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Item 4BCITY OF SOUTHLAKE MEMORANDUM (January 4, 2011) To: Shana Yelverton, City Manager From: Robert H. Price, P.E., Director of Public Works Subject: Authorize the execution of a contract for billing of treated water between the City of Fort Worth and the Cities of Keller, Southlake and Westlake Action Requested: Authorize the execution of a contract for billing of treated water between the City of Fort Worth and the Cities of Keller, Southlake and Westlake Background Information: Historically, Fort Worth has billed Southlake for all water delivered through the shared water lines that served both Keller and Southlake. The Southlake finance department determines Keller's portion of each month's water invoice and bills Keller for their share. In 2008, in anticipation of the completion of the meter modification project, Council approved a billing agreement between the cities of Fort Worth, Keller and Southlake in which Fort Worth agreed to bill the two cities separately. That agreement expired on December 31, 2010 along with the previous wholesale water purchase contract. This new agreement will accompany the new wholesale contract which took effect January 1, 2011 and will include the future metered connections on the T.W. King water line by both Southlake and Westlake. Since 1984, Southlake and Keller have shared the use of a water supply line form the Fort Worth Alta Vista pump station. In 2005, a second shared line from Fort Worth's Caylor station was placed in service. Following completion of that project, Keller and Southlake jointly contracted to upgrade the water meters on these lines to improve the billing accuracy. Through the 2008 billing agreement, Fort Worth would assume the role of determining the volume of water used by Keller and Southlake by reading the new downstream meters at the two cities' Pearson pump stations. Like the 2008 agreement, this billing contract establishes fair and reasonable methods to split peaking charges for maximum day and maximum hour usage. It also provides a calculation for splitting the cost of any discrepancies between the Fort Worth billing meters and the downstream customer meters and incorporates the future Southlake and Westlake meters on the T.W. King water supply line. The Fort Worth City Council approved this contract on December 14, 2010. This agreement will become effective 60 days after approval by the four cities and will expire on September 30, 2031 along with the new wholesale purchase agreement. Financial Considerations: This agreement establishes fair methods for distributing all the components for wholesale water costs. Strategic Link: The billing contract between the four cities links to the city's strategy map relative to the focus areas of Performance Management and Service Delivery. The specific corporate objective that is met by the execution of this contract is: Collaborate with select partners to implement service solutions. Citizen Input/ Board Review: N/A Legal Review: This contract has been reviewed by the City Attorney. Alternatives: The City Council may approve the proposed billing contract or deny it. Supporting Documents: Proposed Billing Contract Contract Exhibits Staff Recommendation: Authorize the execution of a contract for billing of treated water between the City of Fort Worth and the Cities of Keller, Southlake and Westlake. Staff Contact. Robert H. Price, P.E., Public Works Director Chuck Kendrick, Asst. Director of Public Works j H z LU 12..w �.w 'A CONTRACT BETWEEN THE CITIES OF FORT WORTH, KELLER, SOUTHLAKE AND WESTLAKE RELATED TO THE BILLING FOR TREATED WATER WHEREAS, on or about the day , 2010, the cities of Fort Worth and Keller entered into a contract for the provision by Fort Worth of treated water to Keller, such contract being City of Fort Worth City Secretary Contact No. ; and WHEREAS, on or about the day , 2010, the cities of Fort Worth and Southlake entered into a contract for the provision by Fort Worth of treated water to Southlake, such contract being City of Fort Worth City Secretary Contact No. ; and WHEREAS, on or about the day , 2010, the cities of Fort Worth and Westlake entered into a contract for the provision by Fort Worth of treated water to Westlake, such contract being City of Fort Worth City Secretary Contact No. ; and WHEREAS, the cities of Keller and Southlake entered into a contract between themselves related to the provision of treated water by Southlake to Keller, such treated water being provided to Southlake by Fort Worth; and WHEREAS, the City of Fort Worth