by the supply meters. Seattle shall
perform routine maintenance and recalibration of its supply meters in accordance with
industry standards to ensure the accuracy of the data and information being provided by
the supply meter.
SECTION IV. COST OF WATER SUPPLY & TRANSMISSION
Cost-based rates are a water industry accepted practice and the historical practice of Seattle and
the Wholesale Customers. The ratemaking principles, policies and methodologies set forth in this
Section IV are intended to meet the objective of equitable and cost-based rates.
IV.A. Ratemaking and Cost-allocation Principles
The parties will apply the following general principles and policies to the establishment of all
rates, charges, and cost allocations for water supply, transmission, and related services under this
Contract.
1. No expenses attributable to electric power development may be allocated to the cost
pools identified herein unless the pools are allocated a commensurate share of revenue
derived from such development.
2. Seattle shall utilize the governmental accounting and financial reporting standards
established by the Governmental Accounting Standards Board (“GASB standards”) that
follow generally accepted accounting principles, as may be amended from time to time,
consistently applied as a basis for developing the financial information upon which rates
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and charges are based.
3. Abrupt changes in financial policies should be avoided.
4. The rate structure should encourage the efficient use of water, conservation and the
timely development of new environmentally responsible, cost-efficient, and high-quality
water sources and should incorporate seasonal rates and other pricing approaches to
encourage efficient use.
5. The rate structure should be innovative, flexible, and adaptive whenever it is cost
effective and beneficial in furthering the ratemaking policies.
6. The rate structure should be simple to administer and easily understandable.
7. The rate structure should be designed to recover the costs to own, operate and support
the Seattle Regional Water Supply System fairly and objectively.
8. Unless modified with the approval of the Operating Board or implemented prior to the
initiation of the current Contract review process in 2020, Seattle’s ratemaking processes
will reflect the generally accepted guidelines and practices of the U.S. water industry.
9. When revenues for regional or subregional assets are received outside of rates or
Facilities Charges (such as but not limited to capital contributions, grants, donated plant,
insurance or FEMA reimbursements, payments based on allowances or other agreed-
upon terms), that portion of the asset equal to the amount of outside revenue received
shall be removed from the applicable cost pool. When revenues for Index O&M Costs
or Non-Index O&M Costs are received outside of rates (such as but not limited to grants,
fee for services, insurance or FEMA reimbursements, payments based on allowances
or other agreed-upon terms), the Index O&M Costs or Non-Index O&M Costs shall be
reduced by the corresponding amount.
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10. Certain costs may be recovered through allowances or other mutually negotiated terms.
Any costs recovered through such terms must be recognized and accounted for
appropriately within Seattle’s ratemaking processes to eliminate the possibility of
double-recovery.
11. Any portion of Seattle’s Non-Index O&M Costs or capital costs which benefit only an
individual Wholesale Customer or serves growth of a customer having a Block Purchase
Contract shall be allocated to that customer or to a cost pool in which the customer bears
an appropriate share, except as specifically provided in Sections IV.C.3.b, IV.D.2, and
VI.D.2 of this Contract.
12. Only those costs incurred by the Seattle Water Enterprise Fund to own, operate, and
reasonably support the Seattle Regional Water Supply System are eligible for recovery
through the rates and charges pursuant to the terms of this Contract.
13. Seattle shall provide reasonable and early notice and appropriate information to the
Operating Board so that it can carry out its roles with reasonable opportunity for
meaningful input.
14. The Seattle Retail Distribution System shall be treated as the equivalent of a Wholesale
Customer of the Seattle Regional Water Supply System for the purpose of charging
Seattle the same applicable wholesale rates and charges as Water Utility for water supply
and transmission unless specifically provided otherwise in this Contract. Costs calculated
under the costs pools described below shall apply to all Wholesale Customers and to the
Seattle Retail Distribution System consistently.
15. All parties will use best efforts in establishing rates and cost allocations that reflect the
ratemaking and cost allocation principles set forth in this Section IV.A.
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16. Costs should be capitalized for wholesale ratemaking purposes by applying the same
capitalization policy as applied to the Seattle Water Enterprise Fund, except as allowed
under Section IV.D.2.a.i.
IV.B. Ratemaking Framework
Subject to the foregoing principles, wholesale rates and charges for the services described in this
Contract shall be developed by Seattle based on the following framework:
1. Water Supply and Transmission Services. The costs of water supply and transmission
of water shall be accounted for in the cost pools described in Section IV.C below. Seattle
will recover the costs in each cost pool by establishing separate rates or charges for each
cost pool but may charge composite rates. Rates and charges will be applied consistently
to Wholesale Customers within a Customer Class and the Seattle Retail Distribution
System except as may be specifically defined as a charge to an individual or subset of
Wholesale Customers, including Seattle.
2. Mixed-use Allowances. Seattle owns and operates Mixed-use Assets and performs
Mixed-use O&M that are shared between or used to support both the Seattle Regional
Water Supply System and the Seattle Retail Distribution System. The parties mutually
agree to the recovery of costs of the portion of the Mixed-use Assets and Mixed-use
O&M used to support the Seattle Regional Water Supply System to the extent specified
in this Contract, including in Sections IV.D.2.b and 3.a.ii.
3. Seattle Retail Distribution System. Seattle may not allocate the costs of the Seattle Retail
Distribution System or the portion of the Mixed-use Assets and Mixed-use O&M used
to support the Seattle Retail Distribution System to any cost pools under this Contract.
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IV.C. Seattle Regional Water Supply System Cost Pools
For the purposes of determining costs of water supply and transmission, there shall be the cost
pools described below.
1. Existing Regional System Cost Pool.. The Existing Regional System Cost Pool
shall be accounted for as follows:
a. A rate shall be charged to recover the full costs of owning, operating, maintaining,
repairing, renewing, and replacing and supporting the Existing Regional
Facilities, which are assigned to this cost pool. Seattle may amend the list of
Existing Regional Facilities in Exhibit VI, if necessary, to add or delete Existing
Regional Facilities, as appropriate. The amended Exhibit VI will be incorporated
as part of this Contract.
b. The Operating Board may approve the allocation of 1) any portion of a New
Supply or New Transmission Facility project that enhances reliability of Existing
Regional Facilities to the Existing Regional System Cost Pool and 2) any portion
of an Existing Regional Facility project that expands the supply capacity of the
Seattle Regional Water Supply System to the New Supply Cost Pool or the
transmission capacity of the Seattle Regional Water Supply system to the New
Transmission Cost Pool. Seattle will amend the relevant lists of Regional
Facilities in Exhibit VI, as appropriate, to document any portion of a project or
costs that are allocated by the Operating Board under this Section IV.C.1.b. The
amended Exhibit VI will be incorporated as part of this Contract.
c. Costs of Service Connections and Metering Equipment. If Seattle requests a
change in the location of the Service Connection to Water Utility for the benefit
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of the Seattle Regional Water Supply System or incurs costs for metering
equipment that meet one of the exceptions in Section III.E, then the costs,
including any retirement costs of the old Service Connection, shall be included in
the Existing Regional System Cost Pool. If Water Utility requests a new Service
Connection, a change in location, an adjustment to service conditions of an
existing Service Connection or Seattle incurs any other costs that are allocated to
Water Utility pursuant to Section III.E., then Seattle shall invoice Water Utility
for the costs of the new, replaced/repaired or changed Service Connection,
including any retirement costs of the old Service Connection consistent with
Section III.E.
2. New Supply Cost Pool. The New Supply Cost Pool shall be accounted for as follows:
a. A rate shall be charged to recover the full costs of owning, constructing, operating,
maintaining, repairing, renewing and replacing and supporting the New Supply
Facilities, which are assigned to this cost pool, and which includes the costs of the
Regional Water Conservation Program. Seattle may amend the list of New Supply
Facilities in Exhibit VI, to add or delete New Supply Facilities, as appropriate.
The amended Exhibit VI will be incorporated as part of this Contract.
b. The Operating Board may approve the allocation of certain costs to the New
Supply Cost Pool consistent with Section IV.C.1.b above. Seattle will amend the
relevant lists of Regional Facilities in Exhibit VI, as appropriate, to document any
portion of a project or costs that are allocated by the Operating Board under this
Section IV.C.2.b. The amended Exhibit VI will be incorporated as part of this
Contract.
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c. The Operating Board shall determine whether the infrastructure costs of New
Supply Facilities shall be recovered through FCs or new supply rates.
d. The Operating Board may allocate the reasonable expenses of the Operating
Board to this cost pool.
3. New Transmission Cost Pool. The New Transmission Cost Pool shall be accounted for
as follows:
a. A rate shall be charged to recover the full costs of owning, constructing, operating,
maintaining, repairing, renewing, and replacing and supporting the New
Transmission Facilities, which are assigned to this cost pool. Seattle may amend
the list of New Transmission Facilities in Exhibit VI, if necessary, to add or delete
New Transmission Facilities, as appropriate. The amended Exhibit VI will be
incorporated as part of this Contract.
b. The Operating Board may approve the allocation of certain costs to the New
Transmission Cost Pool consistent with Section IV.C.1.b above. In addition, the
Operating Board may approve the allocation of any portion of a New
Transmission Facility project that benefits only a subset of Wholesale Customers
or an individual Wholesale Customer to a subregional cost pool or the individual
Wholesale Customer. Seattle will amend the relevant lists of Regional or
Subregional Facilities in Exhibits VI or VII, as appropriate, to document any
portion of a project or costs that are allocated by the Operating Board under this
subsection IV.C.3.b. The amended Exhibits VI or VII will be incorporated as part
of this Contract.
c. The Operating Board shall determine whether the infrastructure costs of New
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City of Renton
Transmission Facilities shall be recovered through FCs or new transmission rates.
d. The Operating Board may allocate the reasonable expenses of the Operating
Board to this cost pool.
4. Operating Board Review. Prior to commencing in the design and construction of
facilities eligible for inclusion in the New Supply or New Transmission Cost Pools,
Seattle will review the purpose, timing, and need for said new supplies with the
Operating Board. The Operating Board will have 90 days to provide Seattle with written
comments on the proposed new supply or transmission development along with its
recommendation on whether or not Seattle should proceed with the proposed plan.
Nothing in this provision shall be interpreted to prevent Seattle from engaging in
preliminary design efforts necessary to determine the feasibility of, or costs associated
with, a particular project.
5. Subregional Cost Pools. Certain Wholesale Customers are served, in part, by subregional
transmission facilities that only benefit those Wholesale Customers in the specific
subregions. If Water Utility is served by subregional transmission facilities as described
in Exhibit I, Water Utility is subject to the relevant provisions of this Section IV.C.5. If
Water Utility is not served by subregional transmission facilities, this provision does not
apply. The following subregional cost pools shall be accounted for as follows:
a. Eastside, Southwest and Renton Subregional Cost Pools. A rate for each
subregion shall be charged to the appropriate Wholesale Customers who are
served by the respective subregional facilities to recover the full costs, as defined
by this Contract, of owning, constructing, operating, maintaining, repairing,
renewing and replacing and supporting the Eastside, Southwest or Renton
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Subregional Facilities, respectively, which are assigned to the respective
subregional cost pools. Seattle may amend the list of Subregional Facilities in
Exhibit VII, if necessary, to add or delete Subregional Facilities. The amended
Exhibit VII will be incorporated as part of this Contract.
b. The Operating Board may approve the allocation of other costs that benefit the
specific Wholesale Customers served by the Eastside, Southwest or Renton
Subregional Cost Pools, as appropriate.
6. Renton New Supply Cost Pool. The Renton New Supply Cost Pool shall be accounted
for as follows:
The full costs of owning, constructing, operating, maintaining, repairing, renewing and
replacing and supporting the New Supply Facilities developed after January 1, 2012,
including the costs of the Regional Water Conservation Program beginning January 1,
2012, shall be included in the Renton New Supply Cost Pool.
7. Creation of Additional Cost Pools. Seattle, in its discretion, may create additional cost
pools, including its allocation by customer or customer class, to provide equity and
flexibility in payment arrangements and the allocation of costs as the Seattle Regional
Water Supply System expands to include new infrastructure, operations, and customers
or responds to changed circumstances such as new regulatory requirements. The
Operating Board may review and recommend revisions to the definition of the additional
cost pool, and how it will be accounted for or allocated by customer or customer class.
The Operating Board may approve the allocation of costs, or portion thereof, between a
newly created additional cost pool and an existing cost pool if the costs to be allocated
satisfy the criteria for allocation to the existing cost pool. Seattle and Water Utility will
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City of Renton
revise the Contract by letter agreement for the limited purposes of documenting the
creation and allocation of an additional cost pool under this Section IV.C.7.
8. Approval of Cost Allocation Method. The Operating Board shall use its best efforts to
determine and approve a cost allocation method for infrastructure projects and related
capital costs within the Seattle Regional Water Supply System prior to the project
obtaining construction approval from the Seattle City Council. Failure of the Operating
Board to approve a cost allocation method, however, shall not hinder Seattle from
approving such projects in order to assure Seattle’s fulfillment of its obligations under
this Contract.
IV.D. Allocation of Costs and Revenues into Cost Pools
1. Accounting. Seattle shall maintain and use a cost accounting system consistent with the
provisions of this Contract and the GASB standards, as amended from time to time,
consistently applied in developing the financial information for determining the costs of
acquisition or ownership, construction, repair, renewal, replacement, upgrade, expansion,
maintenance and operation of the Seattle Regional Water Supply System. Seattle’s
compliance with GASB standards will take precedence over any conflicting accounting
provisions under this Contract.
a. Asset Accounts. An asset account shall be maintained for each facility and within
that account, Seattle shall record the original cost of that facility, plus betterments,
and less retirements.
b. Depreciation. Facilities shall be depreciated according to industry-standard water
system asset lives and a record of life-to-date depreciation shall be maintained for
each facility. No depreciation shall be recorded in the first calendar year of
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operation of a facility. A full year’s depreciation shall be recorded in every
subsequent year.
c. Net Book Value. The Net Book Value of any facility shall be its original cost,
plus betterments, and less retirements as recorded in its facility asset account, less
life-to-date depreciation.
2. Infrastructure Costs. Each cost pool shall include the infrastructure costs for the facilities
assigned to each cost pool as more particularly listed in Exhibits VI and VII (Regional
Facilities and Subregional Facilities, respectively) and recognized on a utility or cash
basis depending upon the facility and the cost pool as set forth below.
a. Cost Basis. Seattle shall determine one of the following bases to recognize the
infrastructure costs for ratemaking purposes and use it consistently throughout the
life of the facility.
i. Utility Basis. Seattle shall use the Utility Basis to recognize the infrastructure
costs for all Existing Regional and Subregional Facilities, as well as their
replacements and betterments or portions thereof. Seattle shall also use the
Utility Basis for New Supply and New Transmission Facilities. Under the
Utility Basis, the infrastructure cost for a facility in any year shall be the sum
of (i) the annual depreciation expense recorded for that facility and (ii) the
product of the Net Book Value of that facility and the Rate of Return on
Investment of that facility.
(a) Seattle, in its discretion, may consider interest costs as current
infrastructure costs during the construction of a facility. However, any
such interest costs must be considered contributions in aid of
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construction, and not included in the Net Book Value of the facility
for purposes of recognizing infrastructure costs under the Utility Basis
in future years.
(b) For ratemaking purposes and with the approval of the Operating
Board, assets may be depreciated over a different time frame than that
used by Seattle for financial reporting purposes in preparation of its
audited Financial Statements.
ii. Cash Basis. Seattle, with the approval of the Operating Board, may use the
Cash Basis to recognize infrastructure costs for any Regional or Subregional
Facilities or a portion thereof. Under the Cash Basis, the infrastructure cost
for a facility in any year shall be the actual cash expenditure made by Seattle
in that year for either the payment of construction costs or actual principal
and interest costs on debt issued to finance its construction. In the event that
the depreciation lifetime of the facility listed in the asset account is less than
the term of the debt issued to finance all or a portion of the facility, Seattle
will select debt maturities such that the construction cost of the facility will
be fully amortized under the Cash Basis at the end of its depreciation lifetime.
b. Infrastructure Adder. The parties agree the Infrastructure Adder provides a
reasonable way to recover an allowance for 1) the regional portion of
infrastructure costs of Mixed-use Assets; 2) the regional portion of mixed-use
unrestricted cash assets; and 3) the equity or higher opportunity cost of cash
financing Regional Facilities or the regional portion of Mixed-use Assets.
c. Facilities Charges.
