ML17306B048

Salt River Project 1991-92 Annual Rept.

ML17306B048
Person / Time
Site:	Palo Verde
Issue date:	04/30/1992
From:	Lassen J, Perkins C, Schrader W SALT RIVER PROJECT
To:
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ML17306B046	List: ML17306B048 ML17306B049 ML17306B051
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NUDOCS 9210190159
Download: ML17306B048 (42)

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9 9210190159 921008 PDR ADOCK 05000528 I PDR IIIIP Illlcmjkc(:

Salt River Project (SRP), the nation's third largest (OOPQ@gog public power utility and Arizona's largest water INQQOI oo 0 0 0 supplier, is the oldest multiple-purpose reclamation Q s 0 0 enterprise in the United States. We are named for the major river which supplies water to metropolitan

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an oooo ooooooooooI QygpgjeooxtN'moKO'kksr Phoenix the Salt River.

SRP was created in 1903 through provisions of the National Reclamation Act. Individual landowners in the Salt River Valley pledged their property as collateral for a government loan to build Theodore Roosevelt 0 Dam, the cornerstone of SRP's water business.

SRP consists of two compatible organizations, the Ilaaass Salt River Valley Water Users'ssociation, and the Salt SQOS61I11d&0. S River Project Agricultural Improvement and Power District.

mome The Association is a private Arizona corporation SfIIN@9lLR that administers water rights to SRP's 240,00&ere 00.0~0 Ibm~i ~rl gg gggggg)ggOQ area. We operate and maintain a statmf-thwart water delivery system that combines gravity flow and hoego) oOfo~oJgggyi@g pumping. This system carries water to municipal, RQmaS industrial, agricultural and residential users. In

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cooperation with the U.S. Forest Service, the Association helps manage the 13,000-square. mile watersheds of the Salt and Verde rivers.

The District is a public power utilityand a political subdivision of Arizona. We provide electricity to about IRKll Hltlll 550,000 residential, industrial, commercial and OIQmKS agricultural power users, chiefly in metropolitan

,Iiitggiiggiig Phoenix. Our 2,900 square-mile service area spans giitQI@gQ gimp ~

Qii@QG+i~i~i (QQisIIKIIogg@gsiy portions of Maricopa, Gila and Pinal counties in central Arizona.

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SRP's mission is to be the lowest supplier 0 SRP will continue to support balanced among our competitors of high-value energy solutions to environmental issues. We will and water services. contribute to the scientific understanding We describe our business direction to of environmental matters and will support that mission in terms of the four Cs: communicate results with customers, Customer Service, Competition, Commitment employees and the public.

and Cost. Executive management builds on 0 Service quality will remain a high priority these fundamentals by focusing on the for SRP and will be crucial in dealing following strategic priorities to guide the with the more competitive environment.

company:

Customers and their needs will define 0 SRP will become more cost competitive service quality. This applies to both by accepting a greater degree of risk and internal and external customers.

flexibilityin operations and planning. We 0 To compete effectively, SRP will need will focus on lowering the costs of internal employees of the highest caliber with operation to meet financial targets and to multiple skills. Rather than increase the make strategic investments.

work force, we willrecruit, retain, retrain 0 We will continue fulfilling our unique and redeploy employees to meet these heritage of storage, transportation and challenges. We remain dedicated to delivery of water to customers at a providing a safe and healthful work place.

reasonable price. We will consider adding 0 SRP will focus on activities that benefit new water services, at full cost, as markets and meet the expectations of our for such services develop.

customers and shareholders, and the communities where we do business.

To 0llI'4"i';

Sondholders <<

VI+ 4 and Shareholders QO Ppij g (From left) General hfanager CM Perkins, Vice President IVflliamP. Schrader and President John R. Lassen.

Increasing competition and an uncertain mid-1980s. SRP had net revenues of 840.2 economy present a unique window of million, and healthy cash flows, with funds opportunity for those utilities in good available for corporate purposes at 8182.9 financial condition. million. Also, SRP sold a record $ 53 million in We see that window as being wide open minibonds in response to local investor demand.

for Salt River Project. These results are encouraging, but our Our confidence is high because decisions concern is that window of opportunity. Like we made the past several years paid healthy any solid, long-term investment, SRP must dividends in fiscal year 1991-92. Our power be able to combine sound planning with facilities are reliable and our power operations occasional risk-taking.

set numerous performance records. SRP The strategic priorities outlined at the reservoirs are functionally full. beginning of this report are our road map We had the best year financially since the for realizing our mission, to be the lowxost

supplier of high-value energy and water SRP is many things. It is a federal services. We think these strategic priorities reclamation project, a modern public power will favorably position SRP in the Phoenix utility and a special improvement district and regional markets. within our state. It facilitates the growth of Today's business environment confirms homes, business and industry, and crops.

the validity of our mission and suggests the Fundamentally, though, SRP remains need to take steps to reconfirm our commit- committed to providing water and energy ment to achieve it. To achieve our mission, leadership. This leadership means providing we must rededicate our efforts and improve a stable, economic base of resources for our organization. In some cases, these our customers and shareholders, and the improvements represent significant changes willingness to shift gears and take advantage from established practice. of improvement opportunities to benefit We improved operations by reorganizing those we serve.

and reducing our work force, even though we We invite you to read our annual report were healthier financially at the time than and learn more about SRP, our direction and other utilities in the region. Our six-year our vision.

financial plan continues to be a key to our solid financial planning. These actions resulted in our present strong financial position. John R. Lassen We are pleased to report that SRP is President enjoying very favorable public opinion. Most of our customers we surveyed say we are a well-managed company. The value of living in William P. Schrader an SRP area continues to increase largely Vice President because of the service quality we offer our customers.

Service quality starts at the top. Each member of executive management also is a CM. erklns customer service representative. We identified General Manager a number of our largest business and industrial customers, and assigned several to each executive. The partnerships we foster with these customers are important to us.

We continue to establish partnerships by channeling resources into activities consistent with SRP core businesses that clearly benefit customers and communities where we do business. Through leadership in the public policy arena, corporate contributions and employee involvement, we are committed to making a difference in people's lives.