authorized the resale of treated water by Southlake to the City of Keller; such contract being City of Fort Worth City Secretary Contract No. 17683; and WHEREAS, the City of Fort Worth authorized Westlake's additional point of connection and the joint use of the T.W. King Water Supply Line with Southlake through City of Fort Worth City Secretary Contract No. ; and WHEREAS, Keller, Southlake and Westlake desire to enter into a contract with Fort Worth related to the billing for treated water delivered to Keller by Southlake and Southlake to Westlake including provisions related to billing for lost water according to the methodology described in the memo issued by Freese and Nichols, dated April 25, 2010 which shall be included in the contract; and WHEREAS, the City of Fort Worth is agreeable to provide billing services related to the treated water provided by Keller, Southlake and Westlake subject to and solely pursuant to the terms and conditions stated below. NOW, THEREFORE, THE CITIES OF KELLER, SOUTHLAKE, WESTLAKE AND FORT WORTH AGREE AS FOLLOWS: 1. TFRM The Agreement shall be effective upon the date the last party fully executes the contract and shall terminate on September 30, 2031, unless terminated earlier as provided herein. It may be renewed on terms mutually agreeable to the parties. 2. RATES FOR WATER TAKEN The rates to be charged for treated water delivered by Fort Worth to the Cities of Keller, Southlake and Westlake (hereinafter referred to as "the Cities") shall be equal to the volume rates and rate of use charges currently in effect and as they may change from time to time, all in accordance with City of Fort Worth City Secretary Contracts , and such contracts being hereinafter referred to collectively as the "Contracts". 3. DETERMINATION OF UNACCOUNTED WATER LOSSES, ALLOCATION TO EACH PARTY FOR BILLING PURPOSES A. Two factors shall be used to determine unaccounted water loss: 1) the interior surface area of the water supply pipeline required to deliver flow to each city's delivery point as determined in Section 4; and 2) the recorded actual water usage, as described in Section 5. B. A city which does not take any flow during the monthly billing period shall not be assessed an unaccounted water loss; however, if flow is not taken by any city during any monthly billing period, then the unaccounted water loss of the Delivery System in that monthly billing period shall be allocated proportionately to each city based on the surface area of the water supply pipeline required to deliver flow to each city's delivery point. 4. SURFACE AREA OF THE WATER SUPPLY PIPELINE The surface area of the water supply pipeline used by each city based on the flow paths available to convey flow to each City's delivery point are as follows: • Southlake Pearson Delivery Point: the Cities agree that the resulting average interior surface area of pipeline that can deliver flow through both the Fort Worth Northside 11 Caylor Tank through the 42-inch line and the Fort Worth North Beach Tank through the 36-inch/30-inch line equals 240,151 square feet. • Keller Pearson Delivery Point: the Cities agree that the resulting average interior surface area of pipeline that can deliver flow equals 240,151 square feet. BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 2 of 11 Westlake Delivery Point: the Cities agree that the resulting average interior surface area of pipeline that can deliver flow to the future anticipated Westlake Delivery Point is 380,494 square feet. T.W. King Delivery Point: the Cities agree that the resulting average interior surface area of pipeline that can deliver flow to the future anticipated Southlake T.W. King Delivery Point is 453,405 square feet. 5. Recorded Actual Water Usage The total actual water delivered from all of the Fort Worth meters as shown on Exhibit "A" shall be measured on a monthly basis. The recorded actual water usage by each city at meters numbered 3, 4, 5 or 6 shall also be measured from each delivery point on a monthly basis by Fort Worth pursuant to the Contracts. The sum of the water delivered from the Fort Worth meters numbered 1 and 2 shall then be compared to the sum of the water usage by the Cities at meters numbered 3, 4, 5 and 6. The difference shall equal and be the total unaccounted water loss volume. As an example only: Table A Total Unaccounted Water Loss Calculation Total Fort Worth Meters Total Sum of the Actual Total Unaccounted Measured Water Used at the Cities Water Loss Volume Delivery Points 44 MG per Month 42 MG per Month 2 MG per Month TA Each city's percentage of allocated