ML021150024

Application for Order & Conforming Administrative Amendments for License Transfer

ML021150024
Person / Time
Site:	Palo Verde
Issue date:	04/15/2002
From:	James M. Levine Arizona Public Service Co, Pinnacle West Energy Corp
To:	Collins S Office of Nuclear Reactor Regulation
References
102-04686-JML/KCM/SAB
Download: ML021150024 (94)

Text

PINNACLE AVEST ,,,, ENERGY..

NRC LICENSE TRANSFER APPLICATION APRIL 15, 2002 submitted by Pinnacle West Energy Corporation Arizona Public Service Company Palo Verde Nuclear GeneratingStation NRC Facility Operating License Nos. NPF-41, NPF-51, NPF-74 Docket Nos. 50-528, 50-529, and 50-530

10 C.F.R. § 50.80 10 C.F.R. § 50.90 James M. Levine Mail Station 9046 Executive Vice President TEL (602)250-2095 P.O. Box 53999 Generation FAX (602)250-3002 Phoenix, AZ 85072-3999 102-04686-JML/KCM/SAB April 15, 2002 BY HAND DELIVERY U.S. Nuclear Regulatory Commission ATTN: Samuel J. Collins, Director, Office of Nuclear Reactor Regulation Mail Stop 0-5 E7 One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738

SUBJECT:

Palo Verde Nuclear Generating Station Facility Operating License Nos. NPF-41, NPF-51, and NPF-74 Docket Nos. 50-528, 50-529, and 50-530 Application for Order and Conforming Administrative Amendments for License Transfer Pursuant to Section 184 of the Atomic Energy Act of 1954, as amended ("AEA"), and 10 C.F.R. § 50.80, Pinnacle West Energy Corporation ("PWE") and Arizona Public Service Company ("APS") (collectively, the "Applicants") hereby request the consent of the Nuclear Regulatory Commission ("NRC") to the proposed transfer of APS's existing NRC operating licenses for Palo Verde Nuclear Generating Station Units 1, 2, & 3

("PVNGS") to PWE. APS also requests NRC approval of certain conforming administrative amendments to the PVNGS operating licenses to reflect the proposed transfer to PWE.

Through the attached Application for Order and Conforming Administrative Amendments for License Transfer ("Application"), PWE and APS request that the NRC consent to this transfer and authorize PWE to own and operate each PVNGS unit under essentially the same conditions and authorizations included in the existing NRC licenses for APS for these units. No physical changes will be made to PVNGS as a result of this transfer, nor will there be any changes in the licensing basis for PVNGS or the day-to-day management or operation of PVNGS. AP I 3:

U.S. Nuclear Regulatory Commission ATTN: Samuel J. Collins, Director, Office of Nuclear Reactor Regulation Application for License Transfer Page 2 APS is currently the licensed operator of PVNGS and is also a licensed owner of a 29.1% undivided ownership interest in PVNGS. Pursuant to the restructuring requirements imposed on electric utilities in Arizona under the Retail Electric Competition Rules adopted by the Arizona Corporation Commission ("ACC"), APS is required to legally separate its electric generation supply business (i.e., generation and power sales) from its transmission and distribution business and phase in competition in its service territory for generation supply at the retail level during the period from January 1, 1999 to December 31, 2002. APS is therefore transferring all of its fossil fired and nuclear generating facilities to PWE, including its interests in PVNGS, in accordance with the terms of the APS restructuring settlement agreement approved by the ACC. PWE, like APS, is an Arizona corporation which is a direct, wholly-owned subsidiary of Pinnacle West Capital Corporation ("PNW").

The information contained in this Application demonstrates that PWE will possess the requisite technical and financial qualifications to own and operate PVNGS. The proposed transfer will be consistent with the requirements set forth in the AEA, NRC regulations and the relevant NRC licenses and orders. It will neither have any adverse impact on the public health and safety nor be inimical to the common defense and security. PWE and APS, therefore, respectfully request that the Commission consent to the transfer in accordance with 10 C.F.R. § 50.80 and approve the conforming administrative amendments to the PVNGS licenses pursuant to 10 C.F.R. § 50.92.

The Application contains a proprietary, separately bound Addendum as Attachment 4A of the Application. Because this Attachment contains confidential commercial or financial information, PWE and APS request that Attachment 4A be withheld from public disclosure pursuant to 10 C.F.R. § 2.790, as described in the Affidavit of James M.

Levine, provided as Attachment 6 to the Application. A non-proprietary version of this attachment suitable for public disclosure is provided as Attachment 4 to the Application.

PWE and APS request that the NRC review this Application on a schedule that will permit the issuance of NRC consent to the license transfer, and approval of the conforming administrative license amendments as promptly as possible, and in any event before October 15, 2002. Such consent should be immediately'effective upon issuance, and should permit the transfer and the implementation date of the conforming amendments to occur at anytime up until December 31, 2003. PWE and APS will keep the NRC informed if there are any significant changes in the status of the other required approvals or any other developments that have an impact on the schedule.

U.S. Nuclear Regulatory Commission ATTN: Samuel J. Collins, Director, Office of Nuclear Reactor Regulation Application for License Transfer Page 3 If the NRC requires additional information concerning this license transfer request, please contact Scott Bauer at 623-393-5978. Service upon the Applicants of comments, hearing requests or intervention petitions, or other pleadings, if applicable, should be made to Jay M. Gutierrez, counsel for PWE and APS at Morgan, Lewis &

Bockius, LLP, 1111 Pennsylvania Avenue, N.W., Washington, D.C. 20004 (tel: 202 739-5466, fax 202-739-3001; e-mail: jgutierrez@ morganlewis.com).

Sincerely, JJ mes M. Levin xecutive Vice President, Generation Arizona Public Service Company and Chief Operating Officer, Pinnacle West Energy Corporation

Enclosure:

Application for Order and Conforming Administrative Amendments for License Transfer cc (w/encl.): Document Control Desk, NRC (3 copies)

Ellis W. Merschoff, Regional Administrator, Region IV, NRC James H. Moorman Ill, PVNGS, Senior Resident Inspector, NRC Jack N. Donohew, PVNGS Project Manager, NRR Aubrey V. Godwin, Arizona Radiation Regulatory Agency

PALO VERDE NUCLEAR GENERATING STATION APPLICATION FOR ORDER AND CONFORMING ADMINISTRATIVE AMENDMENTS FOR LICENSE TRANSFER (NRC FACILITY OPERATING LICENSE NOS. NPF-41, NPF-51, AND NPF-74)

TABLE OF CONTENTS Page I. INT RO D UC TIO N .................................................................................... 1 II. STATEMENT OF PURPOSE OF THE TRANSFER AND NATURE OF THE TRANSACTION MAKING THE TRANSFER NECESSARY OR D ES IR A B LE ........................................................................................... 2 II1. GENERAL CORPORATE INFORMATION REGARDING PWE .............. 3 A. Name of the Proposed New Licensee ........................................... 3 B. A ddress ......................................................................................... 3 C. Description of Business or Occupation ........................................ 3 D. Organization and Management .................................................... 4

1. State of Incorporation and Place of Business ..................... 4

2. Directors and Principal Officers ......................................... 4 IV. TECHNICAL QUALIFICATIONS ............................................................ 5 V. FOREIGN OWNERSHIP, CONTROL, AND DOMINATION .................... 6 VI. FINANCIAL QUALIFICATIONS OF PWE ............................................... 7 VII. DECOMMISSIONING FUNDING ASSURANCE .................................... 8 VIII. ANTITRUST CONSIDERATIONS .......................................................... 10 IX. RESTRICTED DATA AND CLASSIFIED NATIONAL SECURITY IN FO R MATIO N ...................................................................................... 10 X. O TH ER ISSU ES ..................................................................................... 11 A. Public Health, Safety and Welfare Considerations ............................. 11 B. Em ergency Planning .......................................................................... 11 C . Off-site Pow er ..................................................................................... 12 D . Exclusion A rea ................................................................................... 13 E . S ecurity ............................................................................................. 13 F. Quality Assurance Program ............................................................... 14 i

G. Updated Final Safety Analysis Report ............................................... 14 H . T raining ............................................................................................ . . 15 Xl. ENVIRONMENTAL CONSIDERATIONS .................................................. 15 XlI. PRICE-ANDERSON INDEMNITY AND NUCLEAR INSURANCE ........... 16 XIII. OTHER RELATED APPROVALS ................................................................ 16 XIV EFFECTIVE DATE .................................................................................. 17 XV. CONCLUSION ......................................................................................... 17 ii

LIST OF ATTACHMENTS Annotated and Re-typed Pages of PVNGS Licenses Reflecting Conforming Administrative License Amendments Associated With Proposed Transfer of PVNGS Operating Licenses from APS to PWE Licensee's Evaluation of Conforming Administrative License Amendments Associated With Proposed Transfer of PVNGS Operating Licenses from APS to PWE PWE Nuclear Organization Chart PWE Financial Projections (Non-Proprietary Version) Affirmation of James M. Levine 10 C.F.R. § 2.790 Affidavit of James M. Levine Addendum A PWE Financial Projections (Proprietary Version) iii

I. INTRODUCTION This Application requests the consent of the Nuclear Regulatory Commission

("NRC") to the transfer of ownership and operating interests in the Palo Verde Nuclear Generating Station Units 1, 2, and 3 ("PVNGS") currently held by Arizona Public Service Company ("APS") to Pinnacle West Energy Corporation ("PWE") (collectively, the "Applicants"). Specifically, the Applicants request that the NRC issue an order consenting to the transfer of APS's 29.1 % undivided ownership interest and operating authority for PVNGS to PWE. PVNGS is composed of three 1270 MWe (net) nuclear power plants, each consisting of a Combustion Engineering ("CE") Pressurized Water Reactor ("PWR"), a General Electric ("GE") steam turbine and other associated plant equipment, and other related site facilities. PVNGS is located in Tonopah, Arizona, 55 miles west of downtown Phoenix. Pursuant to the PVNGS Participation Agreement, the three units are jointly owned by seven entities in the following percentages:

OWNER %OWNERSHIP INTEREST Arizona Public Service Company 29.10 Salt River Project Agricultural 17.49 Improvement and Power District El Paso Electric Company 15.80 Southern California Edison Company 15.80 Public Service Company of New Mexico 10.20 Southern California Public Power Authority 5.91 Los Angeles Department of Water and Power 5.70 Pursuant to the PVNGS Participation Agreement, APS currently acts as the Operating Agent for PVNGS, and it operates the facility on behalf of all the owners in accordance with the operating licenses issued by the NRC. The Applicants request that NRC consent to this transfer and authorize PWE to own and operate each PVNGS unit 1

under essentially the same conditions and authorizations included in the existing NRC operating licenses for these units.

No physical changes will be made to PVNGS as a result of this transfer, nor will there be any changes in the licensing basis for PVNGS or the day-to-day management or operation of PVNGS. The current plant organization, the oversight organizations, and the engineering and support organizations all will be transferred essentially intact to PWE. The Applicants also request the NRC to approve certain conforming administrative amendments to the PVNGS license to reflect the proposed transfer.

Annotated and re-typed pages of the PVNGS Licenses showing the conforming amendments are presented in Attachment 1. Licensee's Evaluation of the conforming amendments confirming that these amendments do no more than reflect the proposed transfer is provided in Attachment 2.

II. STATEMENT OF PURPOSE OF THE TRANSFER AND NATURE OF THE TRANSACTION MAKING THE TRANSFER NECESSARY OR DESIRABLE Pursuant to the restructuring requirements imposed on electric utilities in Arizona under the Retail Electric Competition Rules adopted by the Arizona Corporation Commission ("ACC"), APS is required to legally separate its electric generation supply business (i.e. generation and power sales) from its transmission and distribution business and phase in competition in its service territory for generation supply at the retail level during the period from January 1, 1999 to December 31, 2002. A.A.C. Rules 14-2-1601 through 14-2-1617. APS is therefore transferring all of its fossil-fired and nuclear generating facilities to PWE, including its interests in PVNGS, in accordance with the terms of the APS restructuring settlement agreement, dated May 14, 1999 2

("Settlement Agreement"), which was approved by the ACC in ACC Opinion and Order, Decision 61973, on October 6, 1999.-1 IlI. GENERAL CORPORATE INFORMATION REGARDING PWE A. Name of Proposed New Licensee Pinnacle West Energy Corporation B. Address 400 North Fifth Street, Phoenix, AZ 85004 C. Description of Business or Occupation PWE is a corporation organized under the laws of the State of Arizona engaged in the development, ownership, and operation of electric generating facilities and the sale of electric power at wholesale. PWE, like APS, is a direct, wholly-owned subsidiary of Pinnacle West Capital Corporation ("PNW").2 Upon the completion of the transfer of the APS generating facilities to PWE, PWE will own approximately 5300 MWe of generating capacity and operate all of the nuclear and fossil-fired generating facilities currently being operated by APS.

The Retail Electric Competition Rules approved by the ACC, A.A.C. R14-2-1601 to 1617, were appealed by several parties and a trial court decision that the Rules are constitutionally deficient is being reviewed by the Arizona Court of Appeals. However, the Rules have not been stayed, and the Settlement Agreement approved by the ACC provides APS with the authority to transfer its generation assets to PWE independent of the current legal status of the Rules.

PNW is an Arizona corporation and a public utility holding company which holds an exemption under the Public Utility Holding Company Act of 1935, as amended

("PUHCA"), as an "intrastate" holding company pursuant to Section 3(a)(1) of PUHCA. The proposed transfer of APS's interests in PVNGS to PWE will not result in any change in the ownership, management or operation of PNW.

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D. Organization and Management

1. State of Incorporation and Place of Business PWE is an Arizona corporation with its principal place of business located in the State of Arizona at 400 North Fifth Street, Phoenix, Arizona 85004.

2. Directors and Principal Officers The names, titles, and mailing addresses of the individuals who will be the principal officers of PWE upon the completion of the transfer of APS's generating facilities to PWE, all of whom are citizens of the United States, are set forth below.

Name of Officer Title William L. Stewart President James M. Levine Chief Operating Officer and Chief Nuclear Officer Gregg R. Overbeck Senior Vice President, Nuclear William Ide Vice President, Nuclear Production Carl D. Mauldin Vice President, Nuclear Engineering and Support John Denman Vice President, Fossil Ajoy K. Banerjee Vice President, Generation Expansion Ajit P. Bhatti Vice President, Generation Planning Warren Kotzmann Vice President, Business and Corporate Services Faye Widenmann Secretary Barbara M. Gomez Treasurer The business address for the PWE officers is 400 North Fifth Street, Phoenix AZ 85004.

The names and addresses of the individuals who are directors of PWE, all of whom are citizens of the United States, are set forth below.

Names of Directors William J. Post (Chairman)

Eddie Basha Jack E. Davis Michael L. Gallagher Pamela Grant 4

Roy A. Herberger, Jr.

Martha 0. Hesse William S. Jamieson, Jr.

Humberto S. Lopez Robert G. Matlock Kathryn L. Munro Bruce J. Nordstrom William L. Stewart The business address for the PWE directors is 400 North Fifth Street, Phoenix, AZ 85004.3 IV. TECHNICAL QUALIFICATIONS The technical qualifications of PWE to carry out its responsibilities under the Operating Licenses for PVNGS, as amended, will be at least equivalent to the present technical qualifications of APS. Upon NRC approval of the license transfer and the effectiveness of the conforming license amendments, PWE will assume responsibility for, and control over, the operation and maintenance of PVNGS. The present PVNGS plant organization, the oversight organizations and the engineering and support a PNW's principal place of business is also located at 400 North Fifth Street, Phoenix, Arizona 85004. The names and titles of the principal senior officers of PNW are as follows:

Name of Officer Title William J. Post Chairman of the Board of Directors and Chief Executive Officer Jack E. Davis President Armando B. Flores Executive Vice President, Corporate Business Services Nancy C. Loftin Vice President & General Counsel Michael V. Palmeri Vice President, Finance Chris N. Froggatt Vice President & Controller Faye Widenmann Secretary Barbara M. Gomez Treasurer The directors of PWE also serve as the directors of PNW. All of the principal senior officers and directors of PNW are citizens of the United States. The business address for the officers and directors of PNW is 400 North Fifth Street, Phoenix, AZ 85004.

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organizations all will be transferred essentially intact from APS to PWE.