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Salt River Project I

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~ 4 IS4 l (Fmm left) General Nanagert Chf. Perhins; Associate General ilfanagerst Richard H. Siluemtan, Late &

Administrative Services; LJ. "Chip" U'Ren, Operations & Human Resources Services; D. hfichael Rappoport, Public & Conununications Services; hfarh B. Bonsall, Financial, Information & Planning Services; David G. Areghini, Potver, Constntction & Engineering Services; and Oren D. 7hompson, Customer, hfarhetinf4 & )Vater Services.

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<<;4','~,,'S..~~'~,, '+*, i SRP is making the most of opportunities analyzing and deploying alternative resource to improve and take advantage of the regional options, including fuel cells, cogeneration economic situation. Although some utilities and solar.

in the West are suffering financial hardships Through research, we better understand and the regional economy is sluggish, we specific areas and types of service that drive have been able to strengthen our position. the level of customer satisfaction. In turn, we SRP will continue to invest in strategic will use our research results to realign our transmission facilities and to support resources and to maintain or improve customer wholesale transmission access. Further, we satisfaction. To further improve our product, will continue to pursue wholesale energy we will continue to refine our power quality transactions that benefit our customers. SRP program.

also continues to develop expertise in SRP uses energy<fficiency programs to provide customers with more options and ski, to increase SRP's resource flexibility and reliability. We willimprove research, develop-ment and assimilation of technological advances that benefit the company and our Peoria Glendale ~Scottsdate customers.

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~ Chandler Florcncco QgipiRIIiir Jct.

Hagstaff ijjreratirrLrEfficiency Imjrroves, fo~gkg Itesoorce Oirtioos Targeted In fiscal year 1991-92, Navajo Generating Phoenix P Electric service area served exclusively by SRP. Station (NGS) continued as one of the top-

~ Tucsotl Q SRP provides full power requirements operating coal-fired plants in the nation.

of another utility for resale. NGS'et capacity factor for the year was 87.1 Q SRP provides lull power requirements of another utility for resale. Project makes percent; this a measure of the actual amount direct sales to customers lor all mining loads. of electricity generated as a percentage of the SRP's Electr io 0 Electric service areas not served by SRP. maximum potential. NGS'et capacity factor

~~;~A>, Setvice Area The Salt River Project Agncuftural improvement arrd was greater than budgeted, and higher'thari Porver Districtprtovideselectricity to porver users in a last year's mark of 82.8 percent. SRP manages 2,900square-mile service area in parts ofhfaricopa, Gila and Pinal counties. NGS and owns 21.7 percent of the plant.

Capacity factors for five plants in which like complex batteries. These modular units SRP has part ownership also were greater could be used to match load growth in specific than budgeted. These facilities include Four customer areas.

Corners Generating Station in northwestern SRP signed a letter of intent to purchase New Mexico, Mohave Generating Station in an early production fuel cell unit when it southern Nevada, and Craig and Hayden becomes available. Such a unit would be up to generating stations in western Colorado. 50 percent more efficient, and environmentally The most impressive numbers were superior to conventional coal-fired and gas-achieved by the fifth plant, Palo Verde Nuclear fired power plants.

Generating Station, located west of Phoenix.

For the second straight year, Palo Verde Fileril)ilitya ilIuSI, produced more electricity than any other Another component of our resource plan U.S. nuclear facility. SRP owns 17.49 percent is transmission flexibility.The more access we of Palo Verde.

have to other utilities'ystems and other parts Even though our generating resources of the region, the more options we have to buy are performing well, we continue to improve and sell electricity.

our future resource options. For example, in

.SRP's most significant transmission fiscal year 1991-92 we contracted to buy 150 development is the 500 kilovolt (kV) Mead-megawatts (MVf) of capacity and energy Phoenix Project. Stretching from the Las Vegas from the U.S. Bureau of Reclamation's share of area to Phoenix, this transmission link will NGS. This will be available to us as early as 1993.

This purchase provides SRP with a provide SRP with direct access to many western utilities. The scheduled in-service reliable, economical source of power. Buying date is December 1995.

capacityand energy fromexistingsources helps defer the need to build expensive new generating facilities. This additional capacity enhances our ability to meet our customers'needs during peak usage times.

Other resource options weare studying include canceling an older arrangement to sell electricity to another utility, and the recapture of ~o e o f(p=

a portion of SRP's original share of Palo Verde. These choices also would enhance our ability to meet peak demand needs.

Some of our resource options are non-traditional. We are one of several utilities supporting the development of molten carbonate SRP's Della 10 progratn, launched this year, millimproue the electric system's efficiency by 10 percent and should saue up fuel cell technology. Fuel cells are to $ 50 million during the next five years.

unique effort. Delta 10 will help us find and upgrade the limiting parts of our system, and make changes in operating procedures.

For example, we found several operations and maintenance "choke points" on our system.

By eliminating these choke points, we improved system efficiency and eliminated the need for new substations and transformers.

Our goal is to increase the capacity of our existing electrical system by 10 percent. Delta 10 already is paying off; we project to save about 850 million during the next five years.

In another effort to minimize costs, SRP By baying and selling electricity to otlrer utilities, successfully bid in July 1991 for federal coal SRP increases reaenue and lowers its costs.

leases on 6,442 acres near Fence Lake in Our reliability indicators for this past western New Mexico. With the new acquisition, fiscal year demonstrated that our electrical SRP has leases on 18,000 acres near Fence system served our customers extremely well. Lake and coal reserves of more than 120 However, one of our biggest challenges is million tons.

how to serve an estimated 80,000 new power The acquisition ensures dependable customers in the next five years without supplies of coal for Coronado Generating increases in budget or personnel. Station (CGS), which is about 45 miles from the We believe one of the answers is our Fence Lake area. The coal is low in sulfur, Delta 10 program. This is a team approach allowing CGS to continue operating as one of to designing, building and managing our the cleanest coal-fired plants in the nation.

transmission and distribution system. We Fence Lake Mine could be operational by1995.

are integrating creative engineering, new A detailed environmental assessment was technology and our field experience in a conducted at the mine site. We determined we could mine coal with negligible impact on the environment and no significant impact on regional water levels.

