ML17305A293

Salt River Project 1988-89 Annual Rept

ML17305A293
Person / Time
Site:	Palo Verde
Issue date:	12/31/1988
From:	Boulais M, Lassen J, Pfister A SALT RIVER PROJECT
To:
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ML17305A289	List: ML17305A288 ML17305A290 ML17305A292 ML17305A293 ML19327A906 ML19327A907
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NUDOCS 8910190238
Download: ML17305A293 (30)

Text

THE ATTACHED FILES ARE OFFICIAL RE-CORDS OF THE RECORDS 8

REPORTS MANAGEMENTBRANCH. THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS 8 ARCHIVES SERVICES SECTION P1-122 WHITE FLINT.

PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAlL.

REMOVAL OF ANY PAGE(S)

FROM DOCUMENT FOR REPRO-DUCTION MUST BE REFERRED TO FILE PERSONNEL.

-NOTICE-F88-5 ggUAL POR7 asxol9o2 e a9iosi PDR ADGGK QGQOO.":i28 PDC "Y"

I is to be the low-cost supplier among our competitors of high-value energy and water services.

'C Salt River Project is named for the Salt River, which supplies water to the Phoenix metropolitan area.

We are the nation's third-largest public power utility and Arizona's largest water supplier.

The Project consists of two compatible organizations the Salt. River Valley Water Users'ssociation and the Salt River Project Agricultural Improvement and Power District.

The Association is a private Arizona

. corporation. It administers water rights of SRP's 240,000-acre area and operates and maintains

, the irrigation transmission and distribution

, system.'This system carries water to municipal, industrial, agricultural and residential users.

The District is a public power utility and a politica) subdivision of Arizona. It provides electricity to approximately 500,000 residential, commercial, industrial and agricultural power users in a 2,900-square-mile service area in parts of Maricopa, Gila and Pinal counties.

IGHLIGHTS Total Operating Revenues

($000)

REVENUES/EXPENSES (gee Page 16)

Total operating revenues

($000)

Total operating expenses

($000)

Net operating revenues

($000)

Other income ($000).

Net financing costs ($000)

Net revenues

($000).

Fiscal 1989 Fiscal 1988 959,346 790 972 1,063,306 832 316

,063,306 59,346 230,990 4,571 223,798 168,3?4 39,265 191 378 652,139 11,763 16,261 POWER OPERATIONS (See Page I7)

Energy customers at year end Total kilowatt-hour sales (000)

Average annual kilowatt.hour use/residential customer Average annual residential revenues/kilowatt-hour (cents) 37+64 505,618 16,335,115 518,889 17,789,940 1983 1988 1989 1978 12,824 12,988 8.03 7.65 Electric Dollar WATER OPERATIONS (gee Page l6)

Assessed water accounts Water runoff (acre-feet).

Water in storage, Dec. 31 (acre. feet).

Water deliveries (acre. feet).

Calendar 1988 Calendar 198?

einvested i Project Plan

$.16 fuel and Purchased Power

$.25 182,226 1,136,727'82,110 1,120,034 1,598,989 951,693 1,624,272 997,324 Operations 3nd Maintenance

'.24 Payment of Interest

$.20 SELECTED OTHER DATA (See Page I6)

Gross plant investment ($000).

Long-term debt ($000)

Taxes & tax equivalents ($000).....

Electric-revenue contributions to support water operations ($000)..

Employees at year end.

Fiscal 1989 Fiscal 1988 axes

$.12 5,335,784 3,251,724 121,154 5,560,160 3,505,163 125,171 29,22?

5,805 34,069 5,599 Repayment of Principal on SRP Bonds

$.03

'ased on U.S.G.S. provisional records and subject to adjustment.

ONTENT5 Message from Management

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.7 11 14 ower ater...

ommunit inance...

16 Statistical Review

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18 Combined Financial Statements 22 Notes to Combined Financial Statements Officers 26 Board Members and Council Members 27-28 As a special service, SRP is making this Annual Report information available through the Arizona State Library for the Blind and Physically Handicapped, 1030 N. 32nd St., Phoenix, AZ 85008, (602) 255.5578.

It8vspgI SALTRIVER PROJECT PUBLISHER SRP Communications &

Public Affairs Department P.O. Box 52025 Phoenix, Arizona 85072-2025 (602) 2364266 EDITOR Angela Yearta DESIGN Jeryl Jones TYPESETTING Michele Jones COMPUTER GRAPHICS Nysa Sanfmo.Parnsh PHOTOGRAPHY James

Eastwood, Suzanne Knapp, Chet Snellback, Ed Toliver and Angela Yearta On the coverThis abstract of SRP's new Information Systems Building in Tempe represents our efforts to provide toff.the-line customer service and to meet future industry challenges in an efficient manner.

0 UR ONDHOLDERS AND HAREHOLDERS John R. Lassen President Marcel J. Boulafs Vice President A.J. Pflster General Manager While Salt River Project's accounting ledger will record moderate results for fiscal year 1988-89, it was, nonetheless, an extremely important year for the Project.

We passed the $ 1 billion mark in revenues from electric and water operations in fiscal 1988-89. Total operating revenues were $ 1.06 billion compared to $959.3 million in 1987-88. After operating, financing and other expenses, we realized total net revenues of

$ 11.8 million in fiscal 1988-89, compared to $ 16.3 million in 1987-88.

While cash flow remained particularly strong, net revenues were lower than last year',

partially due to the added expenses of a companywide reorganization.

A $32.7 million "unusual" expense was recorded against income in fiscal 198849 due to the reorganization a top to bottom review of SRP's organizational structure, staffing levels, practices and procedures which consumed much of the fiscal year and will be wrapped up in the next. We believe the reorganization is critically important for us to continue providing high-value power and water services to our customers and shareholders in the future.

By effecting improvements in organizational structure and work practices, and reflecting moderate growth compared to historical standards, the reorganization will eliminate 791 positions companywide, and will result in estimated cash flow savings of

$50 million each year.

Ultimately, several hundred employees will be affected, but we'e going to great lengths to ensure they are treated fairly. The bulk of the $32.7 million expense was for enhanced severance packages and professional career continuation services offered to displaced employees.

Some relatively minor, subsequent expenses of the reorganization may occur in the next fiscal year, though they will be more than offset by the savings of the program.

We see the reorganization as an opportunity to grow stronger in the increasingly competitive utility industry. Utilities are merging, and independent power producers and cogeneration facilities are gaining a stronger foothold in the energy business generally.

We recognize the importance of being prepared for the challenges of this changing environment.

Such changes are the reason that "complacency" is not in our vocabulary. Employing a theme of "Maximum Effectiveness," we are reprioritizing our work duties, eliminating what we feel are unnecessary functions, modifying our management structure and

systems, and redirecting our services to better match customer and shareholder needs.

We are continuing to regionalize our offices to locate service employees closer to the customers they serve. We are emphasizing incentive programs which shift the SRP energy load to off-peak hours and save our customers money on their electric bills.

Our staff monitors the market to obtain competitive coal prices. Recently, we ended a

contract with the Kaiser Coal Co., which will save our customers

$200 million during the next 16 years.

SRP also conforms to the Arizona Groundwater Management Act to reduce water consumption.

We continue to support conservation efforts and to develop methods of supplementing our water supplies.

Streamlining our activities will help hold down costs, which will enable us to delay the need for an electric rate increase.

We haven't had a rate increase since October 1987 when electric rates went up an average of 5.6 percent.

To the extent that we hold the line on the costs of electricity and efficiently manage our water resources, we can benefit the central Arizona economy. It's no secret that our state's economy is in a down cycle, and it behooves us to do what we can to help keep Arizona an economically attractive place to do business.

Our goal is to devote appropriate resources, time and money to economic development for a more prosperous future.

We are working to build on our positive standing in the public power industry.

Currently, the American Public Power Association (APPA) ranks SRP third in terms of electric customers.

Last fiscal year, we served 518,889 customers, an increase of 13,271 customers from 198748.

APPA also ranks SRP third in kilowatt-hours (kWh) sold. During fiscal 1988-89, we sold almost 17.8 billion kWh, up from 16.3 billion kWh the previous year.

We delivered 951,693 acre-feet (af) of water to the irrigators and eight Valley cities in our 240,000-acre area in 1988, compared to 997,324 af in 1987.

The next decade holds exciting prospects for Salt River Project. Through our internal restructuring, we feel ready to tackle the challenges of the changing utility industry in the 1990s.

,1 OW-ER Competition in the energy business is driving Salt River Project's future. We have been gearing up for the new challenges through enhanced planning, increased research and development efforts, and a companywide reorganization. At the same time, we'e keeping our customers'eeds and demands foremost in our minds.

SRP Tackles Future Challenges Today Throughout the 1980s, we proceeded with construction of a third unit at Coronado Generating Station in St. Johns, Ariz., and participated in construction of the Palo Verde Nuclear Generating Station west of Phoenix. Our goal was to ensure an adequate and reliable energy supply for our rapidly growing customer population.

Then we began experiencing a slowdown in customer growth. For example, in fiscal year 1988-89, we added 13,271 electric customers for a system total of 518,889 customers. This was 5,000 fewer than the 18,297 customers added in fiscal year 198748 and about 17,000 fewer than the 30,000 customers added each of the previous four years.

Not only did customer growth slow, but the increasingly dynamic utility industry shifted to a buyer's market. An abundance of excess generation became available at attractive prices. So in February 1988, we deferred the in-service date of the Coronado Generating Station Unit III until 2004. The most recent Loads and Resources Study indicates that Coronado Unit III will be completed in 2005.

