ML17305B107

1989 Annual Rept,Salt River Project.

ML17305B107
Person / Time
Site:	Palo Verde
Issue date:	12/31/1989
From:	Lassen J SALT RIVER PROJECT
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THIS IS THE SALT RIVER PROJECT:

Named after the Salt River, which supplies water to the SALT RIVER PROJECT'S CORPORATE MISSION: metropolitan Phoenix area, the Salt River Project is the oldest and To be the low-cost supplier among our competitors of high-value energy most successful multi-purpose and water services. redamation development in the United States.

SRP began in 1903 when individual landowners pledged their property as collateral for a government loan to build the Theodore Roosevelt Dam.

Throughout the decades we have SALT RIVER PROJECT'S We are committed to providing energy and water services to our grown to become Arizona's largest ENVIRONMENTAL water supplier and the nation's customers in an environmentally POLICY: responsible manner. We work to third largest public power utility.

eliminate in our operations the The Project consists of two We operate our business in a manner which minimizes negative release of any pollutants that may compatible organizations the cause damage to our natural Salt River Valley Water impact on our natural resources resources. We dispose of wastes and the Salt River Users'ssociation through their wise use and through safe and responsible Project Agricultural Improvement development. We have a methods. We protect habitats in and Power District.

stewardship role in regard to our rivers and lakes, and in other The Association is a private land, water and air, and we are areas where we operate. We Arizona corporation. It administers committed to preserving them for water rights of SRP's 240,000-acre present and future generations. protect cultural resources, wherever possible, when our area, and operates and maintains This means we manage our the irrigation transmission and operations, facilities and properties facilities and operations may distribution system. This system with the proper regard for the impact their integrity.

We conserve resources. We carries water to municipal, rights of others.

work to minimize the creation of industrial, agricultural and As a guiding principle, we hold residential users.

to the rational use of natural waste and we recycle materials whenever possible. We invest in The District is a public power resources to achieve the greatest improved energy efficiency and utility and a political subdivision of good for the largest number of conservation in our operations. Arizona. It provides electricity to people for the longest period of approximately 520,000 residential, time.

industrial and agricultural power users in a 2,900-square-mile service area in parts of Maricopa, Gila and Pinal counties.

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CONTENTS MESSAGE FROM MANAGEMENT 1989-90 HIGHLIGH'IS AIR QUALITY WATER QVAUTY LAND QUALITY 40 POWER WATER Our cover: This design represents the significance of the many environmental programs implemented, organized and supported by Salt FINANCIALPERFORMANCE River Project in fulfilling our stewardship role in regard to our land, water and air.

The photograph was taken at Lake Powell, near Page in Northern OFFICERS Arizona. SRP sponsors the annual Page Attacks Trash deanup program in which citizens clean up areas around Page and the lake. The program has been designated one of President George Bush's "Daily Points of Ught." BOARD MEMBERS COUNCIL MEMBERS 30 Our report: The paper stock used throughout this report meets the EPA requirements for recyded paper. The spiral binding is made entirely from recyded metal. W g~ Esne SALT IIIVEIZPIICVECT Publisher: SRP Communications &

Public Affairs Department P.O. Box 52025 Phoenix, Arizona 85072-2025 As a special service, SRP is maMng this Annual Report lrdormation avaihbl'e through the Arizona State (602) 23&600 Ubrary for the Blind and Physically t tan~, l030 N. 32nd St. Phoenix, Arizona 85008. (602) 255457K

~ 84.9010

The year 1990 brought about the 20th anniversary of Earth Day. Therefore, we think it is appropriate to dedicate a signiTicant portion of our 1989-90 Annual Report to discussing our continuing environmental efforts. As you will TO OUR read, we at Salt River Project believe environmental protection to be critically important. And, we have demonstrated our environmental commitment BONDHOLDERS AND for many years.

SHAREHOLDERS: As we enter the decade of the 1990s, we realize we are encountering an electric utility industry unlike any we have seen before.

SRP's Executive Management has long recognized that the electric utility industry would undergo profound changes. We now believe that these changes will bring significant competitive forces upon SRP.

In response, we completed an extensive corporate reorganization during fiscal year 1988-89. It was a top-down reorganization, designed to provide us with the personnel and procedural efficiency necessary for continued success in the future.

We, in essence, designed and structured a new organization. With the

/ theme of Maximum Effectiveness, we are working to instill in our employees a continuous quality improvement work ethic. We'e made signiTicant advances this past fiscal year, but we still have a ways to go.

I Our vision of a more competitive future has become reality much quicker than we thought. This past fiscal year Included efforts by a Northwest electric utility company, PaciTiCorp, to purchase Arizona's largest John R. Lassen President electric utility, Arizona Public Service Co. (APS), and an aggressive, local marketing campaign by Southwest Gas Co. to promote dual+nergy homes.

APS, to date, has rebuffed PacifiCorp's overtures, and we in turn, offered to purchase APS assets within service areas located within our water service territory. However, our offer was refused by APS parent company Pinnacle West Capital Corp.

We believe that our reorganization and our Maximum Effectiveness efforts have positioned us to successfully address these new challenges for the utility industry.

Through our reorganization we realized savings of $ 29.4 million this past year which enhanced our financial position. And, because of those savings, we were able to better handle significant, unexpected expenses incurred this past year. These included paying our share for extensive outages and increased operating expenses at Palo Verde Nuclear Generating Station.

The reorganization savings also allowed us to postpone a planned rate increase from October 1989 to May 1990. This was our first rate increase since October 1987. The 7.5 percent overall increase in our electric William P. Sehrader Vice President rates falls within our goal of keeping rate increases at or below the national inflation rate.

Our mission is to be the low-cost supplier among our competitors of high-value energy and water services. We are committed to providing those services in an environmentally responsible manner. We operate to minimize negative impacts on our natural resources through their wise use and development. This means we are committed to manage our operations, facilities and properties with the proper regard for the environment.

We are excited about the challenges and opportunities that this new decade offers. With the new foundation we have built, we look forward to prospering in the decade ahead.

A.J. Pfister Ceneral Manager

1989-90 HIGHLIGHTS REVENUES/EXPENSES Fiscal 1990 Fiscal 1989 (See Page i8)

Total operating revenues ($ 000) 1,121,935 1,063,306 Total operating expenses ($ 000) 918 068 832 316 Net operating revenues ($ 000) 203,877 230,990 Other income ($ 000) 30,622 4,571 Net financing costs ($ 000) 247 691 223 798 Net revenues ($ 000) (13,192) 11,763 POWER OPERATIONS (See Page 19)

Electric Dollar Energy customers at year-end 526,333 518,889 Total kilowatt-hour sales (000) 17,009,214 17,789,940 Reimusted~ Fuel and Average annual kilowatt-hour urchased use/residential customer 13,171 13,184 Project Phnt Pnuur Average annual residential $ 0.14 $ 0.27 revenues/kilowatt-hour (cents) 8.27 8.03 r 46 Pa)'ment WATER OPERATIONS Calendar 1989 Calendar 1988 of (See Page 18) interest

$ 0.19 Assessed water accounts 181,873 182,226 Water runoff (acre-feet) 454,471" 1,136,727 Water in storage, Dec. 31 (acre-feet) 990,838 1,598,989 Reps)ment g Water deliveries (acre-feet) 939,921 951,693 of Principat~~r on SRP Bonds Operations.

and SELECTED OTHER DATA (See Page I8)

Fiscal 1990 Fiscal 1989 80.03

., Taxes~~ > hiaintenancd 60.12 $ 0.25 Gross plant investment ($ 000) 5,712,380 5,560,160 long-term debt ($ 000) 3,603,430 3,505,163 Taxes 5 tax equivalents ($ 000) 138,609 125,171 Electric-revenue contributions to 33,850 34;069 support water operations ($ 000)

Employees at year-end 5,055 5,599

'ased on USGS. prooisional records and subject ro adjustmenb Electric Sales Revenues Electric Sales Other~I I'fTotal Kilowatt-Hours (in thousands) 10$ X hfines~ 7,462/01 5.74K 6,226/22 Residential L24X .469X I

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'Does not include interdepartmental sales. Residential Commercial/ Other Sales Resales Industrial

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release of any

, pollutants thatvnay cause AIR QUALITY damage to our natural', '

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k evaluated the use of a gas tracer only as Canyon haze originates to the west and a means of tracking emission sources. It southwest of the canyon.

never was intended to identify and Other studies in which we have or are As evidenced by this statement in our quantify sources of visibility impairment. participating indude:

environmental policy, SRP management Using independent resemhers, we are 'ero Emissions Regional Observation is committed to maintaining a quality conducting a separate $ 12 million study 'O2 Field Monitoring Project environment in which to live and work. to quantify NGS'ontribution to Grand 4 Source Emission And Plume As metropolitan Phoenix grows, air Canyon haze. The EPA was asked to Characterization.

quality suffers from the influx of residents. participate in this study, but dedined. It has, however, agreed to consider the New Coal Technology Burns For With efforts of concerned citizens and results in evaluating the need to install A Cleaner Tomorrow companies like SRP, we'e making strides We recognize that innovations in coal-to reduce automobile emissions. additional pollution control equipment.

Our study, designed with input from fired electrical generation technology Large cities are not the only the country's top atmospheric scientists, require work force and monetary areas with which we are concerned. We indudes: commitments.

manage two coal-fired generating stations We participate in a technical advisory

> 26 monitoring stations in remote locations of Arizona and we 4 four identifiable chemical tracers to for a large-scale atmospheric fluidizedbed take painstaking measures to ensure they combustion (AFBC) project at Colorado-meet environmental requirements. track direction and age of emissions Ute Electric Association's Nuda, Colo.,

ground-level and upperair sampling NGS: A Tradition In AirQuality and monitoring to characterize the generating station. Our contnbutions have Navajo Generating Station (NGS) is a induded more than $ 50,000 and the loan atmosphere coal-fired, 2,250 megawatt station located > extensive local and regional-scale of two engineers on a full-time basis.

on the Navajo Reservation, about four AFBC technology offers a potentially meteorological assessment.

miles from Page We manage the plant, economical alternative for reducing air Currently, the National Academy of pollution in that it reduces SO2 and of which we own 21.7 percent.