Electric Customer Growth (Thousands) y y 0 c c) c) y c) y y y y y

'y 600 Custome Nemls llrivc Proy ants y

yc) yc) yc) yc)yyc) c) y c) y c) y y y y y SRP's primary market strategy is to 550 y y y y y c) o, c) c-

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I provide services and choices that respond to 500

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yc our customers'eeds and expectations.

c yC Our demand-sidestrategyprovidesa wide 450 y

c) 'y variety of commercial and residential customer programs to improve load factor 400 .)il 8748 8849 89-90 90-91 91-92 encourage energy efficiency. Our goal is'nd Fiscal Year to achieve peak reductions of 238 MW by

"gt Spanish translation of billing information.

The template is available free by request.

We also have a Spanishwnly telephone line in our customer telephone center. The ti line gives Spanish<peaking customers direct t access to information about their bills, hook-ups, deposits and payment arrangements.

Enhanced access to account information

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f I 1 prompted installing solid state recorders and remote communication systems at more than w-4 I, half of our customerwwned substations. This

~Qp technology substantially improved the Our customer service representatives are one of accuracy of billings to our major customers.

the company's most important links lo lhe people Ne serve. We can query the recorders each day and check for metering problems, thus avoiding c 1997 and 611 MW by 2012. estimated bills and the associated labor costs.

We enjoy continued success with our The system also has allowed us to Climate Crafted Home program. It promotes improve our cash flow by reducing the time r an all<lectric, energy<fficient designed and between reading and billing by one to two built house. About 60 percent of all new days. We now read and bill these major homes being built in our electric service accounts on the same day. Customer response territory are Climate Crafted Homes. is excellent. Some customers ask that we We have a number of new programs in call them when the bill is prepared to response to customer requests. Residential expedite their budget allocations. Remote KiloWatch is a mail-in home energy audit communications will be established at the program. Home owners check their houses remaining substations during the coming for energy efficiency and return the survey to fiscal year.

SRP for follow-up action. This program will Another improvement in customer service be implemented in the coming year.

With our Direct Load Control program, we will provide incentives to customers who Real Price of Hlecfvicity allow us to control their peak usage. We are 1992 Dollars (Cents/kWh) targeting heat pumps, air conditioners and 8.0 g g g g> gg g 0 < 0g g g g pool motors. This may be the initial program 7.5 00000ggggg

,ggggg oo>~~gggg in which we target market to specific, local c g

g g g g g areas to delay expensive transmission and g 7.0 g l g distribution system construction.

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g We have several thousand customers 6.5 > ~ g g who speak and read only Spanish. We g g 5

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developed a template to help them under- R$ goP$Q +M ~c 8748 8849 89-90 90-91 91 92 stand their electric bills. When placed over Fiscal Year an SRP electric bill, the template provides a

system enhancements. This gives customers rapid response to their questions about their Hlecfric Dollav bills or past usage. The system will save SRP about $ 80,000 per year during the next five 8.23 years in processing and labor costs.

Despite the economic difficulties in

$ .14 Maricopa County, SRP was able to reduce its

$ .19

~8.04- uncollected electric revenues by $ 839,270 from the fiscal year 199INI total. Improved residential 0 Fuel &Purchased Power and commercial deposit procedures, combined 00&M with a strong focus on high risk receivables 0 Taxes accounted for this reduction.

CI Interest SRP's prudent credit and collection S Principal philosophy protects our financial viability C3 Reinvested in Project Plant and helps moderate the amount of future rate increases to our customers. As a percent involves on-line availability of of revenue, losses were 0.283 percent for customers'illing and account records. It now takes only fiscal year-end 1991-92 compared to 0.351 seconds for customer service agents to percent for last year.

access these records, thanks to computer Aroundahe~loch maintenance on SRP's electric system ensures a high degree of auailability.

s Water leadership begins and ends with Horseshoe dams. Modification work for service excellence. For SRP, we have excelled Roosevelt Dam started in September 1991 and in the water business for almost a century by should be completed in 1995.

providing a stable, economic supply of water, SRP's partnerships with state and local and ensuring the rights to that water. agencies and cities are critical during this SRP has provided leadership while period of reservoir construction. We continuously maintaining high levels of service to our update groups such as the Arizona Department QN-~% '-g'6, h- ~ spry.;y..'

customers and shareholders. We have gone of Transportation, the Maricopa County to new lengths to monitor the quality of water Sheriff's Office, and others about potential we deliver. We continue to improve our down-stream effects caused by Safety of coordination with the municipalities in our Dams work.

service area in handling water quality concerns.

Our leadership was evident in 1991 as we successfully managed above-average runoff into our reservoirs while dam construction was underway. SRP delivered about 21.4 percent more water 932,427 acre. feet (af) compared ~n S,phV+N NQX hg~tshtnf' to 767,855 af in 1991 than the previous year.

Yet, we used far less groundwater, 83,831 af compared to 318,052 af in 1990. Protecting groundwater supplies from overuse helps hht sks sy ensure that we will have water during droughts and for future generations.

htcam IV f tn The high runoff did not prevent reservoir work progress. In April, SRP marked the completion of a four-year, 850 million dam 1k strengthening and modifications program for ;k Stewart Mountain Dam. Stewart Mountain is the first of four SRP dams to be modified g, n'.hmu ighh'V 1 through federal Safety of Dams provisions. u'.a+..'s":

httrrcutture remains a uitat cunrpanent afthe vattey's ihhrr l+s;@J Q",

About $ 210 million will be spent to strengthen economy. SRP mill continue to store, transport and deliver 'z:~~.l,",~>~~. s",.~~~ g',+ps-p mater to customers at a reasonable price.

and improve Theodore Roosevelt, Bartlett and

A netu spitttuay (lefi) tuas added to Stetuart htountain Dam as part of a four year, $ 50 million improuement program completed in April.

progress in negotiations between SRP and five Partnerships Important other Indian communities. Major issues in these Through partnerships with municipal negotiations centered on water requirements, organizations SRP also allows various parties water sources and funding options.

to transport their water supplies conveniently Two of the more notable efforts are the and without the cost of building new facilities.

Gila River Adjudication and the LittleColorado Examples include our agreements with cities River Adjudication. The former will quantify affiliated with the Arizona Municipal Water and set priorities for the rights of all water Users'Association,and with Rio VerdeUtilities.

users in central Arizona's Gila River Basin.

These partnerships are important in Precedent established in the Little Colorado equitably settling water rights issues.