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i. Establishing Facilities Charges. If the Operating Board determines to recover
infrastructure costs for certain New Supply or New Transmission Facilities
through FCs, then Seattle will establish FCs as follows:
(a) ERU Charge. At the time the designated New Supply or New
Transmission Facilities are put into service, Seattle shall establish a
charge per one Equivalent Residential Unit (ERU Charge) for the
Facility, or Facilities as the case may be, pursuant to the
methodology in Exhibit V, which may include adjusting existing
ERU Charges, if any, to include the new ERU Charges being
established.
(b) ERUs.
(i) ERU Definition. Seattle, in its discretion, shall set, or amend
from time to time, the capacity of one ERU to reflect the typical
consumption of a single-family residence based on appropriate
information consistent with accepted industry standards. The
Operating Board may review and recommend revisions to Seattle’s
ERU definition. The then current ERU definition will be used in the
methodology in Exhibit V to establish an ERU Charge.
(ii) ERU Factor. Seattle shall use the table of ERU Factors set forth
in Exhibit V, which assigns a multiplier to each retail meter
connection size. Seattle may propose, and the Operating Board may
approve, adjustments to the table of ERU Factors. In the event the
Operating Board approves an adjustment to the ERU Factors, the
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parties will amend Section B of Exhibit V by letter agreement for
the limited purposes of documenting adjustments to the ERU
Factors.
(c) Facilities Charges. Seattle shall adopt Facilities Charges for each
meter connection size based on the then current ERU Charge
multiplied by the ERU Factor.
ii. Imposition and Payment of Facilities Charges. Seattle shall collect and
Water Utility shall pay FCs based on the following:
(a) Water Utility’s Retail Connections. Until such time as Seattle
develops another basis, Water Utility shall track the number and
size of each retail meter installed by Water Utility during each
month and pay the appropriate Facilities Charges, taking into
account the size of each meter, within 30 days of the end of the
next month, unless Water Utility has an FC Allowance balance
pursuant to Section IV.D.2.c.iii below.
(b) Seattle shall pay FCs on the same basis.
(c) If Water Utility has an FC Allowance as listed in Section 2 of
Exhibit I, the FC Allowance balance will be reduced by an amount
equal to the aggregate of the ERU Factors for each meter added by
Water Utility during the previous month, and such reduction of the
FC Allowance balance shall be in lieu of payment of FCs until the
FC Allowance is zero.
(d) Seattle will allocate FC revenues to offset infrastructure costs in
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the New Supply or New Transmission Cost Pools, respectively,
based on which cost pool the Regional Facility whose
infrastructure costs are being recovered through FCs is assigned.
Seattle and Water Utility agree that FC revenues are the sole
property of Seattle.
iii. FC Allowance for Supplies. If Water Utility operates Independent
Supplies or Purchased Supplies as listed in Exhibit I, Seattle shall establish
a growth allowance (“FC Allowance”) based on the amount of additional
ERUs the Independent Supply or Purchased Supply is sufficient to serve
within Water Utility's retail distribution service area as specifically
described in Section 2 of Exhibit I as of the effective date of this Contract.
The FC Allowance shall be a credit against the imposition of FCs until the
FC Allowance reaches zero, then Water Utility shall pay FCs in
accordance with Section IV.D.2.c.ii above.
(a) Increase in FC Allowance. If Water Utility develops new
Independent Supplies, makes improvements to an existing
Independent Supply, or acquires new Purchased Supplies that
increases the average annual production listed in Section 2 and/or
Section 3 of Exhibit 1, the FC Allowance shall be adjusted as
follows. If the new or improved Independent Supply or Purchased
Supply produces at least one-third of its average annual production
during the period between mid-May and mid-September, a trial
period ("Trial Period") for the new or improved Independent
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Supply or Purchased Supply shall commence on January 1st of the
calendar year following the year in which the new or improved
Independent Supply or Purchased Supply was placed into
production. The Trial Period shall extend for three calendar years.
At the conclusion of the Trial Period, the FC Allowance shall be
increased by the additional number of ERUs, using the then
current ERU definition, served by the average annual production
of the new or improved Independent Supply or Purchased Supply
during the Trial Period. The parties will amend Exhibit I by letter
agreement to document the adjusted FC Allowance and the
average annual production of the new or improved Independent
Supply or Purchased Supply.
(b) Decrease in FC Allowance. In the event that the average annual
production of an Independent Supply or Purchased Supply, or of all
Independent or Purchased Supplies in aggregate, is lower than the
average annual production as listed and under the conditions
provided in Section II or Section III of Exhibit 1, the outstanding
FC Allowance shall be reduced by the number of ERUs, at the then
current ERU definition, that could be served, on an annual basis, by
a supply of the same size as the reduction in average annual
production of the Independent Supplies or Purchased Supplies. In
the event that this adjustment results in a negative FC Allowance,
Water Utility shall pay Seattle an amount equal to the then-current
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ERU Charge multiplied by the (negative) FC Allowance multiplied
by minus one. The FC Allowance shall be zero upon full payment
or commencement of payments under a payment agreement
pursuant to Section VII.A.2.
iv. Record-Keeping.
(a) Monthly Report. Water Utility shall provide Seattle with a
monthly report, in a form acceptable to Seattle, along with its
monthly payment of FCs, showing the number of retail
connections by size that Water Utility installed in the previous
month.
(b) Annual Report. Water Utility shall provide Seattle with an annual
report by January 31st of each year for the previous year, in a form
acceptable to Seattle, showing the total number of its retail
connections by size as of December 31 of each year.
(c) Seattle Annual Report on ERUs. Seattle shall prepare and
distribute a report, no later than March 31st of each year, showing
the ERUs for the Seattle Retail Distribution System and each
Wholesale Customer for the previous year and each year since the
original effective date of this Contract.
3. O&M Costs. The parties mutually agree to handle the O&M Costs for each cost pool as
follows:
a. Annual O&M Costs. For each of the Existing Regional System, New Supply and
New Transmission Cost Pools, the Annual O&M Costs shall consist of the
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relevant Index O&M Costs times the Mixed-Use Multiplier, plus any Non-index
O&M Costs in that year, if any.
i. Index O&M Costs. The Index O&M Costs are the O&M Costs for the
regional O&M Cost categories for each cost pool as more particularly
described in Exhibit VIII and are intended to reflect the O&M Costs for
Regional Facilities and regional-only programs and support functions.
Seattle, in consultation with the Operating Board, may amend the list of
Index O&M Cost categories in Exhibit VIII, if necessary, when a Regional
Facility is added to or deleted from Exhibit VI or a regional-only program
or support function is established or discontinued. The amended Exhibit
VIII will be incorporated as part of this Contract.
ii. Mixed-use Multipliers. The parties agree to use an initial Mixed-use
Multiplier of 2.001, which, as applied above, results in an allowance for
the portion of Mixed-use O&M Costs that support the Seattle Regional
Water Supply System. The initial Mixed-use Multiplier established in
this Contract, and any adjusted Mixed-use Multiplier, shall be consistent
with the Ratemaking Principles in Section IV.A of this Contract and will
be subject to periodic adjustment and review as provided in subsection
(a) and (b) below and Section IV.H.1.a.
(a) The Mixed-Use Multiplier shall be adjusted every five years as a
part of the Wholesale Statements, following the procedure below.
(i) Categorize the prior three years’ O&M Costs of the Seattle
Water Enterprise Fund, net of debt service and taxes on water
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sales, into the following: Index O&M Costs, Non-index O&M
Costs, Mixed-use O&M Costs, and the remainder, which is
assigned as Seattle’s retail costs.
(ii) Divide the Index O&M Cost by the sum of the Index O&M
Cost and the retail cost. This calculation produces a percentage.
(iii) Apply the percentage produced in (ii) to the Mixed-use
O&M Costs. The result is the portion of the Mixed-use O&M
that will be recovered by the Mixed-use Multiplier.
(iv) To calculate the Mixed-use Multiplier, add the result from
(iii) to the Index O&M Cost and divide that sum by the Index
O&M Cost.
(b) Seattle, in its discretion, may adjust the Mixed-use Multiplier
from time to time when 1) it determines that the allowance
produced by the then current Mixed-use Multiplier should not
change in proportion to a change in the Index O&M Costs; and
2) the change in the Index O&M Costs was due to the addition
or deletion of a Regional Facility resulting in a change of more
than $100,000 of Index O&M Costs. The calculation of the
adjusted Mixed-use Multiplier shall follow the procedure
outlined in Section IV.D.3.a.ii.(a) above, except that the
anticipated change in cost for the added or deleted Regional
Facility shall be added to or subtracted from the Index O&M
Cost, respectively. The calculation of the adjusted Mixed-use
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Multiplier will be documented in the Wholesale Statements
described in Section IV.H.
iii. Non-index O&M Costs. Seattle, in its discretion, may add certain regional
O&M Costs that are unique or nonrecurring to the Annual O&M Cost in
any year(s), as appropriate. For Non-Index O&M Costs larger than 1% of
the annual Index O&M Costs, the Operating Board may elect to amortize
the costs over a timeframe of the Board's choosing, not to exceed ten years.
The annual amortization shall be included in the applicable cost pool, as
well as the product of the unamortized cost and Seattle's Cash Pool Rate..
b. Subregional O&M Costs. For each of the Subregional Cost Pools, the Annual
O&M Costs shall consist of the actual O&M Costs for the respective Subregional
Facilities assigned to each Subregional Cost Pool, including any net disposition
costs for any of the Subregional Facilities in that cost pool, if any; together with
any additional O&M Costs for the Subregional Facilities approved by Operating
Board.
c. Renton New Supply O&M Costs. For the Renton New Supply Cost Pool, the
Annual O&M Costs shall be the same as the Annual O&M Costs in the New
Supply Cost Pool.
d. Disposition Costs. The costs of disposing of Regional or Subregional Facilities
shall be included in the cost pool to which the Regional or Subregional Facilities
are assigned. In the case of Regional Facilities, the net disposition costs will be
added as a Non-index O&M Cost. Net disposition costs shall be calculated as
follows:
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i. Disposition Under the Utility Basis. The Net Book Value of the facility,
less any sales, salvage, or other revenues derived from the disposition of
that facility. If an alternate life is being used for ratemaking purposes as
compared to Seattle's financial reporting and Financial Statement
purposes, the Net Book Value refers to the remaining asset value under
the alternate life.
ii. Disposition Under the Cash Basis. The value of principal of unpaid
maturities of debt used to finance the construction cost of the facility, less
any sales, salvage or other revenues derived from the disposition of that
facility.
iii. Certain Large Net Disposition Costs. For net disposition costs larger than
1% of the annual Index O&M Costs, the Operating Board may elect to
amortize the net disposition costs over the remaining life of the asset(s),
or another timeframe of the Board's choosing not to exceed ten years. The
annual amortization shall be included in the applicable cost pool, as well
as the product of the unamortized net disposition cost and Seattle's Cash
Pool Rate.
IV.E Allocation of Cost Pools by Customer or Cu s tomer Class.
The costs and revenues in the cost pools shall be allocated within the pools as follows:
1. Allocation of Existing Regional System Cost Pool. The total cost of the Existing
Regional System Cost Pool shall be allocated to customer classes as follows:
a. Block Purchase Customer Class. The portion of costs in the Existing Regional
System Cost Pool allocated to holders of Block Purchase Contracts shall be
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determined pursuant to those contracts, if any.
b. Other wholesale customers. The portion of costs in the Existing Regional System
Cost Pool or Existing Supply and Existing Transmission Cost Pools, depending
how they are named in the Block Contracts, allocated to holders of other types of
wholesale water supply contracts with Seattle shall be determined pursuant to
those contracts, if any.
c. Full and Partial Requirements Customer Class. The holders of Full and Partial
Requirements Contracts and the Seattle Retail Distribution System shall be
allocated the remaining costs in the Existing Regional System Cost Pool after the
allocations in Sections IV.E.1.a and b above.
2. Allocation of New Supply Cost Pool. The total costs of the New Supply Cost Pool shall
be allocated as follows:
a. Block Purchase Customer Class. The portion of costs in the New Supply Cost
Pool allocated to holders of Block Purchase Contracts shall be determined
pursuant to those contracts, if any.
b. Other wholesale customers. The portion of costs in the New Supply Cost Pool
allocated to holders of other types of wholesale water supply contracts with Seattle
shall be determined pursuant to those contracts, if any.
c . Full and Partial Requirements Customer Class. The holders of Full and Partial
Requirements Contracts, except for Renton, and the Seattle Retail Distribution
System shall be allocated the remaining costs in the New Supply Cost Pool after
the allocations to Block Purchase Customers or other wholesale customers, if any,
pursuant to Sections IV.E.2.a and b above; and after deducting an equivalent
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amount of costs that are allocated to Renton under the Renton New Supply Cost
Pool pursuant to Section IV.E.5 below.
3. Allocation of New Transmission Cost Pool. The costs allocated to the New Transmission
Cost Pool shall be allocated as follows:
a. Block Purchase Customer Class. The portion of costs in the New Transmission
Cost Pool allocated to holders of Block Purchase Contracts shall be determined
pursuant to those contracts, if any.
b. Other wholesale customers. The portion of costs in the New Transmission Cost
Pool allocated to holders of other types of wholesale water supply contracts with
Seattle shall be determined pursuant to those contracts, if any.
c . Full and Partial Requirements Customer Class. The holders of Full and Partial
Requirements Contracts and the Seattle Retail Distribution System shall be
allocated the remaining costs in the New Transmission Cost Pool after allocations
to Block Purchase Customers or other wholesale customers, if any, pursuant to
Section IV.E.3.a and b above.
4. Allocation of Eastside, Southwest and Renton Subregion Cost Pools. All costs in the
Eastside, Southwest and Renton Subregional Cost Pools shall be allocated to the
Wholesale Customers served by the respective Subregional Facilities according to
Exhibit VII.
5. Allocation of the Renton New Supply Cost Pool. A portion of the costs in the Renton
New Supply Cost Pool shall be allocated as follows:
a. Block Purchase Customer Class and other wholesale customers. The holders of
Block Purchase Contracts or other wholesale customers shall not be allocated any
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costs from the Renton New Supply Cost Pool.
b. Full and Partial Requirements Customers. Except for Renton, the holders of Full
and Partial Requirements Contracts and the Seattle Retail Distribution System
shall not be allocated any costs from the Renton New Supply Cost Pool.
c. Renton. Renton shall be allocated 6.8% of the remaining costs in the Renton New
Supply Cost Pool after deducting an amount equivalent to the amount of costs
from the New Supply Cost Pool allocated to the Block Purchase Customer Class
or other wholesale customers, if any, pursuant to Section IV.E.2.a and b above.
Seattle will recover the costs allocated to Renton from the Renton New Supply
Cost Pool by a block payment paid in 12 equal installments in lieu of paying new
supply rates or Facilities Charges (FCs) from the New Supply Cost Pool.
i. Seattle may update the percentage share of the costs in this cost pool
allocated to Renton if Renton acquires additional retail distribution service
area pursuant to Section II.B.2, or on January 1, 2022 and every 5 years
thereafter during the term of this Contract. The basis for any adjustments
to the percentage allocation will be based on the percentage of average
annual flows of Renton’s retail customers over the 5 prior years as
compared to the average annual flows of all retail customers of the
Wholesale Customers and the Seattle Regional Distribution System over
the same 5 years.
