Water_Purchasing_Contracts

January 15, 2013 104

Water Purchasing Contracts

Applicability

This BMP is intended for all water systems (“utility”) that purchase or sell water. A utility
may have already accomplished this BMP if it has a written contract to purchase or sell
water.

Description

In order for many water systems (“utilities”) to meet the water supply needs of their
customers, they must contract with other utilities to supply the needed water. When
these contracts are developed and formalized, it is important that the seller and the
buyer have a complete understanding of the requirements and expectations of the
contract.

Some of the obvious contract requirements that should be documented are the volume
of water committed for sale or purchase, how the cost of the water will be determined,
the length of the contract, if the contract is renewable and if the water will be used on a
regular or emergency basis. The contract should also indicate if the buying system is
required to comply with all of the selling system’s water use restrictions when
implemented. Open contracts in which a utility verbally agrees to sell water to another
utility should be avoided. It is important for both utilities to maintain contractually agreed
upon water volumes to facilitate good planning practices. Utilities that list contract water
volumes on their local water supply plans will also facilitate a quicker review and
approval of their plan.
Another important part of the contract is the conditions that will be placed on the buyer
concerning efforts to implement BMPs for water conservation.
In accordance with Session Law 2011-374, all local water supply plans must include a
plan for the reduction of long-term per capita demand on potable water. Since the utility
selling the water must implement BMPs to meet this requirement, it would be
appropriate for the sales contract to require the buying utility to also implement BMPs to
reduce potable water demand. The implementation of BMPs will help reduce the
amount of water used and reduce the cost of the water to the utility.
Some of the BMPs that should be considered for inclusion in the contract are
requirements for:
Water Audits
Water Loss Abatement
Metering
Retrofitting of Residential Fixtures
Public Information Program
School Education and Outreach
Retrofitting Irrigation Systems

January 15, 2013 105

Regionally Approved Landscaping
Rainwater Harvesting, Condensate Reuse and Gray Water Use

Implementation

Utilities pursuing this BMP should begin implementing it according to the following
procedure:

Review all the wholesale water purchases and sales contracts.
Use the sample contract enclosed (sample contracts may also be obtained from
North Carolina League of Municipality) to negotiate with the purchaser or seller
on price and volume.
Decide which water efficiency practices will be asked of the purchasing entity.

Schedule

To accomplish this BMP, the utility should do the following:

The utility should develop procedures for implementation of this BMP in the first
six months. The procedures should include an annual, or at least a five year
review, of all information related to the established contract.
The contract participants should develop procedures for making changes to and
maintain a proactive review of the contract.

Scope

To accomplish this BMP, the utility should adopt a contract within six months after
implementation, and maintain a copy of the contract at the town or city hall and water
treatment plant. The town or city manager, as well as the water system
manager/Operator in Responsible Charge (ORC) should be well-versed with the terms
of the contract.

Documentation

To track this BMP, the utility should maintain the following documentation:

A copy of its legally adopted contract should be held at town or city hall, as well
as at the water treatment plant.
A review should be made at regular intervals (annually, or at least every five
years) of the contract and its applicability.
A copy of any changes or modification to the contract should be officially
amended by adoption.

January 15, 2013 106

Determination of Water Savings

Water savings can be tracked through performance of annual water audits and
implementation of other BMPs to conserve water. Water savings for the selling and
buying utility should be realized as a result of contract conditions requiring the
implementation of BMPs.

Cost Effectiveness

The cost effectiveness of implementing this BMP can in part be determined based on
the effectiveness of BMPs enacted by the buying utility. Although a true cost-
effectiveness analysis cannot be determined without a measure of water savings prior
to establishing a contract, the point at which this BMP is implemented can serve as the
benchmark year, and successive years that reveal a reduction in water used can be
used to calculate cost savings by the selling and buying utility. This BMP is an integral
part of a best management practice program, and should be considered fundamental to
a successful water efficiency program. In addition, by implementing this BMP, the
selling utility can assure the needed water supply to the buying utility.

For comments or questions regarding the Water Purchasing Contracts BMP, please
contact the water resources specialist of the Water Supply Planning Branch at 919-707-
9035.

Additional Inter-local Water Agreement Tips

The UNC Environmental Finance Center has developed guidelines for the crafting of
inter-local agreements. These guidelines provide extensive information on items to
consider when drafting water supply contracts. Those items can include service area
and annexation, which party is responsible for maintaining the meter, water quality
issues, water pressure requirements, how and when water rates will change, re-selling
water to other systems, nonrevenue water, and inflow & infiltration (I&I). These
guidelines can be found at:
http://www.efc.unc.edu/publications/2009/water_partnership_tips.pdf.

January 15, 2013 107

Purchase Water Contract Sample

State of North Carolina
County of ___________

WATER SERVICE UTILITY AGREEMENT

THIS AGREEMENT, made and entered into this ____ day of _________, 20__ by and
between the ____________, a North Carolina (Authority, City, County, Private Entity,
Sanitary Districts, Town, etc.), hereinafter referred to as “PROVIDER and the
______________, a (Authority, City, County, Private Entity, Sanitary Districts, Town,
etc.), hereinafter referred to as “CUSTOMER”;

WHEREAS, the CUSTOMER wishes to procure a source of treated drinking water
suitable for re-sale to it citizens, residents and industries; and

WHEREAS, the PROVIDER has treated drinking water available for sale to
CUSTOMER; now, therefore;

WITNESSETH:

That in consideration of, and subject to, the terms and conditions hereinafter set forth,
the parties covenant and agree as follows:

1. Purpose. The purpose of this Agreement is to set forth the terms and conditions
by which CUSTOMER shall purchase, and PROVIDER shall sell, treated drinking
water for re-sale by CUSTOMER to its constituent citizens, residents and
industries.