River Adjudication, which involves water Throughout the century SRP has worked resources in northern Arizona, will significantly hard to clearly define our customers'nd affect the Gila River case.

shareholders'water rights in relation to those Another way we demonstrate stewardship of other parties.

of water resources is developing our One~o-An example of this approach is the Salt Fioe-Vear Groundtuater Action Plan. The Plan, River Pima-Maricopa Indian Community completed in September, is a strategic (SRPMIC) settlement that took effect this evaluation of the 247 wells in SRP's ground-year. Included in the agreement are provisions water system. Its objective is to ensure SRP's to build water facilities for the SRPMC, and to groundwater system can adequately and help fund certain commercial and agricultural reliably meet the future needs of those we improvements.

serve, in accordance with all applicable laws.

The success of this settlement spurred

Chandler, Phoenix and Tempe, was located Wnict llnnlity: A Kcy Concern on one of SRP's major canals. Special sensors As concern about the environment at the station indicate general water quality continues to grow, SRP has pursued oppor-and warn of possible toxic contamination.

tunities to provide leadership in resolving Continuous, automated measurements of water quality issues.

the canal water are transmitted directly to a SRP work crews installed two probes in central monitoring office. A network of similar one of our canals to provide real-time stations along SRP canals has been proposed.

monitoring of nitrate levels. Monitoring the Our unique weed control program nitrate level allows us to examine water involving the white amur fish continues to quality and minimize impacts to city drinking expand. In 1992 we plan to add 4,500 of the water supplies. Because of the initial program's fish to SRP canals. Then, 74 miles of the 135-success, probe installation is planned for mile canal system will contain the white three additional sites in 1992.

amur, a ravenous vegetarian carp. The white In November 1991, SRP presented a final amur is a sound environmental alternative research report to three Valley cities about to chemicals to rid canal waters of aquatic our prototype, real-time water quality weeds that consume water.

monitoring station. The facility, sponsored by SIMP'$

Peoria Iirigate(1 Ares Glendale Phoenix Scottsdale Shah Mesa Tempe Gilbert nnmyi Chandler

~ 'I%KB SRPreseruoirs feed the 135 mile canal system that, along tuilh other smaller tuaterways, carries later to eight cities, as Nell as agricultural and urban irrigators.

A significant improvement in water operations involved moving the Association Dispatch Center (ADC) to SRP's main administrative facility in early 1991 from its old home in north Tempe. The new location provides more space and utility for the ADC,

~tg'li;. which consists of two areas jointly responsible for operating the SRP canal system.

The new ADC location also contains SRP's new Supervisory Control and Data Acquisition system, used to monitor and control canal operation. The new system has expansion capabilities which allow for real4me monitoring of water quality, canal and lateral flow rates, and allow for monitoring of more facilities.

F The system is being expanded to incorporate hydrology and deepwell monitor locations.

A series of late minter storms changed a potentially ADC acquired a new neighbor in May 1991 dry urinter season into an abooe aoerage one for precipitation and runoff from SRP's umtershed. when the National Weather Service Forecasting Office began leasing space down the hall at SRP's main building. The Weather Service office Leadetshiys illeans L<'fficiency formerly was at Sky Harbor International aml Service Iiaalily Airport. Benefits of the new arrangement are Service quality and efficiency were key coordinated weather forecasting, reduced reasons why in 1991 SRP combined the Water operating expenses and shared data.

Group with marketing and areas responsible for power customer services and accounting.

The restructuring prompted a number of SRP's Watetshed Aven changes which streamlined operations and improved customer and shareholder service.

Hagstaff Changes included centralizing customer calls and most subdivision functions at our main administrative office, and combining Phoenix water accounting and customer services in a

~ Tucson single department. We also implemented permanent water scheduling for agricultural areas in our service territory.

Another service enhancement was installing a voice-messaging line for water SRP's umter supply begins on a l3,000square-mile customers with mobile phones. This gives natural drainage area, in the tnountains north and callers an alternative to waiting to speak to an east ofmetropolitan Phoenix This "utatershed "feeds the Salt and Verde riuers, which, in turn, flolinto a agent during busy hours. series of six reserooirs.

Focus for the Finture In the coming years, SRP will continue providing water leadership, and working to Rnnoff from SRP Watershed Area (Acre-Feet) solve crucial water issues. Areas of strategic 1,800,000 priority include: '0~0~ ~ g 0 5000 0 0 6 1,500,000 0 0 0

~ Establishing partnerships with municipal-1,200,000 0 0 0 g 0

'0'0 0 0 0 0

ities for water quality responsibility and associated costs. Although SRP has a 900,000 ><~'000 0 0 0 number of partnerships, we must ensure 600,000 '0 0 0 0 0~ 0 c that all those that need help have the 300,000 7

option to obtain services from SRP.

1987 1988 1989 1990 1991

~ Assisting in resolving the problem of short-Calendar Year term use of water from the Central Arizona Project (CAP). Groundwater conservation is the CAP's primary purpose, which it achieves by importing Colorado River water for municipal, agricultural and Store~I )Vater in SRP Reservoirs (Acre-Feet) as of Dec. 31 industrial use.

1,800,000 n 0 0 y 0

~ Protecting shareholders'ater rights in 1,500,000 0 OOC OO 0 ongoing adjudications and supporting 0 0 0 (

appropriate settlements of Native American 1,200,000 0

0 C y 0 0 000 water rights. 900,000 n 0

'c 0 c 600,000 ( 0

~ Developing programs for improving 0 t.'

300,000 communications with urban customers and shareholders.

1987 1988 1989 1990 1991

~ Considering other water resource options Calendar Year Projects such as groundwater recharge and associated soil aquiferr treatment, transportation of Total 1991 runoff from the Salt and Verde riuer tuatersheds tuas 1,71 1,752 acre4eet (aQ tuhich Las reclaimed water, and water exchanges. 80 percent more than median. Tlte year began tuith 840845 af of stored tuater in the raseruofrs. 1991

~ Supporting canal multiple use. By the turn ended tuith 1,540,477 af in storage 104 percent of median and 76 percent of capacity.?7te of the century SRP canal banks could be uratersupply included 926, 757afofsurface tuater and 83,831 af of groundtuater for a total of 1,010,588 af.

dotted with cafes, shops, parks and other (An acre4oot is enough tooter to couer one acre of aesthetic features. land to a depth of one foot about 325,850 gallons.)