We signed power purchase contracts for 50 megawatts (MW) each from Tucson Electric Power Co. (TEP) and Arizona Electric Power Cooperative (AEPCO) beginning in 1990. The power purchases will increase to 100 MW from each utility in 1991.

The contracts are expected to save SRP $ 185 million between now and 2011, and defer about $420 million in construction costs.

Buying power from other utilities also means SRP will borrow less for construction during the next five years, and we will be able to maintain a favorable financial position.

Even with the slowdown in new customer accounts, we expect to add 200,000 more electric customers by 2000. That's an average of 16,600 customers per year.

To accommodate growth, last year we built two new distribution substations, added capacity at 10 existing substations and installed 630 miles of new distribution lines.

Une biforking Foreman Robert Booth Is supervisor of a fourmember crew whkh constructs and maintains l2 kilovolt tkVJ power lines and Installs transformers. He Is one of BSO Power Construction and Maintenance employees who ensurt.

that SRP customers have electricity when they need it.

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Coal is Still Top Energy Source Coal provided 61.7 percent of our electric generation last year. The majority of our coal-generated power comes from the Navajo Generating Station in Page, Ariz., and the Coronado Generating Station. We also participate in four coal-fired plants in Colorado, New Mexico and Nevada.

At Coronado Generating Station, we began a priority coal burn in July 1988. This inventory stabilization program was designed to limit the coal stockpile growth by burning, at a minimum, the coal delivered each year. The stockpile had grown substantially during the past three years.

By burning at least the annual deliveries of coal at Coronado, SRP will save

$62 million in the next 15 years. Money will be saved on the expenses necessary to maintain a large stockpile including:

> interest on money used to buy the coal

> taxes on coal in the stockpile

A bulldozer moves coal at the Coronado Generating Station In St. Johns, Ariz.

The plant burns up to 8,000 tons of coal per day. Currently, we are limiting the coal sto<<kpiie growth to save approximately S4 million each year until 2004.

v physical loss of the coal from the pile a small portion blows away and the quality diminishes as it is exposed to the environment

'tr fuel handling costs.

Kaiser Coal Contract Ended On Sept. 29, 1988, we terminated our contract with the Kaiser Coal Co. through which coal was supplied to the Coronado Generating Station. Ending the contract will save our customers approximately $200 million during the next 16 years. The contract, negotiated in 1978, provided for minimum annual purchases of 475,000 tons of coal through 2004.

Under the termination agreement, we continued to purchase coal from Kaiser until the end of calendar year 1988. Our payments to Kaiser totaled $59 million.

o Fence Lake is Possible Future Coal Source c

M' an To secure possible future coal supplies for the Coronado Generating Station, we are studying coal deposits in the Fence Lake, N.M., area. Fence Lake is located about 40 miles east of Coronado and contains approximately 117 million tons of surface mineable coal.

SRP already has state and private leases for 11,000 acres in the Fence Lake area.

In September 1988, we filed an application for a federal coal lease in the area adjacent to the state leases. The application will undergo review and public comment before it can be h

approved.

In October, as a part of the review process, we selected Dames and Moore to conduct an environmental impact study. This study will result in an Environmental Impact Statement (EIS). This is another step in SRP's possible acquisition of federal coal leases on an additional 6,840 acres.

We have successfully burned 100,000 tons of Fence Lake coal at Coronado Generating Station to test the coal for heat, sulfur content and handling characteristics.

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SRP has developed a new Corporate Munklpal Aesthetics Policy which enables cities to actively partldpate In decisions about the location and appearance of new electric facilities. The policy specifies that we will spend up to I percent of our gross revenues each year to respond to municipal requests in excess of our normal standards, based upon a selealon process In concert with the cities. We also will, based upon our flnandal ability, match city funds made available for this purpose.

Fuel Sources 1988-89 Fiscal Year Coal 61.7o/o Nuclear 19.9'/o Gas 8.1'/o Palo Verde Sets Records, Experiences Outages We own 17.49 percent of Palo Verde Nuclear Generating Station, which is operated by Arizona Public Service Co. (APS). Last year nuclear power provided 19.9 percent of our electric supply.

Palo Verde Unit I began commercial operation on Jan. 30, 1986, and Unit II, on Sept. 20, 1986. Unit III, the final of the three 1,270 MW electric generating units, began operating on Feb. I, 1988.

Unit III had a spectacular year in 1988, setting an industry record for the longest continuous run the greatest number of days on line by an American-manufactured nuclear plant in the world during its first year of operation. Unit III exceeded the 181.54ay record by operating 214 consecutive days until Aug. I, 1988.

0.3/o Oil In late March, the Arizona Corporation Commission released the results of an Ernst and Whinney prudency audit of Palo Verde construction costs. The Misc.

r purchases report concluded that costs due to poor management totaled $60 million, while benefits due to exceptional management totaled almost $293 million, or a net Hydro benefit of about $233 million.

8.2'e receive more than 600,000 kilowatts (kW) of power when all three Palo Verde units are operating. In March 1989, however, all three Palo Verde units went out of service.

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Units I and III are in refueling outages. Unit II has been out of service, pending completion of several work tasks including modification and testing of atmospheric dump valves, which are used to vent excess steam.

The units will be out of service until refueling has been completed and Nuclear Regulatory Commission (NRC) approval for restart has been obtained. Although the NRC recently has been critical of Palo Verde, SRP is optimistic that APS is taking the steps necessary to improve operations at Palo Verde and to regain the confidence of the NRC.

We estimate the need for purchases of up to 300,000 kW of power from other utilities to ensure adequate power reserves while Palo Verde is off line.

When a generating unit is out of service, we replace the lost power with the lowest cost alternate resource available. This may be from either our own system or other utilities in the Southwest.

Our older Phoenix generating stations are regularly used for system peak load operation in order to supply the system requirements in the most economical combination available.

We arranged short-term contracts with several utilities to provide substitute capacity for the Palo Verde units while they were out of service during the summer of 1989. Our participation in the Western Systems Power Pool made it easier to arrange the contracts.

SRP's goal is to have a reserve generating capacity of 20 percent a standard used by many utilities.

Corporate Aesthetics Policy Beautifies Cities With the urbanization of our service area, Valley cities are making increased demands for improved appearances around electric facilities. Cities also are offering input about the location of our new facilities.

In response, our Board of Directors in December 1988, approved a new Corporate Municipal Aesthetics Policy.

This highly participative policy will provide approximately $ 10 million annually to be shared by the cities for aesthetics.

Tradeshelper Karen 8oyfe rappels off the coal control building at Coronado Generating Station. An emergency medical technician (EMr], she teaches SRP employees how to get into hard-to-reach areas during possible emergency situations. EMr training occurs each month at the coal fired plant. Such efforts help us meet our No.

1 corporate obfective of safety first.

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Photovoltaics Research Under Way SRP is participating in a research program which could turn technology into a commercial state by the mid-1990s. The Photovoltaics for UtilityScale Applications project is designed to compare and evaluate photovoltaic systems in a utility setting.

We are working on this endeavor with the Department of Energy, the Electric Power Research Institute (EPRI), several other research organizations and a number of utilities. SRP is a member of the Technical Review Committee and will provide $100,000 in funding during the next four years.

SRP views the photovoltaic research as an important way to increase our understanding of new technology and its value to our customers.

In other areas of research, we developed a task force to investigate superconductivity.

We also set goals to develop a longer range, strategic research and development (R&D) program and to continue participation in wide-ranging R&D activities through EPRI.

photovoltaics Plant Mechanics Alfonso Mannle and Ed Reed work on a Combined Reheat Valve ICRV] at the Navafo Generating Station In Page, Ariz. High-pressure steam flows through the valve into the turbine generator which produces electricity.

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Transmission Access Enhances Competitive Edge In recent years, bulk supply power markets have become more vital. In addition

SRP received the American Public Power Association's Energy Innovator of the Year Award for the development of thermal mass block. The block contains a polyurethane foam whkh helps to Insulate homes.

I to the traditional function of providing a short-term balance in power supply among a few utilities, today's bulk power supply markets can provide a less expensive, long-term supply for utilities. If we are to enhance our competitive positions in bulk power markets, we must expand our transmission access.

We are continuing to participate in the Mead-Phoenix Project, which initially was envisioned as a direct current (DC) line, proposed to extend from west Phoenix to near Boulder City, Nev.

We completed a feasibility study, and the Western Area Power Administration prepared a draft environmental impact study. We identified a transmission line corridor and obtained a Certificate of Environmental Compatibility from the state of Arizona. The participating utilities currently are working toward the initial construction of the project as an alternating current (AC) line, convertible to DC in the future. A decision to build the line could be reached in the early 1990s.

We also are considering participation in Western Area upgrades of the Colorado River Storage Project transmission system, which is the transmission system connecting hydroelectric dams on the lower Colorado River to the bulk power grid.

Finally, we are considering contracts for use of other utility transmission systems from the Four Corners region to our load center.

Our objective is to gain additional access to regional markets, including the ability to increase bulk power transfers with the Pacific Northwest.

hhxhOT thhueaeoh SRP's Electric Service Area East Valley Service Center Opens Service to our customers is the driving force behind the East Valley Service Center. We completed the center in the summer of 1988 as part of an ongoing plan to locate SRP's service employees closer to the customers they support.

The center is a 64-acre site with four major buildings, totaling more than 178,000 square feet of floor space.

At the center, customers can turn on or off electric service, make billing inquiries, pay electric and irrigation bills, and establish new service.