unaccounted water loss shall then be determined on a monthly basis by: 1. Multiplying the surface area designated for each citya in Section 4A by each city's recorded actual water usage to determine the product of the two factors; then 2. Adding up the productsc' for all of the Cities; then 3. Dividing the product of each city' by the total sum product°T for total Cities' to determine each city's percentage of unaccounted water loss'; then 4. The unaccounted water loss assessed to each Citye shall be determined by multiplying the percentage allocated to each city' by the total unaccounted water loss volumeTA As an example only: Table B Allocation of Unaccounted Water Losses Between Soutmake, Keller and Westlake Delivery Average Interior Record Actual Product of % of Actual Point Surface Area of Water Usage at Two Variables Allocation Unaccounted Pipeline to Each Each Cities Affecting Loss of Total Water Loss BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 3 of 11 Cities Delivery Meter Allocation' Water Loss Allocations Point' Southlake 240,1 51 20 MG per 4,803,200 39.78% 0.79 MG per Pearson Month Month Keller 240,151 12 MG per 2,881,812 23.87% 0.48 MG per Pearson Month Month Westlake 380,494 2 MG per 760,988 6.30% 0.13 MG per Month Month Southlake 453,405 8 MG per 3,627,240 30.05% 0.60 MG per T.W. King Month Month Total 42 MG per 12,073,240sT 100.00% 2.0 MG per Month MonthTA Keller and Westlake agree that the treated water delivered to meters numbered 3, 4, 5 and 6 under this Agreement will not be added to the treated water taken by each of them pursuant to City of Fort Worth City Secretary Contact No. and No. . Keller and Westlake will continue to receive separate monthly bills and a separate annual bill under Fort Worth City Secretary Contract No. and , as well as monthly bills and an annual bill under this Agreement. 6. MAXIMUM HOUR. MAXIMUM DAY CHARGES The assessment of the maximum hour and the maximum day charges incurred at meters numbered 1 and 2 shall be based on the volume at each city's meter numbered 3, 4, 5 or 6 during the same maximum hour and maximum day time period and shall be determined as follows: A. First, to determine each city's allocated percentage of maximum day and maximum hour charges take each city's recorded actual water usage for the actual maximum hour and maximum day and divide by the total volume of meters 3 and 4 on Exhibit "A"; and meters 5 and 6 once the meters have been connected to the system; then B. Each city's allocated percentage as calculated above shall be multiplied by the total maximum day and maximum hour charge incurred from meters 1 and 2 per the Contracts. C. The total annual payment for water delivered to each city shall be based on the annual and peak volumes delivered to each city during the Fiscal Year, as determined by meters, flow recording devices or other approved methods, and as provided in this Agreement. The October monthly payment for September's usage shall contain any adjustments necessary to update the calculations as necessary to recover the annual payment for the Customer's actual withdrawals from the Fort Worth System (including Rate of Use Charges as defined in the Contracts for Maximum Hour and Maximum Day Demands) for the Fiscal Year BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 4 of 11 just ended, during which the water usage occurred. Each city will be responsible for its own portion of the settle -up amount. D. This information shall not be used for annual billings made under City of Fort Worth City Secretary Contracts No. , No. and No. E. If any of the cities did not take water during prior year to the current billing year, then the monthly maximum day and maximum hour charges for the current billing year will be based on the readings from the most recent year with reading. F. For historical information and comparison, and solely for use under this Agreement, Fort Worth and the Cities agree that the maximum day and maxium hour volumes shall be: Maximum Day Maximum Hour Keller 4.97 MGD 5.95 MGD Southlake 18.29 MGD 20.26 MGD Westlake To be determined at the design stage of the future meter. This information shall not be used for annual billings made under City of Fort Worth City Secretary Contract No. and 7. MONTHLY CALCULATION A. The methodology as described in Section 3 and 4 have been derived from the consultant's memorandum to Southlake, Keller and Westlake dated April 25, 2010 and attached as Exhibit "B". By executing this Agreement, the Cities acknowledge that they have had their respective utility personnel or consultants review Exhibit "B" and that they fully understand the methodology and agree to the calculations demonstrated therein for the purpose of billing treated water delivered to Keller, Southlake and Westlake. B. Except as provided in Section 5, monthly billing for water volume will be based on meter readings for total volume from meters numbered 3, 4, 5 and 6. C. Furthermore, attached hereto as Exhibit "C" is an example of a calculation for billing the total water, including the maximum day and the maximum hour charges, to each city on a monthly basis under this Agreement. 