Regional Water System
title
Authorization of the Execution of the Potable Water Supply Contract with the City of Lucas, a current Customer of NTMWD.
end
SUBJECT
recommendation
Authorize execution of new Potable Water Supply Contract with City of Lucas (Lucas), a current Customer of NTMWD.
end
PURPOSE
The previous contract does not expire until August 2034, but Lucas and NTMWD wish to completely restate the terms of the previous contract and enter into a new Potable Water Supply Contract.
RECOMMENDATION
The Executive Director, NTMWD staff and Lloyd, Gosselink, Rochelle & Townsend, P. C., recommend the Board of Directors authorize execution of a potable water supply contract with the City of Lucas.
|
Contracting Party: |
City of Lucas, Texas |
|
|
|
|
Scope: |
Potable Water Supply Contract |
|
|
|
|
Project: |
N/A |
|
|
|
|
Amount: |
N/A |
|
|
|
|
Committee: |
This will be an item on the March 25th, 2026, Water Committee meeting agenda |
DRIVER(S) FOR THIS PROJECT
|
Strategic Objective: |
1.1 High Quality Services 3.2 Engaged Members, Customers and Stakeholders |
|
☐ Regulatory Compliance |
☐ Asset Condition |
|
☐ Capacity |
☐ Redundancy/Resiliency |
|
☐ Relocation or External Requests |
☐ Operational Efficiency |
|
☐ Safety |
☒ Administrative |
|
☐ Policy |
☐ Other _____________ |
BACKGROUND
PURPOSE
• NTMWD and Lucas previously entered into the Potable Water Supply Contract in August 2004.
• Lucas has requested using the existing location of Point of Delivery No. 3 to connect to the NTMWD 72-inch conveyance line and additional time to construct facilities necessary to receive water from NTMWD and to renew their Potable Water Contract.
• Lucas desires to adopt the updated customer contract template in order to take advantage of the favorable terms negotiated with Members and Customers and formally adopted by NTMWD.
COMPONENTS OF THE CONTRACT WITH CUSTOMER
• SPECIAL CONDITION: Contract allows Lucas an additional 36 months to construct facilities to receive water from NTMWD.
• Contract term of 20 years.
• Point of Delivery No. 1 - Abandoned and no longer in use
• Point of Delivery No. 2 - Located at Country Club Road across from Creek View Lane, Lucas, Texas near the connection with McKinney Parallel 42-inch conveyance line
• Point of Delivery No. 3 - Alter the location of Point of Delivery (POD) from “near the intersection of F.M. 2551 and McGarity Lane on the Plano-McKinney 84-inch pipeline” to a new connection with the Allen-Plano-Frisco-McKinney Project B Phase I 72-inch conveyance line adjacent to McGarity Lane and near Maplewood Lane.
• Customer rate shall be equal to the rate set by the NTMWD Board of Directors for Member Cities (“Member City Rate”) plus $0.05.
• Commencing FY 2029, the customer rate shall be made up of two tiers and a cap that includes the Legacy Premium Component, Growth Premium Component, and Effective Premium Cap, as follows:
o Legacy Premium Component: For that portion of the Customer’s annual minimum equal to its Fiscal Year (FY) 2028 annual minimum plus 5% (“Legacy Volume”) the Customer Rate applied shall be the Member City Rate plus 5-cents (“Legacy Charge”);
o Growth Premium Component: For that portion of the Customer’s annual minimum greater than the Legacy Volume (“Growth Volume”), the Customer Rate applied shall be the Member City Rate plus 10% (“Growth Charge”); and
o Effective Premium Cap: For the purposes of this calculation, “Effective Rate” means the amount to be paid by Customer per 1,000 gallons resulting from the calculation of the Legacy Premium Component and the Growth Premium Component. If the Customer’s calculated Effective Rate exceeds the Member City Rate plus 2.8%, the Customer Rate shall be adjusted to result in payment by the Customer that equals the Member City Rate plus 2.8% (Effective Premium Rate). After a Customer reaches the Effective Premium Rate, the Customer Rate cannot fall below it.
o This phase-in will only be available to Customers executing the new Customer contract template prior to July 31, 2028.
• The new Customer rate methodology and the Customer contract are of benefit to Customers and the region in that it:
o Provides certainty on the Customer rate for years to come;
o Incentivizes conservation; and
o Allows a reasonable phase-in for Customers through recognition of the Legacy Premium Component and the Effective Premium Cap.
• An Annual Minimum of 753,732,000 gallons per year.
• An Annual Maximum of 1,000,000 gallons per year.
• Cost of potable water is set at the Customer Rate.
• Any water delivered in excess of the annual minimum will also be purchased at the water rate established by the Board of Directors.
• If Customer exceeds the maximum rate of delivery of 2.2 times the daily average, the Customer shall pay three times the Customer entity water rate for such quantity. There is a provision for emergency conditions extending up to 48 hours during which NTMWD may, at its sole discretion, waive the additional cost.
• NTMWD, in its sole discretion and at any time, may deliver water to Customer at a delivery rate greater than 2.2 times the daily average for the purpose of (i) minimizing or managing energy costs (4CP); or (ii) managing hydraulic constraints in NTMWD’s system. If NTMWD exercises either of these options, Customer shall only pay the contract water rate for water received.
• If NTMWD does not have infrastructure installed with the capability of limiting the delivery rate of water to 2.2 times the daily average, or such infrastructure is currently inoperable, Customer shall pay the contract water rate for water received from NTMWD.
• A provision that allows NTMWD to charge three times the water rate for such quantity of water used by the Customer that is above the authorized amount or authorized rate of delivery as allowed by NTMWD’s Water Conservation and Drought Contingency Plan, as such plan may be amended from time to time
Lucas approved this contract at its March 5, 2026, council meeting and signed the Contract on March 6, 2026. A copy of the contract is attached.
FUNDING
N/A