A central objective in planning the proposed transfer of employees and operating responsibility from APS to PWE has been to ensure there will be no disruption in the operation or maintenance of the plants, ongoing plant improvement plans and initiatives, or the integrity of the existing operating organizations. The Applicants anticipate that, consistent with applicable NRC requirements, some current employees of PNW and APS may remain as employees of those companies and continue to serve the same functions at PVNGS pursuant to service agreements among PWE, PNW and APS.

Additionally, some current PNW or APS employees may become employees of PWE prior to the effective date of the transfer of operating authority to PWE and, consistent with applicable NRC requirements, provide services to APS prior to the transfer.

When the proposed amendments become effective, PWE will operate, manage, and maintain PVNGS in accordance with the terms and requirements established by the NRC with the same regard for public and personnel safety heretofore exemplified by APS. The PVNGS nuclear operating organization will remain essentially intact with the only significant change being that the Chief Nuclear Officer will report directly to the President of PWE rather than the President of APS Generation.

An organizational chart showing the key positions and functions in the PWE nuclear operating organization is contained in Attachment 3.

V. FOREIGN OWNERSHIP, CONTROL AND DOMINATION The shares of common stock of PNW are publicly traded on the New York Stock Exchange and are widely held. PWE is a direct wholly-owned subsidiary of PNW. All of the directors and officers of PNW and PWE are U.S. citizens. Neither PNW nor PWE is 6

owned, controlled, or dominated by any alien, foreign corporation or foreign government. Based upon filings with the Securities and Exchange Commission

("SEC"), neither PNW nor PWE is aware of any alien, foreign corporation or foreign government which holds more than 5% of the securities of PNW.

VI. FINANCIAL QUALIFICATIONS OF PWE As specified in its NRC licenses, APS is currently licensed pursuant to Section 103 of the Atomic Energy Act of 1954, as amended ("AEA") and 10 C.F.R. Part 50 to hold a 29.1% undivided ownership interest in PVNGS and to operate PVNGS. Under 10 C.F.R. § 50.33(f), "electric utilities" licensed pursuant to Section 103 of the AEA are exempt from the requirement to demonstrate financial qualifications. The Applicants believe that PWE will be an "electric utility" under 10 C.F.R. § 50.2, since it will recover its costs through wholesale sales of the power generated at PVNGS and PWE's other generating facilities at "just and reasonable" rates subject to regulation by the Federal Energy Regulatory Commission ("FERC") under § 205 of the Federal Power Act. In this regard, PWE's share of the output from PVNGS and the power produced at PWE's other generating facilities will be sold to PNW under power sale agreements between PWE and PNW. PNW, in turn, will resell power which it purchases from PWE to APS and other wholesale customers.

Even if PWE were not considered an "electric utility," as that term is currently defined in 10 C.F.R. § 50.2, PWE has reasonable assurance of obtaining the funds necessary to cover its estimated pro rata share of the costs of operating PVNGS over the remaining term of the PVNGS licenses through its power sales, as shown in PWE's financial projections in Attachment 4A, which is contained in a separately bound 7

proprietary Addendum to this Application. (A redacted version of these financial projections suitable for public disclosure is provided as Attachment 4). A projected balance sheet for PWE upon the transfer of APS's generating facilities to PWE, which is also confidential, is provided in Attachment 4A. (A redacted version of this projected balance sheet, suitable for public disclosure, is provided as Attachment 4). Pursuant to 10 C.F.R. §§ 2.790 (a)(4), 2.790(b)(1), and 9.17(a)(4), APS requests that Attachment 4A to this application be withheld from public disclosure because it contains confidential commercial and financial information. This request is supported by the 10 CFR § 2.790 Affidavit of James M. Levine provided as Attachment 6.

In accordance with 10 C.F.R. § 50.33(f)(2), PWE's financial projections contain estimates of the PVNGS operating costs for each of the next five years and PWE's projected power sales revenues from PVNGS during this period demonstrating that these revenues will be more than sufficient to cover its share of these costs. These financial projections demonstrate that PWE will have adequate financial resources to safely operate PVNGS, cover PWE's pro rata share of the fixed operating costs at PVNGS over an extended outage, and fulfill its other financial obligations as an NRC licensee under 10 C.F.R. Part 140, 10 C.F.R. § 50.54(w), and other applicable NRC regulations.

VII. DECOMMISSIONING FUNDING ASSURANCE When APS's interests in PVNGS are transferred to PWE, APS will also assign its decommissioning trusts and decommissioning trust funds for PVNGS to PWE. PWE will maintain these decommissioning trust funds under the terms of the PVNGS Decommissioning Trust Agreements in external sinking funds segregated from its other 8

assets and outside its administrative control in accordance with the requirements of 10 C.F.R. § 50.75(e)(1)(i) and (ii).

Pursuant to the terms of the ACC's Retail Electric Competition Rules and the APS Settlement Agreement, PWE will continue to have access to funds from ratepayers to recover the cost of decommissioning the 29.1% interest in PVNGS through a non bypassable charge collected by APS as part of the APS System Benefit Charge approved by the ACC. APS will deposit the amounts collected from ratepayers for this purpose into the PVNGS decommissioning trusts maintained by PWE or transfer such amounts to PWE for deposit into these trusts. The combination of the decommissioning trust funds assigned by APS to PWE at the time of the license transfer, and the continued collection of a "non-bypassable charge" from ratepayers within the meaning of 10 C.F.R. § 50.75(e)(1)(ii)(B), provides adequate assurance that sufficient funds will be available when needed for PWE's pro rata share of the PVNGS decommissioning costs pursuant to 10 C.F.R. § 50.75. PWE will ensure that these decommissioning funding arrangements remain in place until the decommissioning trusts are fully funded, or ensure that other mechanisms that provide equivalent assurance of decommissioning funding in accordance with the Commission's regulations are maintained.

In addition, the PVNGS Decommissioning Trust Agreements will remain in a form that is acceptable to the NRC, but will be modified, as necessary, to provide that: (a) investments in the securities or other obligations of PNW, PWE, and their affiliates, successors, or assigns shall be prohibited; (b) except for investments tied to market indices or other non-nuclear sector mutual funds, investments in any entity owning one or more nuclear power plants shall be prohibited; (c) investments made in the trusts 9

shall adhere to the investment guidelines established by the ACC and the "prudent investor' standard set forth in the regulations of the FERC; (d) except for taxes and administrative costs, no disbursements or payments from the trusts shall be made by the trustee unless the trustee has first provided thirty days' prior written notice of such disbursement or payment to the NRC and the trustee has not received written notice of objection from the NRC Director, Office of Nuclear Reactor Regulation, by the later of (1) the date that is thirty days after the giving of such notice; or (2) the date of disbursement or payment; and (e) the Decommissioning Trust Agreements may not be modified in any material respect without first providing thirty days' prior written notice to the NRC Director, Office of Nuclear Reactor Regulation. Additionally, PWE will take all necessary steps to ensure that the decommissioning trusts are maintained in accordance with this Application and applicable NRC requirements.

VIII. ANTITRUST CONSIDERATIONS In accordance with the Commission's decision in Kansas Gas and Electric Company (Wolf Creek Generating Station, Unit 1) CLI-99-19, 49 NRC 441 (1999) and the recent amendment to 10 C.F.R. § 50.90 (65 Fed. Reg. 44649, July 19, 2000),

antitrust reviews of post-operating license transfer applications are not required. For this reason, the NRC need not consider any antitrust issues in connection with this application.

IX. RESTRICTED DATA AND CLASSIFIED NATIONAL SECURITY INFORMATION The proposed transfer does not involve any Restricted Data or other Classified National Security Information or any change in access to such Restricted Data or Classified National Security Information. The existing restrictions on access to 10

Restricted Data and Classified National Security Information applicable to APS will remain unaffected by the proposed transfer to PWE, and will apply to PWE in the future.

X. OTHER ISSUES A. Public Health, Safety and Welfare Considerations The proposed conforming license amendments will designate PWE as a licensee and authorize PWE to manage, operate and maintain PVNGS on behalf of the licensed owners. The license amendments will not affect the physical configuration of the facility or the Technical Specifications under which PVNGS operates. Moreover, as described in this Application, the technical qualifications of PWE to operate PVNGS will be at least equivalent to those of APS. The proposed license amendments will, therefore, not have an adverse impact on the public health, safety and welfare.

B. Emergency Planning Upon consummation of the license transfer, PWE will assume authority and responsibility for functions necessary to fulfill the emergency planning requirements specified in 10 C.F.R. § 50.47(b) and Part 50, Appendix E. No substantive changes will be made to the existing PVNGS Emergency Plan presently implemented by APS, nor will there be any changes to the existing Emergency Response Organization as a result of these proposed amendments.

Following the assumption of operating responsibility by PWE, emergency planning support will be provided by PNW and APS as needed. To the extent that personnel, resources, and facilities currently used for emergency planning functions are not being transferred to PWE, PNW and APS will continue to provide the personnel, resources and facilities necessary to perform these functions. These functions will be 11

thoroughly reviewed, and the required support will be assured by support agreements between PWE, PNW, and APS as necessary to support the PVNGS Emergency Plan.

Long-term utilization of any PNW or APS resources in these areas will be based on cost-effectiveness and existing relationships with offsite organizations and agencies.

Appropriate action will also be taken with respect to existing agreements for support from organizations and agencies not affiliated with the licensed owners, to notify the parties to such agreements of PWE's relationship with the other owners and PWE's responsibilities for management and operation of PVNGS. This notification will be accomplished prior to the license transfer.

In sum, the proposed license amendments will not impact compliance with the emergency planning requirements. Because the effectiveness of the Emergency Plan will not be decreased, specific emergency plan and procedure changes to reflect the change in the entity responsible for plant operation will be submitted to the NRC after the changes are made, in accordance with 10 C.F.R. § 50.54(q) and Appendix E,Section V, as appropriate.

C. Off-site Power Offsite power is currently provided to PVNGS over transmission facilities owned or controlled by APS and the other PVNGS owners. The existing contractual agreements will be amended to assure that these arrangements will not change as a result of the transfer of ownership and operational control requested by this application.

The proposed license amendments to authorize assumption of partial ownership and operating responsibility by PWE will not result in any material change in the design of the offsite power system for PVNGS, or in its operation, maintenance or testing. Upon 12

consummation of the license transfer, APS and the other PVNGS owners will continue to provide transmission access to PVNGS to assure continued compliance with General Design Criterion ("GDC") 17. Based on the foregoing, there is adequate assurance that independent sources of off-site power will continue to be provided to PVNGS.

D. Exclusion Area The PVNGS owners control all surface and subsurface property rights within the exclusion area boundary of PVNGS. The PVNGS Participation Agreement provides APS, as the Operating Agent for PVNGS, with the authority to exercise control over the exclusion area and all activities within that area. Upon NRC approval of the license transfer and conforming administrative amendments authorizing the transfer of operating responsibility for PVNGS to PWE and receipt of the other required approvals, PWE will have the authority to control all activities within the PVNGS exclusion area, to the extent required by 10 C.F.R. Part 100.

E. Security Upon consummation of the license transfer, PWE will assume authority and responsibility for the functions necessary to fulfill the security planning requirements specified in 10 C.F.R. Part 73. APS does not anticipate any substantive changes to the existing NRC-approved physical security, guard training and qualifications, and safeguards contingency plans in connection with the license transfer. Any changes that do occur, or necessary conforming changes, will be made in accordance with 10 C.F.R.

§ 50.54(p). Transition plans will be established to ensure that the support described in the existing security plans will be maintained following the transfer.

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The Applicants anticipate that no substantive changes will be made to the existing on-site security organization. However, certain corporate support and/or corporate oversight functions may be changed, transferred on site, or transferred to a corporate support organization. Persons assigned to perform these functions will meet the same qualification requirements as the existing responsible corporate support personnel.

Existing agreements for support from organizations and agencies not affiliated with APS will be assigned to PWE, as necessary. APS plans to notify the parties to such agreements in advance of the transfer of the licenses to PWE and to advise those parties of PWE's responsibility for management and operation of PVNGS. Thus, the proposed license transfer will not impact compliance with physical security requirements.

F. Quality Assurance Program Upon consummation of the license transfer, PWE will assume authority and responsibility for the functions necessary to fulfill the quality assurance requirements of 10 C.F.R. Part 50, Appendix B. APS anticipates that it will transfer all of the current functions and personnel of the existing QA organization to PWE. The Applicants do not anticipate any substantive changes to the existing Quality Assurance Plans, but any changes that do occur will be made in accordance with 10 C.F.R. §50.54(a).

G. Updated Final Safety Analysis Report With the exception of areas discussed in this license amendment application, the proposed license amendments will not change or invalidate any information presently appearing in the PVNGS Updated Final Safety Analysis Report ("UFSAR") and all licensing basis commitments will remain in effect. Revisions to the UFSAR necessary 14

to reflect the assumption of operating authority by PWE will be incorporated into the UFSAR following NRC approval in accordance with 10 C.F.R. § 50.71(e).

H. Training The proposed license amendments will not impact compliance with the operator requalification program requirements of 10 C.F.R. § 50.54 and related sections, nor maintenance of the Institute of Nuclear Power Operations accreditation for licensed and non-licensed personnel training. Upon assumption of operating responsibility for PVNGS, PWE will assume ultimate responsibility for implementation of present training programs. Changes to the programs to reflect the transition will not decrease the scope of the approved operator requalification program in accordance with 10 C.F.R.

§ 50.54(i).

XI. ENVIRONMENTAL CONSIDERATIONS The requested approval for transfer of the PVNGS operating licenses and accompanying administrative amendments are exempt from environmental review because they fall within the categorical exclusion contained in 10 C.F.R. § 51.22(c)(21) for which neither an Environmental Assessment nor an Environmental Impact Statement is required. Moreover, the proposed transfer does not involve any amendment to the facility operating licenses or other change that would substantially alter the actual operation of PVNGS. The proposed transfer and changes to the facility operating licenses do not involve an increase in the amounts, or a change in the types, of any radiological effluents that may be allowed to be released off-site, and involve no increase in the amounts or change in the types of non-radiological effluents that may be released off-site. Further, there is no increase in the individual or cumulative 15

operational radiation exposure, and the proposed transfer and facility operating license changes have no environmental impact.

XII. PRICE-ANDERSON INDEMNITY AND NUCLEAR INSURANCE As a result of the transfers, PWE will become responsible for the nuclear insurance for the PVNGS site as well as the required property insurance. Accordingly, PWE requests that the NRC issue a new Price Anderson indemnity agreement to PWE upon consenting to the license transfers. The conforming changes (to reflect the transfer of APS's ownership interest and operating responsibility for PVNGS to PWE) to all required nuclear property and nuclear liability insurance policies will be made effective upon the date of the license transfer. The information provided in connection with PWE's financial qualifications demonstrates that PWE will be able to pay a maximum aggregate annual assessment of $8.73 million (its proportionate share of $10 million per unit) in retrospective premiums under the secondary layer of insurance required under the Price-Anderson Act in compliance with 10 C.F.R. §140.21(e)-(f).

XIII. OTHER RELATED APPROVALS The Applicants have already received the regulatory approvals and rulings required from the ACC, FERC, and the SEC in connection with the proposed transfer of APS's fossil-fired and nuclear generating facilities, including its PVNGS interests, to PWE.4 The Applicants also plan to seek a ruling from the Internal Revenue Service with respect to the assignment of the decommissioning funds and obtain any consents or approvals required in connection with the designation of PWE as the Operating Agent Under the terms of the ACC Opinion and Order approving the Settlement Agreement, APS is required to provide the ACC with 30 days advance notice of the proposed transfer date.

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for PVNGS under the PVNGS Participation Agreement and the transfer of APS's interests in PVNGS to PWE under the sale-leaseback agreements related to a portion of APS's ownership interest in PVNGS Unit 2. In a related matter, APS is seeking a variance from the ACC under the Retail Electric Competition Rules and the approval of a long-term power sales agreement between APS and PNW which would extend the phase-in period for the transition to competitive bidding after APS's generating facilities are transferred to PWE.

XIV. EFFECTIVE DATE PWE and APS request that the NRC review this Application on a schedule that will permit the transfer of the licenses, and approval of the conforming administrative license amendments as promptly as possible and, in any event, before October 15, 2002. The Applicants also request that NRC's consent to the transfer of APS's 29.1% ownership interest and operating authority from PVNGS to PWE be made immediately effective upon issuance, and permit the transfer and implementation date of the conforming amendments to occur at any time up until December 31, 2003, or such later date as the NRC may permit. It is also requested that the conforming amendments be made effective on the date of the transfer. The Applicants will keep the NRC informed of any regulatory or the other developments that have an impact on the schedule.