0 Since 1903, SRP has been making a One of our most important investments difference in the Salt River Valley. We do that is in local education programs. For example, by investing in the communities where we as part of our commitment to encourage do business, and by looking for opportunities teaching excellence, SRP annually recognizes to best use our resources to benefit others. Arizona teachers through the Teachers SRP's community responsibility is evident Recognition & Awards Program (TRAP). The in a variety of ways. We participate in program spotlights teaching excellence in community programs, encourage employee areas related to energy, water, Arizona history volunteerism, fund charitable causes and and Native American culture.

promote educational programs. In addition to important basic educational skills, students need to be able to think creatively about critical issues society now faces. The TRAP honorees nurture such creativity in their students.

SRP was recognized by the S~ Scottsdale Chamber of Commerce as one of the best sponsors of a

+1

~l businesseducation partnership with I>> Scot tsdale schools. Our work in this regard includes funding a high school career and college center, summer p/p teacher workshop and tour, and water and electrical safety programs.

During the fiscal year, several hundred junior high school, high school and college students "job shadowed" SRP employees in various departments. Employees performed This spring SRP published a book about canal and mater and explained their jobs alongside safety. The book, printed in English and Spanish, mas distributed to school teachers and Head Start principals. students, providing students insight into careers in the job market. Job

shadowing is the result of busin~ucation control. The Phoenix Futures Forum is a non-partnerships between SRP and schools in the profit, citizens'rogram that focuses on the communities where we do business. city's quality of life issues.

As part of our ongoing effort to prevent Health care is a critical quality of life water-related tragedies, we illustrated and issue. We supported the remodeling and published "Can Al Be Safe?," a book designed expansion of Phoenix Memorial Hospital's to educate children about canal and water emergency services department. The hospital safety. The books, printed in English and provides emergency services for more than Spanish, are distributed free to Valley schools a quarter of a million people within SRP's and Head Start agencies. water service territory. Phoenix Memorial is Education at SRP is truly a global effort. a non-profit hospital serving the south International visitors to SRP receive training Phoenix community since 1934.

in various areas including water management, Another key concern in metropolitan conservation, environmental issues and Phoenix is economic development. SRP's supervisory control. In calendar 1991, we business and industrial development group hosted almost 700 visitors from 63 different seeks out and provides information to potential countries a 24.6 percent increase from new commercial and industrial customers 1990. Visitors come to us from other nations looking to move to metropolitan Phoenix. The through the V.S. State Department, the state group also assists existing SRP commercial and of Arizona, engineering firms and universities. industrial customers considering expansion.

While thinking globally, we act locally, In another example of our economic too. We continue to support a variety of arts development efforts, SRP helped sponsor and and cultural organizations that promote +a> 4)%p Arizona's unique cultural heritage and I

diversity. One example is our assistance to the state's oldest cultural institution, the Arizona Historical Society Museum. A new Pi~.

building to house the museum is scheduled to open in the spring of 1993. Our contribution supports an exhibit detailing the Salt River Valley's growth between the Civil War and the 1920s.

SitP Turgets Civic Issues goal g V r,p N j,,

Our efforts to enrich the community were recognized in April 1992 when we were named

.P'RP one of the Top 10 Vision Weavers by the Phoenix Futures Forum. In addition to our continued, demonstrated community commitment, we supports education through its educational seruices representatiues, who make presentations on water, energy were acknowledged for our contribution to and safety to hundreds of Valley classrooms annually.

recycling, resource conservation and waste

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heralded by the Edison Electric Institute and other key utility industry groups.

We also provided S81A million in lieu of tax payments to school districts, cities, EH counties, community colleges and special districts in nine Arizona counties for 1992.

As a political subdivision of the state, SRP makes voluntary contributions instead of paying property taxes.

The contribution makes SRP effectively the state's second-largest taxpayer. Payments are based on the value of SRP electric facilities i

in each county. SRP's 1991 payments were I;I S76.2 million.

Volunteer Efforts Bncourogeti We established an Employee Volunteer Committee to further increase our community involvement. The new program offers employees h'o one has a monopoly on atisdomt SRP officials the chance to participate, and allows them to exchange information Nfth international oisitors.

include family members. A seven-member employee steering committee directs the produce a newspaper supplement examining program, selecting volunteer projects and Arizona's economic future. The supplement's recruiting employees.

goal was to stimulate efforts by groups The Central Arizona Shelter Services guiding Arizona's economic future.

(CASS) was an early recipient of our Investing in SRP communities also means employees'fforts.

Thirty4ive SRP volunteers painted the aesthetic improvements. We will provide the homeless shelter inside and out in late spring.

cities with about SIO million in fiscal year "Adopts-family" programs are a popular 1992-93 to improve the appearance of SRP means of community involvement. SRP facilities. Our research shows that customers employees and members of the International want aesthetically designed SRP water and Brotherhood of Electrical Workers Local power facilities at reasonable cost.

Union 266 adopted 13 families last year.

SRP has experienced unqualified success Local Union 266, which represents our hourly in siting, designing and.building its facilities employees, worked with SRP volunteers, the in concert with the concerns of the customers.

Salvation Army and St. Vincent DePaul Society We use a unique, interactive public involvement to identify single parents and needy individuals.

process to get new and needed projects built More than 400 SRP employees and family in a timely, costwffective manner.

members gathered cash, food, clothing and Of the 300 projects SRP has undertaken furniture donations.

since 1983, 292 were completed without major During the holiday season, another group opposition. It's a success rate that has been

of SRP employees donated and delivered about work force and family issues to food, clothing, toys and household supplies implement changes in benefits and schedules to needy families in Phoenix. Others at SRP to adapt to employees'aregiving needs. For gathered toys and clothing during the holiday example, many work groups at SRP are season to benefit children of residents of a testing various flexible work-hour schedules.

stat~perated drug rehabilitation center. Flexibility and responsiveness also are "Share and share alike" has added important in providing competitive benefits in meaning at SRP. Since 1982, more than 83.8 the face of rising health care costs. The goal is million in energy aid has been provided to to provide health care benefits employees, 27,000 needy Arizona families through their dependents and SRP retirees need at Project S.H.A.R.E., Service to Help Arizonans costs all can afford. We continue to evaluate with Relief on Energy. SRP helped found our benefits package to address this challenge.

