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<br />obligation to provide LCWSD with a sufficient amount of Treated Water for LCWSD to <br />meet its minimum production, storage, service pump, or pressure maintenance <br />requirements, or any other requirements imposed on LCWSD by virtue of 30 Texas <br />Administrative Code Chapters 290 or 291, or any other Regulatory Requirements. <br /> <br />ARTICLE III - RATES, BILLING AND PAYMENT <br /> <br />3.1 CHARGES FOR WATER. LCWSD will pay to Paris the fees and charges for the <br />Treated Water delivered by Paris that may include Late Fees, and rates to be applied for <br />the Capacity Charge, Demand Charge, Volume Charge, and Excess Demand Charge. <br /> <br />3.2 WATER RATES. <br /> <br />a. Initial Rates. Upon the Effective Date of this Agreement, the Volume Rate <br />and the Demand Rate for water supplied from Paris' Water Treatment Plant <br />(Points of Delivery 3A and 3B), the FM 79 connection (Point of Delivery 1) <br />and Paris' Water Distribution System (Points of Delivery 4, 5, 6, 7 and 8), <br />respectively, as well as the Capacity Charge, shall be as set out in Exhibit 1. <br /> <br />b. Annual Cost of Service Study and Subsequent Annual Rates. The Volume <br />Rate, Demand Rate, and Capacity Charge shall be recalculated in a cost of <br />service study and set annually prior to the beginning of a new Rate Year. <br /> <br />c. Cost and Rate Methodology. The initial rates and subsequent annual rates <br />that LCWSD pays to Paris for Treated Water shall be calculated in accordance <br />with the cost allocation methodologies described and contained within the <br />Water Rate Study and the rate methodologies contained within Exhibit 1 <br />except as provided in Article 3.2 (d) below. The cost and rate methodologies <br />set forth in the Water Rate Study and Exhibit 1 are hereby specifically agreed <br />to between LCWSD and Paris. Those methodologies include the following <br />principles: <br /> <br />1. the "Cash Basis" methodology for rate settings; <br /> <br />2. the "Base/Extra Capacity" cost allocations methodology, as sanctioned <br />by the American W ateI' Works Association; <br /> <br />3. the Cost of Service Study based on historical accumulated cost and <br />Treated Water consumption and production data for the Test Year, <br />adjusted for known and measurable changes; <br /> <br />4. Capacity Charge. Allocation for the Capacity Charge shall be based <br />on the Phase 1 Maximum Hour Capacity Demand as a percentage of <br />the Initial Rated Plant Capacity. The allocation percentage shall be <br />applied to the capital cost requirements (e.g. debt service, cash capital <br />outlays, etc.) of the Water Treatment System, as shown in Exhibit 1. <br /> <br />12 Paris/l "CWSD Wholesale Treated Water Contract <br />