2011-072 RES AGREEMENT BETWEEN CITY OF PARIS AND DAISY FARMS

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Volume Rate -$1.20 per 1,000 gallons (b) Secondary Rate Term. The Volume Rates during the Secondary Rate Term shall be calculated annually pursuant to a Cost of Service Study; however, for each given year during the Secondary Rate Term, the Volume Rate charged to Daisy Farms shall not exceed the Projected Cost of Service Rate for the corresponding year for Years 6 through 10 as shown on Exhibit B. (c) Final Rate Term. The Volume Rates during the Final Rate Term shall be calculated annually pursuant to a Cost of Service Study as described in Section 5.3(d) below. (d) Rate Methodology. The Volume Rates subsequent to the Initial Rate for Treated Water shall be calculated annually in a Cost of Service Study in accordance with the methodology described in the Water and Wastewater Cost of Service Study, City of Paris, Texas, June 2010, prepared and submitted by J. Stowe & Co., attached hereto as Exhibit C("2010 COSS"), and in accordance with Section 5.3(d). The Parties agree that the rate methodology described and used in the 2010 COSS shall be used in future Cost of Service Studies until the Parties agree to a different rate methodology and that Daisy Farms shall be a separate Treated Water customer class in future Cost of Service Studies. The principles of the rate methodology to be used until the Parties agree otherwise are as follows: 1. The "Cash Basis" methodology for rate setting; 2. The "Base - Extra Capacity" cost allocation methodology, as sanctioned by the American Water Works Association; 3. The Cost of Service Study shall be based on historical Costs of the System and Treated Water consumption and production data for the Test Year, adjusted for known and measurable changes; 4. The Cost of Service Study and Volume Rate shall be based on historical water consumption and demands for the Test Year for the Delivery Point(s), adjusted for known and measurable changes, and adjusted for water loss on the Paris Treated Water System associated with the distribution and transmission pipes having a diameter of 8" and greater. 5. The lesser of Daisy Farms' actual peaking ratio, consisting of Daisy Farms' Maximum Day Usage divided by Daisy Farms' average daily Treated Water usage determined through Meter readings during the corresponding Test Year, or an assumed peaking ratio of 1.10 to l, shall be used to determine the Volume Rate for the subsequent Rate Year. 6. The Costs of the System allocated to Daisy Farms shall not include any of Paris' costs that have otherwise been directly assigned to Daisy Farms through a charge described in this Agreement in addition to the Volume Charge. 5.3 Billing and Payment. (a) Volume Charge. Each month during the term of this Agreement, Paris shall read the Meter(s) measuring Treated Water being provided to Daisy Farms. The number of gallons of Treated Water measured by the Meter(s) shall be multiplied by the Volume Rate to determine the Volume Charge. Paris shall prepare and deliver to Daisy Farms a statement Page 10 of 23