S.HARE with the Salvation Army and others.

To encourageparticipation, wecommitted to match our customers'ew pledges dollar-for4ollar. Customer response was strong; new pledges of $ 62,000 were received in two months.

These are just a sampling of SRP efforts in the community to make a difference. We will oo(, HEM rse~L A.P IK~~g continue to channel our resources into KH activities that are clearly beneficial to our ICES customers and shareholders. We also will >. MS SHELTER continue to support employee volunteerism 9 VlfMADISON and corporate participation in areas most beneficial to SRP customers and shareholders.

RiIpl0yi',cs: Aii Essciitinl C0Iiiiaiiity

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In order to make a difference in the

~,

community, we have to continue to craft an environment that nurtures employee creativity, development and well-being.

We are removing work practices that impair efficiency. We need to continue to establish SRP uolunteers painted and refurbished a homeless challenging employee safety objectives. We center this year one of many community seruice must design recognition systems to reward proj ects employees complete euery year.

high performance and teamwork. We also must be responsive to a diverse work force.

One way to be responsive is to evaluate employees'hanging needs. SRP management is using results from an employee survey

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Everybody wants a healthy environment. NGS successfully passed numerous SRP's charge is to balance environmental rules federal and state emissions tests since the and public concerns against pressures rising plant's first unit came online in 1974. We from customers'eeds and from economic demonstrate our continued commitment to realities. We must guarantee that the preserving the environment by our support of investments we make in the environment the new NGS emission control facility.

reap solid, long-term benefits.

Our negotiated settlement to reduce sulfur dioxide emissions at Navajo Generating Station (NGS) is one such Investment. The coal-fired power plant, managed by SRP, is about 80 miles from the Grand Canyon National Park's South Rim main visitor area in northern Arizona.

<<C SRP selected Stone &Webster Engineering Corp. in April 1992 as the architect/engineer for NGS'ew emission control system. Stone

& Webster and SRP will design and engineer a system to reduce annual sulfur dioxide emissions by 90 percent from NGS'hree 750-megawatt generating units. Installation of the system is planned for a three-year period;

'>)- 't,g~w the system's first phase should be in service by 1997.

The initial construction is expected to cost about $ 430 million. Yearly operation and maintenance costs will result in a total cost of more than $ 2.9 billion for 22 years the anticipated!ife of the emission system. This is Recyclingis one Nay toe can do more With less tuhge leauing precious resources for future less than the U.S. Environmental Protection generations. I Agency's (EPA) earlier plan, estimated to cost

$4 billion.

20

SRP employees help clean the Valley s itocycling Makes a Difference air by riding their bicycles to uorh.

Recycling also preserves the environment.

In October, our corporate recycling program won the Governor's Pride in Arizona award. energy used in a commercial SRP's recycling program for fiscal year 1991-92 building is for lighting.

involved the recovery of more than 8 million To augment our effort, last fall pounds of material, saving untold amounts of we joined the EPA's national Green .4 raw natural resources and landfill space. Lights program to increase lighting SRP even found a way to recycle contam- efficiency and reduce pollution. As inated soil. We needed to pave a new work a partner in the program, we survey area, and we had about 3,000 cubic yards of and improve lighting efficiency in petroleum contaminated soils (PCS) to dispose. our facilities as well as provide incentives for We solved both problems by mixing PCS and our electric customers.

asphalt for paving materials for a fouracre Another way to clean the air is reduced storage area in a maintenance yard. To augment automobile use. SRP employees continued this safe practice, SRP conducts tests to ensure their leadership in this regard by taking top there is no groundwater contamination. honors the second consecutive year in the SRP is one of the few pioneers in Arizona Valleywide Clean Air Business Challenge.

of this asphalt recycling technology. In Competing against other major local busi-addition to being an environmentally sound nesses last winter, almost 34 percent of SRP's way to use PCS, we saved about 30 percent to employees participated by using alternative 40 percent on disposal costs. means of transportation to get to work.

SRP is a major sponsor of Phoenix Clean and Beautiful. In December, Phoenix Clean SIIP Participates in Itosenrch and Beautiful won three first-place awards in Keep America Beautiful Inc.'s national as<1 Dovolopateat awards program. Phoenix Clean and Beautiful Research and development projects are was chosen for its display of public/private critical to solving environmental challenges partnerships, and for its public education we face. SRP long has been a participant in about proper solid waste management. environmental research.

The biggest of SRP-sponsored clean-ups Construction began earlier this year for is Page Attacks Trash. At the 11th annual the Desert House, a prototype home designed event last May, 3,500 people collected 8 tons to conserve water and energy. The house will of trash from Page and the surrounding area, show it is possible to live in harmony in the including around Lake Powell. desert and still enjoy modern amenities. The From reduced litter to reduced lighting: single-family, three-bedroom dwelling is SRP has had an aggressive lighting efficiency designed to be of median cost and size for a incentive program for commercial customers Phoenix home.

for three years. More than 230 of our business SRP is sponsoring construction of the customers have switched to energy<fficient home in partnership with a number of lighting. Roughly 30 percent to 50 percent of organizations. Each participant provided

design ideas, including the most efficient two local high schools.

energy and water features. The project's goal The two cars, which were built by is to reduce water and energy consumption students, finished second and third in a 150-by 40 percent from a conventional three- mile race for dual-power cars. Both vehicles bedroom home. ran on power supplied by electric batteries Last fiscal year we supported construction and an auxiliary, gas-powered generator.

of a water harvesting project. This water conservation activity will collect about 1.5 million gallons from on-site rain and waste Public Information, runoff annually, and reuse it five times. The Bilucatiuu Crucial recycled water willirrigate and provide other In the future, we willcontinue to promote services within a project called the Arizona and support balanced solutions to environ-Solar Oasis. mental issues through rigorous education The Arizona Solar Oasis at the Phoenix and communication efforts. SRP will identify Civic Plaza in downtown Phoenix will show- environmental areas of interest and share case energy conservation and environmental information with customers, shareholders, activities applicable to public buildings and employees and the public. We also will develop areas. The water harvesting project helps and communicate action plans consistent SRP promote environmental and water with the spirit of environmental laws and conservation programs. regulations.