Sciences is conducting a critical review NGS currently is the focus of a nitrogen oxide emissions. It also allows of the Park Service report and other for using alternative fuels, induding debate concerning its contribution to atmospheric research to determine if the refuse-derived waste products.

visibility impairment within the Grand methods used support the conclusions.

Canyon National Park. The main area of Fewer Vehicles Drive Cleaner Should it be determined that NGS is the park is located about 70 miles a significant contributor to canyon Air southwest of NGS.

visibility impairment, we are prepared to Metropolitan Phoenix continues to The U.S. Environmental Protection take the necessary remedial actions. experience significant air quality Agency (EPA) has published a proposed problems, exceeding federal carbon Our concern for air quality extends to rule that visibility impairment reasonably the outset of NGS. We have burned coal monoxide standards on numerous days can be attributed to NGS emissions of with a very low average sulfur content, during winter months.

sulfur dioxide (SO2).

about one-half of one percent, since the Automobiles are major contributors to While we recognize the Grand first unit became operational in 1974. This this problem. To address the problem, we Canyon's significance as a natural allows NGS to be within state limits for are involved in a countywide plan to treasure, we are concerned that the EPA SO2 emissions and meet federal new reduce miles traveled and commuter trips rule is based on a National Park Service source performance standards established by single occupant vehides.

draft report which, because of flawed while the plant was under construction. Our employees are encouraged to methods and inappropriate analytical We'e demonstrated that our concern rideshare. We offer access to two techniques, provided unvalidated regarding S02 emissions goes beyond just computer databases of individuals looking condusions.

burning dean coal. During the past 16 for rideshare partners. Other alternative The Park Service report draws data years we willingly participated in nine transportation methods we subsidize or from a six-week Winter Haze Intensive different studies to determine support are vanpooling, bicyding and Tracer Experiment (WHITEX) study, in environmental effects.

NGS'egional mass transit use.

which we participated. The study Conducted 1978-1980, the Visibility In the case of a personal emergency Impairment due to Sulfur Transport and or approved emergency overtime, lhnsformation in the Atmosphere study employees using these alternatives are conduded that the majority of Grand guaranteed a ride home from work.

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e hold tp the rational ttse of natural resources to achieoe the

'greatest good for the largest number of people for the WATER QUALITY period of time." 'ongest I I monitoring station prototype on the types of groundwater recharge, which Arizona Canal. On a 24-hour basis, this means placing surface water into an facility samples and tests water being underground aquifer.

More than just rhetoric, this phrase delivered through the canal. Our Granite Reef Undetgtound Stomge from our environmental policy is part of Physiochemical elements of the water and Recovery Project is a joint effort our daily operations. induding pH, temperature and turbidity among SRP, the Salt River Pimaklaricopa Key to the success of Arizona's Salt are measured by sensors. Indian Community and the cities of River Valley has been a dependable water A fully automated biological monitor, Chandler, Gilbert, Mesa, Phoenix, supply. Originally used primarily for crop which measures breathing patterns of Scot tsdale and Tempe.

irrigation, today more than 60 percent of juvenile bluegill fish, provides early Still in the testing and permitting the water delivered by SRP is for domestic warning of potential contamination stages, the project calls for recharging up consumption. events. Should a contamination event to 200,000 acre-feet (af) of water through However, we believe there's more to occur, or the sensors exceed a preset the normally dry Salt River bed below our it than just delivering enough water to range, this information will be radioed to Granite Reef Diversion Dam. Water would meet the needs of thirsty Arizonans. We our water control center and to water be directed through a network of berms strive to ensure that water delivered is of treatment plants downstream. to permit increased infiltration into the sufficient quality, and that we make best Information gained from our first underground aquifer.

use of the water we have. station will be used to develop stations Our efforts also indude a well injection throughout our water distnbution system. experiment in which we recharge Laboratory Ensures Adequate groundwater supplies by pumping on-site Quality Water Supply Nature To Control Nature treated surface water into the ground Our Environmental Laboratory is Uncontrolled, algae and weeds within through one of our wells.

licensed by Arizona's Department of our canals could consume up to 45 This artificial groundwater recharge Health Services. This certifies our percent of the water we deliver annually.

allows storage of excess surface water, capability to perform complex analytical In our quest for better ways to maintain delivered by canal, in an environment tests of our water supplies. Data the canals, we'e beginning to use triploid which reduces evaporation loss.

determined through the testing helps us white amur fish instead of herbicides.

We estimate that this technology will identify potential water quality problems, Bred specifically for weed control, enable us to store up to 60,000 af of water and supports our goal of providing white amur can eat their own weight daily in 150 of our wells, enough to meet the adequate quality water. in aquatic weeds.

annual needs of 40,000 families.

We have monitored our water storage In our test program, which we began and distribution system for more than 50 in 1989, we placed 1,788 of the fish in Water Conservation Program years. In the past, we focused more on nine miles of our Tempe and New For McDonnell Douglas Crosscut canals. The results have been We'e working with McDonnell assessing the water in regard to outstanding, helping us realize a $ 152,152 Douglas Helicopter Co. to develop water agricultural uses. Today, we work to savings in canal weed control costs, and conservation programs at its ensure an adequate water supply for all all without adding chemicals to the water. manufacturing plant in Mesa.

of our customers.

Our preliminary program entails using We monitor water on our watershed, Nature's Water Storage Facility groundwater from an existing well at the in our canals and from our groundwater In years of low precipitation and plant site to cool the facility. Groundwater wells. Monitoring permits us to detect runoff, groundwater can be an important replaces more costly, treated drinking pollution sources, allowing for assessment factor in meeting the water needs of water from the city of Mesa.

and remediation of potential water quality Valley residents. During periods of above- Untreated well water is pumped into problems. normal precipitation and runoff, water can the plant's cooling towers and passed Real-Time Water Quality be lost because of a lack of storage space. through heat exchangers to cool the Monitoring Provides Checks Additionally, demand for water varies plant. It is returned to the well where the In cooperation with the cities of seasonally. temperature cools, lessening the potential Chandler, Phoenix and Tempe, we When we combined these simple for evaporation.

constructed a real-time water quality facts, we determined that there had to be Our conservation program recharges a way to resolve the dilemma use the groundwater supply and negates the natural water storage areas beneath the need to dispose of normally resulting ground. We are experimenting with two waste water.

l1 e haveI a stervardship role in regard,to,bur land...and ive are committed to preserving it for . LAND QUALITY present and future generations."

represent additional income of We also sponsor and participate in approximately $ 976,000. these community programs: Lower Salt River Cleanup, Phoenix North and South One Company's Ash Is Another Mountain Preserve Cleanup, Take Pride This phrase from our environmental Company's Treasure In Scottsdale and Tolleson Community policy exemplifies our company for Fly ash, the powdery flue dust residue SRP has played a major role in the Pride Day.

from coal burned in our steam geneiating development of the Salt River Valley. units, continues to be disposed of in an E-One Exposition Promotes We'e seen it grow from a predominantly environmentally sound way. Environmental Concern agricultural community to a thriving Left uncaptured, some 1,330 tons of This past fiscal year we joined the metropolis. Farm fields have given way fly ash per day could leave our coal-fired Valley Forward Association as partners in to homes, populations have increased, Navajo Generating Station stacks and sponsoring E-One, the state's first and city boundaries have edged further enter uncontrolled into the environment. environmental exposition. National in into the surrounding desert. But electrostatic precipitators at our Navajo scope, the event was designed to promote While this growth has been beneficial and Coronado generating stations redaim environmental education and provide in many ways, we also realize the 99.5 percent and 99.8 percent, entertainment.

importance of preserving the integrity of respectively, of the ash for safe disposal. More than 5,000 people attended the open natural areas and their inhabitants. We sell fly ash to concrete two-day event. It featured 84 booths from manufacturers. Used in concrete, it 77 exhibitors ranging from recyding Recycling Programs Save More Than Dollars improves workability and increases companies and waste management firms To operate our company, we were strength. More importantly, it provides for to the Arizona Humane Society and the an environmentally safe use of the fly ash Maricopa Audubon Society.

producing 250 tons a month of solid and reduces the amount of natural In conjunction with E One we held waste, enough garbage to fill 825 cubic yards of landfill space. And, we were resources used in concrete production. our 11th annual Energy Fair for children In 1984, the U.S. Environmental grades K through 12. This year's theme spending $ 16,000 per month to haul away what was considered merely trash. Protection Agency issued guidelines was "Energy and the Environment" and giving preference to federal construction we presented $ 4,135 in awards, induding Upon further review, we realized that job bids that induded the use of fly ash. a $ 1,000 grand prize. More than 200 an office paper recyding program could students participated in this year's fair, not only save money, but also reduce the Cleanup Programs Capture making it the state's second-largest event amount of landfill space required. At the Communities'ommitment same time we could save thousands of of its kind.

Community involvement and deanup trees per year. For every ton of paper we programs long have been the SRP way. SRP Supports Bald Eagles recyde, we could save 3.3 cubic yards of We recently joined more than 4,300 Page We are a member of the Southwestern landfill space and 17 trees. citizens in celebrating the 10th Bald Eagle Management Committee, a Early this fiscal year we instituted a anniversary of the Page Attacks Trash consortium dedicated to the study and pilot program to indude office paper with deanup (PAT). This year's campaign conservation of bald eagles in Arizona.

our existing computer paper recyding bagged and properly disposed of more A symbol of freedom in the United States, project and found it to be very successful. than 180 tons of trash. the bald eagle, unfortunately, had nearly During the year, we removed from the As one of the originators of the deanup vanished from Arizona.

waste stream 432,430 pounds of paper program, we took great pride when in Arizona now serves as habitat for more products. This resulted in approximately 1989 President George Bush prodaimed than 20 breeding pairs of bald eagles.