6. Allocation of Additional Cost Pools. At the time an additional cost pool is created by
Seattle pursuant to Section IV.C.7, the additional cost pool will be allocated by customer
or customer class. The parties will enter into a letter agreement for the limited purposes
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of documenting the allocation of an additional cost pool.
IV.F. Elective Services
1. Elective Services. Seattle may provide certain elective services that are in addition to the
services provided under this Contract to Water Utility upon request by Water Utility.
Such services shall be negotiated and contracted for separately between Water Utility and
Seattle or provided at then current standard charges, if applicable. Elective services may
include:
a. Transmission Wheeling. Seattle, at its sole discretion, may provide Water Utility
access to excess transmission capacity, if any, for a fee and under any conditions
it deems reasonable to protect the Seattle Regional Water Supply System for
purposes of wheeling compatible water to or from Water Utility through the
Seattle Regional Water Supply System. The Operating Board may review and
recommend revisions to any policies or criteria Seattle may use to consider a
request for wheeling services from a Wholesale Customer.
b. Water Quality. So long as Seattle owns and operates a water quality lab, Water
Utility may request the services of that lab based on its published rates for testing
of samples for water quality monitoring that Water Utility performs.
IV.G. Rate Setting, Adjustments and Special Charges
1. Wholesale Rate Setting. Seattle, in its sole discretion, shall determine the structure of FCs
and wholesale water rates, except that the FCs or wholesale rates may not, without
approval of the Operating Board, be set to collect more than the projected costs included
in the cost pools as described in this Section IV.
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2. Retail Rate Setting. Each party to this Contract shall have sole authority for
establishing retail rates, connection charges and other fees and charges within its
respective jurisdiction, including the manner of passing through or incorporating any
wholesale rates and charges due under this Contract.
3. Wholesale Rate Adjustment. Seattle may adjust water service rates and FCs from
time to time. Rate adjustments will be effective only within five years of the completion
of a rate study consistent with Section IV.G.4 below and provided that Seattle transmits
its final rate adjustment proposal to the Operating Board and Water Utility for final
review at least 30 days before it transmits it to Seattle City Council for consideration. The
Operating Board may review and recommend revisions to the final rate proposal. Seattle
will provide a written explanation of any recommendations that are not accepted and
forwarded to Seattle City Council.
4. Rate Study and Review Consultant. Seattle shall conduct a rate study in accordance with
accepted industry standards and this Contract. Seattle shall provide Water Utility and the
Operating Board 30 days’ advance written notice of its intent to conduct a rate study and
shall make detailed information and progress reports during the course of the rate study
available to Water Utility, other Wholesale Customers and the Operating Board for review
and comment. Seattle shall select an independent rate consultant to review the rate study,
including an independent review of the allocation of costs and revenues between cost
pools. The Operating Board may review and recommend revisions to the scope of work
for the rate consultant. Seattle shall cause a final rate consultant report to be made available
to Water Utility and the Operating Board not less than 30 days before Seattle formally
transmits any resulting rate adjustment proposal to the Operating Board. Unless otherwise
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approved by the Operating Board, Seattle shall conduct a cost-of-service rate study no
less frequently than once every five years.
5. Special Charges.
a. Demand Charge.
i. Seattle, in its discretion, may adopt and implement a demand charge in
accordance with the methodology described in Exhibit III. The demand
charge consists of a calculation of Water Utility’s deficient storage, if any,
and a Storage Deficiency Rate (i.e., dollars per 1000 gallons of deficient
storage) that is based on an equivalent annualized cost of providing the
deficient storage, and which shall be updated with each rate study.
ii. Seattle shall be exempt from the demand charge until such time as
metering devices are installed pursuant to Section III.E.2.
iii. The costs and revenues from implementing the demand charge will be
allocated to the Existing Regional System Cost Pool. The Operating Board
may approve the allocation of these costs and revenues to the New
Transmission Cost Pool in the future to offset other costs that may be
allocated to the New Transmission Cost Pool in the future.
iv. Seattle shall suspend the implementation of demand charges, if any, in the
event of emergencies and unforeseen conditions.
b. Emergency Surcharge. In the event of a drought, catastrophe, or other
extraordinary condition that requires emergency expenditures to maintain
sufficient and safe water supply or transmission capacity, or both, Seattle, through
its City Council, may impose an emergency surcharge on all Wholesale
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Customers, including Seattle, in order to pay for emergency expenditures or
maintain financial stability of the Seattle Regional Water Supply System, or both
(“Emergency Surcharge”). The Operating Board may review and recommend
revisions to any proposed Emergency Surcharge prior to submission to the Seattle
City Council for consideration. Seattle shall provide a written explanation of any
recommendations that are not accepted and forwarded to City Council. Revenues
from an Emergency Surcharge will be applied to the appropriate cost pool that
relates to the emergency situation giving rise to the Emergency Surcharge. For
the avoidance of doubt, and for example only, an Emergency Surcharge issued
in response to a drought would be applied to offset costs in the Existing Regional
System Cost Pool and an Emergency Surcharge issued to pay for extensive
transmission repair on New Transmission Facilities would offset costs in the
New Transmission Cost Pool. If the emergency is not related to any particular
cost pool, the Operating Board shall make the final determination as to which
cost pool the revenues shall be applied.
c. New Wholesale Customer Charge. Seattle will charge any new customer who
signs a Full or Partial Requirements Contract after the Effective Date of this
Contract and who has not previously contributed to the costs in the New Supply
Cost Pool or the development of New Supply Facilities an appropriate charge for
an equitable share of the New Supply Facilities. This charge may be satisfied by
either paying FCs and new supply rates or arranging a special water supply rate
in lieu of paying FCs. The revenue from this charge will be allocated to offset
costs in the New Supply Cost Pool.
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6. Transition.
a. Initial Existing Regional System Running Balance Surplus.
As part of the contract transition process, Seattle shall implement a one-time
return of the lesser of the full amount of the Existing Regional System Cost
Pool running balance surplus or $82M to Wholesale Customers in lump sum
payments following completion of the updated contracts (either fully executed
with mutual agreement or amended through the process identified in Section
II.A.4(b)) with all Wholesale Customers. Water Utility will receive payment
for its prorated portion of the amount above based on each Wholesale
Customer’s demand since the balance last crossed zero within 60 days
following the completion of the updated contracts (as defined above), even if
such payments are made before the Effective Date of the Contract.
b. Cost-of-Service Rate Study.
Seattle agrees to begin performing a cost-of-service rate study no later than
three months of the date on which all Wholesale Customer contracts are either
fully executed pursuant to Section II.A.4.a or amended pursuant to Section
II.A.4.b.
c. Rebate Based on Alternate Utility Basis Cost.
As a result of negotiations pursuant to Section II.A.4.a, an Alternate Utility
Basis will be applied as described below to calculate an annual rebate to
Wholesale Customers signing this First Amended and Restated Contract for the
Supply of Water. Water Utility will be eligible for an annual rebate in the form
of a credit on its bill for a portion of the difference between Utility Basis cost
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and the Alternate Utility Basis cost (for assets whose cost is calculated on a
Utility Basis) as described below, if the Alternate Utility Basis results in a lower
cost. This comparison will be conducted annually as part of the Wholesale
Statement Review and the Water Utility’s portion will be based on Water
Utility’s percentage of Wholesale Customer demand for each applicable Cost
Pool in that year.
i. Definitions.
The following definitions will be used to calculate the Alternate Utility
Basis cost:
“Alternate Infrastructure Adder” – A certain percentage amount that is
applied as a component of the Rate of Return on Investment to the Net
Book Value of facilities recognized under the Utility Basis, which may be
adjusted pursuant to Section IV.G.6.c.iii below.
“Alternate Mixed-use Assets” – Capitalized facilities or assets that are
shared between or used to support both the Seattle Retail Distribution
System and the Seattle Regional Water Supply System.
"Alternate Rate of Return on Investment" – Alternate Seattle’s Average
Cost of Debt plus the Alternate Infrastructure Adder.
“Alternate Seattle’s Average Cost of Debt” (“Alternate ACOD”) - The
weighted average coupon interest rate on Seattle’s water system debt
outstanding over the course of a calendar year with adjustments to
recognize i) outstanding amortized premium or discount on water system
debt; ii) gains/losses on water system bond refunding's; iii) issuance costs
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including third party costs paid by bond proceeds; iv) prepaid insurance
costs; v) net interest expense on debt service reserves; and vi) any other
appropriate ongoing debt costs, e.g. variable rate remarketing, ongoing
credit rating agency monitoring fees, calculated at the end of each calendar
year during the term of this Contract.
ii. Under the Alternate Utility Basis, the infrastructure cost for a facility in
any year shall be the sum of (i) the annual depreciation expense recorded
for that facility and (ii) the product of the Net Book Value of that facility
and the Alternate Rate of Return on Investment of that facility.
a. Seattle, in its discretion, may consider interest costs as current
infrastructure costs during the construction of a facility. However, any
such interest costs must be considered contributions in aid of
construction, and not included in the Net Book Value of the facility
for purposes of recognizing infrastructure costs under the Utility Basis
in future years.
b. For ratemaking purposes and with the approval of the Operating
Board, assets may be depreciated over a different time frame than that
used by Seattle for financial reporting purposes in preparation of its
audited Financial Statements.
iii. Alternate Infrastructure Adder. The parties mutually agree to use an initial
Alternate Infrastructure Adder of 1.40%, which Seattle will apply as a
component of the Rate of Return on Investment, to the Net Book Value of
facilities that are recognized under the Utility Basis. The parties agree the
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Alternate Infrastructure Adder provides a reasonable way to recover an
allowance for 1) the regional portion of infrastructure costs of Mixed-use
Assets; 2) the regional portion of mixed-use unrestricted cash assets; and
3) the equity or higher opportunity cost of cash financing Regional
Facilities or the regional portion of Mixed-use Assets. The parties agree
that Seattle may adjust the Alternate Infrastructure Adder that is applied
to facilities recognized under the Alternate Utility Basis from time to time
as follows:
a. In order to maintain an equitable allocation of costs through the
allowance, Seattle may increase or decrease the then current Alternate
Infrastructure Adder annually by 0.12% for every 1.00% increase or
decrease to Seattle’s Alternative ACOD, or portion thereof, as the case
may be, e.g. if Seattle’s Alternative ACOD increases from 4.08% to
5.08%, the Infrastructure Adder would increase from 1.40% to 1.52%.
b. In the event the Operating Board determines to use the Cash Basis to
recognize costs for a Regional or Subregional Facility, Seattle may
adjust the then current Alternate Infrastructure Adder by multiplying
it by an amount equal to the sum of the then current NBV of Regional
and Subregional Facilities recognized under the Alternate Utility
Basis plus the current NBV of such Facilities recognized under the
Cash Basis, divided by the then current NBV of Regional and
Subregional Facilities recognized under the Alternative Utility Basis
only.
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IV.H. Cost Review and Truing Actual Costs and Actual Revenues
1. Wholesale Statement Review. At the end of each fiscal year, Seattle shall cause an
independent review of its statement of actual costs and revenues received allocated to
each cost pool (“Wholesale Statements”). Seattle will select an independent accountant,
which may be Seattle’s independent auditor for its audited financial statements.,
a. Scope of Review. The procedures for the annual review shall be set by the
Operating Board and shall include, at a minimum: (i) a comparison of the actual
costs and revenues received to Seattle’s accounting records, (ii) a comparison of
the procedures used by Seattle to allocate costs and revenues to each cost pool to
those procedures and requirements specified in this Contract, (iii) in years where
the Mixed-use Multiplier is adjusted, the accuracy of the adjustment calculation,
and (iv) identification of any corrective actions necessary. The scope of review
may include additional elements identified by the independent accountant, as
well as procedures at Seattle’s discretion together with any reasonable requests
of the Operating Board.
b. Operating Board and Water Utility Review of Report of Independent Accountant.
Seattle will cause the independent accountant to present a copy of the review
report to the Operating Board and Water Utility.
c. Operating Board and Water Utility Right to Review. The Operating Board, or
Water Utility at its sole expense, may select its own independent accountant to
review the Wholesale Statements including the Mixed-use Multiplier under
separate agreed-upon procedures at their discretion. Subject to Seattle’s
reasonable requests for security and confidentiality procedures and agreement to
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the same, an independent accountant retained by Water Utility, may at any time
upon prior reasonable notice to Seattle and in coordination with Seattle’s
reasonable scheduling ability, during normal business hours, review the books,
records and accounts of Seattle to the extent that such books, records and
accounts are directly used in the production of the Wholesale Statements or other
allocations, charges or payments under this Contract. Seattle shall maintain all
such books, records and accounts. Independent accountant’s access shall include
the right to make copies and discuss the books and records with Seattle’s
personnel having knowledge of the facilities, systems, processes and document
contents. Water Utility’s right to review shall survive the expiration or
termination of this Contract for a period of three (3) years. If an inspection or
examination pursuant to this section discloses overpricing or overcharges by
Seattle in excess of one percent (1%) of the appropriate amount due, in addition
to making adjustments for the overcharges, the reasonable actual cost of Water
Utility’s review shall be reimbursed to Water Utility by Seattle, and the costs will
be included in the Existing Regional Cost Pool. Any adjustments which must be
made as a result of any such review shall be reflected in the Wholesale
Statements.
2. Truing Actual Costs and Actual Revenues. Seattle shall reconcile the projected costs and
revenue targets for the various cost pools and the actual expenses and revenues received
during each year of this Contract as follows:
a. Running Balances. For each cost pool, Seattle shall maintain a running balance
of the surplus or deficit of actual rate revenues collected from each class of
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customers less actual expenses incurred, except that Seattle shall maintain
separate running balances for FC revenues pursuant to Section IV.H.2.c below.
Each running balance shall earn simple interest at Seattle’s Cash Pool Rate. At
the end of each fiscal year, Seattle shall adjust each balance to reflect the operating
results of that year. The year-end statement of these balances shall be reviewed as
described in Section IV.H.1 above.
b. Running Balance Deficits. Seattle shall design rates to eliminate any deficit in the
cost pool running balances, except as provided herein.
c. Running Balance Surpluses.
i. Running Balance Surplus at True Up.
Annually, after presentation of the Wholesale Statements to the Operating
Board, the Board shall decide the portions of any surplus to be a) returned to
the Wholesale Customers as a credit on their bill in the following year, with
the balance prorated to each Wholesale Customer based on each Wholesale
Customer’s demand since the balance last crossed zero, b) redeemed as a
capital contribution towards specific assets assigned to the applicable Cost
Pool, and/or c) retained for rate smoothing purposes as determined by the
Operating Board based on the review of the most recent rate study following
the process in Section IV.H.2.iii below. The Operating Board may select one
or any combination of these options for implementation. When returned as a
credit on the bill or redeemed as a capital contribution, the surplus balance
shall be reduced by those amounts.
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ii. Running Balance Surplus at Contract Transition.
The running surplus balance existing as of December 31, 2024 shall be fully
or partially returned as provided in Section IV.G.6, Contract Transition.
iii. Running Balance Surplus at Rate Study.
During each rate study, the Operating Board shall decide the portion of the
surplus, up to an amount not to exceed 30 percent of the annual projected
costs in the relevant cost pool for the first year of the rate study, to retain for
future rate smoothing purposes. Seattle shall design rates to eliminate any
surpluses above this amount in the cost pool running balances.
d. FC Running Balances. Seattle shall maintain separate running balances within
the New Supply and New Transmission Cost Pools, as appropriate, of the
surplus or deficit balances of actual FC revenues received in any year over the
facility’s annual utility or cash basis costs to be recovered through FCs for that
year. Running surplus FC balances shall earn simple interest at Seattle’s Cash
Pool Rate. For any year with a running FC deficit balance, Seattle shall
transfer an amount from the running balance of rate revenues in the New
Supply or New Transmission Cost Pool, as the case may be, to eliminate the
FC deficit balance for that year even if it results in a deficit running balance
in rates. FC surplus balances in any subsequent year shall be transferred back
to the running balance in the New Supply or New Transmission Cost Pools
until the amount transferred to eliminate the prior deficit FC balance is repaid.
