Water devolution update.

Some of you may have read the "STATEMENT OF POSITION OF THE DISTRICT OF COLDSTREAM" with reference to the Arbitration procedure Vernon initiated. Those of you who did not read it and wish to read it you can find it by clicking on here.

The solicitors acting on behalf of Vernon have responded to position of both Coldstream's and Electoral Areas "B" and "C". The document, entitled CITY OF VERNON'S REPLY TO STATEMENTS OF POSITION" is public and copies could be obtained from the District of Coldstream by those interested in the Statement. Some of the items are quite startling and I wish to quote some of them.

4. Historical Rights and Practices - Vernon's right to withdraw and the terms and conditions that govern its withdrawal should not be constrained by principles that predate the creation of the utility. In particular Vernon says:

• Various statements of principles were formulated by the parties prior to the establishment of the GVWS, including a statement that the regional authority would only sell bulk water, not retain any class of customers, and that the distribution and sale of water would be the exclusive right of the local jurisdictions;

• Water allocation rights originally provided to agricultural users do not include a right to demand a subsidized rate on an ongoing basis provided by other user classes, which burden disproportionately falls on Vernon's residential and ICI customer base;

6. Asset Division — Reserves — Debt - Vernon's position is that the arbitration should proceed to examine the function division of bulk and local distribution assets in accordance with the proposal set out by Vernon in the QDS Quadra Development Solutions Technical and Financial Report. If B&C do not agree with that proposed division they are entitled to respond with their own analysis and proposal but the arbitration process should not be adjourned for an independent assessment as proposed by B&C. . Vernon's position is that there is sufficient time before any hearing on the substantive issues for B&C to respond to the Vernon/QDS proposal

10. Vernon agrees that water licences issued to Vernon have been transferred to GVS but says that no other assets of Vernon have been transferred, and that none will be in view of its intention to withdraw from the service and pending the outcome of this arbitration.

11. Vernon does not agree that it derived any benefit from Coldstream water licences, funds or infrastructure. Coldstream's infrastructure is depleted and in need of upgrading at significant cost. Vernon, in conjunction with the other participants, obtained access to additional water through licences issued to the GVS. In the case of Duteau Creek, the capacity in the water licences cannot be utilized without the new treatment plant, an undertaking funded by all participants, but with the majority of funds contributed by Vernon.

13. In reply to paragraph 15 of Coldstream's Statement Vernon says that the other participants have benefited similarly from the Water Service. Vernon denies that it has benefited from additional taxation and development cost charge revenues. In addition to the contributions referred to in paragraph 12 above, Vernon's financial contributions to the Water Service from rates paid by its residential and ICI customer base provide a significant subsidy to the agricultural user groups of Coldstream and Electoral Areas B & C.

16. There is no inherent right to equal service costs between jurisdictions. For example, Vernon's taxpayers pay a higher rate per officer than Coldstream's taxpayers for police services. Vernon would not expect that Coldstream transfer funds to achieve equalization in policing costs. Differential service costs are a basic outcome of citizens being organized into local jurisdictions with discrete geography, land uses and community profiles.

17. Decisions with respect to stabilization of irrigation costs are fundamentally a matter of political choice as to whether one customer group should be subsidized by other customer groups. Coldstream and Electoral Areas B&C must accept that the cost implications of subsidizing their large agricultural user base should be borne by their taxpayers. Neither Coldstream or B&C have a right to continue to draw on Vernon for this subsidy as a consequence of Vernon having provided the subsidy during the period of its participation in the Water Service.

20. Separation of irrigation and non-irrigation distribution requires substantial expenditures for lengthy pipe installation to benefit the agricultural customer base which is concentrated in Coldstream and B&C. The cost of doubling the distribution lines exceeded the cost of the required treatment improvements. Vernon should not be expected to subsidize the cost of separating the distribution system in Coldstream and B&C.

21. Coldstream's assertion that an equitable rate structure must be established as a condition of Vernon's withdrawal reflects a claim of an ongoing right to a subsidy provided by Vernon's larger domestic customer base. Vernon's position is that it imposing an ongoing obligation on Vernon's customers following withdrawal is not equitable to Vernon.

30. Vernon denies that it has drawn capacity from Coldstream's licence capacity. In addition to drawing from the capacity under its former licences, Vernon has utilized water from the former NOWA licences, As a participant in the former NOWA Vernon's utilization of this capacity should not give rise to any right to compensation in favour of any other participant.

It is difficult to understand how Vernon politicians could arrive to those conclusions. I could comment on a number of issues knowing full well that they are erroneous. I was involved in negotiations prior to 2000. I know that all parties agreed that the agricultural community should be provided with rates that would allow them to compete fairly within the Valley. They had the original water licences the value of which is immeasurable.

Item 20. appears to be the most ridiculous. Separation of domestic and agriculture water would benefit the domestic customers and not the agricultural users. Agriculture only needs water during the summer months (5-6 months). To say that I am disappointed in the lies and misrepresentations is an understatement.

Comments would be appreciated. I assume most Coldstream water customers would not be happy with double or triple water rates which would be the consequence if Vernon succeeds in their quest.

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