More than 300 employees work at the service center. They are responsible for designing, building, maintaining and repairing SRP's electric distribution systems for the entire East Valley, including SRP's system of hydroelectric facilities extending up the Salt River to Theodore Roosevelt Dam.

Similar service centers are in Fountain Hills, Scottsdale, Tempe and the West Valley.

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Q Eleark Servke area served exetusNefy by salt River Proiea.

Q salt Rivet ptoJttt provides full power requtremenu of fufnxe PUblk scrvkc fot Ic5alc. Profert makes dlrctt 5aks to Customers for all mrhrhg toads.

The Salt River Project agricultural Improvement and Power District provides electrldty to power users In a 2,900.squar~ile service area in parts of Markopa, Gila and Pinal counties.

g Salt River Pro/crt provides fullpower requtremehts of Arftona Publk Servke for resale.

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Programs Save Customers Money We strive for a mutually beneficial relationship between our customers'lectricity usage patterns and our generating capability. Several SRP incentive programs help shift electricity use to off-peak hours and help residential, commercial and industrial customers save money.

Load shifting also helps reduce the need to build expensive, new generating stations.

Some of these programs are Electric Savings Time, the Energy Efficient Lighting Program and the Thermal Energy Storage Program.

ATER Water distribution within the Salt River Project water service territory has changed during the past 20 years. Back then, we supplied 70 percent of our water to agricultural accounts and 30 percent to urban users.

Today, those numbers have flip-flopped.

Water demands, however, have not declined: High density urban housing, plus business and industry demands have caused water demands to remain comparable to those associated with agriculture. We recognize the need for innovation to ensure an adequate water supply to meet future demand.

Staff Chemist David McKlnney tests water samples in the SRP Water Quality Laboratory. He performs three to four tests on the samples: each covers up to 30 organic compounds.

Six to fo other tests each cover up to 20 inorganic compounds.

Last year the lab received 3,860 water samples for analysis. Testing helps ensure a quality water supply.

Valley Residents Enjoy Wet Year in 1988 Thanks to Salt River Project's reservoir system and careful planning, Valley residents enjoyed an ample water supply last year while much of the nation was reeling from drought.

Our water originates from a 13,000-square-mile watershed (a natural drainage area) that drains into the Salt and Verde rivers.

Water is stored behind six dams and released as needed through 133 miles of main canals. Another 1,132 miles of smaller canals called laterals branch off the main canals to deliver water to users.

The Salt River Valley Water Users'ssociation operates our water system. Eight cities receive most of the water, treat it and deliver it to Valley residents. The Association also provides irrigation water to farmers and urban irrigators.

Runoff from snowmelt and rain into Salt River Project reservoirs totaled 1,136,727 acre-feet (af) during calendar year 1988. (An acre-foot is enough water to cover one acre of land to a depth of one foot, or approximately 325,850 gallons.)

Last year, runoff was 14 percent above normal and 16,693 af more than in 1987.

As a result, SRP's six reservoirs contained 1,598,989 af on Dec. 31, 1988, which was 79 percent of capacity but 25 percent above normal. Total Project water supplied to the Valley in 1988 was 1,053,717 af. Of this amount, 1,001,247 af was surface water and 52,470 af was groundwater.

After losses to evaporation, seepage and other factors, we delivered 951,693 af to the Valley, compared to 997,324 af in 198?. Of this total, 428,146 af were used for non-agricultural purposes such as municipal and industrial contracts, parks, churches and residential irrigation. Agriculture accounts received 311,338 af; decreed deliveries including Indian reservations totaled 54,537 af; and off-Project and non-member deliveries totaled 157,673 af.

Following the trend toward urbanization, 2,070 acres of land were converted from agricultural use to urban use in 1988. This amount, however, was less than the 3,501 acres converted in 1987.

SRP Plans for Future Water Supplies SRP continually looks to the future of Arizona's water supplies. Staff hydrologists, for example, reviewed and suggested changes to the Second Management Plan of the Arizona Groundwater Management Act. The act is designed to reduce groundwater consumption throughout the state. The second plan will begin in 1990 and run through 2000.

ln January l989, we put f,788 sterile, trlplold white amur fish Into portions of the Tempe and New Crosscut canals.

The fish are part of a pilot program to convof aquatic weeds without using chemkals. The fish can eat twke their weight ln weeds each day. The Arizona Legislature last year approved the use of sterile white amur fish for weed control.

Weed control saves water and helps keep it clean.

We are participating in site construction plans for the Granite Reef Underground Storage and Recovery Project. Underground storage is a method of water management.

The project entails injecting between 30,000 and 70,000 af of water into the riverbed three miles below Granite Reef Diversion Dam. If the pilot program is successful, SRP and others may recharge up to 200,000 af of water at Granite Reef within the next two or three years.

Other participants are the Salt River Pima-Maricopa Indian Community and the Arizona Municipal Water Users'ssociation (AMWUA).

Staff also developed a groundwater model for water resource management planning at the Coronado Generating Station and worked with a statewide group of representatives to draft legislation concerning in-state water transfers.

During 1988, SRP coordinated research to determine improvements for landscape flood irrigation practices.

Employees studied 44 subdivisions and 16 other urban irrigation accounts in office records and field surveys. Employees are analyzing data to determine whether customers are using water efficiently. Findings will be used to develop policy aimed at improved water conservation and customer service.

SRP Supports Water Conservation In addition to recharge activities and conforming to legislative requirements, SRP supports community water conservation programs. One project is a demonstration garden at Mesa Community College. Completed in April 1989, the garden teaches students and the public about low water-use plants. The garden also will provide SRP with data about water usage of plants and turf.

Working with the city of Phoenix, SRP helped fund the preliminary design of a demonstration house to be built at the Desert Botanical Garden. The house will be used for water conservation experiments and load management testing. SRP and the city of Phoenix each donated

$ 16,000 to University of Arizona architecture students who designed the house.

Charlie Ester and Cedl Pendergast are part of a fi~ember hydrology staff whl<<h monitors watershed conditions to hetter manage the Valley's water supply.

Last year we added eight new measurement sites to enhance our precipitation and soil moisture monitoring. Hydrofogy staff evaluate Impacts to watershed yield through water planning studies of drought frequency, forest fire polky and water yield patterns.

Cooperation Helps Government Organizations SRP cooperates with local cities and state organizations to maintain the water system.

For example, in 1988 SRP completed design of the $28 million Tempe Canal Relocation Project. The project will make space for construction of the Price Road Freeway being built by the Arizona Department of Transportation.

The project consists of two and a half miles of twin, 10-foot diameter, concrete pipelines to replace the existing Tempe Canal from the north side of the Superstition Freeway to the head of the Western Canal. Staff will build several major facilities to assure reliable deliveries to SRP water users.

SRP has coordinated an intergovernmental agreement for joint participation in the construction, operation and maintenance of the Central Arizona Project/Salt River Project interconnection. The interconnection connects the two water delivery systems at the Granite Reef Diversion Dam.

Water Quality: An Important Objective SRP works to ensure that Valley cities and irrigators receive both the quantity and quality of water they require.

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Canal lining is an important method of water conservadon.

SRP uses cement to line canals and reduce water loss due to seepage.

last year we lined 5.3 mlles of canals and piped 7.9 mlles of laterals.

570 I'

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appearance and purpose of Roosevelt Dam are in accordance with Plan 6, the preferred choice of nine flood control and regulatory storage options developed by the Central Arizona Water Control Study.

Modifications to the Verde River dams may include new spillways to prevent dam failure in a "probable maximum flood" and dam stability improvements to prevent dam failure in a "maximum credible earthquake." Various alternatives are being studied. Work would occur in the 1990s.

Employees Share Knowledge Internationally At SRP, we welcome visitors from all over the world. In addition to offering tours and discussing current water operations, we have hosted 400 forei n technical ersonnel in seven on-th g

P e

job training programs and eight seminars.

Four engineers and two university students from Egypt participated in a technology transfer/share program at SRP under the Professional Employee Exchange Program (PEEP). PEEP has been extended through 1991.

(

7 Modifications are under way at Theodore Roosevelt Dam. Work will include a foundation drainage tunnel, modified outlet works, modified spllhvays and a pfunge pool. The dam's height willbe fnueased by about 77 feet. ModNcadons are scheduled to be finished by July l994. A new bridge lplaured below) also Is being construaed for better traffic flow.

SRP'S Irrigated Area

('.0l la Glend,tl(

I'ho('nix (0 tsdale Flagstaff Mesa

,.Phoenix

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~ Tucson The Salt River Valley Water Users'ssociation administers water rights of SRP's 240,000 acre area.

10

OMMUMTY Maintaining growth and quality of life in Arizona's communities is important to Salt River Project. We strive to make better places of the towns where our customers and employees live and work. Our efforts often begin with monetary gifts and are personalized through the volunteer efforts of our employees.

Contributions Benefit Communities As a political subdivison of the state of Arizona, SRP makes contributions in-lieu of property tax payments each year to benefit the communities where its electric facilities are located. Recipients are school districts, cities, counties and the state.

Contributions are made in accordance with legislation passed by the Arizona Legislature in 1963.

Last fiscal year, SRP's in-lieu of tax payments to the nine Arizona counties where the Project has facilities totaled $50 million. Nearly half of these monies will go directly to school and community college districts.

In effect, SRP is the state's third largest property taxpayer. Based on the value of SRP's electric facilities in each county, property tax payments are computed with the same formula used for investor-owned utilities.

Customer Service Representative Lupe Hidalgo emphasizes the Importance of providing excellent servke to the enure community. A two-year SRP employee, she received a monthly employee recognltlon award for her efforts. Last year, Customer Servkes answered f.250,000 phone calls.