Any remaining surplus FC balances, if any, may upon Operating Board
approval, be transferred to the running balances of rate revenues in the New
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Supply or New Transmission cost pools for rate smoothing purposes.
Otherwise, they shall be retained as a surplus FC balance in an amount up to
two times the Net Book Value of the Regional Facilities whose infrastructure
costs are being recovered by FCs. Any surplus FC balance that exceeds two
times the Net Book Value of those facilities shall be transferred to the running
balance for the New Supply or New Transmission Cost Pools, as appropriate,
(and the FC surplus balance shall be reduced by the amount transferred). This
transfer is permanent and not repaid. ERU Charges are based on Section
IV.D.2.c and shall not be adjusted to reflect surpluses or deficits in FC
balances.
SECTION V. OPERATING BOARD
1. Purpose. The purpose of the Operating Board is to provide advice and direction in certain
areas of limited authority over policy, financial and operational matters as they affect the
Seattle Regional Water Supply System. The representatives of the Operating Board shall,
to the best of their ability, act in the best interests of the Seattle Regional Water Supply
System as a whole, not for the benefit of a group of Wholesale Customers or an individual
Wholesale Customer. Therefore, only Wholesale Customers that have agreed to
automatic extensions of this Contract, committed to purchase their Full or Partial
Requirements as set out on Exhibit I, and agreed to the limitations on purchase reductions
contained in Section II.B.5, are eligible to have their representative voted onto the
Operating Board.
2. Structure and Authority. The Operating Board shall have only the roles and limited
authorities as specifically and explicitly set forth in specific provisions of this Contract.
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The Operating Board shall have the structure described in Exhibit IV.
3. Review. The parties may review the structure and roles and limited authorities of the
Operating Board as of January 1, 2027 and every five years thereafter to determine its
effectiveness in addressing regional and contractual issues. The review may address the
composition of the Board and its roles and limited authorities as set forth in the Contract
and Exhibit IV. Any Wholesale Customer, including Water Utility, or Seattle may initiate
the review. The initiating party shall provide all Wholesale Customers and Seattle, as the
case may be, with its proposals. Water Utility and Seattle agree to consider each other’s
and any other Wholesale Customer's comments and proposals and to respond in writing
stating its reasons for rejecting any proposals and the reasons for its own counter proposal.
Notwithstanding any other provisions in this Contract, any changes to the Operating
Board structure shall be made through an Amendment to the Operating Board Bylaws;
provided that any such changes shall be subject to the restrictions and limitations
contained in this Contract.
SECTION VI. PLANNING
VI.A. Reporting of Planning Data
1. By no later than March 1 of each year, Water Utility shall report to Seattle and the
Operating Board the following data for the previous calendar year as follows, except as
otherwise provided in Section VI.A.4 below:
a. The amount of water produced each month from its Independent Supplies, listed
by source.
b. The amount of water purchased each month from any other water utilities, listed
by other utility name and whether Emergency or Purchased Supply.
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c. The amount of water sold each month to any other water utilities, listed by other
utility name and whether Emergency or Resale Supply.
d. The amount of water wheeled through Water Utility’s distribution system each
month, listed by both utility names that deliver water to and receive water from
Water Utility.
e. The amount of water sold to retail and wholesale customers, by customer class
and by month.
f. The number of accounts billed, by customer class and month.
g. Other data reasonably necessary to track, report and plan for the metrics used for
the regional WUE Goal, upon Seattle’s request.
2. Water Utility shall report other data as may be reasonably requested by Seattle for water
planning purposes or as may be required by amendments to applicable regulations from
time to time, except as otherwise provided in Section VI.A.4 below. This data may
include, but not be limited to:
a. Water Utility’s forecasts of the amount of water to be used by Water Utility from
Alternate Supplies. Forecasts will reflect best judgement of Water Utility and be
consistent with industry standards.
b. Water Utility’s forecasts of annual growth in the number of meters installed by
Water Utility by the size of the meter as necessary for establishing Facility
Charges pursuant to Section IV.D.2.c.
c. Water Utility’s rates and charges, including background information such as rate
studies.
d. Water Utility’s maps, land use and growth projections, and geographical
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information system (“GIS”) layers of current and future retail service areas of
Water Utility, provided that Water Utility shall be permitted to withhold
information or records which Water Utility reasonably believes the release of
such information and records presents a security risk associated with Water
Utility’s facilities, infrastructure and operations.
3. Records relevant to water supply and consumption within the possession of Seattle or
Water Utility shall be provided to the other upon reasonable request.
4. Water Utility shall not be required to provide records, including related information or
data, that are exempt from disclosure under the Public Records Act, Chapter 42.56 RCW,
or other applicable federal and state laws.
VI.B. Submittal of Water Utility Water System Plans
Water Utility shall provide a copy of its proposed water system plan, including any amendments,
to Seattle for review and comment before adoption by its legislative body, and a copy of its final
approved water system plan or amendments.
VI.C. Seattle as Water Planning Agency
1. Seattle shall be the lead agency and primary planning authority for the purposes of
fulfilling its obligations to provide for the Full or Partial Water Requirements of Water
Utility, as appropriate.
2. Seattle, in consultation with the Operating Board, shall examine and investigate water
supplies suitable and adequate to meet the present and reasonable future needs of Seattle
and the Wholesale Customers.
3. Seattle, in consultation with the Operating Board, shall prepare and adopt a plan for
acquiring new, high quality water supplies in a timely and cost-effective manner. The
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City of Renton
plan shall provide for the lands, waters, water rights and easements necessary therefor,
and facilities for retaining, storing and delivering such waters, including dams, reservoirs,
aqueducts and pipelines to convey same throughout the Seattle Regional Water Supply
System. In preparing or adopting the plan, Seattle shall consider as possible alternatives
or additional water supply sources, the acquisition of water from sources controlled or
developed by individual water utilities, legally constituted groups of water utilities or
utilities which are not presently supplied by the Seattle Regional Water Supply System.
Seattle has final responsibility for the plan and for fulfilling the obligations of this
Contract. However, the Operating Board may participate in developing the plan by
proposing goals and objectives for the Seattle Regional Water Supply System, by making
any additional suggestions and by acting in a review capacity. If Water Utility opts out
of an Extension pursuant to Section II.A.3, Seattle shall begin planning for Water Utility
to stop purchasing water from Seattle at the expiration of its Contract Term.
VI.D. Capital Improvement Plan
1. To fulfill the requirements of this Contract, Seattle shall make improvements to the
Seattle Regional Water Supply System based on a Capital Improvement Plan adopted by
the Seattle City Council. The projects and programs in the Capital Improvement Plan will
include those that meet operational, regulatory, or contractual requirements, provide for
growth, improve reliability and resiliency, and are cost-effective. Prior to submission of
the proposed Capital Improvement Plan to the Seattle City Council for approval, Seattle
shall provide the Operating Board a reasonable and meaningful opportunity to review and
recommend revisions to the relevant portions of the proposed Capital Improvement Plan
that affect the Seattle Regional Water Supply System. Seattle shall give serious
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City of Renton
consideration to the recommendations of the Operating Board. Seattle will transmit the
final adopted Capital Improvement Plan to the Operating Board and Water Utility within
30 days of adoption. Seattle shall provide periodic updates of major projects and
programs affecting the Seattle Regional Water Supply System upon request of the
Operating Board. Seattle shall also review and respond to concerns expressed by the
Operating Board or any Wholesale Customer regarding the scheduling of or delays in
completing projects included in Seattle’s Capital Improvement Plan or questions about
the budgets or actual costs incurred on projects included in Seattle’s Capital Improvement
Plan. Seattle shall, upon request, provide opportunities for the Operating Board, or a
designee of the Operating Board, to participate in options analysis, design review or value
engineering for relevant projects or programs that substantially affect the Seattle Regional
Water Supply System or Wholesale Customers.
2. The Operating Board may approve the allocation to a cost pool in Section IV.C of
reasonable costs for capital improvements that serve or benefit an individual Wholesale
Customer, including Water Utility, that are reasonably necessary to alleviate a
disproportionate adverse impact to the retail distribution system(s) of Water Utility or
another Wholesale Customer, to the extent it is caused by a capital project in the Capital
Improvement Plan for the Seattle Regional Water Supply System. Water Utility, or
another Wholesale Customer may request consideration of this provision, and the
Operating Board will make a determination of whether 1) there is a disproportionate
adverse impact and either (i) such disproportional adverse impact could have been
reasonably avoided through a different project design in the Capital Improvement Plan,
or (ii) the other Wholesale Customers, including the Seattle Retail Distribution System,
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City of Renton
receive tangible benefits, directly or indirectly, from the project in the Capital
Improvement Plan; 2) the proportion of capital costs to include, if any; and 3) the cost
pool the costs would be allocated to, if any. Water Utility and Seattle will enter into a
separate agreement consistent with this section if the Operating Board determines this
provision applies to Water Utility and the costs will be allocated to the cost pool
identified by the Operating Board.
SECTION VII. PAYMENT
VII.A. Collection of Money Due City
1. Seattle shall bill Water Utility on a monthly basis for all charges due under this Contract
unless the Contract expressly provides otherwise, in which case Water Utility will submit
payment according to the Contract. Water Utility shall pay all charges within 60 days of
the invoice or billing date or, if another provision is applicable, when due.
2. For those charges that are not monthly commodity charges or Facilities Charges, Water
Utility and Seattle may mutually agree by letter agreement to a reasonable monthly
payment plan and any outstanding balance shall be charged interest at Seattle’s Cash Pool
Rate until paid in full.
VII.B. Penalties for Late Payment
All late payments, and any refund of an amount in dispute that was paid under protest, shall
accrue interest at 1% per month.
VII.C. Billing Disputes
1. Water Utility may dispute the accuracy of any portion of charges billed by Seattle by
notifying Seattle in writing within the 60-day payment period of the specific nature of the
dispute and paying the undisputed portion of the charges. This provision is not intended
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to limit Water Utility’s right to dispute billing errors or charges that are not reasonably
discoverable by Water Utility within the 60-day payment period.
2. Seattle shall consider and decide any billing dispute in a reasonable and timely manner.
Any billing disputes that remain after such consideration shall be reconciled pursuant to
the dispute resolution procedures of this Contract.
VII.D. Availability of Records
Upon request with reasonable notice, Water Utility or Seattle shall make any public records that
support the charges or payments under this Contract available to the other party for inspection
and copying during normal business hours.
SECTION VIII. CONTRACT AMENDMENTS
Seattle shall notify Water Utility and all other holders of Full or Partial Requirements Contracts
of any amendments to such contracts within 30 days of the execution of such amendment. Water
Utility shall then have 90 days to decide whether to include such amendment in this Contract by
giving written notice to Seattle of its election to do so. Upon the issuance of such notice, Seattle
shall issue the amendment to Water Utility and the amendment shall be final and binding upon
both parties upon mutual execution.
SECTION IX. DISPUTE RESOLUTION
Dispute resolution shall proceed as follows:
IX.A. Operating Board Review
Any dispute regarding this Contract that remains unresolved after good faith negotiations between
Water Utility and Seattle shall be referred to the Operating Board for consideration and
recommendation. Each party shall submit a written statement regarding the dispute to the
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City of Renton
Operating Board.
1. If the dispute cannot be resolved in discussions with the Operating Board, then the
Operating Board shall provide written recommendations to each party within 60 days of
receiving the written statements, which shall include any applicable findings or
interpretations of the applicable facts or contract provisions.
2. If either party rejects the written recommendation of the Operating Board, that party shall,
within 10 days, notify the other party in writing of its reasons.
IX.B. Seattle Mayor Review
If the dispute remains unresolved, the written statements of the parties, the recommendations of
the Operating Board, if applicable, and the written reasons for either party’s rejection of those
recommendations shall then be submitted to the Seattle Mayor for review.
1. Within 60 days of the submittal of the written materials, the Seattle Mayor shall provide
written recommendations to resolve the dispute.
2. If either party rejects the written recommendation of the Seattle Mayor, that party shall,
within 10 days, notify the other party in writing of its reasons.
IX.C. Mediation
Within 10 days of receiving the written rejection of the Seattle Mayor’s recommendations by one
or both parties, each party shall designate in writing not more than 5 candidates it proposes to act
as an impartial mediator.
1. If the parties cannot agree on one of the mediators from the combined list within 5 days,
the Operating Board shall, within an additional 5 days, select one of the mediators from
either list to serve as mediator.
2. Upon selection of the mediator, the parties shall use reasonable efforts to resolve the
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First Amended and Restated Contract for the Supply of Water
City of Renton
dispute within 30 days, or other mutually agreed timeframe, with the assistance of the
mediator.
IX.D. Resort to Litigation or Arbitration
If mediation fails to resolve the dispute within 30 days, or the other mutually agreed timeframe,
of selection of the mediator, the parties may thereafter seek redress in court subject to Section
X.G. below. Alternatively, the parties may mutually agree to resolve any disputes through
arbitration using a single arbitrator acceptable to parties. Nothing in this provision shall be
construed to require arbitration without the mutual agreement of the parties.
IX.E. Efficiency of Review
In order to facilitate a more efficient review of disputes under this Section, the parties may
agree to skip the step in Section IX.A above in order to avoid a redundant act. The parties may
also mutually agree to skip the step in Section IX.C, if it is in the best interests of the parties
in resolving the dispute.
SECTION X. MISCELLANEOUS
X.A. Notification
1. Whenever written notice is required by this Contract, that notice shall be given to the
following representatives, or their designees, by email with receipt requested, actual
delivery or by the United States mail (registered or certified with return receipt requested),
addressed to the respective party at the following addresses or a different address
hereafter designated in writing by the party:
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First Amended and Restated Contract for the Supply of Water
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The date of giving such notice shall be deemed to be the email date or postmarked date of
mailing.
2. Seattle’s Wholesale Contracts Manager will be the initial point of contact for all other
issues arising under the Contract.
X.B. Severability
The purpose of this Contract is to provide for long-term water supply planning and certainty for
both Seattle and Water Utility through adoption of orderly plans calling for the expenditure of
significant sums of money for the Seattle Regional Water Supply System. It is the intent of the
parties that if any provision of this Contract or its application is held by a court of competent
jurisdiction to be illegal, invalid, or void, the validity of the remaining provisions of this Contract
or its application to other entities, or circumstances shall not be affected. The remaining
provisions shall continue in full force and effect, and the rights and obligations of the parties shall
be construed and enforced as if the Contract did not contain the particular invalid provision;
provided, however, if the invalid provision or its application is found by a court of competent
SEATTLE: WATER UTILITY:
General Manager Public Works Director
City of Renton
1055 S Grady Way
Renton, WA 98057
Seattle Public Utilities
Seattle Municipal Tower
PO Box 34018
700 Fifth Ave, Suite 4900
Seattle, WA 98124-4018
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First Amended and Restated Contract for the Supply of Water
City of Renton
jurisdiction to be substantive and to render performance of the remaining provisions unworkable
and non-feasible, is found to seriously affect the consideration and is inseparably connected to
the remainder of the Contract, the entire Contract shall be null and void.
X.C. Consent
Whenever it is provided in this Contract that the prior written consent or approval of either party
is required as a condition precedent to any actions, in each such instance said consent or approval
shall not be unreasonably withheld, and in each such instance where prior consent is sought,
failure of the party to respond in writing within 90 days of the request shall be deemed as that
party's consent or approval unless expressly stated herein. This provision does not apply to
requests for amendments of this Contract.
X.D. Emergency Situations
Nothing in this Contract shall be deemed to preclude either party from taking necessary action to
maintain or restore water supply in emergency situations and such action shall not be deemed a
violation of this Contract.