$ 25,600 in revenues alone. PAT as his 85th "Daily Point of Light." With our help, the committee's nest watch Metal and wood products have been Points of Light are individuals or initiatives program ensures that remaining desert recyded at SRP for many years. In fiscal exemplifying Bush's commitment to bald eagles are free from harassment year 1989-90, we returned about 2,362 making community service central to the during the crucial nesting season.

tons of metal products, and almost life of every American. Our efforts were recognized when we 160,000 feet of wood poles and 340 We annually sponsor several deanups. received the U.S. Fish & Wildlife Service wooden reels for recyding. These figures Many this year were held in conjunction Director's Outstanding Contribution with Earth Day. At the Fowler School Award for our involvement with the Cleanup more than 400 participants committee.

collected approximately 300 tons of trash.

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POWER The 1920s and 1930s saw continued Throughout the year we experienced would approve restart of the unit.

transformation of the Salt River Valley, stellar performances by our generating Unit II was shut down in February with modernization of its cities. During facilities. The Navajo Generating Station 1990 for its second scheduled refueling this time, Valley farmers sought the same achieved its highest annual output since and also returned to service in July. Unit electric service private utility companies 1982. Similarly, Coronado Generating III was in an extended refueling outage provided city residents. Station (CGS) produced its highest level from March 1989 to January 1990. Like Private utilities found it too expensive of annual output since 1986. Unit I, a significant amount of additional to build distribution lines to serve those Our three Valley generating stations work had to be done during the outage.

rural customers. To meet the continued to improve their performance, During 1989, APS strengthened the farmers'emands for electric service, SRP began posting nearly a I percent improvement PVNGS management team through to build lines to supply those customers. in fuel efficiency. changing or adding approximately 20 This was the beginnings of the Salt During the early 1970s, we became a management positions, induding the River Project Agricultural Improvement participant in the Palo Verde Nudear executive in charge of the facility. This and Power District, which was formed in Generating Station (PVNGS), located 50 new management team implemented 1937 after passage of enabling legislation miles west of Phoenix, to provide power numerous programs to address identified by the Arizona Legislature. By 1947, the to our rapidly growing customer base. We shortcomings at the plant.

District had only 12,400 electric now own 17.49 percent of the plant, While much remains to be customers. Today, we serve the electrical which indudes three 1,270 megawatt accomplished, we believe that APS has needs of more than 520,000 residential, (MW) electric generating units and is turned the corner and is moving in the commercial, industrial, mining and managed by Arizona Public Service Co. right direction to demonstrale that PVNGS agricultuml customers. In 1988, Unit III set an industry is a safe plant, capable of achieving high performance record for the longest production performance.

A Year of Records, Outages and continuous run the greatest number of Changes Expanding To Meet Demand days on line-by an American While the explosive new customer At 6 p.m., July 19, 1989, our power manufactured nudear plant in the world customers set a new peak demand of growth we experienced in the mid-1980s during its first year of operation. However, 3,289,000 kilowatts. To meet this has slowed, we still grew by more than the performance of PVNGS has not been demand, we relied on our coal-fired, 7,400 customers. Many of our new as reliable since then.

Valley and hydroelectric generating customers located in outlying areas of our Toward the end of 1988, operational stations, and selected power purchases. service territory, which requires us to problems started to become apparent.

Optimal performance of our facilities continually expand our facilities.

The Nudear Regulatory Commission was paramount to our meeting demand. During 1989-90 we installed (NRC) expressed concerns regarding approximately 289 miles of overhead and operations and indicated a need to Electric Customers underground distribution lines. Our strengthen the nudear management transmission system also expanded with Other team.

40 miles of new 69 kilovolt (kV) lines and 1.?X 1989 was a year of continued 30 miles of 230 kV lines. Four new operating problems and a year for distribution stations were constructed to Commerchl~/

. Residential major changes at Palo Verde.

Unit I shut down on March 5, meet customer demand and seven

?JIX 905K existing substations were modified for 1989, and subsequently added capacity.

entered a scheduled refueling outage in April of DemandSide Marketing Targets that year. It returned to Customers'eeds service in July 1990. In A rapidly changing and increasingly addition to the refueling, a competitive utility industry requires us to significant amount of look at new ways to meet our markets'eeds.

backlogged work and other We now find it effective to conective actions had to be influence how our customers use our completed during the product rather than just to build outage before the NRC generating capacity to meet demand.

Fuel Sources This concept of demand-side Misc. Purchases ?3X H ~,

financial incentives for installing load-management benefits our financial shifting cool stomge syste~

?OX position and our operating economics.

Just as important, it produces increased Continuing Our Customer Service customer satisfaction.

Our larger customers are looking at Tradition 129K Quality customer service alternatives to our services such as cogeneration, other forms of self-long has been our commitment. We work Oit-generation and wheeling, that is, using hard to develop and one utility's transmission lines to deliver F power purchased from another utility.

Many customers also have the choice of maintain quality relationships with our customers. To do so, we Nuclear' 6aX .- Coal

'6.2X natural gas for certain functions.

must understand and In response to these competitive meet our influences, we developed a long-term, customers'eeds in a competent 'Includes tOxlro purchases demand-side marketing program and caring manner.

designed to improve levels of customer Substantial improvements in plant's $ 700 million cost was spent for service and produce cost savings for us cooperation among areas within the environmental protection equipment.

and our customers. Our plan will reduce company were made in our corporate Devices installed indude scrubbers, our peak demand and improve our reorganization to provide enhanced electrostatic precipitators and emission system load factor by encouraging energy customer service. We developed a Single monitors, each designed to reduce the usage during off-peak periods.

Point of Contact program for our external plant's environmental impact.

Critical to the success of our plan is customers through which they promptly Kyrene Generating Station, in Tempe, the implementation of services that can receive answers and resolve celebrated its 35th anniversary. With six provide customers with tangible benefits.

problems. dual-fuel generating units, the 300 MW One such service is our Climate Crafted Other improvements to our Customer facility today is used primarily as a back-Home prograin.

Services effort indude installation of a up station during times when extra power Climate Cmfted homes are less new telephone system at our Customer is needed. Our crews ensure that Kyrene expensive to heat and cool than Telephone Center to better handle is ready to opemte at any time to meet conventional total-electric or dual-energy customer calls, and the implementation customer demand.

homes. To qualify as Climate Crafted, of an electronic, hand-held meter reading subdivisions must meet only two criteria: Fence Lake Project Continues device system.

the homes must be total<ectric and they An affordable supply of dean coal With the new hand-held device, we must meet our energy efficiency standard. is necessary for the continued operation have increased our meter With support of the mortgage lending readers'ccumcy of CGS. We are continuing efforts to and productivity. It also allowed industry, our program also features the secure a federal coal lease and mining meter readers to reprogram the meters of Home Stretch Mortgage. It allows buyers permits for our Fence Lake, N.M., coal our 25,000 Electric Savings Time to qualify for loans as much as 7 percent development project.

customers, and we avoided a very costly larger than for nonZIimate Crafted homes The Fence Lake site could yield more program of changing out the meters.

because of the lower utility bills. than 100 million tons of coal which burns Other-services in our plan indude Kyrene And CGS Celebrate well in CGS'wo 350 MW units. The coa!

Electric Savings Time rates for both Anniversaries has a 0.66 percent sulfur content, which residential and commercial customers; the Two of our generating stations meets our strict environmental standards.

Cash Back Program for residential celebrated significant anniversaries this We currently hold lease rights for customers who install high efficiency heat past year. CGS, a coal-fired plant near St. 11,000 acres at the site, 43 miles east of g3 pumps; the Commercial Bficient Lighting Johns, recognized its 10th anniversary. CGS, and we are applying to lease an Progmm, which provides cash incentives The 700 MW facility is one of the most adjacent 6,840 acres of fedeml land. Our for installation of energy-efficient lighting environmentally sound, coal-fired efforts also indude identifying the most equipment; and the Thermal Energy genemting stations in the United States. economical and efficient means to mine Stomge Rebate Program, which offers Approximately 30 percent of the and transport the coal.

WATER In 1903, the Salt River Valley Water Through careful planning and use of churches, schools and residential Users'ssociation was incorporated to our extensive system of groundwater irrigation. Agricultural accounts ensure that available water could be wells, SRP has allowed metropolitan received 286,676 af while 58,106 af stored and distributed equitably to its Phoenix area residents to avoid the were used for decreed deliveries members. Eighty-seven years later, the immediate threats of drought recently including Indian reservations. Off-Salt River Project still is working to experienced by residents of other states. Project and non-member deliveries meet the water needs of Valley We manage the water from the Salt totaled 144,582 af.

residents, operating dams, maintaining and Verde rivers, which is stored behind Interestingly, SRP witnessed a net the water distribution system and six dams and released as needed. Water return of 114 acres to agricultural use helping to ensure water quality. is distributed through 133 miles of main from urban in 1989. This is a reverse canals and 1,132 miles of laterals, which from the trend set for the past few Dry Conditions Return To branch off the main canals to deliver years. In 1988, 2,070 acres were Arizona water to users. transferred to urban use from After several years of abundant Eight cities receive much of the water, agricultural uses, and in 1987, 3,501 rainfall and runoff, dry conditions treat it and deliver it to Valley residents. acres were converted to urban use.

returned to the 13,000-square-mile Salt We also provide water for irrigation and Verde river watershed (a natural Groundwater: A Vital purposes to farmers and certain urban Resource To Be Managed drainage area into the two rivers).

irrigators.

Runoff from the watershed during Pumped groundwater played a role We began calendar year 1989 with 1989 was 62 percent of normal, while in SRP meeting customer demand in 1,598,526 acre-feet (af) in our six watershed precipitation totaled 71 1989, with a 16 percent increase in reservoirs. (An acre-foot is enough water percent of normal. the number of acre-feet of water to cover one acre of land to a pumped compared to 1988. And it is depth of one foot, or expected to play a very significant role Domestic Water Deliveries approximately 325,850 gallons.)

in 1990. We estimate that it will be Inflows to SRP's six necessary to pump more than reservoirs during 1989 totaled Chsndler 300,000 af of groundwater to meet 454,471 af, which was 682,256 demand in 1990.

af less than 1988. This was the Gilbert 1988 A major concern for SRP and our least amount of runoff we have customers is the Arizona Groundwater 1989 received since 1977.