SRP Keeps Communities Clean, Safe and Active It was a corny idea, but somebody finally invented a better litterbag. As an environmentally concerned company, SRP had been involved in co'mmunity cleanups for years. Through the cleanups and our own operations, we were adding 500,000 litterbags to Arizona landfills yearly.

Because ordinary plastic bags take between 100 and 400 years to degrade, we decided to take cleanups one step further when a new technology became available.

We contracted with a company in Illinois that had a cornstarch formula which, when mixed with plastic, would make a trash bag capable of decomposing in 18 months.

SRP bought more than a half million of the degradable bags to give to customers and other Arizonans throughout the year to help keep the state clean.

For the second year, SRP participated in the Valley's voluntary "Don't Drive One In Five" campaign.

We placed first among large companies for having the greatest number of employees participating during a one-week "Business Challenge" contest.

Nearly 17 percent of our employees found an alternate means of transportation.

Sponsored by the Regional Public Transportation Authority, the Clean Air Campaign was held during the high pollution season in the Valley, from October through January. The campaign encouraged motorists to leave their cars at home and use some other form of transportation, such as buses or car-pooling.

SRP not only emphasizes safety companywide, but also communitywide.

In an effort to make Phoenix and other communities safer places to work and live, SRP teamed up with three other utilities to form Arizona Community Watch.

Through the use of two-way radios or cellular telephones in their company vehicles, employees report crimes, suspicious activities, fires and other hazards in Valley area communities. This joint effort is designed to help police and fire agencies respond quicker and more frequently to accidents or crimes.

Arizonans Learn Through SRP Education Programs SRP also devotes time and energy to education.

For 25 years, SRP's Educational Services Division has been conducting programs

SRP's cornstarch litterbags made their debut at the annual Page Attacks Trash Cleanup in Page, Ariz. More than 5,000 people used about 43,000 of the 40pound capacity litterbags to collect approximately 200 tons of trash. SRP and the degradable litterbag won first place In the national "Take Pride in America" program. SRP's entry was voted Na I of 457 entries from 44

states, The bag was a national entry after earning a first-place award ln the "Take Pride in Arizona" competition sponsored by the Governor' Commission on Arizona Environment.

SRP's number one corporate obJectfve is safety. As a result of this dedication to companywlde safety, in f988 we saw no sfgnificant increase in lost-time or preventable accidents. Crur record earned us second place In the American Pubfk Power Association's (APPA) annual safety contest. The APPA represents more than l,750 utilities.

Historians at SRP's Silva House museum offered an ans and crafts program to school children. Students made turnaf-the<entury toys and Christmas decorations. They also toured the home, which was built ln l900. The museum features early electric appliances and displays in homey settings. Last year 24.000 people took tours of the Silva House.

about water and electricity for teachers and students.

Last year more than 83,000 students and teachers learned from the educational services staff. Topics were: water safety, electric safety, electricity generation, and water and energy conservation.

Students illustrated their knowledge by entering 1,300 posters in SRP's annual water and electric safety poster contest.

Approximately 2,000 people from all over the world took part in 117 tours of SRP canals, dams, power plants and other Project facilities.

Last year, SRP's Speakers Bureau employee volunteers talked to nearly 160,000 members of community groups.

History Moves Forward Last year we took 22,000 people back in time on SRP's Time Machine. This museum on wheels enables us to share our story across the state. The machine showcases SRP's history from the Hohokam people to modern day.

The SRP History Center featured a special display of artifacts, consisting of Hohokam tools, ceramics and ornaments dating as far back as 450 A.D. The artifacts were uncovered from an ancient Hohokam village at an electrical substation site. SRP's staff archaeologist in January 1988 led the full-scale excavation.

Six thousand people toured the History Center last year.

SRP Contributes to Good Causes SRP contributes to many charities, educational institutes and civic groups throughout the state.

In support of higher education, we contributed

$50,000 to the Maricopa Community Colleges Foundation to be used for scholarships during five years.

SRP also supports the arts and cultural community.

Last year, the largest single grant went to the Phoenix Symphony. And, we have just completed a five-year pledge to the new Herberger Theater.

In the area of health and human services, SRP contributed $30,000 to the renovation of Tempe St. Luke's Hospital. We also contributed to a special trust fund established with the Arizona Community Foundation. The foundation helps impoverished, ill or abused children in Arizona.

The SRP Board also approved a $10,000 contribution to the Crisis Nursery for a capital campaign.

We recognized the volunteer efforts of Susan Marie Lord, a freshman at Saguaro High School in Scottsdale.

She received the Young Adult Volunteer Award. Susan, 15, has volunteered for two years with the City of Scottsdale Recreation Division's Special Needs Program. This program is designed for developmentally disabled children, ages 6 to 22, who are enrolled in special education classes.

SRP also supports civic efforts such as the Futures Forum and the Arizona Town Hall. The Futures Forum gathers Phoenix citizens to discuss the future of their city.

The Arizona Town Hall was established in 1962. Approximately 125 prominent Arizona citizens meet twice a year to discuss a topic of major concern to Arizona's future.

We provided seed money for the International Desert Cities Conference to be held 12

4,in Phoenix in 1991. The conference is designed to ensure the survival of desert communities into the 21st century.

For the past seven years, SRP has supported Project S.H.A.R.E. (Service to Help Arizonans with Relief on Energy). This cooperative effort of The Salvation Army, Salt River Project and Arizona Public Service Co. helps needy citizens pay their energy bills.

Last fiscal year, customers of SRP contributed $ 147,251 to Project S.H.A.R.E.

SRP employees also recognized the importance of being active and charitable citizens.

Through payroll deductions to the Employees Booster Associations, Project employees contributed $287,396 to 27 state and local organizations in Arizona last year.

At Coronado Generating Station, employees raised $1,700 for the St. Johns Senior Citizens through a 10,000-meter fun run. The event drew 700 participants.

SRP employees last year served their communities through 118 business and service clubs and non-profit organizations.

Employees were members of 381 trade, technical and non-profit organizations.

In an effort to beautify the community in which they work, employees of the West Valley Service Center last November picked up 150 tons of trash during the Tolleson Cleanup.

SRPs commitment to safety was exemplified this year when Salt River Pete's Water Safety Club inducted its 500,000th member. Nine-yearold Anthony Chavez, a thlrdgrader at M.C.

Cash School, received a plaque. The club's purpose Is to educate children about water safety. Children learn from presentations on water rescue procedures, safe swimming tips, and the dangers of swimming In canals or strange places.

Outstanding Students Recognized Personal achievement and academic success are two areas which SRP actively promotes.

Each year we sponsor several scholarships to deserving students in Arizona communities. For example, the Coronado Generating Station engineering scholarship pays for all college expenses at the recipient's in-state university. The scholarship also includes an option for paid summer employment at the generating station.

Chosen by their principals as the top graduating seniors in their class, 62 high school seniors were honored at the sixth annual "Spotlight On Excellence" recognition dinner. The students were chosen from communities in which SRP owns or operates facilities.

Younger students learn through SRP's annual Energy Fair. Winners receive U.S.

Savings Bonds. This year, students from 12 schools entered more than 100 projects.

Students interested in careers in science and engineering partake in the SRP-sponsored Explorer Post 170. Twice monthly, students hear guest speakers and take career-related field trips.

Last year, Explorer Post 170 earned two post achievement awards and two individual merit awards for growth, leadership, contributions to the community and outstanding club guidelines.

Last August SRP gave a cool welcome to the Valley's new professional football team, the Phoenix Cardinals. It was a fans. for.fans proJect. We disuibuted I I0,000 colorful. hand+eld fans to spectators at the first two games.

Audience members stayed cool while waving the fans which touted, "I'm a Cardinal Fan." In line with an SRP adverdslng campaign, the back of the fan had a message supporting the Arizona Heat Pump Council. The coundl has 60 heat pump contractors and dealers In the Valley.

There Really is a Better Way Making sure electricity and water are good values is a Project goal. In view of this goal, SRP strives to eliminate extra expenses when possible.

The Better Way Program is one such cost-saver.

Since its inception in 1986, the program has saved us more than $2 million. Through employees'uggestions, we refine operations within the organization. By reducing operating costs, employees help hold down rates for SRP customers.

Employees receive monetary awards for their ideas.

INANCE 505,618 518,889 288,902 359.561 Electric Customers SRP Revenues Pass Billion Dollar Mark in 1988-89 For the first time, SRP passed the billion dollar mark in fiscal year 1988-89, with combined operating revenues of $1.06 billion. That compares to $959 million in 198748.

After subtracting expenses, net revenues were $11.8 million, compared to $ 16.3 million last year.

While net revenues declined, funds available for corporate purposes remained strong, climbing to $ 132.2 million, an increase of $ 19.2 million from the prior year.

An increase of 13,271 electric customers and above-average, hot weather during the peak summer months resulted in our electric revenues increasing by $102.9 million. This

increase, however, was offset by the booking of $32.? million for a major corporate reorganization program and an increase in operating expenses and financing costs.

I978 1983 0

Relldentlal 1988 Q

Commercial 8 Industrial 1989 Q Other 3

Ps i asst 1978 1983 1988 1989 13 Agricultural 12 Urban Total Electric Sales 9.2 SitRon 4Vh 13.1 Bi%on kwh 16,3 ih15on kWh 28 81/ion Bvh 1918 1983 r

19SS 1989 The American Public Power Assoclatlon ranks SRP third ln kilowatt hours (kWh) sold.