X.E. No Joint Venture - Individual Liability
This is not an agreement of joint venture or partnership, and no provision of this Contract shall
be construed so as to make Water Utility individually or collectively a partner or joint venturer
with any other Wholesale Customer or with Seattle. Neither party is an agent of the other. Neither
Seattle nor Water Utility shall be liable for the acts of the other in any representative capacity
whatsoever.
X.F. Complete Agreement
This Contract represents the entire agreement between the parties hereto concerning the subject
matter hereof. This Contract may not be amended except as provided herein.
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X.G. Venue, Jurisdiction and Specific Performance
In the event of litigation between the parties, venue and jurisdiction shall lie with the King County
Superior Court of the State of Washington. The parties shall be entitled to specific performance
of the terms hereof.
X.H. Default and Non-Waiver
In the event of default of any provision of the Contract, the non-defaulting party shall issue written
notice to the other party setting forth the nature of the default. If the default is for a monetary
payment due hereunder, the defaulting party shall have thirty (30) days to cure the default. In the
event of other defaults, the defaulting party shall use its best efforts to cure the default within
ninety (90) days. If such default cannot be reasonably cured within such ninety (90) day period,
the defaulting party shall, upon written request prior to the expiration of the ninety (90) day
period, be granted an additional sixty (60) days to cure the default. Any waiver of the breach or
default of any provision, term or condition of this Contract shall not be deemed to be a waiver
of any preceding or succeeding breach or default of the same or any other provision, term or
condition.
X.I. Force Majeure
The time periods for the parties’ performance under any provisions of this Contract shall be
extended for a reasonable period of time during which a party’s performance is prevented, in
good faith, due to circumstances beyond the party’s control such as fire, flood, earthquake,
lockouts, strikes, embargoes, pandemics, acts of God, war and civil disobedience. If this provision
is invoked, the parties agree to immediately take all reasonable steps to alleviate, cure, minimize
or avoid the cause preventing such performance, at their sole expense.
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X.J. Successors
This Contract shall inure to the benefit of and be binding upon the parties and their successors
and assigns.
X.K. Exhibits
Exhibits I through IX are attached hereto and incorporated herein. To the extent this Contract
authorizes the parties to amend a specific exhibit by letter agreement, such amended exhibit will
become attached and incorporated herein upon the effective date of the letter agreement.
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SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereby execute this Contract.
THE CITY OF RENTON
BY:
TITLE: _
DATE
AUTHORIZING LEGISLATION: ORDINANCE/RESOLUTION
THE CITY OF SEATTLE
BY:
General Manager, Seattle Public Utilities
DATE:
AUTHORIZING LEGISLATION: ORDINANCE No.
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First Amended and Restated Contract for the Supply of Water
City of Renton
LIST OF EXHIBITS
I. Purchase Commitment & Emergency, Independent and Purchased Supplies
II. Service Connections, Minimum Hydraulic Gradients, and Flow Rates of Water
Supplied
III. Demand Charge Methodology
IV. Operating Board Structure
V. Facilities Charges
VI. Regional Facilities
VII. Subregional Facilities
VIII. Index O&M Cost Categories
IX. Stranded and Avoided Costs
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First Amended and Restated Contract for the Supply of Water
City of Renton
EXHIBIT I
PURCHASE COMMITMENT & EMERGENCY, INDEPENDENT AND PURCHASED SUPPLIES
City of Renton’s Purchase Commitment is its Partial Water Requirements.
City of Renton is served by the Renton Subregion
City of Renton represents that it has access to the following Alternate Supplies:
I. EMERGENCY SUPPLIES
A. Purchased Supplies/Interties:
WATER UTILITY LOCATION OF
INTERTIE
METER
SIZE
CAPACITY TYPE OF
SERVICE
AGREEMENT
DATE
WATER SUPPLY
To / From
Coal Creek Utility
District
2610 Lynnwood Ave NE 8” 1,250 gpm One-way
Emergency
2013
CAG-193-01
From Renton to Coal Creek
City of Tukwila
(PRV 23)
17300 W Valley Hwy S 8” 1,875 gpm Two-way
Emergency
1995
CAG-95-034
Both Directions
City of Kent
(PRV 25)
SE 43rd St & Lind Ave SW 10” 1,950 gpm Two-way
Emergency
1995
CAG-95-071
Both Directions
Skyway Water & Sewer
District
12603 82nd Ave S 12” 1,250 gpm One-way
Emergency
2011
CAG-11-187
From Skyway to Renton
City of Seattle 2000 Kirkland Ave SE 8” 1,400 gpm One-way
Emergency
2002
CAG-11-188
From Renton to Seattle
City of Seattle Union Ave SE & SE 2nd Pl 10” 2,400 gpm One-way
Emergency
2002
CAG-11-188
From Renton to Seattle
Water District 90 SR-900 & 144th Ave SE None 1,250 gpm One-way
Emergency
2014
CAG-14-129
From Renton to WD 90
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First Amended and Restated Contract for the Supply of Water
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B. Independent Supplies/Wells (No Facilities Charge Allowance):
SOURCE NAME LOCATION CATEGORY
(GW / SW*)
PERMIT or
CLAIM #
AMOUNT OF
WATER RIGHT
AVERAGE ANNUAL
PRODUTION
II. INDEPENDENT SUPPLIES (Continuous Use)
SOURCE NAME LOCATION CATEGORY
(GW / SW)
PERMIT or
CLAIM #
AMOUNT OF WATER
RIGHT
AVERAGE
ANNUAL
PRODUTION
FACILITY
CHARGE
ALLOWANCE
Infiltration Gallery
(Springbrook Spring)
GW GI-20605-C 1,680-acre feet/yr 1,050 gpm NA
RW-1 GW GWC-886-D 1,676-acre feet/yr 1,040 gpm NA
RW-1 GW GWC-5838-A 1,536-acre feet/yr 960 gpm NA
RW-2 GW GWC-887-D 838-acre-feet/yr 1,404 gpm NA
RW-3 GW GWC-5835-A 2,560-acre feet/yr 1,600 gpm NA
RW-1,2,3 GW GWC 5836-A 3,136-acre feet/yr 1,960 gpm NA
PW-8 GW GWC 6775-A 4,839 acre feet/yr 3,000 gpm NA
PW-8 GW GWC 6776-A 800-acre feet/yr 500 gpm NA
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First Amended and Restated Contract for the Supply of Water
City of Renton
SOURCE NAME LOCATION CATEGORY
(GW / SW)
PERMIT or
CLAIM #
AMOUNT OF WATER
RIGHT
AVERAGE
ANNUAL
PRODUTION
FACILITY
CHARGE
ALLOWANCE
PW-9 GW GI-24191-C 1,040-acre feet/yr 1,300 gpm NA
PW-5A GW GWC-3591-A 2,000-acre feet/yr 1,300 gpm NA
PW-5A GW GWC-5834-A 320-acre feet/year 200 gpm NA
Springbrook Creek SW G1-20605-P 1,680-acre feet/yr 1,050 gpm NA
PW-11 GW GI-24781-P 1,792-acre feet/yr 1,600 gpm NA
PW-11 GW GI-25396-P 1,008-acre feet/yr 900 gpm NA
PW-12 GW GI-24782-P 1,792-acre feet/yr 1,600 gpm NA
PW-17 GW GI-25397-P 1,680-acre feet/yr 1,500 gpm NA
TOTAL 14,809.5 acre feet/yr**** 15,152.3 gpm*****
**** Total annual withdrawal from all sources and water rights shall not exceed 14,809 acre-feet per Department of Ecology’s permit conditions
***** Total instantaneous flow rates from all certificated water rights is 15,152 gpm
1. Water Utility shall use its best efforts to maintain and operate the Independent Supplies listed above, if any, in order t o maintain the listed average
annual production for each Independent Supply.
2. Water Utility shall provide written notice to Seattle within thirty days of determining that it is not possible or not cost effective to maintain and operate
an Independent Supply at its listed average annual production. Such written notice shall descri be the new level of average annual production expected
for Independent Supply. Seattle may decrease the FC Allowance under Section IV.D.2.c. The parties will revise this Section II of Exhibit I by letter
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First Amended and Restated Contract for the Supply of Water
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agreement to reflect the new average annual production or decreased FC Allowance.
3. Water Utility shall use its best efforts to cure any temporary interruption of water supply from an Independent Supply. Water Utility shall provide oral
notice to Seattle of any interruption lasting longer than 1 week and the expected additional demand for water deliveries from Seattle resulting from the
interruption. Water Utility shall use its best efforts to minimize the impact of an interruption of an Independent Supply on the Seattle Regional Water
Supply System by utilizing its other Independent Supplies, if any, unaffected by the interruption within their operating and maintenance constraints.
4. It is the intent of the parties that the listed average annual production fairly represents the average annual production of the Independent Supplies. In
the event that, over a 5 year period, (i) the actual average annual production, as may be adjusted to reflect a reasonably unforeseeable interruption in the
Independent Supplies that lasts a substantial amount of time and is cured within a reasonable time, is consistently less than represented, and (ii) the
annual deliveries of water to Water Utility by Seattle are consistently increasing, the listed average annual production shall be revised by letter agreement
to reflect the reduction. Seattle may also decrease the FC Allowance under Section IV.D.2.c, which decrease shall also be revised in the letter agreement.
5. Water Utility shall provide Seattle with six months’ written notice before placing any new or improved Independent Supply into production and the
parties will revise this Section II of Exhibit I to reflect the new or improved Independent Supply and new or increased average annual production capacity.
This condition is independent of and in addition to any other applicable provisions in the Contract relating to adding a new or improved Independent
Supply (e.g. Sections II.B.5, reducing Purchase Commitment and II.D.9, Water Quality provisions for introducing new Alternate Supply).
6. Water Utility shall maintain records of the monthly production of each Independent Supply in a manner consistent with indu stry standards.
III. PURCHASED SUPPLIES (Continuous Use)
NAME LOCATION METER
SIZE
AMOUNT CONDITIONS
ON USE
DATE
RECEIVED
REQUEST
EFFECTIVE
DATE
EXPIRATION
DATE
FACILITIES
CHARGE
ALLOWANCE
1. Water Utility shall use its best efforts to maintain use of Purchased Supplies listed above, if any, in order to maintain the listed average annual
production for each Purchased Supply.
2. Water Utility shall provide written notice to Seattle within thirty days of determining that it is not possible or not cos t effective to maintain use of
Purchased Supply at its listed average annual production. Such written notice shall describe the new level of average annual production expected for
Purchased Supply. Seattle may decrease the FC Allowance under Section IV.D.2.c. The parties will revise this Section III of Exhibit I by letter agreement
to reflect the new average annual production or decreased FC Allowance.
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3. Water Utility shall use its best efforts to cure any temporary interruption of water supply from a Purchased Supply. Water Utility shall provide oral
notice to Seattle of any interruption lasting longer than 1 week and the expected additional demand for water deliveries from Seattle resulting from the
interruption. Water Utility shall use its best efforts to minimize the impact of an interruption of a Purchased Supply on the Seattle Regional Water Supply
System by utilizing its other Purchased Supply Sources unaffected by the interruption within their operating and maintenance constraints.
4. It is the intent of the parties that the listed amount fairly represents the average annual amount of the Purchased Suppli es. In the event that, over a 5
year period, (i) the actual average annual amount, as may be adjusted to reflect a reasonably unforeseeable interruption in the Purchased Supplies that
lasts a substantial amount of time and is cured within a reasonable time, is consistently less than represented , and (ii) the annual deliveries of water to
Water Utility by Seattle are consistently increasing, the listed average annual production shall be revised by letter agreement to reflect the reduction.
Seattle may also decrease the FC Allowance under Section IV.D.2.c, which decrease shall also be revised in the letter agreement.
5. Water Utility shall provide Seattle with six months’ written notice before placing any new or improved Purchased Supply in to production and the
parties will revise this Section III of Exhibit I to reflect the new or improved Purchased Supply and new or increased amount. This condition is
independent of and in addition to any other applicable provisions in the Contract relating to adding a new or improved Purcha sed Supply (e.g. Sections
II.B.5, reducing Purchase Commitment and II.D.9, Water Quality provisions for introducing new Alternate Supply).
6. Water Utility shall maintain records of the monthly amount of each Purchased Supply in a manner consistent with industry standards.
IV. REDUCTONS IN PURCHASE COMMITMENTS – STRANDED COST
NAME REDUCTION
NOTICE
RECEIVED
AMOUNT OF
REDUCTION
AUTOMATICALLY
ALLOWED
REDUCTIONS IN
II.B.5.d.viii
REDUCTION
NOTICES RECEIVED
AFTER EFFECTIVE
DATE
STRANDED COST
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V. APPROVED RESALE OF SEATTLE WATER
NAME LOCATION METER
SIZE
AMOUNT CONDITIONS
ON USE
EFFECTIVE
DATE
EXPIRATION
DATE
Skyway Water and Sewer District
(formally Bryn Mawr/Lakeridge Water
and Sewer District)
80th Ave S & S 126th St 10” 1,950 gpm Wholesale water
to Skyway
1993
CAG-93-097
Effective until
terminated by
parties
VI. WATER SUPPLY CONTRACTS OR AGREEMENTS WITH OTHER WATER UTILITIES
• CAG-93-097 – Agreement with BrynMawr/Lakeridge Water and Sewer District, now known as Skyway Water & Sewer District for Water Supply
and Joint Storage and Transmission facilities. This agreement dated January 1, 1993, is for the financing and cost -sharing between the City and
the District for the design, construction, operation, maintenance and joint-use of the City’s West Hill 1.3 MG reservoir and transmission mains.
The agreement also provides for the wholesale of water from the City to the District. The City supplied the District an average of 0.15MGD over
the past six years through a signal 10-inch metered connection. The agreement was effective on January 1993 and shall remain effective until it is
terminated by agreement of the parties.
• CAG 02-123 – Agreement for the sale of water in an emergency by the City of Renton to the City of Seattle, dated November 30, 2002.
• CAG 95-034 – Agreement for the sale of water in an emergency by the City of Renton and the City of Tukwila, dated March 21, 1995.
• CAG 95-071 – Agreement for the sale of water in an emergency by the City of Renton and the City of Kent, dated May 15, 1995.
• 2011 Agreement - Agreement for the sale of water in an emergency by the City of Renton and Skyway Water and Sewer District. This agreement
was signed by both agencies on October 10, 2011. The emergency intertie was constructed in 2006 and is currently operational.
• 2011 Agreement – for the sale of water in an emergency by the City of Renton and Coal Creek Utility District. This agreement was signed by both
agencies on February 25, 2013. The emergency intertie was constructed in 2009 and is currently operational.
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EXHIBIT II
SERVICE CONNECTIONS, MINIMUM HYDRAULIC GRADIENTS, AND FLOW RATES OF WATER SUPPLIED
SERVICE CONNECTION (1) MINIMUM HYDRAULIC
GRADIENT FOR PLANNING
PURPOSES AT STATION
UPSTREAM OF METER (FEET
NAVD-88 Datum)
FLOW RATE UP TO WHICH
THE MINIMUM HYDRAULIC
GRADIENT APPLIES (gpm)
(3)(4) LOCATION STATION
NUMBER(2)
PIPELINE
SEGMENT
NUMBER(2)
SIZE OF
METER
(IN.)
CRPL4 ROW & Shattuck Ave S 33 13 6 465 Backup
CRPL4 ROW & Benson Rd S 34 13 8 470 Backup
CRPLs ROW & Jones Ave S 36 10 6 470 Backup
CRPLs ROW east of Renton Ave S 37 10 3 470 Backup
CRPLs ROW & 84th Ave S 38 10 6 465 Backup
CRPLs ROW & Kirkland Ave SE
(123rd Ave SE)
39 10 10 475 Backup
Logan Ave near 2nd St (5) 179 10 10 460
135 Logan Ave near 2nd St (5) 180 10 10 460
CRPL4 ROW near Boeing’s
Longacres site
196 13 10 460 65
Total 200
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City of Renton
Notes:
(1) Water is provided to Service Connections at a Wholesale Level of Service.
