2000 01-17 Special Called Workshop Meeting

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The third component cost, Additional Pumping Capacity, will be required to reestablish the ratio of Production to Pumping Capacity to 125%. Additional Pumping capacity will cost an estimated $0.1289 per gallon. The final cost component involves the purchase of capacity in excess. of current percentage of ownership. Because the Authority owns 7.2 MGD, it is entitled to purchase 3.6 MGD of additional capacity. Should the Authority desire to purchase capacity in excess of 3.6 MGD, a Rebate Capacity charge would be payable, in addition to the Production Capacity costs outlined above. The City of Houston estimates this cost at $0.566317 per gallon. It appears that the Authority will probably purchase less than its entitled share. The proposed rebate per gallon would be paid directly from the purchaser to the Authority. Houston's Consultant figured this cost as the average cost per gallon of the original buy- in and the upgrade cost. However, the Authority recently purchased 3 MGD from the City of Galveston at approxunately $1.13 per gallon, and will be required to pay an additional $0.078247 per gallon to upgrade that capacity. Because the additional upgrade costs are only paid by holders of existing production capacity, this cost must be added to the original purchase price of $1.13 to determine the cost paid. This totals $1.208247 per gallon for the total cost of the 3 million gallons purchased from Galveston. To determine the actual value of the rebate per gallon, the cost to purchase additional Production Capacity ($0.319612) and Pumping Capacity ($0.128900) is subtracted from the total original cost of $1.208247, for a total proposed rebate of $0.759735 per gallon (See Table 2). TABLE 2. -REBATE CAPACITY Original Cost per Gallon $1.13. Upgrade Existing Production .078247 Total Original Costs $1.208247 Less Production Expansion Cost Per Gallon ($0.319612) Less Pumping Cost Per Gallon 0.128900 Total Rebate Capacity Cost Per Gallon $0.759735 Any Participant that desires to purchase additional capacity in excess of its current percentage of ownership must pay this cost to Participant(s) that have additional capacity rights that it does not intend to exercise. Currently, the Cities of Pasadena and Friendswood, as well as the Clear Lake City Water Authority, have indicated an interest in up to 3 Million gallons of additional capacity needs in excess of their current percentage of ownership. 4