Water Delivered Wlthln ProJect Boundaries Agricultural vs. Urban Reorganizing for a Strong Future SRP's reorganization program eliminated 791 positions, 200 of which were unfilled slots. As a result, approximately 600 employees were eligible for an enhanced severance package.

Management anticipates that cost reductions associated with the restructuring will save up to $50 million per year.

We restructured the organization to help retain a competitive edge in the utility industry. The program grew out of a corporate objective to improve management practices and processes to increase organizational efficiency.

The reorganization and a five-year financial plan are part of our strategic direction.

Both will help us compete in the future.

The financial plan was designed to focus the Board's and management's attention on long-range operations.

It has three principal targets:

v Rate increases which, when combined with adjustments to the fuel escalator, do not exceed the compound rate of inflation over time.

v A debt service coverage ratio of not less than 1.80. Our current ratio is 1.92.

v A debt ratio of 75 percent or less. We currently are at 71 percent. This ratio helps maintain an AA bond rating from Standard 8t Poors and Aa rating from Moody's Investor Service.

Why We Sell Bonds As Congress looks for ways to balance the budget this year, one area it is examining is the use of taxmempt financing by municipalities. A Supreme Court ruling in April 1988 gave Congress the green light to tax interest on state and local bonds.

SRP issues tax~empt electric system revenue bonds to build and improve electrical facilities. We have raised $2.2 billion so far in the 1980s. Because these bonds are SRP's primary means of raising funds, and because public power systems as do other infrastructure systems require large amounts of external capital, SRP is joining the American Public Power Association (APPA), the Large Public Power Council, and others in urging Congress to preserve taxmempt financing for local government entities.

We sell bonds to finance a $ 1.6 billion construction program which will occur during the next five years. We will build electric distribution facilities worth about $700 million during the five-year period.

SRP held three bond sales during 198IWI9:

v a $ 100 million revenue bond sale at 7.5 percent in October v

a $21.8 million minibond sale at 7.2 percent in December v

a $ 150 million revenue bond sale, including $9.5 million of capital appreciation bonds 14

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PROJECT GENERAL TATISTICAL EVIEW (8ooo) 12 Months Ended April30 12 Months Ended December 31 Operating revenues......,....,.................

Electric Water and irrigation.

Operating expenses.

Other income Net financing costs Net revenues Additions to plant, excluding allowances for funds used during construction Utilityplant, gross.,

Contributions of electric revenues to support water operations.....

Taxes and tax equivalents.............,.......

Employees at year end.

'Does nor include rempo rory employees.

1989

$1,063,306 1,055,042 8,264 832,316 4571 223,798 11,763 341,617 5,560,160 34,069 125,1?1 5,599'988

$959,346 952,133 7,213 790,972 39,265 191,378 16,261 361,881 5,335,784 29,227 121,154 5,805 1983

$652,139 645,171 6,968 457,905 39,332 73,611 159,955 297507 3,386,983 8,337 60,426 5,179 19?S

$337,764 333,329 4,435 246,897

'24,730 49,804 65,793 406,124 1,912,139 7,507 38,339 4,226 Total storage and pumping capacity (acre-feet)......

~

Storage capacity (six reservoirs).........,....

Installed pumping capacity...,.

Water in storage Jan, I (acre-feet)....,.......,....

Project storage only Runoff (acre-feet)

Wafer in storage Dec. 31 (acre-feet)...,............

Project storage only Sources of water for deliveries (acre-feet).........

Gravity supply....,................,....

Groundwater supply (pumping by SRP)..........

Groundwater supply (pumping by others).

Use of water (acre-feet),....,

Agricultural....,....,....,....,,...........

City domestic.

Subdivision irrigation.

Other non.agricultural irrigation (schools, parks, churches, etc,),...............

Decreed deliveries Contract deliveries Seepage and evapotranspiration.....,.....,...

~

Canals, total (miles).

Lined Laterals, total (miles)

Lined and piped Drainage and waste ditches (miles)............,...

Lined and piped Assessed area (acres)

~

Number of assessed accounts Number of times water delivered to users..........

Water statistics are computed on a calendar year basis.

~* Based on U.S.G.S. provisional records and are subject to sass 2,880,369 2,019,102 861,267 1,624,272 1,391,376 1,136,72?"

1,S98,989 1,329,773 1,053,717 1,001,247" 50,004 2,466 951,693 311,338 428,146 313,997 62,669 51>480 54,537 157,673 102,024 133 96 907 817 232 88 238,266 182,226 486,307 adjustment.

1987 2,881,972 2,019,102 862,870 1,691),741 1,464,527 1,120,034 1,624,272 1,391,3?6 1,094,601 1,039,457 50,591 4,553 997,324 336,527 417,914 304,532 61,872 51,510 50,783 192,100 9?,277 133 97 899 807 236 88 238,170 182,110 475,364 1983 2,838,906 2)019,102 819,804 1,630,000 1,345,252 2,829,61?

1,717,40?

1,455,375 1)171,097 1,124,554 43,248 8,295 1,118,166 454,516 364,435 251,110 58,988 54,338 52,298 6,177 156,325 132 71 887 766 244 70 238,172 180,455 479,996 197S 2,811,600 2,063,948 747,652 511,093 288,660 3,389,051 1,839,399 1,548,742 1,050,647 977,988 66,747 5,912 1,050,647 400,707 291,549 198,228 49,615 43,706 43,052 127,195 188,144 131 62 880 738 251 58 238,220 171,875 429,276 16

POWER 12 Months Ended April 30 12 Months Ended December 31 Energy Sources (kWh)

Net nuclear generation, Net steam generation'.

Net gas turbine generation Net combined cycle generation......,..

Net run of river generation...,......,..

Pymped storage generation.....,......

Total net generation' Purchased........,

interchange received...

Wheeling received Total energy sources'nergy disposition (kWh)'"

Residential.....

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Commercial & Industrial Irrigation pumping, Street & highway lighting,...,,....,,.

Public authorities Interdepartmental.

Sales for resale Total sales..........,........,...

Interchange delivered Wheeling delivered Energy losses..

Energy for pumped storage operation....

Total disposition of energy.....,....

Peak overall power system (kW)...,.....

Date and time (M~,

Peak Project customers (kW)

Date and time (MSTI.

Generating capability (kW)"

Nuclear.....,..........,,

Steam',

Gas turbines,.

Combined cycle, Hydroelectric conventional

'Hydroelectric pumped storage..

Total operating capability'...

Contract purchase at peak...,

Total resources'..

Electric customers-year end"'esidential Commercial & Industrial...,...

Other Toiai

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Average annual kWh use/

residential customer'"

Average annual residential revenues/kWh (cents)........,,,.........

1989 3,864,274,000 12,691,834,000 28,239,000 8?5,447,000 348,404,000 168,280,000 17,976,478,000 1,064,999,431 112,182,828 244,548,617 19,398,208,876 6,095,740,065 7,201,161,575 276,195,168 106,249,527 314,981,553 95,397,871 3700,213,776 17,789,939,535 70,079,883 243,539,088 1,059,965,370 234,685,000 19,398,208,876 3,476,000 July 25, 5 p.m.

3,060,000 July'5, 5 p.m.

641,190 2,411,115 393,000 288,000 96,400 137,000 3,966,705 237,544 4,2Q4,249 469,330 40,556 9,003 518,889 12,988 8.03 1988 2,? 14,798,000 11.599,545,000 4,694,000 762,125,000 357,928,000 174,844,000 15,613,934,000 1.986,621,174 127,353,000 10,572,500 17,738,480,674 5,755,597)879 6,806,397,526 226,113,617 103,537,571 293,322,023 85,065,218 3,065,080,688 16335,114>522 130,817,000 9,958,127 1,012,817,025 249,774,000 17,738,480,6?4 3,234,000 Aug. 4, 6 p.m.

2,840,000 Aug. 4, 6 p.m.

427,460 2,411,115 393,000 288,000 96,400 137,000 3,752,975 51?,744 4,270,719 457,235 39,358 9,025 505,618 12,824 7.65 1983 11,399,943,000 16,206,000 287,629,000 613,694,000 199,069,000 12,516,541,000 1,735,645,332 87,348,000 8,154,668 14,347,689,000 3,982,669,563 4,386,224,953 192,420,700 46,948,183 338,755,364 61,423,824 4,079,623,799 13,088,066,386 74,340,000 7,433,303 895,845,311 282,004,000 14,347,689,000 2,619,000 Aug. 2, 6 p.m.

2,172,00Q Aug. 20, 5 p.m. 2,283,250 393,COO 288,000 95,000 137,000

.3,196,250 329,547 3,525,797 332,790 25,092 1,679 359,561 12,277 6.47 19?8 7,221,663,000 59,793,QQO 385,269,000 367,924,000 105.960,000 8,140,609,000 1,808,603,941 249,0?4,000 7,725I059 10,206,012,000 3,278,867,939 3,945,048,976 206,269,684 39,400,289 289,204,179 66,240,885 1,340,060,575 9,165,092,527 124,787,000 7,307,903 759,125,570 149,699,000 10,206012,000 2,196,000 July 14, 3 p.m.

1,854,ooo July 20, 6 p.m.

~0-1,548,250 378,000 288,000 94,000 140,000 2,448,250 461,813 2,910,063 268,107 19,274 1,521 288,902 12,799 4.72

'ncludes SRP participation in jointly owned projects

'" Unit capabilities during summer peak

"'nergy disposition kWh through total sales, electric figures.

customers year end, average kWh use and average annual revenue are estimated 17

OMBINED ALANCE HEETS ASSETS Salt River Project As of April30, 1989 and 1988 (8000) 1989 1988 UTILITYPLANT, at historical cost (iVotes I, 2, 3 and 4):

Plant in service:

Electric..............

