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REQUEST FOR COUNCIL ACTION Date: 8/19/13 Item No.: 7.f Department Approval City Manager Approval Item Description: Approve Contract Amendm ent with St. Paul Regional Water Services Page 1 of 2 B ACKGROUND 1 The City of Roseville entered into a 20 year wholesale water contract with St. Paul Regional 2 Water Services in 2005 that is effective from 2004 until 2024 (Attachment A). There is a clause 3 in the contract that allows SPRWS to modify its rate structure without harm to the City of 4 Roseville and to review the rate charged to Roseville ten years into the contract. SPRWS 5 implemented a new rate structure to its retail customers at the beginning of 2013. The new rates 6 include a base fee in addition to a consumption charge similar to Roseville’s retail rate structure. 7 The contract set the rate for Roseville at 71% of the lowest seasonal rate charged to their retail 8 consumers. 9 SPRWS hired a consultant in 2012 to perform a cost of service study to better understand the 10 current cost of providing water to their wholesale customers. Initially this study indicated no 11 change to the Roseville rate basis. Staff requested a copy of the study for our review and 12 comment. After considerable review and discussion, SPRWS agreed to adjust the allocation of 13 capital costs of watermains feeding Roseville’s water system. The resultant new rate based on 14 the cost of service study, will be 70 % of the reta il consumption rate of SPRWS customers plus a 15 monthly base charge based on meter size. The base fee for 2013 is $46,000 per month for the 16 three large meters near our water booster station. 17 SPRWS has drafted an amendment to the 2005 contract to reflect the new rate structure 18 (Attachment B). Staff has reviewed the amendment and determined it does not harm Roseville 19 by increasing our overall cost for wholesale water. 20 P OLICY O BJECTIVE 21 The city provides quality potable water to its residents requiring a reliable source of wholesale 22 water at a cost effective price. 23 F INANCIAL I MPACTS 24 The 2005 water contract stated a change in rate structure shall not increase the overall cost for 25 wholesale water for Roseville. The net impact of the new rate is estimated to decrease the cost 26 to Roseville by $65,000 per year. The Council did not increase the consumption charge to 27 Roseville resident for 2013 pending the outcome of the cost of service study and proposed new 28 rate structure. Staff recommends not revising the current water rates to Roseville customers at 29 this time. New water rates will be recommended for 2014 later this year. 30