Management Act. SRP developed Glendale As a result, we ended 1989 with recommended revisions of the act that 990,838 af of'water in storage, which would allow for more accurate mesa is 23 percent below normal and 49 measurement of groundwater percent of capacity. Total Project withdrawals, for development of a Peoria water supplied to the Valley in methodology that provides incentives 1989 was 1,062,241 af. Of that for use of alternative supplies and to total, 1,001,252 af was facilitate improved accounting Phoenix~

surface water and 60,989 af requirements for all users.

was groundwater. In serving our customers, SRP Scottsdale After losses to developed and mailed information to evaporation, seepage and all shareholders having certified Tempe I t r other factors, we delivered groundwater rights. Our 939,921 af in 1989 to users, communications provided water-use compared to 951,693 in information pertaining to each 1988. Of the deliveries, certificate, which shareholders could 450,557 af went for use to react to water allocations 20 40 160 non-agricultural uses assigned by the Arizona Department Acre Feet including municipal and of Water Resources for its Second tin Thousands) industrial contracts, parks, Groundwater Management Plan.

FINANCIAL PERFORMANCE The past few years brought about $ 23.8 million more than in 198M9. Association shareholders served many changes in the electric utility Our average customer count increased electricity by Arizona Public Service Co.

industry. Mergers and acquisitions have by 11,355 or 2.2 percent compared to (APS). Of that amount, $ 5.7 million relates become commonplace and the industry 1988-89 figures. More customers, plus to prior years, and is shown on our as a whole is more competitive in nature. warmer temperatures during peak Combined Statements of Net Revenues as We underwent a corpomte reorganization summer months resulted in an electric an Unusual Item. The remaining $ 2.3 in 1988-89 to prepare our company for revenues increase of $ 58.1 million. million relates to this fiscal year.

new financial and operational challenges. We compensate for cost differentials Internal Indicators Relatively between what shareholders'lectric bills Our mission is to be the lowest supplier Strong Despite Palo Verde would be if served by SRP and what they among our competitors of high-value Our six-year financial plan indudes energy and water services. are paying to APS when its residential several internal indicators to measure our electric rates are 15 percent or more New Labor Agreement Signed financial viability. They indude Debt higher than ours.

In November, we reached a new labor Service Coverage Ratio, Funds Available This $ 8 million in unexpected agreement with the International for Corporate Purposes (FACP) and our expenses and the additional costs from Brotherhood of Electrical Workers Local Debt Ratio. Despite the financial impact Palo Verde's outages were not in our Union 266. The union represents clerical, of Palo Verde's outages, these measures original budget. Our situation would have shop and field workers at SRP. Effective indicate that we are financially healthy.

been more difficult if we had not realized through Nov. 15, 1992, the three-year For 1989-90, our Debt Service the savings from our reorganization.

contract indudes wage adjustments. Coverage Ratio was 1.85, dose to the budgeted amount of 1.86 and better than Capital Expenditures Include Rate Increase Approved NGS Contingency our plan goal of not less than 1.80.

Our first rate increase in two and one- Our six-year financial plan projects FACP, the cash basis bottom line from half years was approved by SRP's Board direct capital expenditures of $ 2.1 billion opemtions, was $ 122 million for 1989-90, of Directors and became effective May 15. through 1996. These indude a strong figure despite the accrual basis The overall 7.5 percent increase was contingencies to meet speciTic needs, if net operating loss. While 1989-90 FACP within our financial plan parameters, they arise. The most notable is a $ 116.2 is lower than the 1988-89 amount, it was which call for mte increases, when million contingency for our portion of the

$2 million better than we budgeted.

combined with adjustments to the fuel costs of additional pollution control Our Debt Ratio, targeted in our escalator, to not exceed the compound financial plan to be 75 percent or less, equipment at our Navajo Generating rate of inflation over time. This increase Station (NGS). A definitive study is was 71 4 percent at the end of the year.

originally was scheduled for Oct. 15, 1989, underway to determine if NGS is a but was delayed because of anticipated Reorganization Savings Help significant contributor to Grand Canyon savings from our reorganization. Offset Unexpected Expenses haze and if installation of additional Through our reorganization we have Revenues Pass $ 1 Billion Mark eliminated 603 positions to date, with 71 equipment is warranted.

We once again passed the billion The $ 2.1 billion also indudes a general more reductions to occur through attrition dollar mark, with combined opemting contingency of $ 173.9 million.

or scheduled cutbacks.

revenues this fiscal year of $ 1.12 billion. Bond Sales Represent Source While any reorganization involving This is a 6 percent increase compared to for Future Growth personnel reductions is very painful, we 1988-89 revenues of $1.06 billion. We issue tax-exempt electric system believe that SRP is in better position now However, 1989-90 net revenues were $ 25 revenue bonds to finance the construction to address the future. In addition, savings million less than those of 1988-89. This and equipment necessary to provide from our reorganization, estimated to be year we experienced a net loss of $ 13.2 power to our service area. During this

$ 29.4 million this year, improve our ability million, while in 1988-89 we realized past year we had two bond sales, $ 22 to cope with future financial challenges.

$ 11.8 million in net revenues. million in minibonds at 7.15 percent in We experienced a challenge this year While many factors contributed to this December and $ 100 million in revenue with the accrual of $ 8 million in loss, the largest single iniinence was the bonds at 7.35 percent in February.

unexpected expenses. The expenses Palo Verde Nudear Genemting Station Both sales were rated AA and Aa by resulted from the proposed settlement of outages. These outages resulted in Standard & Poor's Corporation and a lawsuit determining the validity of our operations and maintenance expenses Moody's Investors Service, respectively.

method of compensating certain

$ 16.8 million more than budgeted, and

Surface Water vs Groundwater Supplies

~

1)646344 Groundwater (acre feet)'

1,001,247 I ,001,252 Surface N'ater (acre feet) 758,295 the nanow roadway which now Valley Growth Results In passes over the dam. The New Construction Projects bridge is 80 percent complete We have been actively involved in and is expected to be finished numerous construction projects resulting 656596 in September 1990. from the Valley's rapid growth. From the At Stewart Mountain Dam, planning and engineering functions, to two drawdowns were required completing actual construction, SRP 1979 1984 1988 1989 during 1989 to facilitate repair employees have played key roles. We

'Groundwater supply pumped by SRP work on the dam. Work is 80 continue to successfully coordinate percent complete, and the ADOT's aggressive Urban Highways Regional Service Centers project is scheduled to conclude in construction program with its effects on Allow For Improved August 1991. Modifications to the our water transmission and distribution Customer Service dam indude a new spillway, increased facilities.

To better serve our water height of the dam, drainage of the Construction of the Price Road customers, we reshaped portions of foundation and grouting, power Freeway necessitates the relocation of SRP's Water Group. The three new plant protection, penstock part of the Tempe Canal into two, 10-foot departments Southside, Central and replacement and post-tensioned diameter underground pipelines. This is Northside Water Service Centers steel tendons. SRP's largest underground canal project.

resulted from the merger of Water ADOT's Hohokam Freeway project Operations and Water Construction 5 CAP/SRP Interconnection requires the relocation and expansion of Maintenance functions.

Agreement Signed SRP's Old Crosscut Canal, from a 2,000 These new service centers locate During the year, we signed cubic feet per second (cfs) channel to a an intergovernmental agreement with employees near the areas they serve 4,100 cfs flood control facility.

and increase work efficiency. eight cities for joint participation Construction projects performed by in the construction, operation and Plan 6 Work Continues on our crews induded:

maintenance of the CAP/SRP the Salt River System Interconnection Facility. 'ulti-structures for the inlet and outlet of Tempe Canal pipelines We continue to support the U.S.

Bureau, of Redamation's (USBR) efforts The facility allows CAP water to be diverted three ways: into

' 670-by-110 foot sedimentation basin for Tempe Canal pipelines to complete Plan 6 construction activities at Theodore Roosevelt Dam the Arizona Canal, for distribution to water users north of the Salt River;

' bypass of the Western Canal u relocation of the Grand and Stewart Mountain Dam on the into the South Canal, for distribution Canal and Salt River. to water users south of the Salt River; 1,600 feet of new canal Plan 6 is the flood control and and into the Salt River bed for 'elocation of a well site.

water storage feature of the Central groundwater recharge.

Arizona Project (CAP). Approved in Agricultural vs Urban Water Deliveries SRP Negotiates CAP 1984, Plan 6 is Arizona's alternative to Water Transportation the controversial Orme Dam, Agreements 58X~ 61%

proposed to be built below the Negotiations are under confluence of the Salt and Verde way with the Arizona rivers.

Municipal Water 38K Planning continues for (AMWUA)for SRP Users'ssociation modifications to Roosevelt Dam, which to transport AMWUA-member indude increasing the height by 77 city water. We propose using feet, revamping the spillways and our transmission system constructing a river outlet works in to deliver the cities'AP the dam's left abutment. The Arizona water allotments and water Department of Transportation (AD~ from the new conservation is constructing a suspended-arch storage space planned behind 1979 1984 1988 1989 bridge over the lake to replace I

the enlarged Roosevelt Dam. ~ Agrfcutture gQ Urban

Debt Service Coverage Ratio IR 192 FINANCIAL CONTENTS 185 185 STATISI'ICAL REVIEW Target 180 COMBINED BALANCE SHEETS COMBINED STATEMEYIS OF NET REVENUES 198546 1986.8? 198?48 1988 89 1989 90 COMBINED STATEMENTS OF Target ~ Debt Service Carnage Ratio CASH FLOWS Total Operating Expenses NOTES TO COMBINED

$ 918/58 FINANCIALSTATEMENTS

$ 832)lit

$ 790/?2

$ ?06/77

$ 642/63 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1985 86 1986 87 198788 198849 1989.90 Total Operating Revenues

$ 1,063@06 / 1,121@35

$ 959/46

$ 848,618 lj..

