What is a "take or pay" contract?

The "take or pay" term used to describe the water supply contract means that the cities pay the fixed costs component of the wholesale water rate based on the highest year of consumption, even if in subsequent years they don’t reach that same level of water use. This ensures the fixed system costs are covered regardless of the amount of water used. The cities and their customers receive an annual rebate for the variable costs, such as chemicals and power not used for treatment and delivery, based on each city’s actual consumption for that year.

Cities don’t pay for "unused" water - they pay an allocation of the regional water infrastructure and system costs based upon the maximum amount of potential capacity each city needs. The cities and their customers are paying for water service, not just the water molecules that are delivered. Learn more about how the North Texas Municipal Water District sets their rates.

Show All Answers

1. What type of water meter does the city use?
2. How does my meter work?
3. How can I check for a leak?
4. How can I test my meter for accuracy?
5. I've conducted my own bucket test and I still don't believe my meter is working properly. What are my options?
6. Do mechanical meters slow down or speed up over a lifespan?
7. What is Advanced Metering Infrastructure (AMI)?
8. How does the Advanced Metering Infrastructure (AMI) system work with my meter?
9. Is the Meter Transmission Unit (MTU) a meter?
10. How can I test my Meter Transmission Unit (MTU) for accuracy?
11. If the City had irrigation-specific water meters, would it help my sewer bill?
12. Will the City consider extending the leak adjustment application acceptance window to longer than within 30 days of the leak repair?
13. How are water rates established each year through the Water Rate Study?
14. What is a "take or pay" contract?
15. Why use a tiered rate structure?