(2) Station and Pipeline Segment Numbers are for information purposes and pertain to cost allocations and the demand metering program.
(3) The Total is based on City of Seattle’s estimate of Water Utility’s average daily demand for 2040 multiplied by a peaking factor of 2.0 for peak day use. Seattle and Water
Utility agreed to the allocations of the Total to each Service Connection.
(4) Pursuant to Section III.A of the Contract, Water Utility may use all or some of the flows rates allocated to each Service Connection on any other Service Connection that is
located on the same Pipeline Segment Number, but in that case the minimum hydraulic gradients are not guaranteed.
(5) These Service Connections include the SPU meter vault and all appurtenances north up to the flanges before the 90-degree bends, as defined in Section I.
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City of Renton
EXHIBIT III
DEMAND CHARGE METHODOLOGY
In order to meet the conditions of service in Section III and Exhibit II of the Contract, each Wholesale
Customers has to construct adequate storage volume within their individual retail distribution system
to avoid excessive peak flow withdrawals at the Service Connection and potential adverse impacts
to the Seattle Regional Water Supply System or other Wholesale Customers.
When Seattle has determined to implement demand charges for any period, Water Utility shall be
subject to a demand charge if its average peak hourly flow rate from its 10 highest daily flow days
exceeds its average daily flow rate from the same 10 days by more than 30% as more particularly
described below.
The demand charge and method of application shall be as follows:
1. At Water Utility’s cost, Seattle shall install metering devices that record hourly water
deliveries at Service Connections. All other costs Seattle incurs to implement demand
charges shall be allocated to the Existing Regional System Cost Pool; or New
Transmission Cost Pool, upon approval by the Operating Board.
2. There shall be no requirement for Seattle to install demand-metering equipment or
monitor water deliveries at all Service Connections for the purposes of implementing
demand charges. Seattle, in its discretion, may choose to monitor water deliveries at all
Service Connections, or the Service Connections of one or more Wholesale Customers
based on considerations such as hydraulic capacity or other operational constraints in the
Seattle Regional Water Supply System may be occurring.
3. When calculating Water Utility’s deficient storage and whether demand charges apply:
a. Seattle may consider Service Connections to Water Utility on the same pipeline
segment, or Service Connections that are on the same pipeline segment and
subject to a joint operating agreement between Water Utility and another
Wholesale Customer, as 1 Service Connection; and
b. A “Day” commences at 9:00 a.m. and ends at 9:00 a.m. the following calendar
day.
c. The “Monitoring Period” will generally consist of the summer months of June,
July, and August. However, if peak flow rates create adverse hydraulic or other
operating conditions at other times, Seattle, in consultation with the Operating
Board, may establish a different Monitoring Period.
4. For each Service Connection, Seattle will determine the ten Days within the Monitoring
Period with the highest daily volume of water delivered.
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First Amended and Restated Contract for the Supply of Water
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5. For each of those ten Days, Seattle will determine the “Demand Factor” for each Service
Connection by dividing the peak hourly flow rate by the average flow rate for the same
Day expressed in gallons per hour.
6. Seattle will average: a) the Demand Factors for the ten Days to get an “Average Demand
Factor” and b) the daily volume for the same ten Days to get an “Average Daily Quantity”
of water in gallons for each Service Connection.
7. If Water Utility’s Average Demand Factor exceeds 1.30 at any Service Connection(s),
Water Utility will be subject to a demand charge.
8. If Water Utility is subject to a demand charge, Seattle will determine Water Utility’s
deficient storage volume at each Service Connection where the Average Demand Factor
exceeds 1.3 using the following formula: S = (F-1) Q: where S = deficient storage volume
in gallons, F = Average Demand Factor and Q = Average Daily Quantity.
9. Seattle shall establish a Storage Deficiency Rate each rate study that is based on Seattle’s
most recent actual cost to construct a reservoir, inflated to the most recent year that the
Engineering News Record “ENR” index or equivalent inflation data is available. The
Storage Deficiency Rate is the flat debt service payment required to finance the storage
facility over 30 years at Seattle’s Average Cost of Debt at the time of each rate study,
prorated for 1,000 gallons of storage.
Example:
Annual debt service cost of new reservoir at Average Cost of Debt
Actual cost of new reservoir in 2012 $ 60,000,000
ENR Index in 2012 100.00
ENR Index in 2019 125.00
Increase in Index 1.25
Cost of new reservoir inflated to 2019 $ 75,000,000
Term of Debt 30 Years
Seattle Average Cost of Debt in 2020 4.15%
Annual Cost $ 4,416,596
Volume of new reservoir 61,000,000 Gallons
Annual Debt Service per 1,000 Gallons $ 72
Storage Deficiency Rate $ 72
10. At each Service Connection subject to the demand charge, the demand charge shall be
calculated as S/1000 times the Storage Deficiency Rate. The total demand charge for
Water Utility shall be the sum of the demand charges for each Service Connection. The
demand charge shall be due by March 31 the following calendar year, or Water Utility
may request a payment agreement pursuant to Section VII of the Contract.
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11. Peak flows caused by emergencies in the Seattle Regional Water Supply System or
Water Utility's retail distribution system during any Monitoring Period will be excluded
in determining the demand charge. Peak flows caused by other unusual situations may
also be excluded at Seattle’s sole discretion. Seattle may request documentation of any
emergency or other situation from Water Utility to support a determination to exclude
certain flows from demand charges during a Monitoring Period.
12. At Seattle sole discretion, Seattle may disallow daily flow rates which differ
substantially from customer's daily consumption patterns in calculating the demand
charge.
13. In case of malfunction of metering equipment during certain period causing loss of data,
Seattle shall use the remaining data to determine the demand charge, if any.
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First Amended and Restated Contract for the Supply of Water
City of Renton
EXHIBIT IV
OPERATING BOARD STRUCTURE
1. Structure. The Operating Board (or “Board”) shall be structured as follows:
a. The Board shall consist of seven (7) members, composed of three members representing
Seattle Public Utilities (SPU), three members representing Seattle’s Wholesale Customers
selected as described below, and one independent party selected as set forth below to
be a tie-breaker as needed. Board members shall, to the best of their ability, act in the best
interests of the Seattle Regional Water Supply System as a whole, not the interest of a group
of utilities or an individual utility.
b. The term of each Board position shall commence on January 1 and shall be for four (4)
years. Terms of each Board position shall be staggered such that no more than two
positions are renewed in any single year. Except for SPU members, Board members
may serve not more than three successive terms.
c. Three Board members representing the Wholesale Customers will be selected from the
holders of the First Amended and Restated Contract for the Supply of Water, mutually
agreed to pursuant to Section II.A.4.a. Wholesale Customers will be sorted into three
categories based on utility size. The selected categories will be small, medium, and large
utilities, which will be made up from approximately equal numbers of holders of Full
and Partial Requirements Contracts. Each category of utility may elect, by majority vote
(one vote per utility) its representative to the Operating Board. The Board will be
recomposed on January 1, 2012 and every 5 years thereafter. Only Wholesale customers
demonstrating their commitment to the region by agreeing to limits on purchase reductions
contained in Section II.B.5 shall be eligible to be elected as a member of the Operating
Board.
d. The seventh member of the Board shall be a person having expertise in the operations of
regional water supply systems. Such person shall be selected by majority vote of the
other Board members. In the event of a deadlock in selecting the independent
representative, the independent Board member shall be selected by Judicial Arbitration
and Mediation Services Inc., of Seattle, Washington, or its successor. The seventh member
shall not vote on issues coming before the Board unless there is a deadlock in the voting
among the other six Board members. The seventh member may nevertheless express
his or her opinions in Operating Board discussions. Such member shall have no
employment, financial or contractual relationship with Seattle nor any Wholesale
Customer or any other actual or apparent conflict of interest in holding this position.
2. Voting. Except as otherwise provided above, each member of the Board shall have one vote
on all matters coming before the Board. Each Board member may appoint an alternate to
vote in his or her absence. A quorum of four (4) Board members present shall be required
for any vote. Members of the Board may not grant proxies for any vote.
3. Chairperson. The Board shall have a Chairperson who will be selected and have duties as
defined below:
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First Amended and Restated Contract for the Supply of Water
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a. The Chairperson shall be selected at the first regularly scheduled meeting of each new year.
b. All Chairpersons shall be selected by the Board using a nomination and voting process.
c. Nomination for the position of Chairperson shall be taken from Board members. The
Chairperson shall be selected based upon the simple majority vote of Board members.
Should the Board fail to elect a Chairperson at the first regularly scheduled meeting of the
new year, Seattle shall designate one of the SPU members to be the Acting Chairperson
until such time as the Board elects a Chairperson.
d. The Chairperson shall have the responsibility to call meetings, determine the agenda and
preside over meetings. In the absence of the Chairperson, for whatever reason, Seattle shall
designate one of the SPU members to be the Acting Chairperson for that meeting. The
Chairperson shall also act as the spokesperson for the Board and liaison between the
Administrator and the then current Seattle City Council’s Committee that considers matters
related to Seattle Public Utilities.
4. Schedule/Procedures/Bylaws. The Board shall adopt a regular meeting schedule and notify all
Wholesale Customers of the schedule. The Operating Board may adopt its own internal
procedures and Bylaws. The latest edition of Roberts Rules of Order shall, in the absence of
agreement by the Operating Board on procedural matters, govern all meetings and votes of the
Operating Board.
5. Reporting. The Board will provide reports to the Wholesale Customers, SPU and to the
appropriate Seattle City Council Committee, on its decisions and recommendations in a timely
manner.
6. Responsibilities and Authority of the Board. The Operating Board shall have only those powers
and authorities specifically and explicitly established by the clear terms of this Contract.
7. Expenses. The Board shall be authorized to incur reasonable expenses which will be allocated
by the Board to either or both of the New Transmission or New Supply Cost Pools.
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First Amended and Restated Contract for the Supply of Water
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EXHIBIT V
FACILITIES CHARGES
A. Methodology to Calculate ERU Charges
The ERU Charge is:
the flat annual debt service payment required to finance the N ew Supply or New
Transmission Facility for the lesser of (i) the facility life or (ii) the period over
which new demand is projected to fully utilize the facility’s projected supply or
transmission capacity
- divided by -
the average annual number of new ERUs of demand expected in each year.
Seattle’s Average Cost of Debt at the time the facility is put into service shall be
used to determine the flat debt service payment above. In the event that several New Supply
or New Transmission Facilities are put into service simultaneously, the facilities may be
considered together as providing a total new supply or new transmission capacity for a total
construction cost.
Example: A New Supply Facility costing $100 million is built with a projected total capacity
of 100,000 ERUs and a 50-year facility life. Growth of 5,000 ERUs per year is projected
over the next 20 years, so the facility is projected to be supplying its full capacity in 20
years. If this facility were financed over 20 years at Seattle’s Average Cost of Debt of 6%
interest, the flat annual debt service payment would be $8.7 million and the ERU Charge
would be $1,740 (8,700,000/5,000).
At the time a subsequent New Supply or New Transmission Facility is put into service, but the
capacity of a prior New Supply Facility has not yet been fully utilized, an ERU Charge for the
subsequent facility shall be calculated separately according to the formula above, then averaged
with the then-current ERU Charge from the prior facility. This average shall be weighted by the
remaining number of ERUs at the then-current ERU Charge and the number of new ERUs being
added at the new ERU Charge. This weighted average shall be the new ERU Charge, and the
number of ERUs available at that weighted ERU Charge shall be the sum of the remaining ERUs
for the prior facility plus the number of new ERUs for the subsequent facility.
Example: 10 years ago, a $100 million New Supply Facility was constructed that can supply
100,000 ERUs. 50,000 ERUs remain at the ERU Charge of $1,740. This year, we construct
a New Supply Facility costing $70 million and a 50-year facility life, with a projected
capacity of 40,000 ERUs that is projected to be fully utilized in 10 years. The ERU Charge
of the subsequent New Supply Facility alone using the formula above is $2,375. The
weighted average ERU Charge for any of the 90,000 available ERUs is $2,022 (50,000 *
$1,740 + 40,000 * $2,375) / 90,000).
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B. ERU Factors by Connection Size
Connection Size ERU Factors
1” and smaller 1.12
1 1/2" 5
2” 8
3” 22
4” 31
6” 66
8” 112
10” 169
12” 238
ERU Proving Methodology
The size of the retail water service connection used to serve a retail customer depends upon both
the total demand and the instantaneous flow required by that retail customer. For this reason,
connection size is only a general indicator of the annual demand placed on water supplies by any
particular retail customer.
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First Amended and Restated Contract for the Supply of Water
City of Renton
EXHIBIT VI
REGIONAL FACILITIES
I. Existing Regional Facilities
1. Cedar Source
• All roads, buildings, structures, water supply facilities, other equipment and infrastructure,
recreational and educational facilities, downstream habitat enhancement, fisheries
enhancement and mitigation facilities located within or close to the Cedar River
Hydrographic Watershed boundary as defined by Seattle land ownership or other contractual
rights, including the land itself, and any capitalized or amortized studies or obligations
related to the above. Excepted are facilities solely owned by Seattle City Light for the
purpose of power generation. Facilities shared by Seattle City Light and Seattle Public
Utilities shall be part of the Seattle Regional Water Supply System only to the extent of SPU
share or responsibility.
• All roads, buildings, structures, water supply facilities, and other equipment and
infrastructure located within the Lake Youngs Reservation as defined by Seattle ownership
of the land, including the land itself and any capitalized or amortized studies or obligations
related to the above.
• All facilities, structures, and other equipment and infrastructure located within the Lake
Youngs Aqueduct, the Landsburg Tunnel, and the Lake Youngs Supply Lines right-of-way,
including the right-of-way itself.
2. Tolt Source
• All roads, buildings, structures, water supply facilities, other equipment and infrastructure,
recreational and educational facilities, downstream habitat enhancement, fisheries
enhancement and mitigation facilities located within or close to the South Fork Tolt River
Hydrographic Watershed boundary as defined by Seattle land ownership or other contractual
rights, including the land itself, and any capitalized or amortized studies or obligations
related to the above. Excepted are facilities solely owned by Seattle City Light for the
purpose of power generation. Facilities shared by Seattle City Light and Seattle Public
Utilities shall be part of the Seattle Regional Water Supply System only to the extent of SPU
share or responsibility.
• Tolt Pipeline No. 1, from the Tolt Regulating Basin to the outlet of the Tolt Treatment
Facility, including any transfer and ancillary small diameter parallel pipes.
• Tolt Pipeline No. 2, from the Tolt Regulating Basin to the inlet of the Tolt Treatment
Facility, including any transfer and ancillary small diameter parallel pipes, and including
the connection to Tolt Pipeline No. 1 (a.k.a. TPL2 Phase 6b).
• Tolt Treatment Facility, including its outlet line up to the connection to Tolt Pipeline No. 1.
3. Seattle Wellfields (formerly known as Highline Wells)
• Riverton Wells, including all pumping and treatment equipment, original yard piping, to the
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First Amended and Restated Contract for the Supply of Water
City of Renton
connection to CRPL4, and the low flow piping to Riverton Reservoir.
• Boulevard Well, including all pumping and treatment equipment, and all piping up to the
connection to CRPL4.
• Any facilities related to operation of the Seattle Wellfields, such as for streamflow
augmentation or mitigation.
4. Other
• GIS Projects related to facilities identified herein as part of the Seattle Regional Water
Supply System.
• Hardware and Software projects related to facilities identified herein as part of the Seattle
Regional Water Supply System.
5. Pipelines
• Tolt Pipeline No. 1, from the outlet pipeline of the Tolt Treatment Facility to Lake Forest
Reservoir, including any transfer and ancillary small diameter parallel pipes.