XV. CONCLUSION For the reasons stated above, the Applicants respectfully submit that the proposed transfer of APS's interests in PVNGS to PWE is consistent with the requirements set forth in the AEA, NRC regulations and the relevant NRC licenses and 17

orders. The Applicants therefore respectfully request that, in accordance with Section 184 of the AEA and 10 C.F.R. § 50.80, the NRC consent to the transfer of control of APS's NRC licenses for PVNGS to PWE and approve the conforming administrative amendments to the PVNGS licenses to reflect this transfer.

18

ATTACHMENT 1 ANNOTATED AND RE-TYPED PAGES OF PVNGS LICENSES REFLECTING CONFORMING ADMINISTRATIVE LICENSE AMENDMENTS ASSOCIATED WITH PROPOSED TRANSFER OF PVNGS OPERATING LICENSES FROM APS TO PWE

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555-0001 ARIZONA PUBLIC SERVICE COMPANYPINNACLE WEST ENERGY CORPORATION SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT EL PASO ELECTRIC COMPANY SOUTHERN CALIFORNIA EDISON COMPANY PUBLIC SERVICE COMPANY OF NEW MEXICO LOS ANGELES DEPARTMENT OF WATER AND POWER SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY DOCKET NO. STN 50-528 PALO VERDE NUCLEAR GENERATING STATION, UNIT 1 FACILITY OPERATING LICENSE License No. NPF-41

1. The Nuclear Regulatory Commission (the Commission or the NRC) has found that:

A. The application for license filed by, Aizena Public ScriFve Compan Pinnacle West Energy Corporation1 , on behalf of itself and the Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees), complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's regulations set forth in 10 CFR Chapter I and all required notifications to other agencies or bodies have been duly made; B. Construction of the Palo Verde Nuclear Generating Station, Unit 1 (facility) has been substantially completed in conformity with Construction Permit No.

CPPR-141 and the application, as amended, the provisions of the Act and the regulations of the Commission; C. The facility will operate in conformity with the application, as amended, the provisions of the Act, and the regulations of the Commission (except as exempted from compliance in Section 2.D below);

'The application was originally filed by Arizona Public Service Company, which subsequently transferred its interests in the Palo Verde Nuclear Generating Station to Pinnacle West Energy Corporation on [insert effective date of this amendment].

Amendment No. 4-28 I

D. There is reasonable assurance: (i) that the activities authorized by this operating license can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations set forth in 10 CFR Chapter I (except as exempted from compliance in Section 2.D below);

E. Arizona Public Sc.-ic; Company.Pinnacle West Energy Corporation2 is technically qualified to engage in the activities authorized by this operating license in accordance with the Commission's regulations set forth in 10 CFR Chapter I; F. The licensees have satisfied the applicable provisions of 10 CFR Part 140, "Financial Protection Requirements and Indemnity Agreements", of the Commission's regulations; G. The issuance of this license will not be inimical to the common defense and security or to the health and safety of the public; H. After weighing the environmental, economic, technical, and other benefits of the facility against environmental and other costs, and after considering available alternatives, the issuance of this Facility Operating License No.

NPF-41, subject to the conditions for protection of the environment set forth in the Environmental Protection Plan attached as Appendix B, is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied; and

1. The receipt, possession, and use of source, byproduct and special nuclear material as authorized by this license will be in accordance with the Commission's regulations in 10 CFR Parts 30, 40 and 70.

2. Pursuant to approval by the Nuclear Regulatory Commission at a meeting held on May 30, 1985, the license for fuel loading and low power testing, License No.

NPF-34, issued on December 31, 1984, is superseded by Facility Operating License No. NPF-41 hereby issued to the A.*iZna Public Se.** , C*'mpani. Pinnacle West Enerqy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees) to read as follows:

"22 AriZE..a Public S,*e.,; Company.. Pinnacle West Energy Corporation is authorized to act as agent for Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority and has exclusive responsibility and control over the physical construction, operation and maintenance of the facility.

Amendment No. I

A. This license applies to the Palo Verde Nuclear Generating Station, Unit 1, a pressurized water reactor and associated equipment (facility) owned by the licensees. The facility is located on the licensees' site in Maricopa County, Arizona and is described in the licensees' Final Safety Analysis Report, as supplemented and amended; in the related CESSAR Final Safety Analysis Report, as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; and in their Environmental Report, as supplemented and amended through Supplement No. 4.

B. Subject to the conditions and requirements incorporated herein, the Commission hereby licenses:

(1) Pursuant to Section 103 of the Act and 10 CFR Part 50, AF*ZGRa Public Sevico CompanyPinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority to possess, and Ar*iZOa Public ScrYO*,Company (APS). Pinnacle West Energy Corporation to use and operate the facility at the designated location in Maricopa County, Arizona, in accordance with the procedures and limitations set forth in this license; (2) Pursuant to the Act and 10 CFR Part 70, APS--Pinnacle West Energy Corporation to receive, possess and use at any time special nuclear material as reactor fuel, in accordance with the limitations for storage and amounts required for reactor operation, as described in the licensees' Final Safety Analysis Report, as supplemented and amended and the CESSAR Final Safety Analysis Report as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; (3) Pursuant to the Act and 10 CFR Parts 30, 40 and 70, AP-S-Pinnacle West Energy Corporation to receive, possess and use at any time any byproduct, source and special nuclear material as sealed neutron sources for reactor startup, sealed sources for reactor instrumentation and radiation monitoring equipment calibration, and as fission detectors in amounts as required; (4) -Pursuant to the Act and 10 CFR Part 30, 40 and 70, APS-Pinnacle West Energy Corporation to receive, possess and use in amounts as required any byproduct, source or special nuclear material without restriction to chemical or physical form, for sample analysis or instrument calibration or associated with radioactive apparatus or components; and (5) Pursuant to the Act and 10 CFR Parts 30, 40, and 70, APS-Pinnacle West Energy Corporation to possess, but not separate, such byproduct and special nuclear materials as may be produced by the operation of the facility.

Amendment No. 4-2-8

(6)(a) Pursuant to an Order of the Nuclear Regulatory Commission dated December 12, 1985, the Public Service Company of New Mexico (PNM) was authorized to transfer a portion of its ownership share in Palo Verde, Unit 1 to certain institutional investors on December 31, 1985, and at the same time has leased back from such purchasers the same interest in the Palo Verde, Unit 1 facility. The term of the lease is to January 15, 2015, subject to a right of renewal. Additional sale and leaseback transactions (for a term expiring on January 15, 2015) of all or a portion of PNM's remaining ownership share in Palo Verde Unit 1 are hereby authorized until June 30, 1987. Any such sale and leaseback transaction is subject to the representations and conditions set forth in the aforementioned applications of October 19, 1985, February 5, 1986, October 16, 1986 and November 26, 1986, and the Commission's Order of December 12, 1985, consenting to such transactions. Specifically, the lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde Nuclear Generating Station, Unit 1. For purposes of this condition, the limitations in 10 CFR 50.81, "Creditor Regulations," as now in effect and as they may be subsequently amended, are fully applicable to the lessor and any successor in interest to that lessor as long as the license for Palo Verde, Unit 1 remains in effect; this financial transaction shall have no effect on the license for the Palo Verde nuclear facility throughout the term of the license.

(b) Further, the licensees are also required to notify the NRC in writing prior to any change in: (i) the terms or conditions of any lease agreements executed as part of this transaction; (ii) the ANPP Participation Agreement, (iii) the existing property insurance coverage for the Palo Verde nuclear facility, Unit 1 as specified in license counsel's letter of November 26, 1985, and (iv) any action by the lessor or others that may have an adverse effect on the safe operation of the facility.

C. This license shall be deemed to contain and is subject to the conditions specified in the Commission's regulations set forth in 10 CFR Chapter I and is subject to all applicable provisions of the Act and to the rules, regulations, and orders of the Commission now or hereafter in effect; and is subject to the additional conditions specified or incorporated below:

(1) Maximum Power Level Ar^izna Public, ,,rc Comp.n. (APS) Pinnacle West Enerqy Corporation is authorized to operate the facility at reactor core power levels not in excess of 3876 megawatts thermal (100% power) in accordance with the conditions specified herein.

Amendment No. 41 1T88 o- 28 I

(2) Technical Specifications and Environmental Protection Plan The Technical Specifications contained in Appendix A, as revised through Amendment No.43 .... _, and the Environmental Protection Plan contained in Appendix B, are hereby incorporated into this license. -APS Pinnacle West Energy Corporation shall operate the facility in accordance with the Technical Specifications and the Environmental Protection Plan, except where otherwise stated in specific license conditions.

(3) Antitrust Conditions This license is subject to the antitrust conditions delineated in Appendix C to this license.

(4) Operating Staff Experience Requirements Deleted (5) Post-Fuel-Loading Initial Test Program (Section 14, SER and SSER 2)"

Deleted (6) Environmental Qualification Deleted (7) Fire Protection Program APS-Pinnacle West Energy Corporation shall implement and maintain in effect all provisions of the approved fire protection program as described in the Final Safety analysis Report for the facility, as supplemented and amended, and as approved in the SER through Supplement 11, subject to the following provision:

APS-Pinnacle West Enermy Corporation may make changes to the approved fire protection program without prior approval of the Commission only if those changes would not adversely affect the ability to achieve and maintain safe shutdown in the event of a fire.

(8) Emergency Preparedness Deleted "The parenthetical notation following the title of many license conditions denotes the section of the Safety Evaluation Report and/or its supplements wherein the license condition is discussed.

Amendment No. 32, 33, 8*, 1! &,42 8 I

(9) Results of Piping Vibration Test Program (Section 3.9.2. SER)

Deleted (10) Response to Salem ATWS Event (Section 7.2. SSER 7, and Section 1.11. SSER 8)

Deleted (11) Supplement No. 1 to NUREG-0737 Requirements Deleted (12) Radiochemistry Laboratory (Section 7.3.1.5(3), Emergency Plan)

Deleted (13) RCP Shaft Vibration Monitoring Program (Section 5.4.1. SSER 12)

Deleted (14) Additional Conditions Deleted D. The facility requires an exemption from Paragraph IIl.D.2(b)(ii) of Appendix J to 10 CFR Part 50 (Section 6.2.6, SSER 7). This exemption is authorized by law and will not endanger life or property or the common defense and security and is otherwise in the public interest. This exemption is, therefore, hereby granted pursuant to 10 CFR 50.12. With the granting of this exemption, the facility will operate, to the extent authorized herein, in conformity with the application, as amended, the provisions of the Act, and the rules and regulations of the Commission.

E. The licensees shall fully implement and maintain in effect all provisions of the Commission-approved physical security, guard training and qualification, and safeguards contingency plans including amendments made pursuant to provisions of the Miscellaneous Amendments and Search Requirements revisions to 10 CFR 73.55 (51 FR 27817 and 27822) and to the authority of 10 CFR 50.90 and 10 CFR 50.54(p). The Safeguard Contingency Plan is incorporated into the Physical Security Plan. The plans, which contain Safeguards Information protected under 10 CFR 73.21, are entitled: "Palo Verde Nuclear Station Physical Security Plan," with revisions submitted through March 18, 1997; and "Palo Verde Nuclear Generating Station Guard Training and Qualification Plan," with revisions submitted through December 26, 1987. Changes made in accordance with 10 CFR 73.55 shall be implemented in accordance with the schedule set forth therein.

Amendment No. 32,33,84,114, 11&428_ I

F. Except as otherwise provided in the Technical Specifications or the Environmental Protection Plan, APS-Pinnacle West Energy Corporation shall report any violations of the requirements contained in Section 2.C of this license in the following manner: Initial notification shall be made within 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> in accordance with the provisions of 10 CFR 50.72 with written follow up within 30 days in accordance with the procedures described in 10 CFR 50.73(b), (c) and (e);

G. The licenses shall have and maintain financial protection of such type and in such amounts as the Commission shall require in accordance with Section 170 of the Atomic Energy Act of 1954, as amended, to cover public liability claims; and H. This license is effective as of the date of issuance and shall expire at midnight on December 31, 2024.

FOR THE NUCLEAR REGULATORY COMMISSION Original Signed By Harold R. Denton, Director Office of Nuclear Reactor Regulation

Enclosures:

1. Attachment 1 - [Requirements for Initial Mode 1 Entry] - Deleted

2. Attachment 2 - [Operating Staff Experience Requirements] - Deleted

3. Attachment 3 - [Emergency Response Capabilities] - Deleted

4. Appendix A Technical Specifications

5. Appendix B Environmental Protection Plan

6. Appendix C Antitrust Conditions

7. Appendix D - [Additional Conditions] - Deleted Date of Issuance: June 1, 1985 Amendment No. 111, 4.*-8

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555 ARIZONA PUBLIC SERVICE COMPANYPINNACLE WEST ENERGY CORPORATION SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT EL PASO ELECTRIC COMPANY SOUTHERN CALIFORNIA EDISON COMPANY PUBLIC SERVICE COMPANY OF NEW MEXICO LOS ANGELES DEPARTMENT OF WATER AND POWER SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY DOCKET NO. STN 50-529 PALO VERDE NUCLEAR GENERATING STATION, UNIT 2 FACILITY OPERATING LICENSE License No. NPF-51

1. The Nuclear Regulatory Commission (the Commission or the NRC) has found that:

A. The application for license filed by A^izona Public ScrY,.c Compan;yýinnacle West Energy Corporation1 , on behalf of itself and the Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees), complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's regulations set forth in 10 CFR Chapter I and all required notifications to other agencies or bodies have been duly made; B. Construction of the Palo Verde Nuclear Generating Station, Unit 2 (facility) has been substantially completed in conformity with Construction Permit No.

CPPR-142 and the application, as amended, the provisions of the Act and the regulations of the Commission; C. The facility will operate in conformity with the application, as amended, the provisions of the Act, and the regulations of the Commission (except as exempted from compliance in Section 2.D below);

'The application was originally filed by Arizona Public Service Company, which subsequently transferred its interests in the Palo Verde Nuclear Generatinq Station to Pinnacle West Energy Corporation on [insert effective date of this amendment].

Amendment

D. There is reasonable assurance: (i) that the activities authorized by this operating license can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations set forth in 10 CFR Chapter I (except as exempted from compliance in Section 2.D below);

E. AriZon.a Publi. Ser.ic. CompanyPinnacle West Enerqy Corporation"-2 is technically qualified to engage in the activities authorized by this operating license in accordance with the Commission's regulations set forth in 10 CFR Chapter I; F. The licensees have satisfied the applicable provisions of 10 CFR Part 140, "Financial Protection Requirements and Indemnity Agreements", of the Commission's regulations; G. The issuance of this license will not be inimical to the common defense and security or to the health and safety of the public; H. After weighing the environmental, economic, technical, and other benefits of the facility against environmental and other costs, and after considering available alternatives, the issuance of this Facility Operating License No.

NPF-51, subject to the conditions for protection of the environment set forth in the Environmental Protection Plan attached as Appendix B, is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied; and

1. The receipt, possession, and use of source, byproduct and special nuclear material as authorized by this license will be in accordance with the Commission's regulations in 10 CFR Parts 30, 40 and 70.

2. Pursuant to approval by the Nuclear Regulatory Commission at a meeting held on April 23, 1986, the license for fuel loading and low power testing, License No.

NPF-46, issued on December 9, 1985, is superseded by Facility Operating License No. NPF-51 hereby issued to the Arizoa Public Seric,o

• man,*y*Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees) to read as follows:

tAA-ri-_on. Public Sc"ircc Com..pany Pinnacle West Energy Corporation is authorized to act as agent for Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority and has exclusive responsibility and control over the physical construction, operation and maintenance of the facility.

Amendment I

A. This license applies to the Palo Verde Nuclear Generating Station, Unit 2, a pressurized water reactor and associated equipment (facility) owned by the licensees. The facility is located on the licensees' site in Maricopa County, Arizona and is described in the licensees' Final Safety Analysis Report, as supplemented and amended; in the related CESSAR Final Safety Analysis Report, as supplemented and amended through Amendment No. 8 and referenced in the licensees' updated Final Safety Analysis Report; and in their Environmental Report, as supplemented and amended.