Environmental programs are the focus of For example, SRP is working with other SRP grants given to four Arizona schools. The utilities to determine the specific obligations grants also cultivate one of the state's most required by the federal Clean Air Act precious resources: school children, and the Amendments of 1990. This includes studying quality of their education. long-range compliance implications of acid One grant will be used to turn a classroom rain provisions, participating in federal and into a planetarium. Another grant will fund a state regulatory activities, and reviewing pond, stream and greenhouse to grow and other issues such as global warming.

study indigenous Arizona flora and fauna. It will take the EPA a number of years to A third grant will be spent on a water write the regulations that flesh out the conservation and trash recycling program. A restrictions set forth in the 1990 amendments.

final SRP grant will help establish science SRP's short-term strategy is to influence that experiences in the outdoors in a "living process by talking to regulators and helping laboratory" in order to promote a respect and them understand the impact regulation will responsibility for the local environment. have on electric generation.

SRP participated in an event that promoted student research and development, and environmentally sound vehicles. The Solar 5. Electric 500, last April, was a three-day extravaganza featuring solar- and electric-powered vehicles. We sponsored and provided advisory support for entries from

Solid, strategic financial planning continued greater than any of the five previous fiscal years.

to pay off in fiscal year 1991-92. Prudent financial planning builds investor SRP experienced its best year financially confidence. Arizona residents invested a since 198687, in spite of continuing softness in record $ 53 million in minibonds more than the regional economy. Combined net revenues, double any previous sale in February 1992.

funds available for corporate purposes and These revenue bonds carry a maturity of the debt service coverage ratio were at their about 15 years and were issued at a yield of highest levels since the mid-1980s. 6.30 percent. Minibonds are available in The past fiscal year's pleasant summer $ 200 and $ 500 denominations.

and mild winter in central Arizona reduced We also issued $ 300 million of electric heating and cooling needs, thus moderating system revenue bonds in January 1992. These electricity demand. bonds had an average rate of 6.39 percent.

Yet, electric revenues increased $ 32.9 Proceeds of this issue refunded existing million compared to last year, driven in large highereost debt. The present value of the part by healthy excess sales. Revenues from debt-service savings which will accrue is sales for resale to other utilities grew 15.2 more than $ 25 million.

percent in 1991-92. Both bonds are rated "AA" and "Aa" Judicious cost control helped SRP post by Standard &. Poor's Corp. and Moody's net revenues of $ 40.2 million. While few Investor Services Inc.,

economists predicted the length or scope of respectively. These the economic downturn, SRP positioned itself ratings are among

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to withstand such pressures through budget the highest in the IIII,,,

t, v tel, cutbacks and reorganizations. During the last utility industry.

three years we reduced our work force about 19 percent, and cut planned capital and operating costs about $ 200 million per year.

Cost control also improved our funds available for corporate purposes (FACP). This SRP took advantage of favorable market / .

item represents cash remaining after payment conditions to refinance previously issued of cash operating expenses and debt service. bonds this year. The FACP at the end of 1991-92 was $ 182.9 million, savings willhelp keep electric rates down. C

SRP values the confidence which our Growth in customer load is forecast to investors place in us and believes good be even lower, 2.0 percent, down from the 2.5 communications are vital to maintaining that percent forecast in the last fiscal year. We confidence. We continued our tradition of also forecast slower revenue growth, about hosting bondholder information meetings in 1.4 percent per year. A major influence will be March 1992, when more than 1,900 investors SRP's energy<fficiency programs, which are attended four meetings held in metropolitan designed to modify patterns of energy use in Phoenix and in Tucson. ways benefiting both the customer and SRP.

SRP is committed to keep electric rates Our financial goals include:

as low as practicable. Since 1982, our rates ~ A debt ratio not to exceed 75 percent near-have increased far slower than the rate of term and 60 percent to 65 'percent long.

inflation. In January 1992, SRP implemented term. The debt ratio at the end of 1991-92 an overall 2.9 percent rate increase, one of was 74.4 percent.

the lowest increases in years, to offset rising costs of resources and increased taxes. Despite

~ A debt service coverage ratio of at least this rate increase, the real price of electricity 1.80. This ratio was 2.11 for 1991-92, up the price after adjusting for inflation has from 1.98 for 1990-91.

decreased about 14 percent since 1982. ~ Electric rate increases'(including changes The fuel cost adjustment factor is a means to recoverable fuel costs) limited to the of passing fuel increases and decreases to our rate of inflation over time, not to exceed 4 customers. This factor was lowered twice percent biennially through fiscal year during the past fiscal year, reducing customer 1994-95. We project the real price of bills nearly 3 percent, based on current electric electricity to decrease 7.1 percent during rates. Currently, customers'ills are reduced the next six years. As a result, electricity by the factor because fuel costs have been should consume an increasingly smaller falling. The high availability and reliability of share of our customers'ncomes.

our base-load generation facilities caused fuel

~ Growth in operating expenses per kilowatt-and purchased power expenses to be $ 30.7 hour8.101852e-5 days <br />0.00194 hours <br />1.157407e-5 weeks <br />2.6635e-6 months <br /> limited to less than the rate of million less than budget this year.

inflation over time. Operating budgets, SRP's economic course continues to be capital budgets and staffing were reduced charted by the company's sixyear financial twice during the past three years, saving plan. The plan enumerates our financial about $ 200 million a year. No work force goals, which call for reduced reliance on growth is expected through fiscal year debt, increased solvency or cash flow, and 1997-98.

improved profitability.

The plan accommodates the slower Adherence to these goals will leave SRP economic growth occurring in our service well-positioned to meet the economic, territory in recent years. Revised forecasts competitive and environmental pressures, show electric customer growth at an average while meeting the expectations of our annual rate of 2.7 percent, similar to last customers and investo'rs.

fiscal year. Average growth during the 1980s was 5.6 percent.