Irrigation Common Less-Accumulated depreciation on plant in service Plant held for future use Construction work in progress Nuclear fuel, net of amortization OTHER PROPERTY AND INVESTMENTS:

Non-utility property and other investments.

Segregrated funds, net of current portion CURRENT ASSETS:

Cash and temporary investments, at cost Current portion, segregated funds

'fiade and other accounts receivable, net Fuel stocks, at last-in, firstwut cost,.

Materials and supplies, at average cost Other current assets....

DEFERRED CHARGES AND OTHER ASSETS (Votes I and 5),.......

$4,587.139 107,119 220,123 4,914,381 1,135,244 3,779,13?

298,934 267,02?

79.818 4,424,916 34,448 111,656 146,104 261,855 82,145 57,960 86,554 80,509 24,809 593,832 212,791

$5,377,643

$4,305,817 10],122 203,356 4,610,295 995,525 3,614,770 309,343 333,795 82,351 4,340,259 30,222 100,263 130,485 198,119 77,026 50,824 99,104 71,575 20,763 517,411 145,902

$5,134,057 The accompanying notes are an integral part of these combined balance sheets.

CAPITALIZATIONAND LIABILITIES

,1989 (8000) 1988 LONGTERM DEBT (Notes 5 and 8):

Electric system revenue bonds, net of current portion.......,...

Commercial paper and other

$3,129,380 375,783 3,505,163

$2,891,391 360,333 3,251,724 ACCUMULATEDNET REVENUES:

Balance, beginning of year Net revenues for the year....

Balance, end of year.,

TOTAL CAPITALIZATION, 1,442,926 11,763 1,454,689 4,959,852 1,426,665 16,261 1,442,926 4,694,650 CURRENT LIABILITIES:

Current portion, long-term debt..

Accrued plant deferral costs, current portion (Note 3)

Accounts payable Accrued taxes and tax equivalents...,.

Accrued interest Customers'eposits...

Accrued reorganization costs,............

Other current liabilities,.

32,360 25,448 93,076 45,477 74,425 23,765 31,613 27,863 354,027 26,993 105,200 79,326 44,305 70,381 24,647 27,654 378,506 DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES(Notes 3 and 7) 63,764 60,901 COMMITMENTS AND CONTINGENCIES (Notes 3, 5 and 7).....

$5,377,643

$5,134,057 The accompanying notes are an integral part of these combined balance sheets.

19

OMBINED TATEMENTS OF ET EVENUES Salt River Project For the years ended April 30, 1989 and 1988 (8000) 1989 1988 OPERATING REVENUES (Note I)

Electric....,

Rater and irrigafion.....

Total operating revenues OPERATING EXPENSES:

Purchased power Fuel used in electric generation.

Qfher operating expenses.......

Maintenance..........,.....,

Depreciation and amortization (Note Taxes and tax equivalents..

~

Total operating expenses Net operating revenues OTHER INCOME:

Allowance for equity funds used during construction Interest income..

Other deductions, net.

Total other income Nef revenues before financing costs FINANCING COS IS:

Inferest on bonds..

Amortization of bond discount, issue and refinancing expenses, Interest on other obligations.

Less-Allowance for borrowed funds used during construction.

Net financing costs.......,......................,,.......

NET REVENUES BEFORE UNUSUAL AND EXTRAORDINARYITEMS

$ 1,055,042 8,264 1,063,306 15,327 254,907 193,925 92,334 150,652 125,171 832,316 230,990 4,694 29,585 (45) 34,234 265,224 204,378 7,005 22,668 (10,253) 223,798 41,426

$ 952,133 7,2IB 959,346 26,626 216,093 I?4,251 101,530 151,318 121,154 790,972 168,374 20,005 24,949 (5,689) 39,265 207,639 189,296 6,096 18,409 (22,423) 191,378 16,261 UNUSUAL ITEM Expenses of corporate reorganization program (Note NET REVENUES BEFORE EXTRAORDINARYITEM EXTRAORDINARYITEMGain on exfinguishment of debt (Note 5)

NET REVENUES.

jo)...........

(32,687) 8,739 3,024 11,763 16,261 16,261 The accompanying notes are an integral part of these combined statements.

OMBINED TATEMENTS OF ASH LOWS Salt River Project For the years ended April 30, 1989 and 1988 1989 (8000) 1988 NET CASH FLOWS FROM OPERATING ACTIVITIES:

Net revenues Noncash items included in net revenues:

Depreciation and amortization Amortization of bond related expenses Gain on sale of plant and debt extinguishment Decrease (increase) in fuel stocks and materials and supplies Decrease (increase) in other assets, net.

Increase (decrease) in accounts payable Increases in: Accrued taxes and tax equivalents...

Accrued interest.

Accrued reorganization costs Other liabilities, net.

Termination of coal contract.

Net cash provided by operating activities NET CASH FLOWS FROM INVESTING ACTIVITIES; Additions to utility plant, net of AFUDC Allowance for funds used during construction................,....,

Additions to non-utility property Decrease in note receivable Contributions in aid of construction Proceeds from sale of plant Net cash used by investing activities............,...

NET CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds of bond issues Proceeds of other,long-term debt, net of repayments, Repayment of principal on bonds.,

Repayment of principal on U.S. debt (Note 5).

(increase) decrease in segregated funds.

Net cash provided by financing activities NET INCREASE IN CASH AND TEMPORARY INVESTMENTS.........,...,.

BALANCE AT BEGINNING OF YEAR IN CASH AND TEMPORARY INVESTMENTS, BALANCE AT END OF YEAR IN CASH AND TEMPORARY INVESTMENTS..

$ 11,763 150,652 7,005 (4,390) 3,616 (19,694) 13,750 1,172 4,044 31,613 2,189 (59,410) 142,310 (341,617)

(14,947)

(4,226) 40,527 2,342 (317,921) 264,614 22,333 (27,229)

(3,859)

(16,512) 239,347 63,736 198,119

$261,855

$ 16,261 151,318 6,096 (242)

(20,238) 15,014 (6,102}

2,871 6,620 10,639 182,237 (361,881)

(42,428)

(12,475) 28,969 18,518 433 (368,864) 266,347 1,191 (26,915)

(886) 34,318 274,055 87,428 110,691

$ 198,119 The accompanying notes are an integral part of these combined statements.

21

OTES TO OMBINED INANCIAL TATEMENTS s

Salt River Project For the Years Ended April 30, 1989 and 1988 (I)

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES:

(a) Principles of Combination The combined financial statements include the accounts of the Salt River Project Agricultural Improvement and Power District (the District) and the accounts of its agent, the Salt River Valley Water Users'ssociation (the Association) and a whollywwned subsidiary, Salt River Generating Company, together referred to as Salt River Project (the Project). All significant intercompany transactions have been eliminated. The Project follows the accounting principles promulgated by the Financial Accounting Standards Board.

(b) Regulatory Agent The District's Board of Directors serves as its regulatory agent.

(c) Utmty Plant, Depreciation and Maintenance The accounting records of the Project are maintained substantially in accordance witlt the Uniform System of Accounts prescribed for electric utilities by the Federal Energy Regulatory Commission. Utilityplant is stated at the historical cost of construction. Construction costs include labor, materials, services purchased under contract, and allocations of indirect charges for engineering, supervision, transportation, and administrative expenses.

An allowance for funds used to finance construction work in progress (AFUDC) is capitalized as a part of the electric and general plant. This allowance is deducted from net financing costs in the combined statements of net revenues and added to utilityplant, Capitalization rates of 6.70% and 8.75X were used in 1989 and 1988, respectively.

Depreciation expense is computed on the straight-line basis over the estimated useful lives of the various classes of plant.

Rates in effect resulted in provisions approximating 3.10X and 3 42Ã for 1989 and 1988, respectively, on the average cost of depreciable electric plant, and 1.46K and 1,43% for 1989 and 1988, respectively, for depreciable irrigation plant.

As of May I, 1988, the District prospectively revised its estimate of the depreciable life of the Palo Verde Nuclear Generating Station (PVNGS) from 27 years to 35 years. The revised life more closely approximates industry standards for nuclear plant depreciation. This change reduced depreciation expense for the year ended April 30, 1989, by approximately

$ 12,000,000.

When property representing a retirement unit is replaced, removed or abandoned, the cost of such property is credited to the appropriate utility plant account, and such cost, together with removal costs less salvage, is charged to accumulated depreciation.

The Project charges to maintenance expense the cost of labor, materials, and other expenses incurred in the repair and replacement of minor items of property.

(d) Bond Expense Bond discount, issue and refinancing expenses are being amortized over the terms of the related bond issues.

(e) Revenues Meters for residential, commercial and small industrial customers are read cyclically and sales recorded only when billed. This system of billing results in estimated earned but unbilled revenues which amounted to $26,415,000 and 22

(Thousands) 1989 1988 Electric generating facilities...........

Transmission and distribution.....,...

Irrigation plant Other construction..................

$ 70,497 88,914 30,542 77,074

$ 49,280 113,071 22,039 149,405 826?,027 8333,795

$23,743,000 at April 30, 1989 and 1988, respectively. For large industrial customers, meters are read near month-end and billings recorded on the accrual basis. Electric revenue billings are adjusted periodically for changes in costs of fuel and purchased power, Revenues from water and irrigation operations are recorded when earned.