• Tolt Pipeline No. 2, where constructed, west of the outlet of the Tolt Treatment Facility
(a.k.a TPL2 Phases 1, 2, 3, and 4), including any transfer and ancillary small diameter
parallel pipes.
• Tolt Tieline.
• Tolt Eastside Supply Line (from TESS Junction to the intersection of SE 16th Street and
145th Place SE).
• Tolt Eastside Line Extension (from the intersection of SE 16th Street and 145th Place SE to
Eastside Reservoir).
• The 550 head Pipeline from Maple Leaf Reservoir to Lake Forest Reservoir, sections of
which also known as “The Haller Lake Pipeline”, and “The 195th Street Pipeline”.
• Lake Youngs Bypass No. 4 from the outlet of each of the Cedar Treatment Facility
clearwells to Control Works, including Flow Control Facility 4.
• Lake Youngs Bypass No. 5 from the outlet of each of the Cedar Treatment Facility
clearwells to the Lake Youngs Tunnel, including Flow Control Facility 5.
• The Lake Youngs Tunnel (from the original lake outlet to Control Works).
• The Maple Leaf Pipeline (from the intersection of 18th Avenue E. and E. Prospect Street to
Maple Leaf Reservoir).
• Cedar River Pipeline No. 1 (CRPL1) from Control Works to the 24-inch remote controlled
valve (a.k.a. “The CRPL1 to CRPL2 Valve” in the vicinity and east of Beacon Reservoir
(primarily 66-inch pipeline).
• The primarily 54-inch Pipeline known as “The Old Cedar River Pipeline No. 2”, from the
24-inch remote controlled valve (a.k.a. “The CRPL1 to CRPL2 Valve”) in the vicinity of
Beacon Reservoir to the intersection of 18th Avenue E and E Prospect Street.
• Cedar River Pipeline No. 2 (CRPL2) from Control Works to the 20-inch butterfly valve
(a.k.a. “The CRPL2 to CRPL1 Valve”) in the vicinity and east of Beacon Reservoir
(primarily 54-inch pipeline).
• The primarily 42-inch pipeline known as “The Old Cedar River Pipeline No. 1”, from the
20-inch butterfly valve (a.k.a. “The CRPL2 to CRPL1 Valve”) in the vicinity and east of
Beacon Reservoir to the intersection of 12th Avenue and E Olive Street.
• The short pipeline sections of various diameters in the vicinity and east of Beacon Reservoir
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First Amended and Restated Contract for the Supply of Water
City of Renton
connecting CRPL1, CRPL2, Old CRPL1 and Old CRPL2.
• Cedar River Pipeline No. 3 from Control Works to the intersection of 18th Avenue E. and
E. Prospect Street (primarily 66-inch).
• 30” intertie pipeline between “The Old CRPL1” and CRPL3 in E Olive Street, from 12th
Avenue to 18th Avenue.
• The interconnections between the Maple Leaf Pipeline, Cedar River Pipeline No. 3, and the
Old Cedar River Pipeline No. 2 in the vicinity of the intersection of 18th Avenue E and E
Prospect Street.
• Cedar River Pipeline No. 4 from Control Works to the West Seattle Pipeline.
• West Seattle Pipeline from Augusta Gatehouse to Cedar River Pipeline 4.
• The interconnections between the Cedar River Pipelines 1, 2, and 3 in the vicinity of 51st
Avenue S and S Leo Street.
• Cedar Eastside Supply Line (from the Cedar Wye to the intersection of SE 16th Street and
145th Place SE).
• The 8th Avenue S. Pipeline between S. 146th Street and S. 160th Street.
• The Bow Lake Pipeline (between 8th Avenue S. and CRPL 4, and as relocated outside
runways at SeaTac Airport).
• The Burien Feeder (in S. 146th Street between 8th Avenue S. and CRPL 4).
• The Fairwood Line (between Fairwood Pump Station and Soos Reservoirs).
• The 24-inch discharge pipeline of Lake Youngs Pump Station up to Soos Reservoirs.
• The 12-inch discharge pipeline of Lake Youngs Pump Station up to Soos Reservoirs.
• The 630 head pipeline between Lake Youngs Pump Station and the Cedar River WSD pump
station at the eastern boundary of the Lake Youngs Reservation.
6. Reservoirs
Reservoirs, Tanks, and Standpipes, including overflow pipes, all valves, appurtenances, and
disinfection facility located on the premises of each storage facility, unless otherwise noted
• Lake Forest Reservoir
• Eastside Reservoir
• Riverton Reservoir
• Maple Leaf Reservoir (excluding Roosevelt Way Pump Station and its suction and discharge
piping, Maple Leaf Tank and 520 zone piping, except where solely serving the disinfection
facility)
• Soos Reservoirs
7. Pump Stations
Pump Stations, Major Valve Structures, and other transmission Facilities
• Eastgate Pump Station
• TESS Junction Pump Station
• Lake Hills Pump Station
• Maplewood Pump Station
• Maple Leaf Pump Station
• Bothell Way Pump Station
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First Amended and Restated Contract for the Supply of Water
City of Renton
• Fairwood Pump Station
• Lake Youngs Pump Station
• The Control Works
• Augusta Gatehouse
• Duvall Shops
8. Service Connections to Wholesale Customers installed before January 1, 2002, and Service
Connections assigned to the Existing Regional System Cost Pool pursuant to Section III.E.1., are
part of the Existing Regional Facilities. Unless otherwise identified as regional, Service
Connections to Wholesale Customers installed after December 31, 2001 shall not be considered
Existing Regional Facilities.
9. The Existing Regional Facilities include all necessary and convenient appurtenances, including,
but not limited to, rights of way, land ownership or contractual rights to use, e.g. easements,
security infrastructure, dewatering facilities, line valves, system meters, and remote automation
devices.
II. New Supply Facilities
1. Regional Water Conservation Program. The capitalized or deferred cost of the Regional Water
Conservation Program, which generally consists of rebate programs for customers to upgrade
fixtures or equipment to more efficient models
III. New Transmission Facilities
[Reserved.]
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First Amended and Restated Contract for the Supply of Water
City of Renton
EXHIBIT VII
SUBREGIONAL FACILITIES AND ALLOCATIONS
I. Eastern Subregion
A. List of Eastern Subregional Facilities
SEGMENT 1
(Cascade, Mercer Island, and Seattle)
1. The portion of the of the original Mercer Island Pipeline from the tee off the Cedar Eastside
Supply Line in Factoria Boulevard SE to the west flange of the main line tee at the east end of
the 16-inch Mercer Slough Bridge Pipeline (30-inch).
SEGMENT 2
(Cascade, Mercer Island, and Seattle)
l. The portion of the of the original Mercer Island Pipeline from the west flange of the main line
tee at the east end of the 16-inch Mercer Slough Bridge Pipeline to the west flange of the 20-
inch valve west of the wye to the East Channel Bridge Pipeline (30-inch).
2. The entire 16-inch Mercer Slough Bridge Pipeline (16-inch).
3. The portion of the East Channel Bridge 16-inch Pipeline, from the wye off item 1 of Segment 2
above to the north flange of the 16-inch line valve, including the valve bypass line.
SEGMENT 3
(Mercer Island and Seattle)
1. The portion of the original Mercer Island Pipeline from the west flange of the 20-inch valve
west of the Enatai service to Bellevue to the west flange of the tee for the Shorewood Apartments
service on Mercer Island (20-inch across the East Channel, 24inch on Mercer Island).
2. The 16-inch East Channel Bridge Pipeline, except for the portion listed as item 3 of Segment 2
above.
SEGMENT 4
(Mercer Island only)
1. The portion of the original Mercer Island Pipeline from the west flange of the tee for the
Shorewood Apartments service on Mercer Island to the west end of the original Mercer Island
pipeline near SE 43rd Street & 89th Ave SE on Mercer Island (24-inch).
The facilities include the appurtenance of these transmission facilities including but not limited to
rights of way, line valves, system meters and remote automation devices.
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B. Allocation of Costs in the Eastern Subregional Cost Pool
In each year, the costs of each Eastside Subregional Facility shall be allocated by the segments
identified in Section I.A above based on Peak 7 Day flows through each segment. In the event that
Peak 7 Day flow data is not available, Peak Month flows may be substituted. The annual cost of each
segment is adjusted by the annual utility basis cost of the following initial amounts, amortized over
50 years starting in 1998.
Segment 1: $73,157.01 increase
Segment 2: $1,296,845.17 decrease
Segment 3: $136,782.17 increase
Segment 4: $72,442.13 increase
Seattle shall establish a common rate for each Eastside Subregional segment that recovers the costs
allocated to that segment plus any costs allocated from preceding segments to downstream segments
based on the flow data used. Wholesale Customers served by Eastern Subregional Facilities as may
be identified in Exhibit I will pay the applicable segment rates for every unit of water delivered to
the Service Connection(s), or in Seattle’s case to the retail connection, on the identified segment,
e.g. Service Connections on Segment 3 would pay the rate for Segment 3, which rate would recover
costs allocated from Segments 1, 2 and 3.
Seattle will track running balances and actual costs and actual revenues for each segment within the
Eastside Subregional Cost Pool and shall true up each segment in a manner consistent with Section
IV.H, except that Seattle may adjust the running balances between Segments 3 and 4 for a Wholesale
Customer served by both Segments as follows:
Seattle will track the portion of surplus or deficit balance created by each Wholesale Customer,
including Seattle, in Segment 3 based on the percentage of revenues paid by each. If there is a surplus
balance for Segment 3, Seattle may transfer all or a portion of the surplus created by the Wholesale
Customer served by both Segments to reduce a running deficit balance for Segment 4 and credit
Seattle for a proportionate share of the Segment 3 surplus. If there is a surplus balance for Segment
4, Seattle may transfer all or a portion of the surplus in Segment 4 to reduce the portion of a running
deficit balance in Segment 3 created by the Wholesale Customer served by both Segments and
charge Seattle for a proportionate share of the Segment 3 deficit balance.
II. Southwestern Subregion
A. List of Southwest Subregion Transmission Facilities
585 ZONE FACILITIES
Pipelines
1. The discharge pipeline of Burien Pump Station, from the pump station to Ambaum Boulevard
SW.
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2. The pipeline in 8 Ave SW from SW Kenyon Street to SW 108 Street.
3. The discharge pipeline of Highland Park Pump Station to SW 108th Street.
4. The 585 Pipeline in SW 108th Street between 4th Avenue SW and 12th Avenue SW.
5. The 585 head Pipeline in 4th Avenue SW between SW 108th Street and SW 146th Street.
6. The 585 Pipeline in 12th Avenue SW and Ambaum Boulevard SW between SW 108th Street
and SW 146th Street.
7. The 585 Pipeline in Ambaum Boulevard SW between SW 146th Street and SW 149th Street.
8. The 585 pipeline in SW 149th Street between Ambaum Boulevard SW and 14th Avenue SW.
9. The 585 pipeline in 12 Ave SW from SW 108 Street to SW 106 Street.
10. The discharge of the Trenton Turbines pump station within the West Seattle Reservoir property,
and up to SW Cloverdale Street.
11. The 585 pipeline in 5 Ave SW from SW Cloverdale Street to SW Kenyon Street.
12. The 585 pipeline in SW Kenyon Street from 5 Ave SW to 8 Ave SW.
13. The 585 pipeline in SW Kenyon Street from 8 Ave SW to 35 Ave SW.
14. The 585 pipeline in 35 Ave SW from SW Kenyon Street to SW Myrtle Street.
15. The 585 pipeline in SW Myrtle Street from 35 Ave SW to Myrtle Tanks.
Pump Stations
1. Burien Pump Station, including its suction line from the 24-inch tee to the pump station.
2. Highland Park Pump Station, including its suction line from the tee off the 42-inch West Seattle
Reservoir inlet-outlet line to the pump station.
3. Trenton Turbines Pump Station, including the suction/supply line from the pump station to the
36x36x20 tee.
Tanks
l. Beverly Park Tank, and all associated appurtenances and connections to the 585 zone.
2. Myrtle Tanks, and all associated appurtenances and connections to the 585 zone.
WEST SEATTLE RESERVOIR FACILITIES
l. The reservoir Gate House, except for the West Seattle Low Service Pump Station .
2. All reservoir appurtenances, including but not limited to the reservoir drain, washout, and
overflow pipelines.
3. The reservoir bypass from the tee off the West Seattle Pipeline to the reservoir easterly outlet
pipeline.
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First Amended and Restated Contract for the Supply of Water
City of Renton
WEST SEATTLE PIPELINE FACILITY
From the connection to Cedar River Pipeline No. 4 to the West Seattle Reservoir Gate House.
DES MOINES WAY PIPELINE FACILITIES
l. From the connection to the Bow Lake Pipeline as relocated outside SeaTac Airport, to S 168th
Street.
2. South 168 Street to the terminus of the pipeline near S 208th Street.
MILITARY ROAD FEEDER FACILITY
THE EAST MARGINAL WAY FEEDER FACILITY
From the West Seattle Pipeline to S 115 Street, including pressure reducing and pressure relief
facilities from the West Seattle Pipeline to that feeder.
The facilities include the appurtenance of these transmission facilities including but not limited
to rights of way, line valves, system meters and remote automation devices.
B. Allocation of Costs in the Southwest Subregional Cost Pool
In each year, the cost of each Southwest Subregional Facility identified in Section II.A above shall
be allocated between the Seattle Retail Distribution System and Wholesale Customers served by
the Southwest Subregional Facilities as may be identified in Exhibit I as a group based on the
following agreed upon allocations to the Wholesale Customers:
FACILITY Allocation to Wholesale Customers
585 Zone 50%
West Seattle Reservoir 10%
West Seattle Pipeline 22%
Des Moines Way Pipeline 100%
Military Road Feeder 100%
East Marginal Way Feeder 100%
Wholesale Customers served by the Southwest Subregional Facilities shall pay a uniform rate to
recover the costs from the Southwest Subregional Cost Pool allocated to the Wholesale
Customers. This rate shall apply to every unit of water delivered to a Wholesale Customer served
by Southwest Subregional Facilities without regard to the specific location at which that water
was delivered. Actual costs and actual revenues for the Southwest Sub-region shall be trued up
in a manner consistent with Section IV.H.
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First Amended and Restated Contract for the Supply of Water
City of Renton
III. Renton Subregion
A. List of Renton Subregional Facilities
The 12-inch pipelines, from the outlets off the CRPLs l, 2, and 3 up to the south wall of the SPU
meter vaults in Logan Avenue South.
B. Allocation of Costs in the Renton Subregional Cost Pool
In each year, the cost of all Renton Subregional Facilities shall be allocated to the Wholesale
Customer(s) served by the Renton Subregional Facilities as may be identified in Exhibit 1.
The Wholesale Customer(s) served by the Renton Subregional Facilities shall pay either a rate
established by Seattle or a lump sum, to recover the costs allocated to the Renton Subregional Cost
Pool. The rate shall apply to every unit of water delivered to Wholesale Customer(s) served by the
Renton Subregional Facilities. The parties may agree to a payment agreement for a lump sum
pursuant to Section VII.A.
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First Amended and Restated Contract for the Supply of Water
City of Renton
EXHIBIT VIII
INDEX O&M COST CATEGORIES
The following cost categories as may be amended further from time to time, that capture the portion
of O&M Costs to support Seattle Regional Water Supply System only shall be used as the Index
O&M Costs in the Existing Regional System, New Supply and New Transmission Cost Pools.