8. METER UPGRADES The meters, together with the meter vaults, designated as Meter 3 and Meter 4 on Exhibit "A" attached hereto shall each be upgraded. The plans and design for the meters and the meter vaults are subject to the written approval of Fort Worth. The existing BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 5 of 11 meters shall be replaced with transit time meters and provision shall be made for back-up power to the meters. Further, fire hydrants will be installed on the downstream side of the meters. Keller and Southlake entered into a contract dated January 20, 2004 detailing the division of costs associated with the required meter installation and vault construction, a copy of which is attached hereto as Exhibit "D", same being Southlake City Contract No. 04-15. Exhibit "D" is solely attached for the purpose of cost sharing related to the upgraded meters between the Cities and for no other purpose. 9. FUTURE ANTICIPATED METERS It is anticipated that Southlake will construct a new meter shown on Exhibit "A" as meter number 5 and that Westlake will construct a new meter shown on Exhibit "A" as meter number 6. Prior to construction, each city shall submit plans and design for the meters to Fort Worth for review and written approval of Fort Worth. Each meter shall comply with Fort Worth standards as then in effect. Prior to delivery of water to either meter, each meter must be inspected and approved by Fort Worth and such inspection fees shall be the sole responsibility of the owner city. The inspection fee shall be the same as the fee charged to Fort Worth developers. 10. OPERATION AND MAINTENANCE OF METERS Fort Worth shall be responsible for operating and maintaining meters numbered 3, 4, 5 and 6. In that regard, Fort Worth may either contract for any necessary repairs or perform the work with Fort Worth employees. The Cities agree to reimburse Fort Worth for the total cost of any required maintenance or repair. Repair and maintenance of each meter numbered 3, 4, 5 or 6 will be paid by the owner city. The Cities shall pay for the costs of meter calibration, meter maintenance, power to operate the meters, any upgrades to the remote telemetry unit or meters and station, and any additional expenses for meter reading, testing and calibrations of the meters with the costs being divided as stated immediately above. Calibration of meters 1 and 2 only, shall be performed as described in Section 4 of the Contracts. 11. OPERATION OF DELIVERY SYSTEM "Delivery System" shall mean the system of water mains that delivers treated water to the Cities, as represented by lines A, B, C, D, E, and F on Exhibit "A". Fort Worth shall never have any duty to operate and maintain the Delivery System. The Cities in accordance with whatever contracts exist between them shall be responsible to operate and maintain the Delivery System. BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 6 of 11 12. PROHIBITION OF EXTENSIONS The Cities shall not permit any extensions or connections to the Delivery System without a written amendment to this Agreement. 13. MEDIATION OF DISPUTES If any dispute arises hereunder between the parties, such dispute shall be resolved in accordance with Section 22.6 of the Contracts. 14. EASEMENTS/All-WEATHER ACCESS Each city, as appropriate, shall dedicate an easement to Fort Worth in order for Fort Worth to have access to the meters numbered 3, 4, 5 and 6, as well as the meter vaults. In addition, the Cities shall provide an all-weather access to the meter vaults. 15. CONTRACTS CONTROLLING To the extent that this Agreement modifies either City of Fort Worth City Secretary Contact No. or , this Agreement shall control. In all other matters, the provisions of City of Fort Worth City Secretary Contact No. I and take precedence. 16. TERMINATION This Agreement may be terminated by Fort Worth at any time in its sole discretion by giving written notice to the Cities at least sixty (60) days prior to the date of termination. The Cities may terminate this Agreement only by mutual agreement between the three of the cities and then by the Cities giving written notice to Fort Worth at least sixty (60) days prior to the date of termination. 