(I) Electric Rates Under Arizona law, the District's Board of Directors has the exclusive authority to establish electric rates. The District is required to follow certain procedures, including public notice requirements and holding a special Board meeting, before implementing changes in standard electric rate schedules. The current rates have been in place since October, 1987.

(g) Nuclear Fuel The District amortizes nuclear fuel to fuel expense on a unit of production method.

Under the provisions of the Nuclear Waste Act of 1982, the District is charged one mill per kWh on its share of electricity produced by PVNGS. The District records this charge as a current year expense.

(h) Decommissioning The District reserves for the cost of decommissioning PVNGS based on an outside engineer's study. The total estimate to decommission the District's share of PVNGS is $ 148 million. This estimate will be reviewed and adjusted periodically.

Decommissioning funds collected from the ratepayers of approximately

$6 4 million are mamtained as a segregated fund.

The corresponding liability is classified as an other noncurrent liability.

(I) Income Taxes The District is exempt from federal and state income taxes.

(j) Reclassifications Certain 1988 amounts have been reclassified to conform to the current year presentation.

(2) POSSESSION AND USE OF UTILITYPLANT:

The United States of America refains a paramount right or claim in the Project which arises from the original construction and operation of certain of the Project's facilities as a federal reclamation project. The Project's right to the possession and use of, and to all revenues produced by, these facilities is evidenced by contractual arrangements with the United States.

(3) CONSTRUCTION PROGRAM:

Balances shown for construction work in progress (CWIP) represent expenditures for new facilities required to service anticipated customer needs, and consist of:

~

s.

~

Construction expenditures planned for fiscal years 1990 through 1994 are shown below.

1990 1991 1992 1993 1994 thousands)

$282,873 289,454 336,092 349,967 377,515 1990 1991 1992 1993 1994 Thereafter Total (Thousands) 12,507 26,151 27,288 27,288 515,050 8608)284 Projected construction expenditures include contingency allowances to reflect potential cost increases.

During the fiscal year ended April 30, 1989, the District paid approximately $59 million to terminate a contract with Kaiser Coal Company. The termination will result in substantial savings since the District will no longer be obligated to buy coal from Kaiser for Coronado Units I and 2. The termination cost is being amortized to fuel expense over the remaining 15 year life of the original contract.

At April 30, 1989, commitments had been entered into for delivery of materials and services on construction projects. Jn addition, minimum long.term commitments of approximately $ 1.8 billion exist under coal and fuel oil supply contracts.

The Project has committed to spend approximately $45 million over the next six years for its share of a project to build or modify dams on the Salt and Verde Rivers for flood control, to ensure dam safety and provide water storage associated with the Central Arizona Project.

(4) INTERESTS IN JOINTLY OWNED ELECTRIC UTILITYPLANTS:

These expenditures will be financed primarily by funds currently on hand, future net revenues and the sale of revenue bonds.

ln 1988, the Board of Directors approved deferring the jn-service date of Coronado Generating Station Unit 3. This action was taken as a result, of a study which concluded that the deferral would allow SRP to realize savings in future revenue requirements. The unit is currently scheduled for commercial operation in 2005.

Coronado Unit 3 costs of $280.5 million were transferred to Plant Held for Future Use in accordance with a resolution approved by the Board of Directors on June 13, 1988. Costs incurred include both construction costs incurred to date plus an estimate of costs necessary to defer the in.service date of Coronado Unit 3. The resolution provided that these costs would be included in the amounts to be recovered from consumers over the depreciable life of Coronado Generating Station, subject to the rate adjustment procedures set forth in the Arizona Revised Statutes.

The District has entered into two long-term power purchase agreements to replace a portion of the power which would have been supplied by Coronado Unit 3. Each contract is for 50 MW of firm power starting June 1990, increasing to 100 MW beginning in June 1991 and expiring in the year 2011.

Minimum payments under these purchased power contracts are as follows for the fiscal years ending April 30:

Four Corners (NM).... J0.00%

Mohave (NV).......... 10.00 Navajo (AZ)........... 21.70 Hayden (CO)....,... 50.00 Craig (CO)...,......29.00 Palo Verde (AZi.....,.17.49 84;828 46,202 216,958 67,425 225,345 1,573,376

$ 21,890 18,456 91,364 28,386 63,703 130,550

$ 6,122 1,276 7,430 509 642 11,557 82,214,134

$354,346

$2?,636 The District acts as the operating agent for the participants in the Navajo Project. As operating agent, the District utilizes advanced billings to the participants, based on ownership percentage, to pay the cost of operations. A separate operating fund is maintained by the District to process Navajo Project transactions.

The District's share of direct expenses of the jointly owned plants is included in operating expenses in the combined statements of net revenues.

(5) LONG-TERM DEBT:

thousands)

Interest Rate 1989 1988 Maturitles Electric System Revenue Bonds.....

4.9-11.5%

Unamortized Bond Discount.......,...

Total Revenue Bonds Outstanding..

U.S. Government Non-Interest Bearing Debt.....

Commercial Paper and Other...,. 6.0.7.6%

Total Long Term Deb't s

~

> ~

~

~

~

~

~

~ ~ ~

$3,257,583

$3,010,96I 1990-2029 (95,843)

(92,57'?)

3,161,740 2,918,384 6883 375,783 353,450

$3,53?,523

$3,276,? 77 Electric system revenue bonds are secured by a pledge of, and a lien on, the revenues oi the electric system after deducting operating expenses, as defined in the bond resolution.

The debt service coverage ratio, as defined in the bond resolution, is used by bond rating agencies to help determine the financial health of the District. For the years ended April 30, 1989 and 1988, debt service coverage was as follows:

thousands)

(except for ratios) 1989 1988 Revenues available for debt service....

$449,968

$408,442 Total debt service requirements.......

234,386 214,634 Debt service coverage ratio.....,.....

1.92 1.90 23 The District has entered into various agreements with other electric utilities for the joint ownership of electric generating and transmission facilities. Each participating owner in these facilities must provide for the cost of its ownership share. The following schedule reflects the District's ownership interest (at cost) in jointly owned electric utility plants at April 30, 1989:.

??hsssssds)

Ownership Plant Share Jn Accumulated Plant Name Percent Service Depreciation CWIP

The annual maturities of long-term debt (excluding commercial paper) as of April 30, 1989, due in the fiscal years ending April 30, are as follows:

1990 1991 1992 1993 1994 Thereafter (Thousands) 32,360 34,128 39,368 44,786 50,554 3,057,170 83,258) 366 Service cost interest cost Actual return on assets,...........,.

Net amortization and deferral.........

Net periodic pension income.....

thousands) 1989 1988

$ 9,061 15,735 (47,941) 18,911

$ 8,902 14,751 1,345 (28,775) 3(4,234}

3(3,TTT) 24 Interest and amortization of discount on the various issues results in an effective rate of approximately 7.26X over the remaining terms of the bonds.

At April 30, 1989, the Project has authority to issue additional electric system revenue bonds totalling $488,976,593 principal amount and electric system refunding revenue bonds totalling

$1,518,405,000 principal amount.

From time to time, the District defeases electric system revenue bonds, sometimes resulting in a loss. The District's Board of Directors has determined that such losses should be recovered from the ratepayers during the period of reduced debt service requirements.

Accordingly, under the provisions of Statement of Financial Accounting Standards No. 71, the losses will be amortized on a monthly basis over the life of the refunded bonds. Included in Deferred Charges and Other Assets is

$96,399,000 and $99,138,000 of unamortized defeasance

losses, at April 30, 1989 and 1988, respectively.

In 1984, the District refunded its then outstanding general obligation bonds. Although the refunding constituted an in-substance defeasance of the prior lien on revenues which secured said bonds, the general obligation bonds continue to be general obligations of the District, secured by a lien upon the real property included in the District, a guarantee by the Association, and by the District's taxing authority, As of April 30, 1989 the amount of defeased general obligation bonds outstanding was

$ 105,735,000.

In fiscal year 1989, the Project extinguished approximately

$6.9 million in outstanding debt with the United States Bureau of Reclamation with a payment of approximately $3.9 million. This transaction resulted in a $3 million gain which has been reflected as an extraordinary item in the combined statement of net revenues for the year.

(6) EMPLOYEE BENEFIT PLANS:

The Project has a Jetiremenf. plan (the Plan) covering substantially all employees. The Plan is funded entirely from Project contributions and the income earned on invested assets.

No contributions were required to be made to the Plan in fiscal years 1989 and 1988. Plan assets consist primarily of stocks, U. S.

obligations, corporate bonds, real estate funds, and a guaranteed investment contract.

Net periodic pension cost as of the dates of the latest actuarial report (April 30) is made up of the components listed below as determined using the projected unit credit actuarial cost method:

The discount rate used in determining the actuarial present value of the projected benefit obligation was 9.0X for both 1989 and 1988. The rate of increase used to determine future compensation levels was 5.5X for fiscal years 1989 and 1988.

The expected long-term rate of return on assets is 9.75X for both 1989 and 1988.

The following schedule reconciles the funded status of the Plan with amounts reported in the Project's combined financial statements as of April 30:

thousands) 1989 1988

$252,294 Plan assets at fair value,............

$293,451 Actuarial present value of projected benefit obligation:

Vested benefit obligation..........

(145,579)

Nonv'ested benefit obligation.......

(6,519)

Accumulated benefit obligation.....

(152,098)

Excess of projected benefit obligation over accumulated benefit obligation.................

Projected benefit obligation........

Plan assets in excess of projected benefit obligation Unrecognized net assets.............

