Selected Water Sales Contracts

CED-80-69: Published: Mar 25, 1980. Publicly Released: Mar 25, 1980.

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A review was conducted of the adequacy of western water supplies to support energy and mineral development. Water marketing practices were briefly analyzed on selected water sales contracts. These contracts are administered by the Water and Power Resources Service and are short term contracts. In an effort to recover a portion of the project costs associated with the water sales contracts, Resources Service project authorizations require that project users reimburse the U.S. Treasury for costs associated with certain uses such as irrigation, municipal and industrial water, or power. Most of the other project costs are classified as nonreimbursable and are financed from the U.S. Treasury.

In each of the three contracts reviewed, the Resources Service charged water rates that were too low to guarantee expeditious Federal cost recovery. Unfortunately, when water intermediaries or users do not pay an appropriate share of Federal project costs, others must make up the difference. Since the water consumers had already paid higher prices than the Resources Service charged, higher Federal rates would probably have had little, if any, impact on them. Low rates were not justified when the Resources Service had the authority to base the sales price of municipal and industrial water on the local market price of that water as established by comparison with other water sales or the subsequent resale of the Federal project water. Thus there was a need for additional monitoring of water marketing policies to assure adequate water prices, project repayment, and regional and project consistency.

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