17. EFFECT OF TERMINATION If this Agreement is terminated, the Cities shall revert to the status and contractual relations they were in effect prior to the execution of this Agreement. BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 7 of 11 18. THIRD PARTY BENEFICIARIES The provisions and conditions of this Agreement are solely for the benefit of the parties hereto, and any of their lawful assigns or successors and are not intended to create any rights, contractual or otherwise, to any other person or entity. 19. NOTICES All written notices called for or required by this Agreement shall be sufficient if forwarded to the parties below, or such other party or address as either parry designates in writing, by certified mail, postage prepaid, or by hand delivery: City of Fort Worth: City of Fort Worth Attn: City Manager 1000 Throckmorton Fort Worth, TX 76102 City of Keller with a copy to: City of Fort Worth Attn: Water Director P. O. Box 870 Fort Worth, Texas 76102 City of Keller with a copy to: City of Keller Attn: City Manager Public Works Director P.O. Box 770 P.O. Box 770 Keller, Texas 76244 Keller, Texas 76244 Hand Delivery: 1100 Bear Creek Parkway, Keller, Texas 76248 City of Southlake City of Southlake Attn: City Manager 1400 Main Street, Suite 460 Southlake, Texas 76092 Town of Westlake Town of Westlake Attn: City Manager Westlake, Texas 76 BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 8 of 11 with a copy to: City of Southlake Attn: Public Works Director 1400 Main Street, Suite 230 Southlake, Texas 76092 with a copy to: Town of Westlake Attn: Utility Director Westlake, Texas 760 20. FORCE MAJEURE If, by reason of Force Majeure as hereinafter defined, any parry hereto shall be rendered wholly or partially unable to carry out its obligations under this Agreement, then such party shall give written notice of the particulars of such Force Majeure to the other parties within a reasonable time after the occurrence thereof. The obligations of the party giving such notice, to the extent affected by such Force Majeure, shall be suspended during the continuance of the inability claimed and for no longer period, and any such party shall be in good faith exercise its best efforts to remove and overcome such inability. The term "Force Majeure" as utilized herein shall mean and refer to acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the government of the United States, the State of Texas, or any other civil or military authority; insurrections; riots; epidemics; landslides; earthquakes; lightning; fires; hurricanes; storms; floods; washouts; or other natural disasters; arrest; restraint of government and people; civil disturbances; explosions; breakage or accidents to machinery, pipelines or canals; or other causes not reasonably within the control of the party claiming such inability. Force Majeure shall not excuse the obligation of and party hereto to pay for treated water service provided under this Agreement. 21. NO JOINT VENTURE, PARTNERSHIP, AGENCY This Agreement will not be construed in any form or manner to establish a partnership, joint venture or agency, express or implied, nor any employer -employee, borrowed servant or joint enterprise relationship by and among the parties. Each party shall be an independent contractor and shall be responsible at all times for directing its employees in the course of their duties. Each parry shall be responsible at all times for directing its employees in the course of their duties. 22. CONTRACT CONSTRUCTION The parties acknowledge that each party and, if it so chooses, its counsel have reviewed and revised this Agreement and that the normal rules of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. 23. BILLING AGREEMENT KELLER — SOUTHLAKE-WESTLAKE Page 9 of 11 GOVERNMENTAL POWERS It is understood that by execution of this Agreement, none of the parties hereto waive or surrender any of it governmental powers. 