Unrecognized net gain.....,

Prior service cost not yet recognized in net periodic pension cost..

Prepaid Pension Cost (120008)

(8,76?)

(128,775)

(51,615)

~(48,338 (177,713)

(203,713) 74,581 (60,702)

(5,963) 2,175 1,415 8 13,564 8

9)331 The Project also has two defined contribution plans, the Salaried Employees'hrift Plan and the Hourly 401(k) Plan. Both plans receive employee contributions and partial employer matching contributions. Employees are eligible for participation in the appropriate plan upon completion of one year of service.

Employer contributions to these plans were $2,700,000 and

$2,100,000 in the fiscal years ended April 30, 1989 and 1988.

In addition to providing pension benefits, the Project provides certain health care and life insurance benefits for retired persons.

Substantially all of the Project's employees may become eligible for those benefits if they reach normal retirement age while working for the Project, retire from the Project, are eligible for pension benefits, and have completed a minimum of 5 years regular employment. The cost of retiree health care and life insurance benefits is recognized as expense as the premiums and/or deposits to the mustee are paid. For 1989 and 1988, those costs totalled $2,100,183 and $ 1,696,765, respectively.

(?) LITIGATIONAND OTHER CONTINGENCIES:

Environmental:

At any given time, litigation or administrative proceedings or studies involving environmental matters could affect the Project and its present and proposed generating and operating facilities.

Many normal activities in connection with the operation of the Project generate hazardous wastes, which in the last 10 years, have been the. subject of substantial federal, state, and local legislation imposing strict liability on generators, transporters, storers, and disposers of hazardous waste for clean.up costs and damages which result from substance release or contamination, regardless of time or location. Increased operating expenses due to adverse environmental decisions would be passed on to customers through electric rates.

The District's principal generating stations, due to their proximity to large national parks, monuments and wilderness areas, may be subject to provisions relating to visibility

< protecffon. Currently, the U.S. Environmental Protection Agency is evaluating whether the Navajo Generating Station is a source of visibility impairment requiring installation of environmental controls. Installation would require significant additional expenditures, which would be passed on to customers through increased electric rates.

Payments to Certain Property Owners in the Association's Service Areas Now Provided Electric Power by Others:

The Articles of Incorporation of the Association provide for the indemnification of certain property owners in the Association's service areas now provided electric power by others if they are required to pay substantially more for power than they would if they were furnished electric power by the Association. A reserve for these payments has been established which, in the opinion of management, adequately covers the Project's liability as of April 30, 1989.

Other Litigation:

In the normal course of business the Project is a defendant in various litigation matters, In management's opinion, the ultimate resolution of these matters will not have a significant adverse effect on the Project's financial position or results of operations.

Indian Matters:

From time to time, the District is involved in litigation and disputes with various Indian tribes on issues concerning royalty

payments, taxes, and water rights, among others.

Resolution of these matters may result in increased operating expenses which would be passed on to customers.

(8) REVOLVING CREDIT AGREEMENT/

COMMERCIALPAPER PROGRAM:

The District's Board has authorized the issuance of up to

$375,000,000 of short-term promissory notes (the Promissory Notes), which are sold in the tax-exempt.commercial paper market. The Promissory Notes will mature in no more than 2?0 days from the date of issuance and in no event after July 12, 1990. As of April 30, 1989, the District had $375,000,000 of the Promissory Notes outstanding at an average interest rate to the District of 6.96%.

The District maintains a revolving credit agreement (the Agreement) with a consortium of nineteen banks to provide liquidity support for the Promissory Notes. Under the terms of the Agreement, the District may borrow up to $375,000,000 through October 15, 1990. The District must repay all outstanding borrowings by October 15, 1990. Borrowings under the Agreement initially bear interest at a rate equal to 0.625K plus the weekly average rate for three-month Certificates of Deposit, as published in the Wall Street Journal, plus certain adjustments.

As of April 30, 1989, the District had no borrowings outstanding under the Agreement.

The indebtedness of the District evidenced by the Promissory Notes and/or borrowings under the Agreement is an unsecured obligation.

The District also maintains a revolving credit agreement with Fuji Bank, Ltd to support the District's mini.bond program. Under its terms, the District may borrow up to $40,000,000 at the Federal Funds Rate plus one-quarter to one. half percent. The agreement expires on November 14, 1990. There were no borrowings outstanding under this agreement at April 30, 1989.

(9) ASSOCIATION OPERATIONS:

Association expenses exceeded revenues by approximately

$34,069,000 for 1989 and $29,227,000 for 1988.

(10) SRP'S ORGANIZATIONALASSESSMENT AND RENEWAL:

In 1989, the Board of Directors approved a program to review the Project's organizational structure in conjunction with revised growth estimates for the Phoenix metropolitan area. This program will result in the elimination of approximately 800 salaried and hourly positions. The related severance benefits have been expensed in the current year.

Independent Auditor's Report To the Board of DIrectors, Salt River Project Agricultural Improvement and Power District, and Board of Governors, Salt River Valley Water Users'ssociation:

We have audited the accompanying combined balance sheets of SALT RIVER PROJECT as of April 30, 1989 and 1988, and the related combined statements of net revenues and cash flows for the years then ended. These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards, Those standards require that we plan and perform the attdit to obtain reasonable assurance about whether the financial statements are free of material misstatement, An audit includes examiningon a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Salt River project as of April 30, 1989 and 1988, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.

Phoenix, Arizona June 15, 1989 Arthur Andersen &. Co.

25

FFICERS ELECTED OFFICERS John R. Lassen President Marcel J. Boulais Vice President PRINCIPAL OFFICERS AND OTHER EXECUTIVES A.J. Pfister General Manager John R. McNamara Associate General Manager Corporate Engineering and Power Robert J. Conlon Assistant General Manager Corporate Engineering John O. Rich Assistant General Manager Power Operations John H, Steffen Assistant General Manager Power Construction & Mainte D.S. Wilson Jr.'ssociate General Manager Water Group Richard Juetten Assistant General Manager Water Resources

&. Services Don G. Parlett Associate General Manager Corporate Services Group Paul G. Ahler Assistant General Manager Human Resources James L.

Swartz'ssistant General Manager Operations Services Group nance Carroll M. Perkins Associate General Manager Financial & Information Services Group Mark B. Bonsall Corporate measurer and Assistant General Manager Financial Services John D. Jacobs Assistant General Manager Information Systems Leroy Michael Jr.'ssociate General Manager Planning & Resources C.A. Howlett Assistant General Manager Customer Services & Marketing D. Michael Rappoport Assistant General Manager Government Affairs Richard H. Silverman Assistant General Manager Law & Land Oren D.

Thompson'ssistant General Manager Communications & Public Affairs Paul D. Rice Corporate Secretary CONSULTAN'I'S Legal Advisers Jennings, Strouss

&. Salmon Auditors Arthur Andersen and Co.

Bond Counsel Mudge Rose Guthrie Alexander and Ferdon Financial Consultant Lazard Freres and Co.

• Effectiue June I, 1989, Oren Thompson tuas named Associate General Manager, Water Group; D.S Wilson Jr. tuas named Associate General Manager, Planning and Resources; James I Stuartz nota reports to the Corporate Engineering and Potuer Group; and Leroy Michael Jr. is an Associate General Manager on special assignment.

26

OARD EMBERS Rudolph Johnson District I Clarence C. Pendergast Jr.

District 2 Bruce B. Brooks District 3 Gilbert R. Rogers District 4 John M, Williams Jr.

District 5 Thomas P. Hurley District 6 William P. Schrader District (

Joe Bob Neely District 8 Olen Sharp District 9 Dwayne E. Dobson District 10 William )V. Arnett Atlarge Fred J. Ash At-large Board members establish policies for the management and conduct of Salt River Project's business affairs.

The 10 members of the Board of Governors of the Salt River Valley Water Users'ssociation are elected every two years by the shareholders (property owners) of the Association.

The Board of Directors of the Salt River Project Agricultural Improvement and Power District consists of 14 members who serve staggered four-year terms. One District board member is elected from each of the 10 SRP voting divisions, and four members are elected at-large.

Traditionally, members of the Association board campaign for similar positions on the District board.

John L Burton Jr, Atlarge Eldon Rudd Atlarge 27

Robert L Coot Ddtrkt I Ihward W. Lydh Distrkt I Carl E. IVeBer Gexd Qcinom Ddtrkt $

Wayne A. Ihrt Dtstrkt 2 hrry D. Ibvcy Dtstrkt 2 Marth Kerapton Cocrocd Vxe Osoinnoo Distrkt S Joha E, Anderson Ddtrkt 3 John A. Vanderwey Ddtnct 2 Wayne A. Marhtta Dktrkt 2 tester L Mowry Ddtrkt 2 leal H. Reed Dtstrkt 4 OUNCIL Mart V. Pace TMnkte EMBERS Byron G. %IRhsoa Dtstrkt 4 Roy W. Cheathasn Diekt 5 W. Cnrth Dana Dick(9 lee L Trettastea Dtstrkt 9 The councils enact and amend bylaws relating to the management and conduct of SRP's business affairs.

Oriand ILHach Dtstskt I0 Three council members are elected

=-.-'a

=!0 by SRP shareholders to two-year terms in each of the 10 areas of the Salt River Valley Water Users'ssociation.

Three council members are elected to staggered four-year terms in each of the 10 divisions of the Salt River Project Agricultural Improvement and Power District.

Traditionally, Association council members seek identical positions on the District council.

rATBhrn P. Schrader Jr.

Distrkt 10 G Me lilith Dtstrkt I0 28