B. Subject to the conditions and requirements incorporated herein, the Commission hereby licenses:

(1) Pursuant to Section 103 of the Act and 10 CFR Part 50, A~izena Public SeF.ic. CompaRYPinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority to possess, and Ariz.na Public Scrlc. Company (APS) Pinnacle West Enerqy Corporation to use and operate the facility at the designated location in Maricopa County, Arizona, in accordance with the procedures and limitations set forth in this license; (2) Pursuant to the Act and 10 CFR Part 70, APS-Pinnacle West Energy Corporation to receive, possess and use at any time special nuclear material as reactor fuel, in accordance with the limitations for storage and amounts required for reactor operation, as described in the licensees' Final Safety Analysis Report, as supplemented and amended, and the CESSAR Final Safety Analysis Report as supplemented and amended through Amendment No. 8 and referenced in the licensees' updated Final Safety Analysis Report; (3) Pursuant to the Act and 10 CFR Parts 30, 40 and 70, APS--Pinnacle West Energy Corporation to receive, possess and use at any time any byproduct, source and special nuclear material as sealed neutron sources for reactor startup, sealed sources for reactor instrumentation and radiation monitoring equipment calibration, and as fission detectors in amounts as required; (4) Pursuant to the Act and 10 CFR Part 30, 40 and 70, APS-Pinnacle West Energy Corporation to receive, possess and use in amounts as required any byproduct, source or special nuclear material without restriction to chemical or physical form, for sample analysis or instrument calibration or associated with radioactive apparatus or components; and (5) Pursuant to the Act and 10 CFR Parts 30, 40, and 70, AP-S-Pinnacle West Energy Corporation to possess, but not separate, such byproduct and special nuclear materials as may be produced by the operation of the facility.

Amendment No. 6§-,91,1- -82 I

(6)(a) Public Service Company of New Mexico (PNM) is authorized to transfer all or a portion of its 10.2% ownership share in Palo Verde, Unit 2 and a proportionate share of a third of PNM's interest in the Palo Verde common facilities to certain equity investors identified in its submissions of August 6 and November 26, 1986, and at the same time to lease back from such purchasers such interest sold in the Palo Verde, Unit 2 facility. The term of the lease is for approximately 29-1/2 years subject to a right of renewal. Additional sale and leaseback transactions of all or a portion of PNM's remaining ownership share of Palo Verde, Unit 2 are hereby authorized until June 30, 1987. Any such sale and leaseback transaction is subject to the representations and conditions set forth in the aforementioned application of February 14, 1986, and the subsequent submittals dated April 22, June 10, July 29, July 30, August 6, and August 7, October 16 and November 26, 1986, as well as the letters of the Director of the Office of Nuclear Reactor Regulation dated August 12 and December 11, 1986, consenting to such transactions. Specifically, the lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde Nuclear Generating Station, Unit 2. For purposes of this condition the limitations in 10 CFR 50.81, "Creditor Regulations,"

as now in effect and as they may be subsequently amended, are fully applicable to the lessor and any successor in interest to that lessor as long as the license for Palo Verde, Unit 2 remains in effect; this financial transaction shall have no effect on the license for the Palo Verde nuclear facility throughout the term of the license.

(b) Further, the licensees are also required to notify the NRC in writing prior to any change in: (i) the terms or conditions of any lease agreements executed as part of this transaction; (ii) the ANPP Participation Agreement, (iii) the existing property insurance coverage for the Palo Verde nuclear facility, Unit 2 as specified in licensee counsel's letter of November 26, 1985, and (iv) and action by the lessor or others that may have an adverse effect on the safe operation of the facility.

(7)(a) Deleted (b) Deleted Amendment No. 6, 91, 129

3 (8)(a) Arizona Public Scr-!cc Company Pinnacle West Energy Corporation is authorized to transfer all or a portion of its 29.1% ownership share in Palo Verde, Unit 2 to certain equity investors identified in i4 submissions of August 6, August 8 and December 5, 1986, and at the same time to lease back from such purchasers such interest sold in the Palo Verde, Unit 2 facility. The term of the lease is for approximately 29-1/2 years subject to a right of renewal. Additional sale and leaseback transactions of all or a portion of APS'6-Pinnacle West Energy Corporation's 3 remaining ownership share in Palo Verde, Unit 2 are hereby authorized until June 30, 1987. Any such sale and lease back transaction is subject to the representations and conditions set forth in the aforementioned application of May 2, 1986, and the subsequent submittals dated July 30, August 2, August 6, August 7, August 8, August 13, October 16 and December 5, 1986, as well as the letters of the Director of the Office of Nuclear Reactor Regulation dated August 15, and December 11, 1986, consenting to such transactions. Specifically, the lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde Nuclear Generating Station, Unit 2. For purposes of this condition the limitations in 10 CFR 50.81, "Creditor Regulations," as now in effect and as they may be subsequently amended, are fully applicable to the lessor and any successor in interest to the lessor as long as the license for Palo Verde, Unit 2 remains in effect; this financial transaction shall have no effect on the license for the Palo Verde nuclear facility throughout the term of the license.

(b) Further, the licensees are also required to notify the NRC in writing prior to any change in: (i) the terms or conditions of any lease agreements executed as part of this transaction; (ii) the ANPP Participation Agreement, (iii) the existing property insurance coverage for the Palo Verde nuclear facility, Unit 2 as specified in licensee counsel's letter of November 26, 1985, and (iv) any action by the lessor or others that may have an adverse effect on the safe operation of the facility.

C. This license shall be deemed to contain and is subject to the conditions specified in the Commission's regulations set forth in 10 CFR Chapter I and is subject to all applicable provisions of the Act and to the rules, regulations, and orders of the Commission now or hereafter in effect; and is subject to the additional conditions specified or incorporated below:

3 The sale and leaseback arrangements were originally entered into by Arizona Public Service Company, but were subsequently transferred to Pinnacle West Energy Corporation on [insert effective date of this amendmentl.

Amendment No. 6,5 00-4-*-8_

(1) Maximum Power Level Arizon..a Publi Se**-e Com.pany (APS Pinnacle West Eneray Corporation is authorized to operate the facility at reactor core power levels not in excess of 3876 megawatts thermal (100% power) in accordance with the conditions specified herein.

(2) Technical Specifications and Environmental Protection Plan The Technical Specifications contained in Appendix A, as revised through Amendment No...43 , and the Environmental Protection Plan contained in Appendix B, are hereby incorporated into this license. -APS--Pinnacle West Energy Corporation shall operate the facility in accordance with the Technical Specifications and the Environmental Protection Plan, except where otherwise stated in specific license conditions.

(3) Antitrust Conditions This license is subject to the antitrust conditions delineated in Appendix C to this license.

(4) Operating Staff Experience Requirements (Section 13.1.2. SSER 9)

Deleted (5) Initial Test Program (Section 14, SER and SSER 2)

Deleted (6) Fire Protection Program AP-S-Pinnacle West Enermy Corporation shall implement and maintain in effect all provisions of the approved fire protection program as described in the Final Safety Analysis Report for the facility, as supplemented and amended, and as approved in the SER through Supplement 11, subject to the following provision:

APS-Pinnacle West Energy Corporation may make changes to the approved fire protection program without prior approval of the Commission only ifthose changes would not adversely affect the ability to achieve and maintain safe shutdown in the event of a fire.

"The parenthetical notation following the title of many license conditions denotes the section of the Safety Evaluation Report and/or its supplements wherein the license condition is discussed.

Amendment No. 6, !00,-!28 I

(7) Inservice Inspection Program (Sections 5.2.4 and 6.6. SER and SSER Deleted (8) Supplement No. 1 to NUREG-0737 Requirements Deleted (9) Additional Conditions Deleted D. (1) AP-S-The facility has previously been granted an exemption from Paragraph IIl.D.2(b)(ii) of Appendix J to 10 CFR Part 50. This exemption was previously granted in-Facility Operating License NPF 46 pursuant to 10 CFR 50.12.

(2) Deleted With the granting of these exemptions, the facility will operate, to the extent authorized herein, in conformity with the application, as amended, the provisions of the Act, and the rules and regulations of the Commission.

E. The licensees shall fully implement and maintain in effect all provisions of the Commission-approved physical security, guard training and qualification, and safeguards contingency plans including amendments made pursuant to provisions of the Miscellaneous Amendments and Search Requirements revisions to 10 CFR 73.55 (51 FR 27817 and 27822) and to the authority of 10 CFR 50.90 and 10 CFR 50.54(p). The Safeguard Contingency Plan is incorporated into the Physical Security Plan. The plans, which contain Safeguards Information protected under 10 CFR 73.21, are entitled: "Palo Verde Nuclear Station Physical Security Plan," with revisions submitted through March 18, 1997; and uPalo Verde Nuclear Generating Station Guard Training and Qualification Plan," with revisions submitted through December 26, 1987. Changes made in accordance with 10 CFR 73.55 shall be implemented in accordance with the schedule set forth therein.

F. Except as otherwise provided in the Technical Specifications or the Environmental Protection Plan, APS-Pinnacle West Energy Corporation shall report any violations of the requirements contained in Section 2.C of this license in the following manner: Initial notification shall be made within 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> to the NRC Operations Center via the Emergency Notification System with written follow-up within 30 days in accordance with the procedures described in 10 CFR 50.73(b), (c) and (e);

Amendment No. 128I-*1*

G. The licensees shall have and maintain financial protection of such type and in such amounts as the Commission shall require in accordance with Section 170 of the Atomic Energy Act of 1954, as amended, to cover public liability claims; and H. This license is effective as of the date of issuance and shall expire at midnight on December 9, 2025.

FOR THE NUCLEAR REGULATORY COMMISSION Original Signed By Darrell G. Eisenhut, Acting Director Office of Nuclear Reactor Regulation Attachments:

1. [Requirements for Initial Mode 1 Entry] - Deleted

2. [Schedule for NUREG-0737, Sup. 1, Requirement (SPDS)] - Deleted

3. Appendix A Technical Specifications

4. Appendix B Environmental Protection Plan

5. Appendix C Antitrust Conditions 6 Appendix D - [Additional Conditions] - Deleted Date of Issuance: April 24, 1986 Amendment No. 28

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555-0001 ARIZONA, PUBLIC SERVICE COMPANY PINNACLE WEST ENERGY CORPORATION SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT EL PASO ELECTRIC COMPANY SOUTHERN CALIFORNIA EDISON COMPANY PUBLIC SERVICE COMPANY OF NEW MEXICO LOS ANGELES DEPARTMENT OF WATER AND POWER SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY DOCKET NO. STN 50-530 PALO VERDE NUCLEAR GENERATING STATION, UNIT 3 FACILITY OPERATING LICENSE License No. NPF-74

1. The Nuclear Regulatory Commission (the Commission or the NRC) has found that:

A. The application for license filed by_ Arizona Public Sor--c- Com.pany..innacle West Ener-qy Corporation1 , on behalf of itself and the Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees), complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's regulations set forth in 10 CFR Chapter I and all required notifications to other agencies or bodies have been duly made; B. Construction of the Palo Verde Nuclear Generating Station, Unit 3 (facility) has been substantially completed in conformity with Construction Permit No.

CPPR-143 and the application, as amended, the provisions of the Act and the regulations of the Commission; C. The facility will operate in conformity with the application, as amended, the provisions of the Act, and the regulations of the Commission (except as exempted from compliance in Section 2.D below);

1 The application was oriqinally filed by Arizona Public Service Company, which subsequently transferred its interests in the Palo Verde Nuclear Generating Station to Pinnacle West Energy Corporation on [insert effective date of this amendmentl.

Amendment No.

D. There is reasonable assurance: (i) that the activities authorized by this operating license can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations set forth in 10 CFR Chapter I (except as exempted from compliance in Section 2.D below);

2 E. Ari;z-n;; Public SRoeico, Com-,pan Pinnacle West Enerqy Corporation. is technically qualified to engage in the activities authorized by this operating license in accordance with the Commission's regulations set forth in 10 CFR Chapter I; F. The licensees have satisfied the applicable provisions of 10 CFR Part 140, "Financial Protection Requirements and Indemnity Agreements," of the Commission's regulations; G. The issuance of this license will not be inimical to the common defense and security or to the health and safety of the public; H. After weighing the environmental, economic, technical, and other benefits of the facility against environmental and other costs, and after considering available alternatives, the issuance of this Facility Operating License No.

NPF-74, subject to the conditions for protection of the environment set forth in the Environmental Protection Plan attached as Appendix B, is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied; and

1. The receipt, possession, and use of source, byproduct, and special nuclear material as authorized by this license will be in accordance with the Commission's regulations in 10 CFR Parts 30, 40, and 70.

2. Pursuant to approval by the Nuclear Regulatory Commission at a meeting held on November 25, 1987, the license for fuel loading and low power testing, License No.

NPF-65, issued on March 25, 1987, is superseded by Facility Operating License No.

NPF-74 hereby issued to the ArFizoa Public S,.-ic. Company.Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees) to read as follows:

A. This license applies to the Palo Verde Nuclear Generating Station, Unit 3, a pressurized water reactor and associated equipment (facility) owned by the licensees. The facility is located on the licensees' site in Maricopa County, Arizona and is described in the licensees' Final Safety Analysis Report, as supplemented and amended; in the related CESSAR Final Safety Analysis 2 Arizona Public SevGice Company Corporation Pinnacle West Energy Corporation is authorized to act as agent for Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority, and has exclusive responsibility and control over the physical construction, operation and maintenance of the facility.

Amendment No. 8

Report, as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; and in their Environmental Report, as supplemented and amended.

B. Subject to the conditions and requirements incorporated herein, the Commission hereby licenses:

(1) Pursuant to Section 103 of the Act and 10 CFR Part 50, AFiZEa Public Scr-Vce CompanyPinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority to possess, and Arizona Publi.-SoRd.c Ceompan.y (APS) Pinnacle West Enery Corporation to use and operate the facility at the designated location in Maricopa County, Arizona, in accordance with the procedures and limitations set forth in this license; (2) Pursuant to the Act and 10 CFR Part 70, APS-Pinnacle West Enery Corporation to receive, possess, and use at any time special nuclear material as reactor fuel, in accordance with the limitations for storage and amounts required for reactor operation, as described in the licensees' Final Safety Analysis Report, as supplemented and amended, and the CESSAR Final Safety Analysis Report as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; (3) Pursuant to the Act and 10 CFR Parts 30, 40, and 70, APS--Pinnacle West Enermqy Corporation to receive, possess, and use at any time any byproduct, source, and special nuclear material as sealed neutron sources for reactor startup, as sealed sources for reactor instrumentation and radiation monitoring equipment calibration, and as fission detectors in amounts as required; (4) Pursuant to the Act and 10 CFR Part 30, 40, and 70, APS-Pinnacle West Enermqy Corporation to receive, possess, and use in amounts required any byproduct, source or special nuclear material without restriction to chemical or physical form, for sample analysis or instrument calibration or associated with radioactive apparatus or components; and (5) Pursuant to the Act and 10 CFR Parts 30,40, and 70, APR-Pinnacle West Enermy Corporation to possess, but not separate, such byproduct and special nuclear materials as may be produced by the operation of the facility.

C. This license shall be deemed to contain and is subject to the conditions specified in the Commission's regulations set forth in 10 CFR Chapter I and is subject to all applicable provisions of the Act and to the rules, regulations, and orders of the Commission now or hereafter in effect; and is subject to the additional conditions specified or incorporated below:

Amendment No. 74--42-9 I

(1) Maximum Power Level ArizGna P..b. i S,, ',,.G.mpa.y (A^S Pinnacle West Enerqy Corporation is authorized to operate the facility at reactor core power levels not in excess of 3876 megawatts thermal (100% power) in accordance with the conditions specified herein.

(2) Technical Specifications and Environmental Protection Plan The Technical Specifications contained in Appendix A, as revised through Amendment No.4-_7 , and the Environmental Protection Plan contained in Appendix B, are hereby incorporated into this license. -APS--Pinnacle West Ener-gy Corporation shall operate the facility in accordance with the Technical Specifications and the Environmental Protection Plan, except where otherwise stated in specific license conditions.

(3) Antitrust Conditions This license is subject to the antitrust conditions delineated in Appendix C to this license.

(4) Initial Test Program (Section 14, SER and SSER 2)

Deleted (5) Additional Conditions Deleted D. APS-The facility has previously been granted an exemption from Paragraph IIl.D.2(b)(ii) of Appendix J to 10 CFR Part 50. This exemption was previously granted in Facility Operating License NPF-65 pursuant to 10 CFR 50.12.