24. FIRST BILLING DATE The first billing date under the terms and conditions of this Agreement shall be sixty (60) days from the effective date of this contract. APPROVAL RECOMMENDED: S. Frank Crumb, P. E. Water Department Director Approved as to Form and Legality: Christa R. Reynolds Sr. Assistant City Attorney APPROVAL RECOMMENDED: Greg Dickens, P. E. Public Works Director Approved as to Form and Legality: City Attorney BILLING AGREEN IENT hELLER — SO )LTTHL AKE-�\ESTLAhE Page 10 of 11 CITY OF FORT WORTH Fernando Costa Assistant City Manager Attest Marty Hendrix City Secretary CITY OF KELLER By: Dan O'Leary City Manager Attest: City Secretary APPROVAL RECOMMENDED: Robert H. Price, P.E., FNSPE Public Works Director Approved as to Form and Legality: City Attorney APPROVAL RECOMMENDED: Utility Director Approved as to Form and Legality: Town Attorney BILLING AGREEN IENT hELLER — SO )LTTHL AKE-�\ESTLAhE Page 11 of 11 CITY OF SOUTHLAKE By: Shana Yelverton City Manager Attest: City Secretary TOWN OF WESTLAKE By: City Manager Attest: Town Secretary C � c *k H c � Y 5 � 'e, f6 vi LU E O = v) A f-- \ N W O ' \ J N 2- F� � d .N s � 3: A �Y wU- FJ-I rrTT� F� H .�- N Lh (INV U) _ O .N N o Q Q w V L "le N co T C4 LLJ .�� i O > C9 LJJ W .A£ 36.. „Z 4 So ui ..Z4 Z T O M '°7 N c C9 O -a M L � a .O LU d F- LU Oa W m C O w Y co F Qy N 7 a o � woLU N C F— f0 O LU r r Y � R � L Ni N 4055 International Plaza, Suite 200 • Fort worth, Texas 76109 • 817-735-7300 • fax 817-735-7491 www.freese.com TO: Bob Price, Director of Public Works, City of Southlake; Chuck Kendrick, Deputy Director of Public Works, City of Southlake; Greg Dickens, Director of Public Works, City of Keller; Jarrod Greenwood, Director of Public Works, City of Westlake CC: Ron King, Freese and Nichols FROM: Thomas Haster, Freese and Nichols SUBJECT Allocation of Unaccounted Water Losses and Maximum Day/Maximum Hour Peaking Charges for Southlake/Keller/Westlake Water Supply System DATE: April 25th, 2010 A. Allocation of Unaccounted Water Losses We have reviewed various options to allocate the unaccounted water losses in the Southlake/Keller and future Westlake Water Supply System. The water loss allocation needs to be flexible enough to facilitate the addition of a future Westlake Delivery Point as well as being as equitable as possible to allow the losses to be shared between the participating cities. The looping of the water supply lines between the City of Fort Worth Caylor Northside II Water Supply and the City of Fort Worth North Beach Eastside II Water Supply adds an additional level of complexity in the water loss allocation to ensure that each wholesale customer equitably share in the future unaccounted water losses. The two variables that should be reflected in the water losses allocation are A) flow used by each wholesale customer and B) surface area of water supply pipeline required to deliver flow to each wholesale customer delivery point. If a wholesale customer is not taking any flow during the monthly billing period they should not have to participate in paying the unaccounted water losses. If a wholesale customer delivery point is located closer to Fort Worth's billing meters than other wholesale customers take points than it is expected that their opportunity for experiencing water losses will be less than others at more remote locations. Therefore, it is with these two variables that Freese and Nichols has developed the following draft methodology to allocate the unaccounted water losses as shown below. The first step in this methodology is to calculate the surface area (pipeline length multiplied by the pipeline parameter) of each pipeline section. These various pipeline sections are shown in the attached Figure 1 as: Line "A" = 36"/30" water transmission line from North Beach (Meter #2) to the Southlake Pearson Delivery Point (Meter #3), Line "B" = 30-inch water transmission line from Southlake Pearson Delivery Point (Meter #3) to Keller Pearson Delivery Point (Meter #4), Line "C" _ 42-inch water transmission line from Caylor (Meter #1) to the split of the 30-inch water lines at Pearson Road, Line "D" = 30-inch water transmission line from Keller Pearson Delivery Point (Meter #4) to the 30-inch water transmission line on Florence Road, Line "E" = 30-inch water transmission line from Pearson Road to the future Westlake Delivery Point (Meter #6) and Line "F" = 30-inch water Allocation of Unaccounted Water Losses and Peaking Charges April 25th, 2010 Page 2 of 4 transmission line from the future Westlake Delivery Point (Meter #6) to the Southlake T.W. King Delivery Point (Meter #5). The following surface area for each pipeline section identified above is; Line "A" = 158,282 square feet, Line "B" is 11,437 square feet, Line "C" = 278,949 square feet, Line "D" = 31,635 square feet, Line "E" _ 140,342 square feet and Line "F" = 72,911 square feet. The next step in the analysis is to estimate the average pipeline surface area used by each entity based on the various flow paths available to convey flow to each delivery point. For the Southlake