1985 86 1986 8? 1987.88 198849 1989 90

STATISTICAL REVIEW 12 Months Ended (thousands of dollars) Months Ended April 30 December 31 1990 1989 1984 19?9 Project General Operating revenues $ 1,121,935 $ 1,063,306 $ 683,993 $ 417,789 Electric 1,113,184 1,055,042 678,698 413,066 Water and irrigation 8,751 8,264 5,295 4,723 Operating expenses 918,058 832,316 484,728 291,610 Other income 30,622 4/71 17,872 (574)

Net financing costs 247,691 223,798 28,961 25,170 Net revenues (toss) (13,192) 11,763 188,176 100,435 Additions to plant, exduding allowances for funds used during construction 238,014 341,617 298669 394,728 Utility plant, gross 5,712,380 5$ 60,160 3,777,893 2,355,783 Contributions of electric revenues to support water operations 5,055'2 33850 34,069 12,094 6,183 lhxes and tax equivalents 138,609 125,1?1 67,745 42,859 Employees at year end 5,599 5,434 4,197

'Does not indude temporary employees 1989 1988 1984 1979 Water'otal storage and pumping capacity (acre-feet) 2886,832 2,880,369 2~,519 2/58,261 Storage capacity (six reservoirs) 2,019,102 2,019,102 2,019,102 2,063948 installed pumping capacity 867,730 861,267 834,417 794,313 Water in storage ian. 1 (acre-feet) 1,598526 1,624,272 1,71?,407 1,839,399 Project storage only 1,325,684 1,391,376 1,455,375 1548,741 Runoff (acre-feet) 454,471" 1,136,727 1,100,100 2,402,641 Water in storage Dec. 31 (acre-feet) 990/98 15989 1,781,671 1563,309 Project storage 768,728 1,329,773 1543571 1,290,971 Sources of water for deliveries (acre-feet) 1,062,241 1,053,717 999@?9 1,338,008 Gravity supply 1,001,252" 1,001,247 758,295 1,264,344 Groundwater supply (pumping by SRP) 53,894 50,004 221,165 65596 Groundwater supply (pumping by others) 7,095 2,466 20,519 8,068 Use of water (acre. feet) 939,921 951,693 881/01 1,100,467 Agricultural 286,676 311,338 353,916 535,046 Urban 450557 428,146 393,851 334,309 City domestic 330/54 313997 281,439 222,098 Subdivision irrigation 66,386 62,669 61,019 55,063 Other nonagricultural irrigation (schools, parks, churches, etc.) 53,317 51,480 51,394 57,148 Decreed deliveries 58,106 54~7 51,704 64505

, Contract deliveries 144582 157,673 84942 120/54 Seepage and evapotranspiration 122,320 102,024 126,842 286,761 Canals, total (miles) 133 133 132 131 Lined 101 96 72 64 Laterals, total (miles) 9]2 907 890 880 Lined and piped 830 817 777 740 Drainage and waste ditches (miles) 230 232 240 247 Lined and piped 90 88 75 58 Assessed area (acres) 238,400 238,266 238,171 238,221 Number of assessed accounts 181,873 182,226 181,083 174,603 Number of times water dehvered to users 508068 486,307 478,325 444,157

'tVoter statistics are computed on a calendar >ear basis.

"Based on USGS prouisional records and are subjed to adjustment.

12 hlonths Ended 12 hlonths Ended April 30 December 31 1990 1989 1984 19?9 fbttter Energy sources (kWh)

Net nudear generation 1,185,427,000 3,864,274,000 Net steam generation'et 13,758,883,000 12,691/34,000 10,655,441,000 8,335,201,000 gas turbine generation 24,816,000 28,239,000 19,399,000 65/67,000 Net combined cycle generation 1,279,637,000 875,447,000 190,299,000 165,285,000 Net run of river generation 277/75,000 348,404,000 521,180,000 581,793,000 Pumped storage generation 44,344,000 168,280,000 206,036,000 79,674,000 Total net 16,570,682,000 I?976,478,000 11592,355,000 9,22?$ 20,000 generation'urchased I $ 16,600,292 1,064rt99,431 2,262,454,908 2,0?N26504 Interchange received 516,820,660 273,883/05 69,424,000 182,335,000 Wheeling received 355,947960 82/47/40 18,970,092 7,778,496 Total energy 18,960,050/12 19,398,208JI?6 13,943,204,000 11,496,860,000 sources'nergy disposition (kWh)"

Residential 6,226,922,136 6,095,740,065 4,290,081,354 3~,579,831 Commercial & Industrial 7,462,901 5?8 7,201,161 /75 4 $ 80,684,473 4,319978,092 Irrigation pumping 181~0,135 276,195,168 260,180,664 195,422,631 Street & highway lighting 110995,460 106,249$ 27 85,698,006 42,194,885 Public authorities 299,164,401 314/81 N3 232,660,889 291,489,443 Interdepartmental 137/07,236 95,397$ ? I 73,212,740 64,785,898 Sales for resale 2590,193,220 3,700,213,776 2,789,722,423 1923,770,250 Total sales 17,009,214,166 I?,789,939535 12,612,240/49 10,421,221,030 Interchange delivered 548,209,000 231 546,000 54,666,000 224/07,000 Wheeling delivered 338,359 JI67 243+9,088 15,450,467 7,101,769 Energy losses 995,887,045 1,059 JI65,370 966513,984 ?28,465,201 Energy for pumped storage operation 68,382,000 234,685,000 294,333,000 115565,000 Total disposition of energy 18,960,050,912 19,398,208$ 76 13,943,204,000 11,496,860,000 Peak overall pomr system (kW) 3,784,000 3,476,000 2,605,000 2,437,000 Date and time (M~ July 19, 6 p.m. July 25, 5 p.m. Sept. 2, 6 pm. Sept. 5, 6 p.m.

Peak Project customers (kW) 3,289,000 3,060,000 2,260,000 1911,000 Date and time (MSf) July 19, 6 p.m. July 25, 5 p.m. Aug. 31, 5 pm. June 27, 5 p.m.

Generating capability (kW)"'ud ear 642,000 641,190 Steam'as 2,428,000 2,411,115 2,211,250 1553,250 turbines 397,000 393,000 393,000 393,000 Combined cycle 292,000 288,000 288,000 288,000 Hydroelectric conventional 94,000 96,400 96,400 95,000 Hydroelectric pumped storage 148,000 137,000 137,000 137,000 Total operating 4,001,000 3,966,705 3,125,650 2,466,250 capability'ontract purchase at peak 459,000 237544 329547 328,661 Total 4,460,000 4,204,249 3,455,197 2,794/11 resources'lectric customers year-end" Residential 476,309 469,330 353,115 -287,293 Commercial & Industrial 41,061 40/56 29,924 20,766 Other 8,963 9,003 8,103 1,643 Total 526,333 518,889 391,142 309,702 Average annua! kWh use/residential customer" 13,171 13,184 12/35 13,038 Average annual residential revenues/kWh (cents) 8.27 8.03 7.06 5.07

'Includes SRP participation in jointly otuned projeas.

"Energy disposition klVh through total sales, elearic customers year.end, aucrage kiVh use and average annual revenue are estimated Iigures.

"'Unit capabilities during summer peak.

COMBINED BALANCE SHEETS Salt River Project as of April 30, 1990 and 1989 (thousands of dollars) 1990 1989 UTIUTY PLANT, at historical cost (NQKs t, 2,3 aiid 4):

Plant in service:

Electric $ 4,652,286 $ 4587,139 116523 107,119 Irrigation Common 338,634 220123 I

Total phnt in service 5,107,443 4/14,381

~-Accumuhted depreciation on plant in service 1,266,656 1,135,244 3/40,787 3,779,137 Plant held for future use (wars s) 298904 29M34 Construction cwork in progress 229,414 267,027 Nudear fuel, net of amortization 76,619 79/18 4,445,724 4,424,916 ONER PROPERTy AND INVESTMEÃIS:

Non.utility property and other investments 36,273 34,448 Segregated funds, net of current portion (t'otz 4) 11?$ 92 111,656 154,165 146,104 CURRENT ASSEIS:

Cash and temporary investments, at cost 227,317 261 $ 55 Current portion, segregated funds p,'orF. 4) 85,268 82,145 Ttade and other accounts receivable, net, induding unbilled revenue in 1990 (t'atm t) 105,033 57860 Fuel st~ at hst-in, first~t cost 51,492 86/54 Materials and supplies, at average cost 86,476 80509 Other current assets pxrK s) 31,352 24/09 586,938 593@32 DEFERRED CHARGES AND ONER ASSEIS (tt(rm 4) 226,476 212,791

$ 5,413,303 $ 5,377,643 The accompanying notes are an integral part of these combined balance sheets.

1990 1989 Capitalization and Liabilities LONGTERM DEBT p:mE s):

Electric system revenue bonds, net of current portion $ 3,222,689 $ 3,129,380 Commercial paper and other 380,741 375,783 3,603,430 3,505,163 ACCUMULATED NET REVENUES:

Balance, beginning of year 1,454,689 1,442/26 Net revenues floss) for the year (I3,192) 11,763 Balance, end of year 1,441,497 1,454,689 lmTAL CAPITALIZATION 5,044,927 4,959852 CURRENT UABILITIES:

Current portion, long-term debt q'ate 4) 35,162 34,794 Accounts payable 68,664 93,076 Accrued taxes and tax equivalents 57,662 45,477 Accmed interest 76$ 23 74,425 Customers'eposits 26,945 23,765 Other current liabilities 34,278 25,429 Accrued reorganization costs q'os 9) 5,235 3],613 Accrued phnt deferral costs, current portion g'mE s) I/23 25,448 305892 354,027 DEFERRED CREDOS AND OtfHER NONZURRENT LIABILITIES(Nom s ana r) 62,384 63,764 COMMITMENTS AND CONTINGENCIES pi'otEs s, 6 and r)

$ 5,413,303 $ 5,377,643 The accompanying notes are an integral part of these combined balance sheee.