With the granting of this exemption, the facility will operate, to the extent authorized herein, in conformity with the application, as amended, the provisions of the Act, and the rules and regulations of the Commission.

E. The licensees shall fully implement and maintain in effect all provisions of the Commission-approved physical security, guard training and qualification, and safeguards contingency plans including amendments made pursuant to provisions of the Miscellaneous Amendments and Search Requirements revisions to 10 CFR 73.55 (51 FR 27817 and 27822) and to the authority of 10 CFR 50.90 and 10 CFR 50.54(p). The Safeguard Contingency Plan is incorporated into the Physical Security Plan. The plans, which contain Safeguards Information protected under 10 CFR 73.21, are entitled: "Palo Amendment No. 80, 83, 128, 137 1

Verde Nuclear Station Physical Security Plan," with revisions submitted through March 18, 1997; and "Palo Verde Nuclear Generating Station Guard Training and Qualification Plan," with revisions submitted through December 26, 1987. Changes made in accordance with 10 CFR 73.55 shall be implemented in accordance with the schedule set forth therein.

F. AP-,S-Pinnacle West Energy Corporation shall implement and maintain in effect all provisions of the approved fire protection program as described in the Final Safety analysis Report for the facility, as supplemented and amended, and as approved in the SER through Supplement 11, subject to the following provision:

APS-Pinnacle West Energy Corporation may make changes to the approved fire protection program without approval of the Commission only ifthose changes would not adversely affect the ability to achieve and maintain safe shutdown in the event of a fire.

G. Except as otherwise provided in the Technical Specifications or the Environmental Protection Plan, APS-Pinnacle West Energy Corporation shall report any violations of the requirements contained in Section 2.C of this license in the following manner: Initial notification shall be made within 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> to the NRC Operations Center via the Emergency Notification System, with written follow-up within 30 days in accordance with the procedures described in 10 CFR 50.73(b), (c), and (e);

H. The licensees shall have and maintain financial protection of such type and in such amounts as the Commission shall require in accordance with Section 170 of the Atomic Energy Act of 1954, as amended, to cover public liability claims; and

1. This license is effective as of the date of issuance and shall expire at midnight on March 25, 2027.

FOR THE NUCLEAR REGULATORY COMMISSION Original Signed By Thomas E. Murley, Director Office of Nuclear Reactor Regulation Attachments:

1. [Requirements for Initial Mode 1 Entry] - Deleted

2. Appendix A Technical Specifications

3. Appendix B Environmental Protection Plan

4. Appendix C Antitrust Conditions

5. Appendix D - [Additional Conditions] - Deleted Date of Issuance: November 25, 1987 83 Amendment No. ,8 , 7, 1.____

APPENDIX B TO FACILITY OPERATING LICENSES NO. NPF-41, NPF-51 AND NPF-74 PALO VERDE NUCLEAR GENERATING STATION, UNITS 1,2, AND 3

,A.RIZONA PUBLIC SERVICE COMPANYPINNACLE WEST ENERGY CORPORATION, ET AL DOCKET NOS. STN 50-528, STN 50-529 AND STN 50-503 ENVIRONMENTAL PROTECTION PLAN (NON-RADIOLOGICAL)

NOVEMBER 1987

MAY 1985 APPENDIX C ANTITRUST CONDITIONS LICENSE NO. NPF-41 Pinnacle West Enermy Corporation. Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District shall comply with the following antitrust conditions:

1. In connection with the antitrust conditions, the following definitions are used herein:

A. "Bulk Power" means the electric power, and any attendant energy, supplied or made available at transmission or subtransmission voltage by one entity to another.

B. "Entity" means a person, private or public corporation, a municipality, a cooperative, an association or business trust owning, operating or proposing in good faith to own or operate equipment or facilities for the generation, transmission or distribution of electricity to or for the public as a utility.

C. "Joint Applicant(s)" means the Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District.

2. A. Each Joint Applicant will transmit Bulk Power over its transmission system, between or among two or more Entities with which it is interconnected, or will be interconnected in the future, without restrictions on use or resale of the power so transmitted, provided that such services can reasonably be accommodated from a technical standpoint without impairing each Joint Applicant's reliability or its own use of its facilities.

B. Each Joint Applicant is obligated under this condition to transmit Bulk Power on the terms stated above, and in connection with each Joint Applicant's plan to construct new transmission facilities for its own use, to include in its planning and construction program sufficient transmission capacity for such Bulk Power transactions, provided that such applicant has received sufficient advance notice as may be necessary from a technical standpoint to accommodate the requirements of any requesting entity, and further provided that such entity(ies) are obligated as may be agreed (i) to share the capital, operating and maintenance costs of such new transmission facilities to the extent that additional cost burdens would be imposed on such Joint Applicant or (ii) to compensate the Joint Applicant fully for the use of its system.

3. The foregoing shall be implemented in a manner consistent with the provisions of the Federal Power Act as applicable and all rates, charges or practices in connection herewith are to be subject to the approval of regulatory agencies having jurisdiction over them.

APRIL 1986 APPENDIX C ANTITRUST CONDITIONS LICENSE NO. NPF-51 Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District shall comply with the following antitrust conditions:

1. In connection with the antitrust conditions, the following definitions are used herein:

A. "Bulk Power" means the electric power, and any attendant energy, supplied or made available at transmission or subtransmission voltage by one entity to another.

B. "Entity" means a person, private or public corporation, a municipality, a cooperative, an association or business trust owning, operating or proposing in good faith to own or operate equipment or facilities for the generation, transmission or distribution of electricity to or for the public as a utility.

C. "Joint Applicant(s)" means the Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District.

2. A. Each Joint Applicant will transmit Bulk Power over its transmission system, between or among two or more Entities with which it is interconnected, or will be interconnected in the future, without restrictions on use or resale of the power so transmitted, provided that such services can reasonably be accommodated from a technical standpoint without impairing each Joint Applicant's reliability or its own use of its facilities.

B. Each Joint Applicant is obligated under this condition to transmit Bulk Power on the terms stated above, and in connection with each Joint Applicant's plan to construct new transmission facilities for its own use, to include in its planning and construction program sufficient transmission capacity for such Bulk Power transactions, provided that such applicant has received sufficient advance notice as may be necessary from a technical standpoint to accommodate the requirements of any requesting entity, and further provided that such entity(ies) are obligated as may be agreed (i) to share the capital, operating and maintenance costs of such new transmission facilities to the extent that additional cost burdens would be imposed on such Joint Applicant or (ii) to compensate the Joint Applicant fully for the use of its system.

3. The foregoing shall be implemented in a manner consistent with the provisions of the Federal Power Act as applicable and all rates, charges or practices in connection herewith are to be subject to the approval of regulatory agencies having jurisdiction over them.

NOVEMBER 1987 APPENDIX C ANTITRUST CONDITIONS LICENSE NO. NPF-74 Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District shall comply with the following antitrust conditions:

1. In connection with the antitrust conditions, the following definitions are used herein:

A. "Bulk Power" means the electric power, and any attendant energy, supplied or made available at transmission or subtransmission voltage by one entity to another.

B. "Entity" means a person, private or public corporation, a municipality, a cooperative, an association or business trust owning, operating or proposing in good faith to own or operate equipment or facilities for the generation, transmission or distribution of electricity to or for the public as a utility.

C. "Joint Applicant(s)" means the Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District.

2. A. Each Joint Applicant will transmit Bulk Power over its transmission system, between or among two or more Entities with which it is interconnected, or will be interconnected in the future, without restrictions on use or resale of the power so transmitted, provided that such services can reasonably be accommodated from a technical standpoint without impairing each Joint Applicant's reliability or its own use of its facilities.

B. Each Joint Applicant is obligated under this condition to transmit Bulk Power on the terms stated above, and in connection with each Joint Applicant's plan to construct new transmission facilities for its own use, to include in its planning and construction program sufficient transmission capacity for such Bulk Power transactions, provided that such Applita~p-__plicant has received sufficient advance notice as may be necessary from a technical standpoint to accommodate the requirements of any requesting entity, and further provided that such entity(ies) are obligated as may be agreed (i) to share the capital, operating and maintenance costs of such new transmission facilities to the extent that additional cost burdens would be imposed on such Joint Applicant or (ii) to compensate the Joint Applicant fully for the use of its system.

3. The foregoing shall be implemented in a manner consistent with the provisions of the Federal Power Act as applicable and all rates, charges or practices in connection herewith are to be subject to the approval of regulatory agencies having jurisdiction over them.

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555-0001 PINNACLE WEST ENERGY CORPORATION SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT EL PASO ELECTRIC COMPANY SOUTHERN CALIFORNIA EDISON COMPANY PUBLIC SERVICE COMPANY OF NEW MEXICO LOS ANGELES DEPARTMENT OF WATER AND POWER SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY DOCKET NO. STN 50-528 PALO VERDE NUCLEAR GENERATING STATION, UNIT 1 FACILITY OPERATING LICENSE License No. NPF-41

1. The Nuclear Regulatory Commission (the Commission or the NRC) has found that:

A. The application for license filed by Pinnacle West Energy Corporation 1 , on behalf of itself and the Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees),

complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's regulations set forth in 10 CFR Chapter I and all required notifications to other agencies or bodies have been duly made; B. Construction of the Palo Verde Nuclear Generating Station, Unit 1 (facility) has been substantially completed in conformity with Construction Permit No.

CPPR-141 and the application, as amended, the provisions of the Act and the regulations of the Commission; C. The facility will operate in conformity with the application, as amended, the provisions of the Act, and the regulations of the Commission (except as exempted from compliance in Section 2.D below);

'The application was originally filed by Arizona Public Service Company, which subsequently transferred its interests in the Palo Verde Nuclear Generating Station to Pinnacle West Energy Corporation on [insert effective date of this amendment].

Amendment No. - I

D. There is reasonable assurance: (I) that the activities authorized by this operating license can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations set forth in 10 CFR Chapter I (except as exempted from compliance in Section 2.D below);

E. Pinnacle West Energy Corporation 2 is technically qualified to engage in the activities authorized by this operating license in accordance with the Commission's regulations set forth in 10 CFR Chapter I; F. The licensees have satisfied the applicable provisions of 10 CFR Part 140, "Financial Protection Requirements and Indemnity Agreements", of the Commission's regulations; G. The issuance of this license will not be inimical to the common defense and security or to the health and safety of the public; H. After weighing the environmental, economic, technical, and other benefits of the facility against environmental and other costs, and after considering available alternatives, the issuance of this Facility Operating License No.

NPF-41, subject to the conditions for protection of the environment set forth in the Environmental Protection Plan attached as Appendix B, is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied; and

1. The receipt, possession, and use of source, byproduct and special nuclear material as authorized by this license will be in accordance with the Commission's regulations in 10 CFR Parts 30, 40 and 70.

2. Pursuant to approval by the Nuclear Regulatory Commission at a meeting held on May 30, 1985, the license for fuel loading and low power testing, License No.

NPF-34, issued on December 31, 1984, is superseded by Facility Operating License No. NPF-41 hereby issued to Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees) to read as follows:

2 Pinnacle West Energy Corporation is authorized to act as agent for Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southem California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority and has exclusive responsibility and control over the physical construction, operation and maintenance of the facility.

Amendment No. - I

A. This license applies to the Palo Verde Nuclear Generating Station, Unit 1, a pressurized water reactor and associated equipment (facility) owned by the licensees. The facility is located on the licensees' site in Maricopa County, Arizona and is described in the licensees' Final Safety Analysis Report, as supplemented and amended; in the related CESSAR Final Safety Analysis Report, as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; and in their Environmental Report, as supplemented and amended through Supplement No. 4.

B. Subject to the conditions and requirements incorporated herein, the Commission hereby licenses:

(1) Pursuant to Section 103 of the Act and 10 CFR Part 50, Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority to possess, and Pinnacle West Energy Corporation to use and operate the facility at the designated location in Maricopa County, Arizona, in accordance with the procedures and limitations set forth in this license; (2) Pursuant to the Act and 10 CFR Part 70, Pinnacle West Energy Corporation to receive, possess and use at any time special nuclear material as reactor fuel, in accordance with the limitations for storage and amounts required for reactor operation, as described in the licensees' Final Safety Analysis Report, as supplemented and amended and the CESSAR Final Safety Analysis Report as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; (3) Pursuant to the Act and 10 CFR Parts 30, 40 and 70, Pinnacle West Energy Corporation to receive, possess and use at any time any byproduct, source and special nuclear material as sealed neutron sources for reactor startup, sealed sources for reactor instrumentation and radiation monitoring equipment calibration, and as fission detectors in amounts as required; (4) Pursuant to the Act and 10 CFR Part 30, 40 and 70, Pinnacle West Energy Corporation to receive, possess and use in amounts as required any byproduct, source or special nuclear material without restriction to chemical or physical form, for sample analysis or instrument calibration or associated with radioactive apparatus or components; and (5) Pursuant to the Act and 10 CFR Parts 30, 40, and 70, Pinnacle West Energy Corporation to possess, but not separate, such byproduct and special nuclear materials as may be produced by the operation of the facility.

Amendment No.

(6)(a) Pursuant to an Order of the Nuclear Regulatory Commission dated December 12, 1985, the Public Service Company of New Mexico (PNM) was authorized to transfer a portion of its ownership share in Palo Verde, Unit 1 to certain institutional investors on December 31, 1985, and at the same time has leased back from such purchasers the same interest in the Palo Verde, Unit 1 facility. The term of the lease is to January 15, 2015, subject to a right of renewal. Additional sale and leaseback transactions (for a term expiring on January 15, 2015) of all or a portion of PNM's remaining ownership share in Palo Verde Unit 1 are hereby authorized until June 30, 1987. Any such sale and leaseback transaction is subject to the representations and conditions set forth in the aforementioned applications of October 19, 1985, February 5, 1986, October 16, 1986 and November 26, 1986, and the Commission's Order of December 12, 1985, consenting to such transactions. Specifically, the lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde Nuclear Generating Station, Unit 1. For purposes of this condition, the limitations in 10 CFR 50.81, "Creditor Regulations,N as now in effect and as they may be subsequently amended, are fully applicable to the lessor and any successor in interest to that lessor as long as the license for Palo Verde, Unit 1 remains in effect; this financial transaction shall have no effect on the license for the Palo Verde nuclear facility throughout the term of the license.

(b) Further, the licensees are also required to notify the NRC in writing prior to any change in: (i) the terms or conditions of any lease agreements executed as part of this transaction; (ii) the ANPP Participation Agreement, (iii) the existing property insurance coverage for the Palo Verde nuclear facility, Unit 1 as specified in license counsel's letter of November 26, 1985, and (iv) any action by the lessor or others that may have an adverse effect on the safe operation of the facility.

C. This license shall be deemed to contain and is subject to the conditions specified in the Commission's regulations set forth in 10 CFR Chapter I and is subject to all applicable provisions of the Act and to the rules, regulations, and orders of the Commission now or hereafter in effect; and is subject to the additional conditions specified or incorporated below:

(1) Maximum Power Level Pinnacle West Energy Corporation is authorized to operate the facility at reactor core power levels not in excess of 3876 megawatts thermal (100% power) in accordance with the conditions specified herein.

Amendment No. - I

(2) Technical Specifications and Environmental Protection Plan The Technical Specifications contained in Appendix A, as revised through Amendment No. , and the Environmental Protection Plan contained in Appendix B, are hereby incorporated into this license.

Pinnacle West Energy Corporation shall operate the facility in accordance with the Technical Specifications and the Environmental Protection Plan, except where otherwise stated in specific license conditions.

(3) Antitrust Conditions This license is subject to the antitrust conditions delineated in Appendix C to this license.

(4) Operating Staff Experience Requirements Deleted (5) Post-Fuel-Loading Initial Test Program (Section 14, SER and SSER 2_V.

Deleted (6) Environmental Qualification Deleted (7) Fire Protection Program Pinnacle West Energy Corporation shall implement and maintain in effect all provisions of the approved fire protection program as described in the Final Safety analysis Report for the facility, as supplemented and amended, and as approved in the SER through Supplement 11, subject to the following provision:

Pinnacle West Energy Corporation may make changes to the approved fire protection program without prior approval of the Commission only if those changes would not adversely affect the ability to achieve and maintain safe shutdown in the event of a fire.