2. Purchase and Sale. CUSTOMER agrees to buy from PROVIDER and
PROVIDER agrees to sell and deliver to CUSTOMER water on the terms and
conditions hereinafter set forth. The water being sold by PROVIDER shall at all
times meet the standards for safe drinking water as promulgated at 40 CFR,
sections 140 through 143, pursuant to the terms of the Safe Drinking Water Act
at 42 USCA, all as amended from time to time, which standards have been
adopted by the State of North Carolina Department of Environment and Natural
Resources, under which standards PROVIDER produces water at its water
treatment plant.

3. Term. This Agreement shall be effective from and after, __________ and shall
continue and remain in full force and effect until and including ____________ (__
years). Either party hereto may, at any time prior to the beginning of the year
before the expiration of this Agreement, give notice to the other of its desire to
renew this Agreement and upon the giving of such notice, the parties hereto shall
negotiate in good faith with reference to a renewal of this Agreement.

January 15, 2013 108

4. Construction of Water Line Appurtenances. Following permit approval by the
Public Water Supply Section of the North Carolina Division of Water Resources;
the CUSTOMER at its own expense shall connect its water system to that of the
PROVIDER in accordance with permitting and sound engineering practices as
mutually agreed upon by both parties regarding pumping capacity, size and type
of materials, workmanship and location. The water line, pumps (if required) and
connections shall be referred to hereinafter as “The Pipeline”. The metering
point(s) shall be mutually agreed upon by both parties and installed by
CUSTOMER at its own expense per PROVIDER specifications and permit
approval.
5. Ownership and Maintenance. The CUSTOMER will own and maintain the
Pipeline up to the metering point(s). The metering point(s) will be owned and
maintained by the PROVIDER. The CUSTOMER will be responsible for the cost
of meter replacement when necessary.

6. Maximum Usage Limit. The CUSTOMER shall have the privilege to receive water
from the PROVIDER water system with a maximum daily consumption not to
exceed _________ gallons per day.

7. Treated Water Charge. The purchase rate for treated water from PROVIDER to
CUSTOMER will be $_________ per thousand gallons.

8. Invoicing. Bills for water supplied hereunder shall be rendered and paid monthly.

9. Water Related Restrictions. CUSTOMER shall be subject to PROVIDER’s water
conservation/restrictions policies in effect at the time of execution of this
Agreement and as they may be amended. Accordingly, CUSTOMER’s water
supply may be preempted in the same manner and fashion as all other water
users of PROVIDER.

10. Long-term Per Capita Reduction.
In accordance with Session Law 2011-374, all local water supply plans must
include a plan for the reduction of long-term per capita demand on potable water.
Since the PROVIDER must implement Best Management Practices (BMPs) to
meet this requirement, it is required for the CUSTOMER to also implement BMPs
to reduce potable water demand. The PROVIDER will supply a list of BMPs they
have implemented to the CUSTOMER as measures to implement or the
Customer must demonstrate to the Provider that comparable BMPs have been
previously implemented or will be implemented on an established schedule.

11. Interruption of Service. Whenever practicable, PROVIDER will notify
CUSTOMER with at least twenty-four (24) hours notice prior to any interruption of
service necessary due to planned maintenance, repairs or other foreseeable
extent of interruption. When interruptions of service are due to emergency
situations, which cannot be foreseen, the affected party will be notified as soon
as possible as to the estimated duration and extent of the interruption.

January 15, 2013 109

12. Amendment or Termination. This Agreement may be amended or terminated
only by an instrument in writing executed by both parties hereto.

IN WITNESS WHEREOF, the undersigned municipal corporations have caused this
Agreement to be executed on their behalf by individuals duly authorized, all as of the
day and year first above written.

PROVIDER__________

___________________________
Mayor or Manager of PROVIDER

ATTEST:

____________________________
PROVIDER Clerk
PROVIDER___________

_____________________________
Mayor or Manager PROVIDER

ATTEST:

____________________________
PROVIDER Clerk
STATE OF NORTH CAROLINA
COUNTY OF _____________

I, __________________, a Notary Public of the aforesaid County and State, so hereby
certify that ___________________, personally appeared before me this day and
acknowledged that (s)he is the (Deputy) PROVIDER Clerk of the PROVIDER of
_________ and that by authority duly given and as the act of the PROVIDER, the
foregoing instrument was signed in its name by its _____________, sealed with its
corporate seal and attested by (him or her) as its (Deputy) PROVIDER Clerk.

WITNESS my hand and Notarial Seal, this the ____ day of ____________ 20__.

____________________________
Notary Public

My Commission Expires: _____________

January 15, 2013 110

STATE OF NORTH CAROLINA
COUTNY OF ____________

I, __________________, a Notary Public of the aforesaid County and State, so hereby
certify that ___________________, personally appeared before me this day and
acknowledged that (s)he is the (Deputy) PROVIDER Clerk of the
PROVIDER_________ and that by authority duly given and as the act of the municipal
corporation, the foregoing instrument was signed in its name by its ___________,
sealed with its corporate seal and attested by (him or her) as its (Deputy) PROVIDER
Clerk.

WITNESS my hand and Notarial Seal, this the ____ day of ____________ 20__.

____________________________
Notary Public

My Commission Expires: _____________