COMBINED STATEMENTS OF NET REVENUES Salt River Project for the years ended April 30, 1990 and 1989 (thousands of dollars) 1990 1989 OPERATING REVENUES txma t):

Hectric $ 1,113,184 $ ),055,042 Water and irrigation 8,751 8,264 Total operating revenues 1,121935 1,063,306 OPERATING EXPENSES:

Power purchased 30,681 15,327 Fuel used in electric generation 273589 254807 Other operating expenses 214,527 193,925 Maintenance 108,608 92,334 Depreciation and amortization 152,044 150,652 lhxes and tax equivalents 1381609 125,171 Ibtal operating expenses 918,058 832,316 Net operating revenues 203877 230990 mHER INCOME:

Allowance for equity funds used during construction 578 4,694 Interest income 37,403 29585 Other deductions, net (14,054) (45)

Total other income 23927 34,234 Net revenues before financing costs 227,804 265,224 FINANCING COSIS:

Interest on bonds 220,490 204,378 Amortization of bond discount, issue and refinancing expenses 7,254 7,005 Interest on other obligations 24,395 22668 Less-Allowance for bommed funds used during construction (4,448) (10,253)

Net financing costs 247,691 223,798 NET REVENUES (LOSS) BEFORE UNUSUAL AND EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (19$ 87) 41,426 UNUSUAI. ITEMS:

Expenses of corporate reorganization program {xoK9) (6927) (32,687)

Settlement of litigation q'olE r) (5,700)

NEI'EVENUES (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (32514)

EXTRAORDINARY ITEM-Gain on extinguishment of debt ft ox 4) 3,024 NET REVENUES (LOSS) BEFORE CUMULA'11VE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (32$ I4) 11,763 CUMULATIVEEFFECT ON PRIOR YEARS {10 APRIL 30, 1989)

OF ACCRUING UNBILLED REVENUE faorE i) 19,322 NEl'EVENUES (LOSS) 5 (13,192) S 11,763 The accompanying notes are an integral part of these combined statements.

COMBINED STATEMENTS OF CASH FLOWS Salt River Project for the years ended April 30, 1990 and 1989 (thousands of dollars) 1990 1989 NET CASH FLOWS FROM OPERATING ACllVITIES:

Net revenues (loss) before cumulative effect of accounting diange $ (32514) $ 11,763 Noncash items induded in net revenues (loss)

Depreciation and amortization 152,044 150,652 Amortization of bond-related expenses 7,254 7,005 Gain on sale of plant and debt extinguishment (959) (4,390)

Decrease (increase) in Fuel stocks and materials and supplies 29,095 3,616 Other assets, net (67,367) (19,694) increase (decrease) in Accounts payable (24,412) 13,750 Accrued taxes and tax equivalents 12,184 1,172 Accrued interest 2,098 4,044 Accrued reorganization costs (26,378) 31,613 Other liabilities, net 22/86 2,189 Termination of coal contract (59,410)

Cumulative effect of accounting change txota t) 19,322 Net cash provided by operating activities 93,253 142,310 NET CASH FLOWS FROM INVESI1NG ACIlVITIES:

Additions to utility plant, net of AFUDC (238,014) (341,617)

Allowance for funds used during construction (5,026) (14,947)

Additions to non-utility property (1/25) (4,226)

Contnbutions in aid of construction 28,486 40527 Proceeds from sale of plant 6/00 2,342 Net cash used by investing activities (209,879) (317,921)

NET CASH FLOWS FROM FINANCING ACl1VITIES:

Proceeds of bond issues 120/47 264,614 Proceeds of other long-term debt, net of repayments 4,340 22,333 Repayment of principal on bonds (33,440) (27,229)

Repayment of principal on U.S. debt q'orE s) (3,859)

Increase in segregated funds (9,359) (16512)

Net cash provided by financing activities 82,088 239,347 NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVFSIMENTS (34438) 63,736 BALANCE AT BEGINNING OF YEAR IN CASH AND TEMPORARY INVESfMEKIS 26IN5 198,119 BALANCE AT END OF YEAR IN CASH AND TEMPORARY INVFSIMENTS $ 227,317 $ 261$ 55 The accompanying notes are an integral part of these combined statements

NOTES TO COMBINED FINANCIAL STATEMENTS Salt River Project As of April 30, 1990 and 1989 of electricity produced by Palo Verde Nudear Generating Station (I)

SUMMARY

OF SIGNIFICANT ACCOUNTING (PVNGS) for the cost to dispose of the fuel.

POLICIES: The District amortizes the cost of nudear fuel, induding its Principles of Combination disposal, to fuel expense on a unit of production method.

The combined financial statements indude the consolidated Decommissioning accounts of the Salt River Project Agricultural improvement and The District reserves for the cost of decommissioning PVNGS Power District and its subsidiaries (the District) and the accounts based on an outside engineer's study. The total estimate to of its agent, the Salt River Valley Water Users'ssociation (the decommission the District's share of PVNGS is $133 million in Association), together referred to as Salt River Project (SRP). The 1989 dollars. This estimate will be reviewed and adjusted District's subsidiaries are Papago Park Center, Inc. (PPCI), a real periodically. Decommissioning funds of approximately $ 9,500,000 estate management company, and Salt River Generating Company at April 30, 1990, are maintained as a segregated fund. The which is currently inactive. All significant intercompany corresponding liability is classiTied in other noncurrent liabilities.

transactions have been eliminated. Beginning in 1991, the decommissioning funds will be Regulation and Accounting Principles maintained in an external trust in accordance with new Nudear Under Arizona law, the District's Board of Directors (the Regulatory Commission regulations.

Board) serves as its regulatory and rate setting agency. The Fuel Costs accompanying combined financial statements reflect the rate The District maintains a fuel adjustment dause balancing making policies of the Board and are in accordance with account to adjust operating results for variations between the generally accepted accounting principles promulgated by the recorded cost of fuel and purchased power and revenue Financial Accounting Standards Board. designated for recovery of such costs. At April 30, 1990, and Utility Plant, Depreciation and Maintenance 1989, unrecovered (overrecovered) fuel costs totalled $ 18,503,000 Utility plant is stated at the historical cost of construction. and $ (1,328,000), respectively, and are recorded as accounts Construction costs indude labor, materials, services purchased receivable and accounts payable, respectively.

under contract, and allocations of indirect charges for Income Taxes engineering, supervision, transportation and administrative The District is exempt from federal and state income taxes.

expenses. Statement of Cash Flows An allowance for funds used to finance construction work in The District considers short-term temporary cash investments progress (AFUDC) is capitalized as a part of the electric and to be cash equivalents. Cash payments for interest were general plant. This allowance is deducted from net financing $ 239,500,000 in 1990 and $ 221,600,000 in 1989.

costs in the combined statements of net revenues and added to Reclassifications utility plant. Capitalization rates of 5.83 percent and 6.70 percent Certain 1989 amounts have been redassified to conform to were used in 1990 and 1989.

the current year presentation.

Depreciation expense is computed on the straight-line basis over the estimated useful lives of the various dasses of plant. Change in Accounting Principle Rates in effect resulted in provisions approximating 2.95 percent Prior to fiscal 1990, electric operating revenues were and 3.10 percent for 1990 and 1989, respectively, on the average recognized when billed. In fiscal 1990, SRP began accruing cost of depreciable electric plant, and 2.49 percent and 146 estimated revenue for electricity that had been delivered to percent for 1990 and 1989, respectively, for depreciable irrigation customers but had not yet been billed. This accounting change plant. results in a better matching of revenues with expenses.

As of May I, 1989, SRP prospectively revised its estimate of Had this accounting method been in effect during fiscal 1989, the useful life of various assets to more dosely approximate operating revenues and net revenues would have increased in industry standards. This change did not significantly impact 1989 by approximately $ 1,500,000.

combined depreciation expense.

The cost of property that is replaced, removed or abandoned, (2) POSSESSION AND USE OF UTILITY together with removal costs less salvage, is charged to PLANT:

accumulated depreciation. The United States of America retains a paramount right or daim SRP charges to maintenance expense the cost of labor, in SRP which arises from the original construction and operation materials, and other expenses incurred in the repair and of certain SRP facilities as a federal redamation project. SRP's replacement of minor items of property. right to the possession and use of, and to all revenues produced Bond Expense by, these facilities is evidenced by contractual arrangements with Bond discount, issue and refinancing expenses are being the United States.

amortized over the terms of the related bond issues.

(3) INTERESTS IN JOINTLY OWNED Electric Rates ELECTRIC UTILITYPLANTS:

Under Arizona law, the Board has the exdusive authority to establish electric rates. SRP is required to follow certain The District has entered into various agreements with other electric utilities for the joint ownership of electric generating and procedures, including public notice requirements and holding a transmission facilities. Each participating owner in these facilities special Board meeting, before implementing changes in standard electric rate schedules. In April 1990 the Board authorized a 7.5 must provide for the cost of its ownership share. The District's percent standard rate increase to be effective May 15, 1990. The share of expenses of the jointly owned plants is induded in previous rates had been in eiieci since Ociober 1987. operating expenses in the combined statements of net revenues.

The following table reflects the District's ownership interest in Nuclear Fuel jointly owned electric utility plants at April 30, 1990:

Under the provisions of the Nudear Waste Act of 1982, the District is charged one mill per kilowatt-hour (kWh) on its share

Plant 1990, and 1989, debt service coverage was 1.85 and 1.92, Ownership In Accumulated respectively.

Plant Name Share Service Depreciation CWIP Interest and amortization of discount on the various issues (thousandth of dollars) results in an effective rate of approximately 7.32 percent over the Four Corners (NM) 10.00% $ 85,943 $ 25,702 $ 7,801 remaining terms of the bonds.

Mohave (NV) 10.00 47,313 19,989 2,612 At April 30, 1990, the Project has authority to issue additional Navajo (AZ) 21.70 221,705 97,242 6,508 electric system revenue bonds totalling $ 367,435,893 principal Hayden (CO) 50.00 67,892 30,200 250 amount and electric system refunding revenue bonds totalling Craig (CO) 29.00 225,688 69,831 536 $ 1,943,405,000 principal amount.