(8) Emergency Preparedness Deleted "Theparenthetical notation following the title of many license conditions denotes the section of the Safety Evaluation Report and/or its supplements wherein the license condition is discussed.

Amendment No. - I

(9) Results of Piping Vibration Test Program (Section 3.9.2, SER)

Deleted (10) Response to Salem ATWS Event (Section 7.2. SSER 7, and Section 1.11, SSER 8)

Deleted (11) Supplement No. 1 to NUREG-0737 Requirements Deleted (12) Radiochemistry Laboratory (Section 7.3.1.5(3). Emergency Plan)

Deleted (13) RCP Shaft Vibration Monitoring Program (Section 5.4.1. SSER 12)

Deleted (14) Additional Conditions Deleted D. The facility requires an exemption from Paragraph IIl.D.2(b)(ii) of Appendix J to 10 CFR Part 50 (Section 6.2.6, SSER 7). This exemption is authorized by law and will not endanger life or property or the common defense and security and is otherwise in the public interest. This exemption is, therefore, hereby granted pursuant to 10 CFR 50.12. With the granting of this exemption, the facility will operate, to the extent authorized herein, in conformity with the application, as amended, the provisions of the Act, and the rules and regulations of the Commission.

E. The licensees shall fully implement and maintain in effect all provisions of the Commission-approved physical security, guard training and qualification, and safeguards contingency plans including amendments made pursuant to provisions of the Miscellaneous Amendments and Search Requirements revisions to 10 CFR 73.55 (51 FR 27817 and 27822) and to the authority of 10 CFR 50.90 and 10 CFR 50.54(p). The Safeguard Contingency Plan is incorporated into the Physical Security Plan. The plans, which contain Safeguards Information protected under 10 CFR 73.21, are entitled: "Palo Verde Nuclear Station Physical Security Plan," with revisions submitted through March 18, 1997; and "Palo Verde Nuclear Generating Station Guard Training and Qualification Plan," with revisions submitted through December 26, 1987. Changes made in accordance with 10 CFR 73.55 shall be implemented in accordance with the schedule set forth therein.

Amendment No. - I

F. Except as otherwise provided in the Technical Specifications or the Environmental Protection Plan, Pinnacle West Energy Corporation shall report any violations of the requirements contained in Section 2.C of this license in the following manner: Initial notification shall be made within 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> in accordance with the provisions of 10 CFR 50.72 with written follow up within 30 days in accordance with the procedures described in 10 CFR 50.73(b), (c) and (e);

G. The licenses shall have and maintain financial protection of such type and in such amounts as the Commission shall require in accordance with Section 170 of the Atomic Energy Act of 1954, as amended, to cover public liability claims; and H. This license is effective as of the date of issuance and shall expire at midnight on December 31, 2024.

FOR THE NUCLEAR REGULATORY COMMISSION Original Signed By Harold R. Denton, Director Office of Nuclear Reactor Regulation

Enclosures:

1. Attachment 1 - [Requirements for Initial Mode 1 Entry] - Deleted

2. Attachment 2 - [Operating Staff Experience Requirements] - Deleted

3. Attachment 3 - [Emergency Response Capabilities] - Deleted

4. Appendix A Technical Specifications

5. Appendix B Environmental Protection Plan

6. Appendix C Antitrust Conditions

7. Appendix D - [Additional Conditions] - Deleted Date of Issuance: June 1, 1985 Amendment No. - I

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555 PINNACLE WEST ENERGY CORPORATION SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT EL PASO ELECTRIC COMPANY SOUTHERN CALIFORNIA EDISON COMPANY PUBLIC SERVICE COMPANY OF NEW MEXICO LOS ANGELES DEPARTMENT OF WATER AND POWER SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY DOCKET NO. STN 50-529 PALO VERDE NUCLEAR GENERATING STATION, UNIT 2 FACILITY OPERATING LICENSE License No. NPF-51

1. The Nuclear Regulatory Commission (the Commission or the NRC) has found that:

A. The application for license filed byPinnacle West Energy Corporation 1 , on behalf of itself and the Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees),

complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's regulations set forth in 10 CFR Chapter I and all required notifications to other agencies or bodies have been duly made; B. Construction of the Palo Verde Nuclear Generating Station, Unit 2 (facility) has been substantially completed in conformity with Construction Permit No.

CPPR-142 and the application, as amended, the provisions of the Act and the regulations of the Commission; C. The facility will operate in conformity with the application, as amended, the provisions of the Act, and the regulations of the Commission (except as exempted from compliance in Section 2.D below);

The application was originally filed by Arizona Public Service Company, which subsequently transferred its interests in the Palo Verde Nuclear Generating Station to Pinnacle West Energy Corporation on [insert effective date of this amendment].

Amendment

D. There is reasonable assurance: (i) that the activities authorized by this operating license can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations set forth in 10 CFR Chapter I (except as exempted from compliance in Section 2.D below);

E. Pinnacle West Energy Corporation 2 is technically qualified to engage in the activities authorized by this operating license in accordance with the Commission's regulations set forth in 10 CFR Chapter I; F. The licensees have satisfied the applicable provisions of 10 CFR Part 140, "Financial Protection Requirements and Indemnity Agreements", of the Commission's regulations; G. The issuance of this license will not be inimical to the common defense and security or to the health and safety of the public; H. After weighing the environmental, economic, technical, and other benefits of the facility against environmental and other costs, and after considering available alternatives, the issuance of this Facility Operating License No.

NPF-51, subject to the conditions for protection of the environment set forth in the Environmental Protection Plan attached as Appendix B, is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied; and I. The receipt, possession, and use of source, byproduct and special nuclear material as authorized by this license will be in accordance with the Commission's regulations in 10 CFR Parts 30, 40 and 70.

2. Pursuant to approval by the Nuclear Regulatory Commission at a meeting held on April 23, 1986, the license for fuel loading and low power testing, License No.

NPF-46, issued on December 9, 1985, is superseded by Facility Operating License No. NPF-51 hereby issued to Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees) to read as follows:

2 Pinnacle West Energy Corporation is authorized to act as agent for Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southem California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority and has exclusive responsibility and control over the physical construction, operation and maintenance of the facility.

Amendment - I

A. This license applies to the Palo Verde Nuclear Generating Station, Unit 2, a pressurized water reactor and associated equipment (facility) owned by the licensees. The facility is located on the licensees' site in Maricopa County, Arizona and is described in the licensees' Final Safety Analysis Report, as supplemented and amended; in the related CESSAR Final Safety Analysis Report, as supplemented and amended through Amendment No. 8 and referenced in the licensees' updated Final Safety Analysis Report; and in their Environmental Report, as supplemented and amended.

B. Subject to the conditions and requirements incorporated herein, the Commission hereby licenses:

(1) Pursuant to Section 103 of the Act and 10 CFR Part 50, Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority to possess, and Pinnacle West Energy Corporation to use and operate the facility at the designated location in Maricopa County, Arizona, in accordance with the procedures and limitations set forth in this license; (2) Pursuant to the Act and 10 CFR Part 70, Pinnacle West Energy Corporation to receive, possess and use at any time special nuclear material as reactor fuel, in accordance with the limitations for storage and amounts required for reactor operation, as described in the licensees' Final Safety Analysis Report, as supplemented and amended, and the CESSAR Final Safety Analysis Report as supplemented and amended through Amendment No. 8 and referenced in the licensees' updated Final Safety Analysis Report; (3) Pursuant to the Act and 10 CFR Parts 30, 40 and 70, Pinnacle West Energy Corporation to receive, possess and use at any time any byproduct, source and special nuclear material as sealed neutron sources for reactor startup, sealed sources for reactor instrumentation and radiation monitoring equipment calibration, and as fission detectors in amounts as required; (4) Pursuant to the Act and 10 CFR Part 30, 40 and 70, Pinnacle West Energy Corporation to receive, possess and use in amounts as required any byproduct, source or special nuclear material without restriction to chemical or physical form, for sample analysis or instrument calibration or associated with radioactive apparatus or components; and (5) Pursuant to the Act and 10 CFR Parts 30, 40, and 70, Pinnacle West Energy Corporation to possess, but not separate, such byproduct and special nuclear materials as may be produced by the operation of the facility.

Amendment No. - I

(6)(a) Public Service Company of New Mexico (PNM) is authorized to transfer all or a portion of its 10.2% ownership share in Palo Verde, Unit 2 and a proportionate share of a third of PNM's interest in the Palo Verde common facilities to certain equity investors identified in its submissions of August 6 and November 26, 1986, and at the same time to lease back from such purchasers such interest sold in the Palo Verde, Unit 2 facility. The term of the lease is for approximately 29-1/2 years subject to a right of renewal. Additional sale and leaseback transactions of all or a portion of PNM's remaining ownership share of Palo Verde, Unit 2 are hereby authorized until June 30, 1987. Any such sale and leaseback transaction is subject to the representations and conditions set forth in the aforementioned application of February 14, 1986, and the subsequent submittals dated April 22, June 10, July 29, July 30, August 6, and August 7, October 16 and November 26, 1986, as well as the letters of the Director of the Office of Nuclear Reactor Regulation dated August 12 and December 11, 1986, consenting to such transactions. Specifically, the lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde Nuclear Generating Station, Unit 2. For purposes of this condition the limitations in 10 CFR 50.81, "Creditor Regulations,"

as now in effect and as they may be subsequently amended, are fully applicable to the lessor and any successor in interest to that lessor as long as the license for Palo Verde, Unit 2 remains in effect; this financial transaction shall have no effect on the license for the Palo Verde nuclear facility throughout the term of the license.

(b) Further, the licensees are also required to notify the NRC in writing prior to any change in: (i) the terms or conditions of any lease agreements executed as part of this transaction; (ii) the ANPP Participation Agreement, (iii) the existing property insurance coverage for the Palo Verde nuclear facility, Unit 2 as specified in licensee counsel's letter of November 26, 1985, and (iv) and action by the lessor or others that may have an adverse effect on the safe operation of the facility.

(7)(a) Deleted (b) Deleted Amendment No. - I

(8)(a) Pinnacle West Energy Corporation 3 is authorized to transfer all or a portion of its 29.1% ownership share in Palo Verde, Unit 2 to certain equity investors identified in submissions of August 6, August 8 and December 5,1986, and at the same time to lease back from such purchasers such interest sold in the Palo Verde, Unit 2 facility. The term of the lease is for approximately 29-1/2 years subject to a right of renewal. Additional sale and leaseback transactions of all or a portion of Pinnacle West Energy Corporation's 3 remaining ownership share in Palo Verde, Unit 2 are hereby authorized until June 30, 1987. Any such sale and lease back transaction is subject to the representations and conditions set forth in the aforementioned application of May 2, 1986, and the subsequent submittals dated July 30, August 2, August 6, August 7, August 8, August 13, October 16 and December 5, 1986, as well as the letters of the Director of the Office of Nuclear Reactor Regulation dated August 15, and December 11, 1986, consenting to such transactions. Specifically, the lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde Nuclear Generating Station, Unit 2. For purposes of this condition the limitations in 10 CFR 50.81, "Creditor Regulations," as now in effect and as they may be subsequently amended, are fully applicable to the lessor and any successor in interest to the lessor as long as the license for Palo Verde, Unit 2 remains in effect; this financial transaction shall have no effect on the license for the Palo Verde nuclear facility throughout the term of the license.

(b) Further, the licensees are also required to notify the NRC in writing prior to any change in: (i) the terms or conditions of any lease agreements executed as part of this transaction; (ii) the ANPP Participation Agreement, (iii) the existing property insurance coverage for the Palo Verde nuclear facility, Unit 2 as specified in licensee counsel's letter of November 26, 1985, and (iv) any action by the lessor or others that may have an adverse effect on the safe operation of the facility.

C. This license shall be deemed to contain and is subject to the conditions specified in the Commission's regulations set forth in 10 CFR Chapter I and is subject to all applicable provisions of the Act and to the rules, regulations, and orders of the Commission now or hereafter in effect; and is subject to the additional conditions specified or incorporated below:

3 The sale and leaseback arrangements were originally entered into by Arizona Public Service Company, but were subsequently transferred to Pinnacle West Energy Corporation on [insert effective date of this amendment].

Amendment No. __ I

(1) Maximum Power Level Pinnacle West Energy Corporation is authorized to operate the facility at reactor core power levels not in excess of 3876 megawatts thermal (100% power) in accordance with the conditions specified herein.

(2) Technical Specifications and Environmental Protection Plan The Technical Specifications contained in Appendix A, as revised through Amendment No._, and the Environmental Protection Plan contained in Appendix B, are hereby incorporated into this license.

Pinnacle West Energy Corporation shall operate the facility in accordance with the Technical Specifications and the Environmental Protection Plan, except where otherwise stated in specific license conditions.

(3) Antitrust Conditions This license is subject to the antitrust conditions delineated in Appendix C to this license.

(4) Operating Staff Experience Requirements (Section 13.1.2, SSER 9)

Deleted (5) Initial Test Program (Section 14, SER and SSER 2)

Deleted (6) Fire Protection Program Pinnacle West Energy Corporation shall implement and maintain in effect all provisions of the approved fire protection program as described in the Final Safety Analysis Report for the facility, as supplemented and amended, and as approved in the SER through Supplement 11, subject to the following provision:

Pinnacle West Energy Corporation may make changes to the approved fire protection program without prior approval of the Commission only if those changes would not adversely affect the ability to achieve and maintain safe shutdown in the event of a fire.

"Theparenthetical notation following the title of many license conditions denotes the section of the Safety Evaluation Report and/or its supplements wherein the license condition is discussed.

Amendment No. -_ II

(7) Inservice Inspection Program (Sections 5.2.4 and 6.6, SER and SSER 9_)

Deleted (8) Supplement No. 1 to NUREG-0737 Requirements Deleted (9) Additional Conditions Deleted D. (1) The facility has previously been granted an exemption from Paragraph IIl.D.2(b)(ii) of Appendix J to 10 CFR Part 50. This exemption was previously granted in Facility Operating License NPF-46 pursuant to 10 CFR 50.12.

(2) Deleted With the granting of these exemptions, the facility will operate, to the extent authorized herein, in conformity with the application, as amended, the provisions of the Act, and the rules and regulations of the Commission.

E. The licensees shall fully implement and maintain in effect all provisions of the Commission-approved physical security, guard training and qualification, and safeguards contingency plans including amendments made pursuant to provisions of the Miscellaneous Amendments and Search Requirements revisions to 10 CFR 73.55 (51 FR 27817 and 27822) and to the authority of 10 CFR 50.90 and 10 CFR 50.54(p). The Safeguard Contingency Plan is incorporated into the Physical Security Plan. The plans, which contain Safeguards Information protected under 10 CFR 73.21, are entitled: "Palo Verde Nuclear Station Physical Security Plan," with revisions submitted through March 18, 1997; and "Palo Verde Nuclear Generating Station Guard Training and Qualification Plan," with revisions submitted through December 26, 1987. Changes made in accordance with 10 CFR 73.55 shall be implemented in accordance with the schedule set forth therein.

F. Except as otherwise provided in the Technical Specifications or the Environmental Protection Plan, Pinnacle West Energy Corporation shall report any violations of the requirements contained in Section 2.C of this license in the following manner: Initial notification shall be made within 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> to the NRC Operations Center via the Emergency Notification System with written follow-up within 30 days in accordance with the procedures described in 10 CFR 50.73(b), (c) and (e);

Amendment No.

G. The licensees shall have and maintain financial protection of such type and in such amounts as the Commission shall require in accordance with Section 170 of the Atomic Energy Act of 1954, as amended, to cover public liability claims; and H. This license is effective as of the date of issuance and shall expire at midnight on December 9, 2025.

FOR THE NUCLEAR REGULATORY COMMISSION Original Signed By Darrell G. Eisenhut, Acting Director Office of Nuclear Reactor Regulation Attachments:

1. [Requirements for Initial Mode 1 Entry] - Deleted

2. [Schedule for NUREG-0737, Sup. 1, Requirement (SPDS)] - Deleted

3. Appendix A Technical Specifications

4. Appendix B Environmental Protection Plan

5. Appendix C Antitrust Conditions 6 Appendix D - [Additional Conditions] - Deleted Date of Issuance: April 24, 1986 Amendment No.