1. Existing Regional System Cost Pool
o Cedar, Tolt, and Lake Youngs Watersheds, including but not limited to
▪ Infrastructure and land: buildings, equipment, pipelines, security, roads,
bridges, communication, IT
▪ Forest management, ecological management including ecological thinning net
of timber sales revenue
▪ Dam safety
▪ Limnology
▪ Costs to comply with external requirements such as those imposed by
Ecology, Tribes, FERC
▪ Management of the public, Patrols, Recreation
▪ Fire Protection including Wildland Fire Teams
o Transmission
▪ Infrastructure and land: buildings, equipment, pipelines, security, roads,
bridges, communication, IT, for the Pipelines, reservoirs, pump stations,
major valve structures, and other transmission facilities as listed in Exhibit VII
▪ Vegetation Management
▪ Litter and vehicle removal
▪ Property costs including Fire Protection, permits, easements, and franchise
fees
o Treatment
▪ Infrastructure and land: buildings, equipment, pipelines, security, roads,
bridges, communication, IT
• Cedar Treatment Plant
• Tolt Filtration Facility
• Landsburg Treatment Facility
• Other treatment in the Seattle Regional Water Supply System
▪ Water Quality Testing for tests described in Section II.D.6.
o Regional planning
▪ Water rights
▪ Climate as it pertains to water supply or infrastructure in the Seattle Regional
Water Supply System
2. New Supply Cost Pool
o The Regional Water Conservation Program
o Operating Board expenses, if allocated
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First Amended and Restated Contract for the Supply of Water
City of Renton
3. New Transmission Cost Pool
o [Reserved]
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First Amended and Restated Contract for the Supply of Water
City of Renton
EXHIBIT IX
STRANDED AND AVOIDED COSTS
1. General Provisions
Within 30 days of receipt of a Notice to reduce or terminate Water Utility’s Purchase Commitment
under Section II.B.5.a, Seattle shall send a written notice to Water Utility, with a copy to the
Operating Board, defining the amount of the reduction or termination that results in aggregate Water
Utility reductions under this Contract that is in excess of the Water Utility’s total Automatically
Allowed Reduction, and providing an annual schedule of the Preliminary Net Stranded Cost, or
Preliminary Net Billing Credit, if applicable, calculated pursuant to the methodology in Section 2
below using the available documented information as of the time of the Notice. If any reduction by
Water Utility results in it having aggregate reductions greater than 5% of the average purchases from
Seattle for the most recent five years but less than or equal to its Automatically Allowed Reduction,
the Stranded Cost for the portion above 5% will be paid by Seattle, through annual Stranded Cost
payments as calculated below. Note: This basis for Seattle payments will apply both to Regional
Stranded Cost calculations and to Subregional Stranded Cost calculations, as further defined below.
On or before 180 days prior to the effective date of the Notice under Section II.B.5.b, Seattle shall
send a written notice to Water Utility, with a copy to the Operating Board, providing a revised
schedule of the Final Net Stranded Cost, or Final Net Billing Credit, if applicable, calculation
pursuant to the methodology in Section 2 below using the available documented information as of
180 days prior to the effective date of the Notice under Section II.B.5.b which may reflect appropriate
adjustments for changed circumstances during the Notice Period, as well as a calculation of any
Stranded Cost obligation to be met by Seattle, as defined above.
The Final Net Stranded Cost, or Final Net Billing Credit, if applicable, will be the payment, or credit,
if applicable, required pursuant to Section II.B.5.c. Water Utility will pay the Final Net Stranded
Cost, or agree to a schedule of payments with equivalent discounted present value, or receive the
Final Net Billing Credit, if applicable, on or before the effective date of the Notice under Section
II.B.5.b.
If Water Utility is reducing its Purchase Commitment and will remain a Wholesale Customer, the
parties may mutually agree to a payment schedule agreement to pay the Final Net Stranded Cost
pursuant to Section VII.A of the Contract.
For rate smoothing or financial performance purposes, Seattle, in consultation with the Operating
Board, may select which cost pool the revenues are applied to and whether or not to delay revenue
recognition to future years.
In the event that Seattle acquires a new wholesale customer or a new block wholesale customer, or
extends the size of the block contract to Cascade Water Alliance or other existing block wholesale
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First Amended and Restated Contract for the Supply of Water
City of Renton
customer, these new regional sales will reduce prior demand reductions that are subject to Stranded
Costs as follows: i) adjustments to prior reductions will be effective for all remaining years of the
Contract, beginning with the first year of the new sales; ii) new customer sales or additional block
sales amounts will be assigned to past Wholesale Customer demand reductions in order of their
effective dates; iii) if the new sales amount is greater than the size of the first-in-time prior demand
reduction, the remainder will be applied to the next-in-time demand reduction, and so on until either
the new sales amount is exhausted or all prior reductions have been reduced to zero. In such cases,
the schedule(s) of Water Utility’s Annual Stranded Costs for remaining years will be reduced
proportionately or entirely as the case may be, and Water Utility will pay the reduced amount from
that year forward or, if it has made a prior payment in excess of its Annual Stranded Costs, it will
receive a credit of equivalent present value.
2. Stranded and Avoided Cost Methodology
A. Annual Regional Stranded Costs and Annual Regional Avoided Costs: Seattle will first
calculate Annual Regional Stranded Costs, and Annual Regional Avoided Costs, if applicable, for
each year beginning with the first year Water Utility’s reduction or termination of its Purchase
Commitment is effective through the last year of the current Contract term using the formula below.
Seattle will use the most up to date and available documented information from its then current Water
System Plan, or annual plans and statements including financial and accounting statements, official
demand forecasts, etc. for all the projections required in the methodology i) as of the date of the
Notice for the Preliminary Net Stranded Costs, or Preliminary Net Billing Credit, if applicable; and
ii) as of 180 days prior to the effective date of the Notice for the Final Net Stranded Costs or Final
Net Billing Credit, if applicable.
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First Amended and Restated Contract for the Supply of Water
City of Renton
Annual Regional Stranded Costs for Year X = [DEP + NBV*RORI + FOC] * Share
where:
• DEP - the projected annual depreciation for the Regional Facilities as of the effective
date of the Notice of the reduction or termination of Water Utility’s Purchase
Commitment for year X,
• NBV - the projected Net Book Value of the Regional Facilities as of the effective date
of the Notice of the reduction or termination of Water Utility’s Purchase Commitment
for year X,
• RORI - the Rate of Return on Investment in effect at the time of the calculation
(remains constant for all years),
• FOC - the projected fixed portion of the Annual O&M Costs for year X, calculated
as the Annual O&M Costs for the first year after the Effective Date (“year 1”) (i.e.
Annual O&M Costs in year 1 * 90% , which represents a deduction of an agreed upon
amount for variable operations costs that are reduced in proportion to Water Utility’s
reduction or termination and therefore not included as Stranded Costs in the
methodology), and escalated at 2.5% per year for each of the remaining years’
calculations through year X.
• Share - the amount of Water Utility’s reduction or termination in excess of its
Automatically Allowed Reduction, divided by the projected total Wholesale
Customer demand for year X, multiplied by the total Wholesale Customer share of
revenue requirements for year X (i.e. (Firm yield – block contract demand)/Firm
yield). For this calculation, block demand priced at Wholesale Customer rates shall
be considered Wholesale Customer demand.
Annual Regional Avoided Costs for Year X = [DSN + NOC] * NSS
where:
DSN - The projected annual debt service payment for year X of 30-year debt at the
then current Seattle Average Cost of Debt to finance the full cost of any New Supply
Facility deferred by the reduction or termination, based on the then most current
Seattle Water System Plan,
NOC – The projected operations cost for year X for the SPU New Supply Facility,
escalated at 2.5% per year from the first year through the end of the contract period,
and
NSS - The New Supply Share, defined as the ratio of the Water Utility's reduction in
demand divided by the projected design capacity of the deferred New Supply Facility,
as measured by average daily demand (ADD).
B. Annual Subregional Stranded Costs: If Water Utility is served by Subregional Facilities,
Seattle will calculate Annual Subregional Stranded Costs for each year beginning with the first year
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First Amended and Restated Contract for the Supply of Water
City of Renton
Water Utility’s reduction or termination of its Purchase Commitment is effective through the last
year of the Contract term using the formula below.
Annual Subregional Stranded Costs for Year X = [SRDEP + SRNBV*RORI + SRFOC] *
SRShare
where:
• SRDEP - the projected annual depreciation for the Subregional Facilities for year X
• SRNBV - the projected Net Book Value of the Subregional Facilities for year X,
• RORI - the Rate of Return on Investment in effect at the time of the calculation
(remains constant for all years),
• SRFOC - the projected fixed portion of the Annual O&M Costs for year X, calculated
as the Annual O&M Costs for the first year after the Effective Date (“year 1”) (i.e.
Annual O&M Costs in year 1 * 90% , which represents a deduction of an agreed upon
amount for variable operations costs that are reduced in proportion to Water Utility’s
reduction or termination and therefore not included in the methodology), and
escalated at 2.5% per year for each of the remaining years’ calculations through year
X.
• SRShare - the amount of Water Utility’s reduction or termination divided by the
projected total Subregional demand for year X in the relevant subregion.
C. Totaling the Stranded Costs or Avoided Costs for all years: Seattle will then calculate the
Net Stranded Costs or Net Billing Credit, if applicable, as follows by discounting each year of Annual
Regional Stranded Costs and Annual Regional Avoided Costs (except year 1) and Annual
Subregional Stranded Costs (if any, and except year 1) to its present value and then adding the first
year and each of the discounted remaining years of the Annual Regional Stranded Costs; and
subtracting first year and each of the discounted remaining years of the Annual Avoided Costs, if
applicable; and adding the first year and each of the discounted remaining years of the Annual
Subregional Stranded Costs, if any. If the difference is positive, a total Final Net Stranded Cost
Payment is due from Water Utility and will reflect any applicable offset from Annual Avoided Costs.
If the difference is negative, a total Final Net Billing Credit will be due from Seattle to Water Utility.
Net Stranded Cost (or Net Billing Credit if negative) =
Annual Regional Stranded Cost(1) – Annual Regional Avoided Cost(1) + Annual
Subregional Stranded Cost(1) +
[Annual Regional Stranded Cost (2) – Annual Regional Avoided Cost (2)+ Annual
Subregional Stranded cost (2)]*Discount Factor(2) +
…calculated for each year from 3 to n (see Illustrative Example of Annual Stranded &
Avoided Cost Calculation)… +
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First Amended and Restated Contract for the Supply of Water
City of Renton
[Annual Regional Stranded Cost(n) -Annual Regional Avoided Cost(n) + Annual
Stranded Subregional Cost(n), if applicable]*Discount Factor(n)
where:
• Annual Regional Stranded Cost(1) – the Annual Regional Stranded Cost in the first
year the reduction or termination is in effect,
• Annual Regional Avoided Cost(1) – the Annual Avoided Cost in the first year the
reduction or termination is in effect,
• Annual Subregional Stranded Cost(1) – the Annual Subregional Stranded Cost in the
first year the reduction or termination is in effect,
• Annual Regional Stranded Cost(2) - the Annual Regional Stranded Cost in the second
year the reduction or termination is in effect,
• Annual Regional Avoided Cost(2) – the Annual Avoided Cost in the second year the
reduction or termination is in effect,
• Annual Subregional Stranded Cost(2) – the Annual Subregional Stranded Cost in the
second year the reduction or termination is in effect,
• Discount Factor(2) - the factor for discounting costs in the second year by one year,
deemed to be the Annual O&M Cost escalation plus 2.5%.
• Annual Regional Stranded Cost(n) - the Annual Regional Stranded Cost in the last
year of the Contract term, deemed to be the Annual O&M Cost escalation plus 2.5%,
• Annual Regional Avoided Cost(n) - the Avoided Cost in the last year of the Contract
term,
• Annual Subregional Stranded Cost(n) - the Annual Subregional Stranded Cost in the
last year of the Contract term, and
• Discount Factor(n) is the multiplied factor for discounting costs in the last year of the
Contract term back to the first year the reduction is in effect, deemed to be the Annual
O&M Cost escalation plus 2.5% per year, with the calculation including each of the
years of the Contract term.
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First Amended and Restated Contract for the Supply of Water
City of Renton
Illustrative Example of Annual Stranded & Avoided Cost Calculation:
Reduction of 1.0 mgd (Million Gallons/Day) of Demand, not in a Subregion
Annual Cost for 1 Year (2030)
Projected Annual Depreciation $22 M
Projected Net Book Value $400 M
RORI 6.0%
Total Annual Capital Costs $22 M + ($400M*6%) = $46 M $46 M
Projected Annual O&M Cost in Year 1 $60 M
Projected Fixed Operations Costs (FOC) in Year 1 $60 M*.90 $54 M1
Total Annual Regional System Cost $46 M + $54 M = $100 M $100 M
Share of Annual Cost Associated with Reduction
Regional System Firm Yield 172 mgd
Block Contracts Portion of Firm Yield2 34.4 mgd
Wholesale Customer plus Cascade Supplemental Block
Share of Annual Revenue Requirements3 (172 – 34.4)/172 mgd = 80%
Wholesale Customer Forecasted Demand plus Cascade
Supplemental Block 100 mgd
Water Utility’s Reduction 1 mgd
Water Utility’s Share of Wholesale Customer plus
Cascade Supplemental Block Demand associated with
Reduction
80% * (1.0/100) = 0.80% 0.80%
Annual Stranded Cost
Water Utility’s Share = Annual Stranded Cost (2030) 0.80% * $100 M = $800,000 $800,000
Annual Regional Avoided Cost, New Supply (beginning 2055)
New Supply Facility (2055 Cost) $600 M
New Supply Facility Financing 30 years, 4% interest => $34.7 M/yr
New Supply Facility O&M Cost in 2055 $8.5 M4
New System Supply Capacity 24 mgd
Water Utility's Avoided Supply Share (beginning in
2055) (1.0/24.0)*($34.7 M + $8.5 M)=$1.80M $1,800,000
1 Each Year X after Year 1, the projected FOC will be escalated at 2.5%.
2 As of the Effective Date of this Contract, includes Cascade (Base Block only, not Supplemental Block) and
Northshore Utility District block contract demand in each Year X at the full amount of their Blocks.
3 Cascade’s Supplemental Block is priced at the same regional rate paid by Wholesale Customers and is therefore
included with Wholesale Customer demand at its full Supplemental Block size.
4 Each Year X after 2055, the projected NOC will be escalated at 2.5%.
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First Amended and Restated Contract for the Supply of Water
City of Renton
Total Present Value of Annual Stranded Costs and Avoided Costs for a 1.0 mgd (Million
Gallons/Day) Reduction Beginning in 2030, Reducing New Supply Needs in 2055
Year
Annual
Stranded
Cost ($000)
Annual
Avoided Cost
($000)
Annual Net
Cost or
Credit
PV of Stranded
& Avoided
Costs ($000)
2030 $800 $0 $800 $800
2031 $796 $0 $796 $758
2032 $792 $0 $792 $718
2033 $788 $0 $788 $681
2034 $784 $0 $784 $645
2035 $780 $0 $780 $611
2036 $776 $0 $776 $579
2037 $772 $0 $772 $549
2038 $768 $0 $768 $520
2039 $764 $0 $764 $492
2040 $760 $0 $760 $467
2041 $768 $0 $768 $449
2042 $776 $0 $776 $432
2043 $784 $0 $784 $416
2044 $792 $0 $792 $400
2045 $800 $0 $800 $385
2046 $808 $0 $808 $370
2047 $816 $0 $816 $356
2048 $824 $0 $824 $342
2049 $832 $0 $832 $329
2050 $840 $0 $840 $317
2051 $850 $0 $850 $305
2052 $860 $0 $860 $294
2053 $870 $0 $870 $283
2054 $880 $0 $880 $273
2055 $890 $1,800 ($910) ($269)
2056 $900 $1,809 ($909) ($256)
2057 $910 $1,818 ($908) ($243)
2058 $920 $1,827 ($907) ($231)
2059 $930 $1,837 ($907) ($220)
2060 $940 $1,846 ($906) ($210)
2061 $950 $1,856 ($906) ($200)
Total Net Stranded Cost $10,143