Palo Verde Nuclear The District has defeased several issues of revenue bonds, Generatin Station (AZ) 17.49 1,583,652 174,759 18,482 sometimes resulting in a loss. In accordance with the Board's resolution, the losses have been deferred and are being

$ 2,232,193 $ 417,723 $ 36,189 amortized on a monthly basis over the remaining life of the refunded bonds. Induded in deferred charges and other assets is The District acts as the operating agent for the participants in $ 93,660,000 and $ 96,399,000 of unamortized defeasance losses, the Navajo Project. at April 30, 1990, and 1989, respectively.

SRP retains an option to recapture up to an additional 5.7 Commercial Paper percent interest in PVNGS which was previously sold to another The District has issued $ 375,000,000 of tax~empt participant. The recapture, which can occur no sooner than commercial paper at an average interest rate to the District of 2001, would be based on reproduction cost new less depreciation. 5.94 percent. The commercial paper matures no more than 270 .

days from the date of issuance and in no event after July 12, (4) LONG-TERM DEBT: 1991. The commercial paper has been dassified as long. term in Long-term debt consists of the following: connection with refinancing terms under a revolving credit agreement with a consortium of banks which supports the Interest commercial paper. Under the terms of the Agreement, the Rate 1990 1989 District may borrow up to $ 375,000,000 through Oct. 29, 1993.

(thousands of dollars) The commercial paper is an unsecured obligation of the Revenue Bonds District.

(mature through 2030) 4.9-11.5% $ 3,348,752 $ 3,257,583 General Obligation Bonds Unamortized Bond In 1984, the District refunded its then outstanding general Discount (92,718) (95,843 obligation bonds. Although the refunding constituted an in-Total Revenue Bonds substance defeasance of the prior lien on revenues which secured 3,256,034 said bonds, the general obligation bonds continue to be general Outstanding 3,161,740 Commercial Paper 5.5.6.4X 375,000 375,000 obligations of the District, secured by a lien upon the real Other 7,558 3,217 property of the District, a guarantee by the Association, and the District's taxing authority. As of April 30, 1990, the amount of Total Lon -Term Debt $ 3,638,592 $ 3,539,957 defeased general obligation bonds outstanding was $ 93,595,000.

The annual maturities of long-term debt (exduding commercial paper)

Government Debt In fiscal year 1989, SRP extinguished approximately $ 6.9 as of April 30, 1990, due in the fiscal years ending April 30, are as million in outstanding debt with the U. S. Bureau of Redamation follows:

with a payment of approximately $ 3.9 million. This transaction resulted in a $3 million gain which has been reflected as an (thousands of dollars) extraordinary item in the combined statements of net revenues 1991 $ 35,162 for 1989.

1992 41,800 1993 50,767 (5) EMPLOYEE BENEFIT PLANS:

1994 53,425 Defined Benefit Plan 1995 57,940 SRP has a defined benefit plan (the Plan) covering Thereafter 3,117,216 substantially all employees. The Plan is funded entirely from SRP contributions and the income earned on invested assets. No

$ 3,356,310 contributions were required to be made to the Plan in fiscal years 1990 and 1989. Plan assets consist primarily of stocks, U.S.

Revenue Bonds obligations, corporate bonds, real estate funds and a guaranteed Revenue bonds are secured by a pledge of, and a lien on, the investment contract.

revenues of the electric system after deducting operating Net periodic pension cost (income) as of the dates of the expenses, as defined in the bond resolution. Under the terms of latest actuarial report (April 30) is made up of the components the bond resolution, the District is required to maintain a debt listed below and was determined using the projected unit credit service fund for the payment of future principal and interest.

actuarial cost method:

Induded in segregated funds is approximately $ 186,249,000 and

$ 181,795,000 of debt service related funds as of April 30, 1990, 1990 1989 and 1989, respectively. (thousands ot dollars)

The District has $ 169,567,322 of Mini-Revenue Bonds Service cost S 8,955 S 9,061 outstanding which can be redeemed at the option of the Interest cost 18,350 15,735 bondholder under certain circumstances. These bonds have been Actual return on assets (18,399) (47,941) dassified as long-term in connection with refinancing terms Net amortization and deferral 13,762 18,911 under an available line of credit with a commercial bank.

The debt service coverage ratio, as defined in the bond Net periodic pension income $ 4,856 S (4,234) resolution, is used by bond rating agencies to help evaluate the financial stability of the District. For the years ended April 30,

The discount rate used in determining the actuarial present These expenditures will be financed primarily by funds value of the projected benefit obligation was 9.0 percent for both currently on hand, future net revenues and the sale of revenue 1990 and 1989. The rate of increase used to determine future bonds.

compensation levels was 55 percent for fiscal years 1990 and 1989. Coronado Unit III The expected long-term rate of return on assets is 9.75 percent for In 1988, the Board approved deferring the in-service date of both 1990 and 1989. Coronado Generating Station Unit Ill. This action was taken as a The following schedule reconciles the funded status of the Plan result of a study which concluded that the deferral would allow with amounts reported in SRP's combined financial statements SRP to realize savings in future revenue requirements. In as of April 30: accordance with the Board's resolution, Coronado Unit III costs of $ 280.5 million were transferred to plant held for future use.

1990 1989 Commercial operation is currently anticipated in 2005.

(thousands ot dollars)

Long.Term Power Contracts Plan assets at fair value $ 301,655 $ 293,451 The District has entered into two long-term power purchase Actuarial present value of agreements to supply a portion of its projected load requirements.

projected benefit obligation: Each contract is for 50 megawatts (MW) of firm power starting Vested benefit obligation (16?,548) (145,579) June 1990, increasing to 100 MW beginning in June 1991 and Nonvested benefit obligation (6,9?0) (6,519) expiring in the year 2011.

Accumulated benefit obligation (174,518) (152,098) In fiscal 1990, the District entered into a long-term contract with a participant in the Navajo Generating Station to acquire an additional Excess of projected benefit percentage of the output of the Station. Minimum payments obligation over accumulated under this contract will be based on 200,000 kilowatts (5V) of capacity benefit obligation 49,555) (51,615 and 760 kWh per kW per year of associated energy. This contract Projected benefit obli ation 224,073) (203,713 will commence May I, 1993, and expire Sept. 30, 2011.

Plan assets in excess of projected Minimum payments under these purchased power contracts benefit obligation 77,582 89,738 are as follows for the fiscal years ending April 30:

Unrecognized net assets (52,030) (56,366)

(thousands of dollars)

Unrecognized net gain (7,958) (21,983) 1991 $ 15,895 Prior service cost not yet 1992 29,539 recognized in net periodic 1993 28,685 pension cost 1,999 2,175 1994 42,904 Prepaid Pension Cost $ 19,593 $ 13,564 1995 42,904 Thereafter 740,916 As a result of SRP's Organizational Assessment and Renewal

$ 900,843 (SOAR) Program, a curtailment gain of approximately $ 1,172,000 was recognized as income in the current year in accordance with Statement Fuel Supply of Financial Accounting Standards No. 88. This income was recorded At April 30, 1990, minimum long-term commitments of as a reduction of SOAR costs incurred in the current year (Note 9).

approximately $ 2.4 billion exist under fuel supply contracts. During Defined Contribution Plans 1989, the District paid approximately $ 59 million to terminate a SRP also has two defined contribution plans, the Salaried contract with Kaiser Coal Company. The remaining termination cost Employees'hrift Plan and the Hourly 401(k) Plan. Both plans receive of S54,15?,000 and $ 58,120,000 at April 30, 1990, and 1989, employee contributions and partial employer matching contributions. respectively, is induded in deferred charges and other assets and is Employees are eligible for employer matching contributions upon being amortized to fuel expense over the remaining life of the original completion of one year of service. SRP contributions to these plans contract. This termination cost is being recovered through the rate were $ 2,615,000 and $ 2,700,000 in the fiscal years ended April 30, increase effective May 15, 1990.

1990, and 1989.

AssocIation Construction Program Other PostempIoyment Benefits SRP is committed to spend approximately S42 million over SRP provides certain health care and life insurance benefits for the next six years for its share of a project to build or modify retired persons. Substantially all of SRP's employees may dams on the Salt and Verde rivers for flood control, to ensure become eligible for those benefits if they reach normal retirement dam safety and provide water storage associated with the Central age while working for SRP, retire and have completed a minimum Arizona Project.

of 5 years regular employment. The cost of retiree health care Papago Park Center and life insurance benefits is recognized as expense as the premiums SRP is currently developing a 470-acre, mixed-use commercial and/or deposits to the trustee are paid. For 1990 and 1989, park called Papago Park Center in Tempe, Arizona. In those costs totaled $ 2,867,000 and $ 2,100,000, respectively.

connection with the infrastructure development, the District and (6) COMMITMENTS: the city of Tempe have entered into an agreement whereby the District Construction Program District will pay a special annual assessment of approximately S1.75 million per year for 19 years to the city of Tempe to pay Construction expenditures, induding contingency allowances, planned for fiscal years 1991 through 1995 are shown below: for its share of street and Infmstructure improvements and right of way acquisition. The obligation of the District to make assessment payments is an unsecured obligation payable from (rnilllons of dollars) District general funds.

1991 $ 283 The District's wholly owned subsidiary, PPCI, will serve as the 1992 316 real estate management company in accordance with the terms 1993 315 of a 99-year lease on the property.