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555-0001 PINNACLE WEST ENERGY CORPORATION SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT EL PASO ELECTRIC COMPANY SOUTHERN CALIFORNIA EDISON COMPANY PUBLIC SERVICE COMPANY OF NEW MEXICO LOS ANGELES DEPARTMENT OF WATER AND POWER SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY DOCKET NO. STN 50-530 PALO VERDE NUCLEAR GENERATING STATION, UNIT 3 FACILITY OPERATING LICENSE License No. NPF-74

1. The Nuclear Regulatory Commission (the Commission or the NRC) has found that:

A. The application for license filed by Pinnacle West Energy Corporation 1 , on behalf of itself and the Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees),

complies with the standards and requirements of the Atomic Energy Act of 1954, as amended, and the Commission's regulations set forth in 10 CFR Chapter I and all required notifications to other agencies or bodies have been duly made; B. Construction of the Palo Verde Nuclear Generating Station, Unit 3 (facility) has been substantially completed in conformity with Construction Permit No.

CPPR-143 and the application, as amended, the provisions of the Act and the regulations of the Commission; C. The facility will operate in conformity with the application, as amended, the provisions of the Act, and the regulations of the Commission (except as exempted from compliance in Section 2.D below);

'The application was originally filed by Arizona Public Service Company, which subsequently transferred its interests in the Palo Verde Nuclear Generating Station to Pinnacle West Energy Corporation on [insert effective date of this amendment].

Amendment No. _

D. There is reasonable assurance: (i) that the activities authorized by this operating license can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations set forth in 10 CFR Chapter I (except as exempted from compliance in Section 2.0 below);

E. Pinnacle West Energy Corporation 2 is technically qualified to engage in the activities authorized by this operating license in accordance with the Commission's regulations set forth in 10 CFR Chapter I; F. The licensees have satisfied the applicable provisions of 10 CFR Part 140, "Financial Protection Requirements and Indemnity Agreements," of the Commission's regulations; G. The issuance of this license will not be inimical to the common defense and security or to the health and safety of the public; H. After weighing the environmental, economic, technical, and other benefits of the facility against environmental and other costs, and after considering available alternatives, the issuance of this Facility Operating License No.

NPF-74, subject to the conditions for protection of the environment set forth in the Environmental Protection Plan attached as Appendix B, is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied; and

1. The receipt, possession, and use of source, byproduct, and special nuclear material as authorized by this license will be in accordance with the Commission's regulations in 10 CFR Parts 30, 40, and 70.

2. Pursuant to approval by the Nuclear Regulatory Commission at a meeting held on November 25, 1987, the license for fuel loading and low power testing, License No.

NPF-65, issued on March 25,1987, is superseded by Facility Operating License No.

NPF-74 hereby issued to Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority (licensees) to read as follows:

A. This license applies to the Palo Verde Nuclear Generating Station, Unit 3, a pressurized water reactor and associated equipment (facility) owned by the licensees. The facility is located on the licensees' site in Maricopa County, Arizona and is described in the licensees' Final Safety Analysis Report, as supplemented and amended; in the related CESSAR Final Safety Analysis Report, as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; and in their Environmental Report, as supplemented and amended.

2 Pinnacle West Energy Corporation is authorized to act as agent for Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southem California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority, and has exclusive responsibility and control over the physical construction, operation and maintenance of the facility.

Amendment No. __

B. Subject to the conditions and requirements incorporated herein, the Commission hereby licenses:

(1) Pursuant to Section 103 of the Act and 10 CFR Part 50, Pinnacle West Energy Corporation, Salt River Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water and Power, and Southern California Public Power Authority to possess, and Pinnacle West Energy Corporation to use and operate the facility at the designated location in Maricopa County, Arizona, in accordance with the procedures and limitations set forth in this license; (2) Pursuant to the Act and 10 CFR Part 70, Pinnacle West Energy Corporation to receive, possess, and use at any time special nuclear material as reactor fuel, in accordance with the limitations for storage and amounts required for reactor operation, as described in the licensees' Final Safety Analysis Report, as supplemented and amended, and the CESSAR Final Safety Analysis Report as supplemented and amended through Amendment No. 8 and referenced in the licensees' Updated Final Safety Analysis Report; (3) Pursuant to the Act and 10 CFR Parts 30, 40, and 70, Pinnacle West Energy Corporation to receive, possess, and use at any time any byproduct, source, and special nuclear material as sealed neutron sources for reactor startup, as sealed sources for reactor instrumentation and radiation monitoring equipment calibration, and as fission detectors in amounts as required; (4) Pursuant to the Act and 10 CFR Part 30, 40, and 70, Pinnacle West Energy Corporation to receive, possess, and use in amounts required any byproduct, source or special nuclear material without restriction to chemical or physical form, for sample analysis or instrument calibration or associated with radioactive apparatus or components; and (5) Pursuant to the Act and 10 CFR Parts 30, 40, and 70, Pinnacle West Energy Corporation to possess, but not separate, such byproduct and special nuclear materials as may be produced by the operation of the facility.

C. This license shall be deemed to contain and is subject to the conditions specified in the Commission's regulations set forth in 10 CFR Chapter I and is subject to all applicable provisions of the Act and to the rules, regulations, and orders of the Commission now or hereafter in effect; and is subject to the additional conditions specified or incorporated below:

Amendment No. - I

(1) Maximum Power Level Pinnacle West Energy Corporation is authorized to operate the facility at reactor core power levels not in excess of 3876 megawatts thermal (100% power) in accordance with the conditions specified herein.

(2) Technical Specifications and Environmental Protection Plan The Technical Specifications contained in Appendix A, as revised through Amendment No. , and the Environmental Protection Plan contained in Appendix B, are hereby incorporated into this license.

Pinnacle West Energy Corporation shall operate the facility in accordance with the Technical Specifications and the Environmental Protection Plan, except where otherwise stated in specific license conditions.

(3) Antitrust Conditions This license is subject to the antitrust conditions delineated in Appendix C to this license.

(4) Initial Test Program (Section 14, SER and SSER 2)

Deleted (5) Additional Conditions Deleted D. The facility has previously been granted an exemption from Paragraph III.D.2(b)(ii) of Appendix J to 10 CFR Part 50. This exemption was previously granted in Facility Operating License NPF-65 pursuant to 10 CFR 50.12.

With the granting of this exemption, the facility will operate, to the extent authorized herein, in conformity with the application, as amended, the provisions of the Act, and the rules and regulations of the Commission.

E. The licensees shall fully implement and maintain in effect all provisions of the Commission-approved physical security, guard training and qualification, and safeguards contingency plans including amendments made pursuant to provisions of the Miscellaneous Amendments and Search Requirements revisions to 10 CFR 73.55 (51 FR 27817 and 27822) and to the authority of 10 CFR 50.90 and 10 CFR 50.54(p). The Safeguard Contingency Plan is incorporated into the Physical Security Plan. The plans, which contain Safeguards Information protected under 10 CFR 73.21, are entitled: "Palo Amendment No.__ I

Verde Nuclear Station Physical Security Plan," with revisions submitted through March 18, 1997; and "Palo Verde Nuclear Generating Station Guard Training and Qualification Plan," with revisions submitted through December 26, 1987. Changes made in accordance with 10 CFR 73.55 shall be implemented in accordance with the schedule set forth therein.

F. Pinnacle West Energy Corporation shall implement and maintain in effect all provisions of the approved fire protection program as described in the Final Safety analysis Report for the facility, as supplemented and amended, and as approved in the SER through Supplement 11, subject to the following provision:

Pinnacle West Energy Corporation may make changes to the approved fire protection program without approval of the Commission only if those changes would not adversely affect the ability to achieve and maintain safe shutdown in the event of a fire.

G. Except as otherwise provided in the Technical Specifications or the Environmental Protection Plan, Pinnacle West Energy Corporation shall report any violations of the requirements contained in Section 2.C of this license in the following manner: Initial notification shall be made within 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> to the NRC Operations Center via the Emergency Notification System, with written follow-up within 30 days in accordance with the procedures described in 10 CFR 50.73(b), (c), and (e);

H. The licensees shall have and maintain financial protection of such type and in such amounts as the Commission shall require in accordance with Section 170 of the Atomic Energy Act of 1954, as amended, to cover public liability claims; and

1. This license is effective as of the date of issuance and shall expire at midnight on March 25, 2027.

FOR THE NUCLEAR REGULATORY COMMISSION Original Signed By Thomas E. Murley, Director Office of Nuclear Reactor Regulation Attachments:

1. [Requirements for Initial Mode 1 Entry] - Deleted

2. Appendix A Technical Specifications

3. Appendix B Environmental Protection Plan

4. Appendix C Antitrust Conditions

5. Appendix D - [Additional Conditions] - Deleted Date of Issuance: November 25, 1987 Amendment No.

APPENDIX B TO FACILITY OPERATING LICENSES NO. NPF-41, NPF-51 AND NPF-74 PALO VERDE NUCLEAR GENERATING STATION, UNITS 1,2, AND 3 PINNACLE WEST ENERGY CORPORATION, ET AL DOCKET NOS. STN 50-528, STN 50-529 AND STN 50-503 ENVIRONMENTAL PROTECTION PLAN (NON-RADIOLOGICAL)

NOVEMBER 1987

MAY 1985 APPENDIX C ANTITRUST CONDITIONS LICENSE NO. NPF-41 Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District shall comply with the following antitrust conditions:

1. In connection with the antitrust conditions, the following definitions are used herein:

A. "Bulk Power" means the electric power, and any attendant energy, supplied or made available at transmission or subtransmission voltage by one entity to another.

B. "Entity" means a person, private or public corporation, a municipality, a cooperative, an association or business trust owning, operating or proposing in good faith to own or operate equipment or facilities for the generation, transmission or distribution of electricity to or for the public as a utility.

C. "Joint Applicant(s)" means the Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District.

2. A. Each Joint Applicant will transmit Bulk Power over its transmission system, between or among two or more Entities with which it is interconnected, or will be interconnected in the future, without restrictions on use or resale of the power so transmitted, provided that such services can reasonably be accommodated from a technical standpoint without impairing each Joint Applicant's reliability or its own use of its facilities.

B. Each Joint Applicant is obligated under this condition to transmit Bulk Power on the terms stated above, and in connection with each Joint Applicant's plan to construct new transmission facilities for its own use, to include in its planning and construction program sufficient transmission capacity for such Bulk Power transactions, provided that such applicant has received sufficient advance notice as may be necessary from a technical standpoint to accommodate the requirements of any requesting entity, and further provided that such entity(ies) are obligated as may be agreed (i) to share the capital, operating and maintenance costs of such new transmission facilities to the extent that additional cost burdens would be imposed on such Joint Applicant or (ii) to compensate the Joint Applicant fully for the use of its system.

3. The foregoing shall be implemented in a manner consistent with the provisions of the Federal Power Act as applicable and all rates, charges or practices in connection herewith are to be subject to the approval of regulatory agencies having jurisdiction over them.

APRIL 1986 APPENDIX C ANTITRUST CONDITIONS LICENSE NO. NPF-51 Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District shall comply with the following antitrust conditions:

1. In connection with the antitrust conditions, the following definitions are used herein:

A. "Bulk Power" means the electric power, and any attendant energy, supplied or made available at transmission or subtransmission voltage by one entity to another.

B. "Entity" means a person, private or public corporation, a municipality, a cooperative, an association or business trust owning, operating or proposing in good faith to own or operate equipment or facilities for the generation, transmission or distribution of electricity to or for the public as a utility.

C. "Joint Applicant(s)" means the Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District.

2. A. Each Joint Applicant will transmit Bulk Power over its transmission system, between or among two or more Entities with which it is interconnected, or will be interconnected in the future, without restrictions on use or resale of the power so transmitted, provided that such services can reasonably be accommodated from a technical standpoint without impairing each Joint Applicant's reliability or its own use of its facilities.

B. Each Joint Applicant is obligated under this condition to transmit Bulk Power on the terms stated above, and in connection with each Joint Applicants plan to construct new transmission facilities for its own use, to include in its planning and construction program sufficient transmission capacity for such Bulk Power transactions, provided that such applicant has received sufficient advance notice as may be necessary from a technical standpoint to accommodate the requirements of any requesting entity, and further provided that such entity(ies) are obligated as may be agreed (i) to share the capital, operating and maintenance costs of such new transmission facilities to the extent that additional cost burdens would be imposed on such Joint Applicant or (ii) to compensate the Joint Applicant fully for the use of its system.

3. The foregoing shall be implemented in a manner consistent with the provisions of the Federal Power Act as applicable and all rates, charges or practices in connection herewith are to be subject to the approval of regulatory agencies having jurisdiction over them.

NOVEMBER 1987 APPENDIX C ANTITRUST CONDITIONS LICENSE NO. NPF-74 Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District shall comply with the following antitrust conditions:

1. In connection with the antitrust conditions, the following definitions are used herein:

A. "Bulk Power" means the electric power, and any attendant energy, supplied or made available at transmission or subtransmission voltage by one entity to another.

B. "Entity" means a person, private or public corporation, a municipality, a cooperative, an association or business trust owning, operating or proposing in good faith to own or operate equipment or facilities for the generation, transmission or distribution of electricity to or for the public as a utility.

C. "Joint Applicant(s)" means the Pinnacle West Energy Corporation, Arizona Public Service Company and the Salt River Project Agricultural Improvement and Power District.

2. A. Each Joint Applicant will transmit Bulk Power over its transmission system, between or among two or more Entities with which it is interconnected, or will be interconnected in the future, without restrictions on use or resale of the power so transmitted, provided that such services can reasonably be accommodated from a technical standpoint without impairing each Joint Applicant's reliability or its own use of its facilities.

B. Each Joint Applicant is obligated under this condition to transmit Bulk Power on the terms stated above, and in connection with each Joint Applicant's plan to construct new transmission facilities for its own use, to include in its planning and construction program sufficient transmission capacity for such Bulk Power transactions, provided that such applicant has received sufficient advance notice as may be necessary from a technical standpoint to accommodate the requirements of any requesting entity, and further provided that such entity(ies) are obligated as may be agreed (i) to share the capital, operating and maintenance costs of such new transmission facilities to the extent that additional cost burdens would be imposed on such Joint Applicant or (ii) to compensate the Joint Applicant fully for the use of its system.

3. The foregoing shall be implemented in a manner consistent with the provisions of the Federal Power Act as applicable and all rates, charges or practices in connection herewith are to be subject to the approval of regulatory agencies having jurisdiction over them.

ATTACHMENT 2 LICENSEE'S EVALUATION OF CONFORMING ADMINISTRATIVE LICENSE AMENDMENTS ASSOCIATED WITH PROPOSED TRANSFER OF PVNGS OPERATING LICENSES FROM APS TO PWE

Licensee's Evaluation

Subject:

Conforming Administrative Amendments for Transfer of Facility Operating Licenses, Licenses NPF-41, NPF-51 and NPF-74, Appendix B, Environmental Plan, and Appendices C, Antitrust Conditions - Unit 1, Unit 2 and Unit 3.

1. DESCRIPTION

2. PROPOSED CHANGE

3. BACKGROUND

4. TECHNICAL ANALYSIS

5. REGULATORY ANALYSIS 5.1 No Significant Hazards Consideration 5.2 Applicable Regulatory Requirements/Criteria

6. ENVIRONMENTAL CONSIDERATION

7. REFERENCES

8. PRECEDENT

1.0 DESCRIPTION

1.1 Pursuant to the restructuring requirements imposed on electric utilities in Arizona under the Retail Electric Competition Rules adopted by the Arizona Corporation Commission (ACC), and the Arizona Public Service Company (APS) restructuring settlement agreement approved by the ACC, APS is required to legally separate its electric generation supply business (i.e. generation and power sales) from its transmission and distribution business and phase in competition in its service territory for generation supply at the retail level during the period from January 1, 1999 to December 31, 2002. In order to do so, APS is transferring all of its fossil-fired and nuclear generating facilities to Pinnacle West Energy Corporation (PWE), including its interests in the Palo Verde Nuclear Generating Station (PVNGS).

The proposed amendments to the PVNGS Units 1, 2 and 3 operating licenses, including Appendix B, Environmental Protection Plan, and Appendices C, Antitrust Conditions - Unit 1, Unit 2 and Unit 3, would delete the references to APS as an undivided owner and the operating authority for PVNGS, insert references to PWE instead, and authorize PWE to possess, use and operate PVNGS under essentially the same conditions and authorization as included in the existing licenses. The proposed amendments are merely conforming administrative changes to the operating licenses, including Appendices B and C, to reflect the proposed transfer of ownership and operating authority from APS to PWE. No changes to the PVNGS Technical Specifications in Appendix A of the licenses are being proposed in this amendment request.

