1. Hawkin s Delafield & Wood LLP PARTNERSHIP GUARANTEES TO ENHANCE WATER CONSERVATION Presented by Rick Sapir (973) 642-1188 esapir@hawkins.com Presented to the United States Conference of Mayors Urban Water Council, Mashantucket, Connecticut October 21, 2004

2. Hawkin s Delafield & Wood LLP 1 WATER CONSERVATION PROJECT EXAMPLES City of San Juan Capistrano, California Puerto Rico Aqueduct and Sewer Authority, Puerto Rico City of San Marcos, Texas City of Laredo, Texas

3. Hawkin s Delafield & Wood LLP 2 CITY OF LAREDO PROJECT Project: Operation and Maintenance Services for the Water, Wastewater, Water Pollution Control and Customer Billing Utilities When: May 8, 2002 with United Water Purpose: Maintain/enhance environmental compliance Save Money Use savings/excess revenues to develop secondary water source Increase water conservation Maintenance and repair of distribution system Rationalize apportionment of cost of water to water users

4. Hawkin s Delafield & Wood LLP 3 BACKGROUND INFORMATION  Population: 190,000  Size of Project: 2 Water Treatment Plants  Capacity: Combined Pumpage Capacity of 64 MGD  Average Daily Demand: 31.03 MGD  Peak Demand: 49.429 MGD  Miles of Pipe: 450

5. Hawkin s Delafield & Wood LLP 4 PROCESS RFP and Selection Process Preparation of Contract Contract Negotiations with Selected Vendor

6. Hawkin s Delafield & Wood LLP 5 PERFORMANCE GUARANTEES Water Treatment Guarantee Water Availability Requirement Water Pressure Guarantee Water Production Efficiency Guarantee Unaccounted for Water Guarantee

7. Hawkin s Delafield & Wood LLP 6 CONSERVATION-RELATED GUARANTEES Water Production Efficiency Guarantee Unaccounted for Water Guarantee

8. Hawkin s Delafield & Wood LLP 7 WATER PRODUCTION EFFICIENCY GUARANTEE Purpose: Ensure efficient production of finished water Guarantee: Company to achieve treatment process loss no greater than 25,000 gallons per day (on an annual average basis)

9. Hawkin s Delafield & Wood LLP 8 REMEDIES FOR FAILURE TO MEET EFFICIENCY GUARANTEE Company may be required to: Pay liquidated damages equal to the quantity of wasted Raw Water (beyond guarantee) times $10,808/mg/yr (as escalated) Implement changes in operating, maintenance, repair, replacement and management practices to meet such guarantee Additional right of City: Terminate Contract

10. Hawkin s Delafield & Wood LLP 9 UNACCOUNTED FOR WATER GUARANTEE Purpose: To improve economic efficiencies of System Guarantee: Achieve unaccounted for water standard (as a percentage of finished water production) by October 1, 2005

11. Hawkin s Delafield & Wood LLP 10 METER REPLACEMENT PROGRAM Purpose: Accurately measure usage in the system to ensure accurate billing for water consumption Program: Meters less than 1 inch: Replace those older than 10 years (no meter to be older than 10 years) Meters greater than 1 inch: Calibrate annually and repair or replace as needed

12. Hawkin s Delafield & Wood LLP 11 REMEDIES FOR FAILURE TO MEET UNACCOUNTED FOR WATER GUARANTEE Company may be required to pay liquidated damages: (actual unaccounted for water standard achieved - 18%) x (volume of water produced that year) x (cost per gallon charged to users) (actual unaccounted for water standard achieved - 18%) x (volume of water produced that year) x (Flow adjustment fee) + incremental excess electricity costs)

13. Hawkin s Delafield & Wood LLP 12 REMEDIES FOR FAILURE TO MEET UNACCOUNTED FOR WATER GUARANTEE City may have right to t erminate contract

14. Hawkin s Delafield & Wood LLP 13 PARTNERSHIPS TO PROMOTE CONSERVATION Efficiently produce finished water Repair leaks to minimize unaccounted for water Accurate metering to incentivize conservation Develop alternate water sources Promote beneficial reuse