Pearson Delivery Point there are two options to receive flow, Fort Worth Northside II Caylor Tank through the 42-inch line and Fort Worth North Beach Tank through the 36-inch/30-inch line. The average pipeline surface area used to deliver flow to the Southlake Pearson Delivery Point is therefore the average of the surface area of Line "A" plus the surface area of Line "B", Line "C" and Line "D" added together. The resulting average surface area of pipeline that can deliver flow to the Southlake Pearson Delivery Point is 240,151 square feet. Using this similar process, the resulting average surface area of pipeline that can deliver flow to the Keller Pearson Delivery Point is also 240,151 square feet. The resulting average surface area of pipeline that can deliver flow to the future anticipated Westlake Delivery Point is 380,494 square feet. The resulting average surface area of pipeline to can deliver flow the Southlake T.W. King Delivery Point is 453,405 square feet. Once the average surface area to each delivery point is calculated, the next step is to record the water usage taken by each delivery point. For the purpose of this calculation let's assume the following average delivery rates are measured at each delivery point; Southlake Pearson uses 20 MGD, Keller Pearson uses 12 MGD, Westlake uses 2 MGD and Southlake T.W. King uses 8 MGD. The actual usage will be measured on a monthly basis to allow these water loss calculation to be represented of the actual usage of the water supply system by each entity participating. Based on these projected delivery rates the product of these two water loss variables would be the following: Southlake Pearson Site Delivery Rate (20 MGD) multiplied by Average Surface Area of Facilities (240,151 square feet) Used to Deliver this flow yielding in a product of 4,803,020. If the sum of the Wholesale Customer Meters read 42 MGD as shown in the above example and the combined Fort Worth billing meters of Caylor and North Beach read 44 MGD, then the unaccounted water loss allocation would be 2 MGD as shown in Table 1 below. Allocation of Unaccounted Water Losses and Peaking Charges April 25th, 2010 Page 3 of 4 Table 1 Total Unaccounted Water Loss Calculation for Southlake/Keller and Westlake Total Fort Worth Billing Meters Total Sum of the Flow Measured Total Unaccounted Water Losses Flow Measured at the Wholesale Delivery Points Between Billing Meters and Wholesale Customer Meters 44 MGD 42 MGD 2 MGD Once the total unaccounted water loss is calculated, it can be allocated to each wholesale customer delivery point using the average surface area of pipeline facilities used to convey flow to each wholesale customer delivery point and the average delivery rate during the billing period as shown below in Table 2. Table 2 Allocation of Unaccounted Water Losses Between Southlake, Keller and Westlake Delivery Average Surface Average Product of Two % of Actual Point Area of Pipeline to Delivery Rate to Variables Allocation of Unaccounted Each Customer Each Customer Affecting Loss Total Water Water Loss Delivery Point Delivery Point Allocation Loss Allocation Southlake 240,151 20 MGD 4,803,200 39.78% 0.79 MGD Pearson Keller 240,151 12 MGD 2,881,812 23.87% 0.48 MGD Pearson Westlake 380,494 2 MGD 760,988 6.30% 0.13 MGD Southlake 453,405 8 MGD 3,627,240 30.05% 0.60 MGD T.W. King Total 42 MGD 12,073,240 100.00% 2.0 MGD B. Allocation of Maximum Day and Maximum Hour Peaking Charges Unlike the allocation of unaccounted water losses, the relative location of various wholesale delivery points for Keller, Southlake and Westlake from Fort Worth has no impact on how much maximum day and maximum hour peaking occurs with each customer city. Therefore, it is not recommended that this same procedure be applied for these peaking charges. Historically the maximum day and maximum hour peaking charges of the combined Caylor and North Beach meter readings has been distributed equally between customer cities based on the respective Allocation of Unaccounted Water Losses and Peaking Charges April 25th, 2010 Page 4 of 4 FREESE M.9,41 volume of water used by each customer city. It is recommended that this same procedure be maintained going forward as a fair and equitable methodology for allocating these peaking charges as the T.W. King Water Supply Line is put into service and additional delivery points for Southlake and Westlake are added. Please let me know if you agree with this amended methodology and if the allocation is acceptable to each of the wholesale customer cities. 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