2.0 PROPOSED CHANGE

The proposed amendments would replace "Arizona Public Service Company" or APS" with "Pinnacle West Energy Corporation" to reflect changes in ownership and operating authority for PVNGS. The proposed amendments conform the operating licenses, including Appendices B and C, to reflect the change in ownership and operating authority.

Annotated changes to existing facility operating licenses NPF-41, NPF-51 and NPF-74, Appendix B, Environmental Protection Plan, and Appendices C, Antitrust Conditions - Unit 1, Unit 2 and Unit 3, are provided in Attachment 1.

Re-typed facility operating licenses, Appendix B, Environmental Protection Plan, and Appendices C, Antitrust Conditions - Unit 1, Unit 2 and Unit 3, with the proposed changes incorporated are also provided in Attachment 1.

In summary, the proposed amendments to the facility operating licenses, including Appendices B and C, conform the existing facility operating licenses to reflect the transfer of ownership and operating authority from APS to PWE. No physical changes will be made to the facilities as a result of these changes, nor will there be any changes in the licensing basis or the day-to-day management or operation of PVNGS. The proposed amendments to the facility operating licenses, including Appendices B and C, are essentially administrative in nature and present no significant hazards consideration under the standards set forth in 10 CFR 50.92(c), and, accordingly, a finding of "no significant hazards consideration" is justified.

3.0 BACKGROUND

The restructuring requirements imposed on electric utilities in Arizona under the Retail Electric Competition Rules adopted by the ACC, and the APS restructuring settlement agreement approved by the ACC, requires APS to legally separate its electric generation supply business (i.e. generation and power sales) from its transmission and distribution business by December 31, 2002. In order to do so, APS is transferring all of its fossil-fired and nuclear generating facilities to PWE, including its interests in PVNGS. The proposed amendments to the facility operating licenses, including Appendices B and C, for PVNGS reflect this transfer of ownership and operating authority.

4.0 TECHNICAL ANALYSIS

The proposed amendments to the facility operating licenses, including Appendices B and C, are essentially administrative in nature. These changes reflect the transfer in ownership and operating authority from APS to PWE. No physical changes to the facilities will be made as a result of these changes, nor will there be any changes to the licensing basis or the day-to-day management or operation of PVNGS. The proposed amendments will not impact the design function, or method of performing or controlling design functions, of structures, systems and components, nor will there be a programmatic effect on various PVNGS programs, including the Quality Assurance Program. As a result, the proposed amendments will not change assumptions, or change, degrade or prevent actions described or assumed in accidents evaluated and described in the PVNGS UFSAR. Therefore, the proposed amendments do not adversely affect nuclear safety or continued safe operation of PVNGS, or result in an increase in the radiological consequences of any accident described in the PVNGS UFSAR.

5.0 REGULATORY ANALYSIS

The proposed amendments reflect the change in ownership and operating authority from APS to PWE and are essentially administrative in nature. No physical changes are being made to the design features or operation of the facilities.

Therefore, the proposed amendments are subject to the NRC's generic determination of no significant hazards consideration in accordance with 10 CFR 2.1315(a). As stated in 10 CFR 2.1315(a), the Commission has determined that any amendment to the license of a utilization facility or the license of an Independent Spent Fuel Storage Installation which does no more than conform the license to reflect the transfer action, involves respectively, "no significant hazards consideration" or "no generic issue as to whether the health and safety of the public will be significantly affected". Although the Commission has issued this determination as a regulation, the licensee is still obligated to perform an evaluation of "no significant hazards consideration" in accordance with 10 CFR 50.92. The licensee evaluation is provided below.

5.1 No Siqnificant Hazards Consideration The proposed amendments to the PVNGS facility operating licenses, including Appendices B and C, conform the licenses to reflect the transfer in ownership and operating authority from APS to PWE. APS has evaluated whether or not a significant hazards consideration is involved with the proposed amendments by focusing on the three standards set forth in 10 CFR 50.92, "Issuance of amendment", as discussed below:

1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated?

Response: No The proposed amendments reflect the change in ownership and operating authority from APS to PWE. The proposed amendments do not involve a significant increase in the probability or consequences of an accident previously evaluated because they do not involve a change to design configuration or operation of the facilities. PVNGS will be operated by PWE with no significant changes in the operating organization or plant management. Therefore, these administrative changes will have no impact on the probability or consequences of an accident previously analyzed.

2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated?

Response: No The proposed amendments reflect the change in ownership and operating authority from APS to PWE and are essentially administrative in nature. No physical changes are being made to the design features or operation of the facilities. Therefore the possibility of a new or different kind of accident from any previously evaluated accident described in the PVNGS UFSAR is not created.

3. Does the proposed change involve a significant reduction in a margin of safety?

Response: No The proposed amendments reflect the change in ownership and operating authority from APS to PWE and are essentially administrative in nature. No physical changes are being made to the design features or operation of the facilities.

Margin of safety is associated with confidence in the ability of the fission product barriers (i.e., fuel cladding, Reactor Coolant System pressure boundary and the containment structure) to limit the radiological dose to the public and control room operators in the event of an accident. The proposed amendments to the facility operating licenses, including Appendices B and C, are essentially administrative in nature and have no impact on the margin of safety and robustness provided in the design and construction of the facilities. In addition, the proposed amendments will not relax any of the criteria used to establish safety limits, nor will the proposed amendments relax safety system settings or limiting conditions of operation as defined in the Technical Specifications. Therefore, the proposed amendments do not result in a significant reduction in the margin of safety.

Based on the above information, APS concludes that the proposed amendments present no significant hazards consideration under the standards set forth in 10 CFR 50.92(c), and, accordingly, a finding of "no significant hazards consideration" is justified.

5.2 Applicable Regulatory Requirements/Criteria The following regulations apply to the issuance of conforming administrative amendments to the facility operating licenses:

10 CFR 2.1315, "Generic determination regarding license amendments to reflect transfers".

10 CFR 51.22, "Criterion for categorical exclusion; identification of licensing and regulatory actions eligible for categorical exclusion or otherwise not requiring environmental review".

10 CFR 50.80, "Transfer of licenses".

10 CFR 50.90, "Application for amendment of license or construction permit".

10 CFR 50.92, "Issuance of amendment".

Analysis The proposed amendments to the facility operating licenses, including Appendices B and C, are essentially administrative in nature. These changes reflect the transfer in ownership and operating authority from APS to PWE. No physical changes to the facilities will be made as a result of these changes, nor will there be any changes to the licensing basis or the day-to-day management or operation of PVNGS. The proposed amendments will not impact the design function, or method of performing or controlling design functions, of structures, systems and components, nor will there be a programmatic effect on various PVNGS programs, including the Quality Assurance Program. As a result, the proposed amendments will not change assumptions, or change, degrade or prevent actions described or assumed in accidents evaluated and described in the PVNGS UFSAR. Therefore, the proposed amendments do not adversely affect nuclear safety or continued safe operation of PVNGS, or result in an increase in the radiological consequences of any accident described in the PVNGS UFSAR.

In conclusion, based on the considerations described above, (1) there is reasonable assurance that the health and safety of the public will not be endangered by operation in the proposed manner, (2) such activities will be conducted in compliance with the Commission's regulations, and (3) the issuance of these amendments will not be inimical to the common defense and security, or to the health and safety, of the public.

6.0 ENVIRONMENTAL CONSIDERATION

APS has determined that the proposed amendments do not involve (i) a significant hazards consideration, (ii)a significant change in the types or a significant increase in the amounts of any effluent that may be released offsite, or (iii) a significant increase in individual or cumulative occupational radiation exposure. Accordingly, the proposed amendments meet the eligibility criteria for categorical exclusion as set forth in 10 CFR 51.22(c)(9). Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment needs to be prepared in connection with the proposed amendments.

7.0 REFERENCES

10 CFR 2.1315, "Generic determination regarding license amendments to reflect transfers".

10 CFR 51.22, "Criterion for categorical exclusion; identification of licensing and regulatory actions eligible for categorical exclusion or otherwise not requiring environmental review".

10 CFR 50.80, "Transfer of licenses".

10 CFR 50.90, "Application for amendment of license or construction permit".

10 CFR 50.92, "Issuance of amendment".

8.0 PRECEDENT There are numerous precedents for license transfer and issuance of conforming license amendments associated with electric industry restructuring. Recent actions included:

Commanche Peak Steam Electric Station, Units I and 2, transfer of ownership and control from TXU Electric Company to TXU Generation Company LP (TAC Numbers MB2203 and MB2204).

Nine Mile Point Nuclear Station, Unit 1 and 2, transfer of licenses to Nine Mile Point Nuclear Station, LLC (TAC Numbers MB2860 and MB2861).

McGuire Nuclear Station, Units I and 2, transfer of operating authority and facility operating licenses from Duke Energy Corporation to Duke Energy Nuclear, LLC (TAC Numbers MB2358 and MB2359).

Catawba Nuclear Station, Units 1 and 2, transfer of operating authority and facility operating licenses from Duke Energy Corporation to Duke Energy Nuclear, LLC (TAC Numbers MB2380 and MB2381).

ATTACHMENT 3 PWE NUCLEAR ORGANIZATION CHART

Technical Executive Technical Vice President Management Admin. Vice President Management Nuclear Assistant Coordinator Engineering & Assistant r_ _i_

Support

ATTACHMENT 4 PWE FINANCIAL PROJECTIONS (NON-PROPRIETARY VERSION)

ATTACHMENT 4 PINNACLE WEST ENERGY CORPORATION FINANCIAL PROJECTIONS Non-Proprietary Version The financial projections addressing the financial qualifications of PWE to own a 29.1% undivided ownership interest in PVNGS and operate PVNGS consist of the following four schedules:

1. A list of the key assumptions related to PWE's total power production, weighted average sales price under its power sale agreements with PNW, generation mix based on projected megawatt hours of production, and PVNGS capacity factor over the five year-period from 2003-2007.

2. A Projected Income Statement for PWE on a company-wide basis over the five year period from 2003-2007.

3. A projected balance sheet for PWE on January 1, 2003 after the transfer of the PVNGS interests to PWE.

4. Comparison of the projected power sales revenues from PVNGS versus the projected O&M costs for PVNGS during the five-year period from 2003-2007.

SCHEDULE 1 Key Assumptions 2003 2004 2005 2006 2007 Total Power Sales (Mwh)

Weighted Average Sales Price ($ per Mwh)

Generation Mix (Mwh)

Gas Coal Nuclear PVNGS Capacity Factor (%)

ATTACHMENT 4 PINNACLE WEST ENERGY CORPORATION FINANCIAL PROJECTIONS Non-Proprietary Version SCHEDULE 2 PINNACLE WEST ENERGY CORPORATION Projected Income Statement

($ Millions) 2003 2004 2005 2006 2007 Revenue ($M)

Power Sales Ancillary Services Other Total Revenue Expenses ($M)

Fuel Operations & Maintenance Taxes Other Than Income Depreciation Decommissioning Total Expenses Operating Income Net Interest Expense Income Tax Net Income

ATTACHMENT 4 PINNACLE WEST ENERGY CORPORATION FINANCIAL PROJECTIONS Non-Proprietary Version SCHEDULE 3 PINNACLE WEST ENERGY CORPORATION Projected Balance Sheet As of January 1, 2003*

($ Millions)

ASSETS CAPITALIZATION AND LIABILITIES UTILITY PLANT CAPITALIZATION Gross Plant Shareholders Equity Less accumulated deprecation Total Capitalization Net Plant INVESTMENTS CURRENT LIABILITIES Decommissioning Fund Accounts Payable Total Investments Short Term Debt Taxes Accrued CURRENT ASSETS Other Cash and Equivalents Total Current Liabilities Accounts Receivable Inventories LONG TERM DEBT AND OTHER Total Current Assets NONCURRENT LIABILITIES Accumulated Deferred Income Taxes Long-Term Debt DEFERRED DEBITS AND OTHER Decommissioning liability Other NONCURRENT ASSETS Total Long Term Debt and Other Noncurrent Liabilities TOTAL ASSETS TOTAL CAPITALIZATION &

LIABILITIES

• following the transfer of the APS's fossil-fired and nuclear generating facilities to PWE

ATTACHMENT 4 PINNACLE WEST ENERGY CORPORATION FINANCIAL PROJECTIONS Non-Proprietary Version SCHEDULE 4 PALO VERDE NUCLEAR GENERATING STATION Comparison of Power Sales Revenues vs. O&M Expenses

($ Millions) 2003 2004 2005 2006 2007 Projected Power Sales Revenues from PVNGS Generation Projected O&M Expenses Labor and Benefits Fuel Contractors/Outside Services Materials Other O&M Total O&M Expense PVNGS OPERATING INCOME PALO VERDE NUCLEAR GENERATING STATION Comparison of Power Sales Revenues vs. O&M Expenses Assuming 10% Reduction in Weighted Average Sales Price for Power Sales

($ Millions) 2003 2004 2005 2006 2007 Projected Power Sales Revenues from PVNGS Generation Projected O&M Expenses Labor and Benefits Fuel Contractors/Outside Services Materials Other O&M Total O&M Expense PVNGS OPERATING INCOME

ATTACHMENT 5 AFFIRMATION OF JAMES M. LEVINE

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of )

)

Palo Verde Nuclear Generating Station) Docket Nos. 50-528 Units 1, 2 & 3 ) 50-529

) 50-530 AFFIRMATION OF JAMES M. LEVINE I, James M. Levine, being duly sworn, hereby affirm and state that I am the Executive Vice-President, Generation, and Chief Nuclear Officer of the Arizona Public Service Company (CAPS"); and the Chief Operating Officer of Pinnacle West Energy Corporation ("PWE"),that I am familiar with the contents of the attached Application for Order and Conforming Administrative Amendments for Transfer of Licenses; and that the matters set forth therein are true and correct to the best of my knowledge and belief.

Ja eM. Levine STATE OF ARIZONA )

)

COUNTY OF MARICOPA )

Subscribed and sworn to before me, a Notary Public in and for the State of Arizona, this j/day of / /2002.

jOFF L~EN~C" TARNOAYPUBUC-ARIZONA i7CNW]Y j Notary P Ii 4d for the COMM. £ices Oct. 12005State S'KAU' of Ani ona

ATTACHMENT 6 10 C.F.R. § 2.790 AFFIDAVIT OF JAMES M. LEVINE

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION 10 CFR § 2.790 In the Matter of

)

Palo Verde Nuclear Generating Station) Docket Nos. 50-528 Units 1, 2 & 3 ) 50-529

) 50-530 AFFIDAVIT I, James M. Levine, the Chief Operating Officer of Pinnacle West Energy Corporation ("PWE"), do hereby affirm and state:

1. I am authorized to execute this affidavit on behalf of PWE.

2. PWE is providing certain confidential information to the Nuclear Regulatory Commission ("NRC") in support of its Application for Order and Conforming Administrative Amendments for Transfer of Licenses.

The documents being provided in Attachment 4A of the Application contain financial projections related to the ownership and operation of PWE's generation assets, including the Palo Verde Nuclear Generating Station. These documents constitute proprietary commercial and financial information that should be held in confidence by the NRC pursuant to the policy reflected in 10 C.F.R. §§ 2.790(a)(4) and 9.17(a)(4), because:

i. This information is and has been held in confidence by PWE.

ii. This information is of a type that is customarily held in confidence by PWE, and there is a rational basis for doing so because the information contains sensitive financial information concerning projected revenues and operating expenses of PWE.

iii. This information is being transmitted to the NRC in confidence.

iv. This information is not available in public sources and could not be gathered readily from other publicly available information.

v. Public disclosure of this information would create substantial harm to the competitive position of PWE by disclosing its internal financial projections.

3. Accordingly, PWE requests that the designated documents be withheld from public disclosure pursuant to the policy reflected in 10 C.F.R. §§ 2.790(a)(4) and 9.17(a)(4).

q STATE OF ARIZONA ))

COUNTY OF MARICOPA

)

Subscrib~d. and sworn tome, a Notary Public, in and for the State of Arizona, this ,MyfL day of 2002.

OFFICIALSEAL Sotate u--'in and for the JOY L. HEINRICH f State of Alizona NOTARY PUBLIC-ARIZONAW MARICOPA COUNTY )

0 M Comm. Expires Oct. 1, 2005~