1994 364 1995 429

(?) CONTINGENCIES: Indian Matters Environmental From time to time, SRP is involved in litigation and disputes with At any given time, litigation or administrative proceedings or various Indian tribes on issues concerning royalty payments, taxes studies involving environmental matters could affect SRP and its and water rights, among others. Resolution of these matters may result present and proposed generating and operating facilities. Many in increased operating expenses which would be passed on to normal activities in connection with SRP's operations generate customers.

hazardous wastes, which in the last 10 years, have been the Other Litigation subject of substantial fedetal, state and local legislation imposing In the normal course of business, SRP is a defendant in various strict liability on generators, transporters, storers and disposers of litigation matters. In management's opinion, the ultimate hazardous waste for dean-up costs and damages which result resolution of these matters will not have a significant adverse effect from substance release or contamination, regardless of time or on SRP's financial position or results of operations.

location. Increased operating expenses due to adverse Nuclear Insurance environmental decisions would be passed on to customers Under existing law, public liability daims that could arise from a through electric rates. single nudear incident are limited to $ 7JI billion. PVNGS participants The District's principal generating stations, due to their currently insure for this potentiial liability through commercial insurance proximity to large national parks, monuments and wilderness carriers to the maximum amount available ($ 200 million) with the areas, may be subject to provisions relating to visibility protection. bahnce covered by an industrywide retrospective assessment program Currently, the U.S. Environmental Protection Agency is evaluating which is required by the Nudear Regulatory Commission. The whether the Navajo Generating Station is a source of visibility maximum assessment per reactor per nuclear incident under the impairment requiring installation of environmental controls. retrospective program is $ 63 million but not more than $ 10 million Installation would require significant additional expenditures, per reactor may be charged in any one year for each incident subject which would be passed on to customers through increased to a 5 percent surcharge which could be applicable in certain electric rates. The District has induded a contingency allowance circumstances.

in the 5-year construction program (Note 6) for the costs of new Based on SRP's ownership share in PVNGS, the maximum potential environmental controls should they be required. assessment would be $ 33.1 million but would be limited to $ 69 million Payments to Certain Property Owners in the per incident in any one year, induding the 5 percent surcharge.

Association's Service Areas Now Provided Electric Power by Others: (8) ASSOCIATION OPERATIONS:

The Artides of Incorporation of the Association provide for the Association expenses exceeded revenues by approximately indemnification of certain property owners in the Association's service $ 33,850,000 for 1990 and $ 34,069,000 for 1989.

areas which are now provided electric power by others if they are required to pay substantially more for power than they would if (9) SRP'S ORGANIZATIONALASSESSMENT AND they were furnished electric power by the Association. A reserve RENEWAL:

for these payments has been established which, in the opinion of In 1989, the Board approved a program to review SRP's management, adequately covers SRP's liability as of April 30, 1990. organizational structure in conjunction with revised growth estimates The District has recently reached a tentative settlement of litigation for the Phoenix metropolitan area. This program resulted in the related to the interpretation of the Artides of Incorporation. As a elimination of approximately 700 salaried and hourly positions. The result of this settlement, an additional liability for previous related estimated severance benefits have been expensed in the periods of approximately $ 5.7 million was established and has combined statements of net revenues as an unusual item.

been presented as an unusual item in the combined statements of net revenues.

Report of Independent Public Accountants To the Board of Directors, Salt River Project Agricultural Improvement and Power District, and Board of Governors, Salt River VaHey Water Users'ssociation:

We have audited the accompanying combined balance sheets of SALT RIVER PROJECT as of April 30, 1990 and 1989, 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit indudes examining, on a test basis, evidence supporting the amounts and disdosures in the financial statements. An audit also indudes 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, 1990 and 1989, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.

As explained in Note I to the financial statements, effective May I, 1989, the Company changed its method of accounting for unbilled revenue.

Phoenix, Arizona, Arthur Andersen & Co.

June 15, 1990.

OFFICERS ELECTED OFFICERS John R. Lassen William P. Schrader President Vice President PRINCIPAL OFFICERS AND OTHER EXECUTIVES A.J. Pfister Oren D. Thompson General Manager Associate General Manager John R. McNamara Water Group Associate General Manager Don G. Parlett'ssociate Corporate Engineering Ei General Manager Potuer Group Corporate Services Group David Areghini Paul G. Abler Assistant General Manager Assistant General Manager Potuer Operations Human Resources Robert J. Conlon D.S. Wilson Jr.

Assistant General Manager Associate General Manager Corporate Engineering Planning Ec Resources John H. Steffen C.A. Howlett Assistant General Manager Associate General Manager Potuer Construction 8 Customer Services Ck Mainlenance Marketing Group James L. Swartz Gary W. Harper Assistant General Manager Assistant General Manager Operations Services Customer Services Carroll M. Perkins Helen W. Knopp Associate General Manager Assistant General Manager Financial 8 Information Communications 8 Public Affairs Services Group D. Michael Rappoport Mark B. Bonsall Assistant General Manager Corporate Treasurer Government Affairs and Assistant General Manager Richard H. Silverman Financial Seruices Assistant General Manager John D. Jacobs Latu 8 Land Assistant General Manager Paul D. Rice Information Systems Corporate Secretary CONSULTANTS Legal Advisers Bond Counsel Jennings, Strouss d'c Salmon Mudge Rose Gulhrie Alexander and Ferdon Independent Public Accountants Financial Consultant Lazard Frhres and Co.

Arthur Andersen and Ca

'Effectioe August I, 1990 LJ. Utten replaced Don 0 Parlett, toho retired from the company.

j!,/i,'

'S rr BOARD MEMBERS lg Rudolph Johnson Oarence C Pendergast Jr. Bruce B. Broohs Gilbert R. Rogers Distrid/Diaision I Ntrid/Diction 2 Distrid/Diadion 3 Ddtrid/Dimion 4 Association & Distrid Associction & Ntrict Aexiation & Dieid Association & District

/

h John hf. Williams Jr. James L DiBer Thomas P. Hurly Ann Burton Ntrid/Diseon 6 Distrid 6 Dice'on 6 Ddtrict/Dicision 7 Aeeation & Ddtrid ksociation Ntrid Assoaation & District oard members',

establish specific Robert E Hurley Olen Sharp Duuyne E Dobson pblicies, 'artd Joe Bob Neely Ddtrict/Dri4sgsn 8 Dhtrict 9 Dicisln 9 District/Dicin'on 10 through Association & District Association Dieid Assolrtion & Ntrict conduct the SRP's'anagement, affairs of the Salt'River .'business Project in accordance with the

,, l articles of incorporation; bylaws and statutes.'jte 10 members of the Board r

of Gover'aors of the Salt River,

! Valley Water Users'ssociation .

are elected every two yea'rs by the shareholders(property owners) of s

the Association.,

9:L 'The Board of Directors of the Salt Riv erProject Agricultural William W. Arnett Fred J. Ash James R. htarshall Hdon Rudd , Improvement and Pbtver District At4arge At.large At-large At4arge consists of 14 members w ho serve District Ntnd Ntrict Ntrid staggered four-year terms. One

, District Board member is elected from each of the 10 SRP voting a'nd four members are 'ivisions, elected at-large.

I

COUNCIL MEMBERS is James hb Aexsano Dktrkt/jvktskn 3 Assockrie & Ddtrict Ccorot rice Oaskmcn if s

/i /

I Robert L Cook k'hrward W. LpVie DistriMNMsm I i'mll hb Rowsy Distrit/Dixie I Wayne A. Itart DistriadNkn 2

~lb~

DktiktDkisicn 2 Ssockk6km & Ddtrict Assockriae & Ddtrkt Heavies & Ddtrkt Association & Dktikt John A. Vandcswcy John E Andmson Dktikuvkiskn 2 Dktrktrvkkjion3 Stocctrt tin & Ddtrkt Asscckrioe & Ijtstrkt Roy W. Cbcatham Oarcnce J Densen'Xeia6 Drsekt4i&in 5 Astockrkn & Ddtrkt kssockrkn

'he Councils set

~

broad policy through enacting and amending bj lauts relating to the management and con1uct of Dmn W. lewis Dane Mc~ Wayerc A. Marietta laster IL ltowey Ddtiktrvkiskn 6 Ddtnct I Dkiskn I Dktiktvte'skn I SRP's business affat'rs. Asscckrkrr & Distn'ct Three Council members are I

by SRP shareholders.to .

'lected ter'ms in each of the 10 'tvo-year districts of tPe Salt River Valley

, 1Vater Users'ssociation.

Three Council members are Beefed to staggered four-pear Gcorttc K Ninth Mark V. yacc W. Certts Dana krtkktDkkkn I

'eimsin each ofthe 10 divisions of Dtstrktrvkiskn 9 ghe Salt River Project Agricultural Improvement and Pomr District.

30 lee L Trcttaskcs C, Me Nilbs DktsiM&siw9

'As ol publication, the ttbtver Distric Council seat /or Division 6 had not been filled.

~ ~

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No Postage Stamp Necessary If Maiied in the United States BUSINESS REPLY MAIL FIRST CLASS PERMIT NO. 1758 PHOENIX, AZ POSTAGE WILL BE PAID BY ADDRESSEE Salt River Project Corporate Communications P.O. Box 52025 Phoenix, AZ 85072-9512 IIIIII IIIIIIIIII III IIIIIIIIIIII IIIII IIIIIIIIIIIIIIII No Postage Stamp Necessary If Mailed in the United States BUSINESS REPLY MAIL FIRST CLASS PERMIT NO. 1758 PHOENIX, AZ POSTAGE WILL BE PAID BY ADDRESSEE Salt River Project Corporate Communications P.O. Box 52025 Phoenix, AZ 85072-9512 Ilrrlrrlrlrllrrrlrrrlrrlllrl Irl << rrllrrlrlrrrlll No Postage Stamp Necessary If Mailed in the United States BUSINESS REPLY MAIL FIRST CLASS PERMIT NO. 1758 PHOENIX, AZ POSTAGE WILL BE PAID BY ADDRESSEE Salt River Project Corporate Communications P.O. Box 52025 Phoenix, AZ 85072-9512

Our mission is. clear:

To be the low-cost supplier C

among our competitors of high-value energy and water

.services; And, we do so in an environmentally responsible which minimizes negative

'anner, impact on'our.natural resources.

We serve a stewardship role in regard to our land, water and air: We are committed to preserving them for present arid future generations.

At SRP, we'e working hard to accomplish our mission and to find ways to safeguard our

~

environment. We believe these two jobs go hand in glove.

From providing high-value energy services.and ensuring an adequate supply of quality w'ater for our,customers, to preserving the integrity of Arizona's archaeological treasures, our is clear. 'ission

+

~8M O~l>+

SALT RIVER PRCVECT