24

Revenues RSales KeyFinanciallndicators Combined Nef, Revenues Debt Ratio (Millions) (Percent) 60 yggg ~~On gggg g g g g g g 45

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c P 1.7 8748 8849 89-90 90-91 91-92 8748 8849 89-90 90-91 91-92 Fiscal Year Fiscal Year Total Electric Sales Funds Available for Corporate Purposes

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Salt River Project Board members within SRP's 240,00&acre water territory.

establish specific policies and, through The Board of Directors of the Salt River SRP's management, conduct SRP's business Project Agricultural Improvement and Power affairs in accordance with the articles of District comprises 14 members who serve incorporation of the Association, bylaws and staggered four-year terms. One District Board statutes. member is elected from each of the 10 SRP The 10 members of the Board of Governors voting divisions; four members are elected of the Salt River Valley Water Users'ssociation at-large.

are elected every two years. One representa- Often members of the Association Board tive is selected for each of 10 voting divisions seek and are elected to similar positions with

the District Board.

The respective Boards have rate-making authority for SRP's power and water businesses.

To qualify as a voter, individuals must own land within one of 10 SRP voting divisions.

Additionally, District voters must be qualified electors of the state of Arizona. Candidates must reside within SRP boundaries, own property in the particular area they wish to represent, and be qualified Arizona electors.

(Seated, from left)

Thomas P. Hurley Division 6, District Salt River Project Howard W. Lydic District/Division l, Association & District Etdon Rudd Ilorljorate Officers At-large, District President ..John R. Lassen John M. Williams Jr.

District/Division 5, Association & District Vice President ... .... William P. Schrader Gilbert R. Rodgers District/Division 4, Association & District Secretary .... ......William K. O'Neal James L Diller District 6, Association Treasurer ... .......Michael W. Lowe Clarence C. Pendergast Jr.

District/Division 2, Association & District Ann M. Burton District/Division 7, Association & District Cowultants Legal Adviser (Standing, from left) Jennings, Strouss & Salmon Fred J. Ash Independent Public Accountants At-large, District Arthur Andersen & Co.

James R. Mmshall Bond Counsel At-large, District Mudge Rose Guthrie Dwayne E Dobson Alexander and Ferdon District/Division 10, Association & District Financial Consultant Joe Bob Nccly Lazard Frkres and Co.

District/Division 8, Association & District Robert E. Hurley District/Division 9, Association & District Bruce B. Brooks District/Division 3, Association & District IVilliamW. Arne tt At-large, District

SP Council Members I

/

Kl t i5 Salt River Project Council members set seek and are elected to similar positions with broad policy by enacting and amending bylaws the District Council.

relating to the management and conduct of To qualify as a voter, individuals must SRP's business affairs. own land within one of 10SRP voting divisions.

Three Association Council members are Additionally, District voters must be qualified elected to two-year terms in each of the 10 electors of the state of Arizona. Candidates SRP voting divisions. must reside within SRP boundaries, own Three District Council members are property in the particular area they wish to publicly elected to staggered four-year terms represent, and be qualified Arizona electors.

in each of the 10 voting divisions.

Often members of the Association Council

(Seated, from left) C. Dale Wims District/Division 10, Association & District Mark V. Pace District/Division 8, Association & District Orland lL Hatch District/Division 10, Association & District Emll M. Rovey District/Division 1, Association & District Ben A. Butler Division 6, District Council Chairman Martin Kempton Elvin E Heming District/Division 8, Association & District District/Division 3, Association & District Carl E. Weiler Lany D. Rovey District/Division 5, Association & District District/Division 2, Association &. District Roy W. Cheatham Charles D. Copplnger District/Division 5, Association & District District/Division 4, Association & District Clarence J. Duncan Robert L Cook District 6, Association District/Division 1, Association &. District Lester Mowty Uoyd Lee Banning District/Division 7, Association & District District/Division 4, Association & District Lawrence P. Schrader David Rousseau District/Division 10, Association &. District District/Division 6, Association & District Council Vice Chairman Dan C. McKinney Jr.

James M. Accomazzo District/Division 7, Association & District District/Division 3, Association & District.

Wayne A. Hart District/Division 2, Association & District (Standing, from left)

Michael K. Gantzel Wayne A. Marietta District/Division 8, Association & District District/Division 7, Association &. District Dale C Rlggins Jr.

Kevin J. Johnson District/Division 9, Association & District.

District/Division 1, Association &. District Byron G. Williams (h'ot pictured)

District/Division 4, Association & District W. Curtis Dana John E Anderson District/Division 9, Association & District District/Division 3, Association &. District Edmund Navarro Lee L Tregaskes District/Division 5, Association & District.

District/Division 9, Association & District Robert W. Warren District/Division 6, Association & District John A. Vanderwey (foreground), District/Division 2, Association & District

Statistical Review (Unaudited'992 12 1991 '986 Months Ended April 30 1981 Project General Operating revenues $ 1,183,349 $ 1,151,997 $ 848,618 $ 539,669 Electric 1,175,379 1,142,494 841936 534,357 Water and irrigation 7,970 9,503 6,682 5,312 Operating expenses 933,616 924,787 642,963 400,323 Other income (deductions)'et 36,457 (196,026) 44,335 47,756 financing costs'et 245,962 249,526 91,674 93/72 revenues (loss) 40,228 (218,342) 158,316 93/30 Additions to plant, exduding alliances for funds used during construction 173,061 238844 355,316 302,702 Utility plant, gross 5,820,751 5,705,685 4,481,667 2@43,247 Contnlxnions of electric revenues to support water operations 31,005 41,529 12,384 4/70 Taxes and tax equivalents 163,745 163,118 83,864 58,134 Employees at year end" 4,681 4,953 5,468 4,580

'items tvithin these categories have been reclassified for 1981 and 1986 lor consistent presentation tvith the current >ears.

"Does not indude temporary employees.

1991 1990 1986 1981 1Vater'btal stomge and pumping capacity (acre-feet) 2,827,393 2,851,171 2/89,725 2,891,177 Stomge capacity (six reservoirs) 2,019,102 2,019,102 2,019,102 2,063,948 Installed pumping capacity 808,291 832,069 870,623 815,229 Water in storage Jan. I (acre-feet) 840845 990,011 1,671435 1,480,332 "J4<'I')Q~ gpss Project stomge only 631,910 766,778 1,445,710 1,227,055 Runoff (acre-feet) 1,711,752" 471,282" 1,070,214" 548N3" Water in storage Dec. 31 (acre-feet) 1/40,477 '33,936 1,691,741 1,116,338 Project storage 1,288596 619,696 1,464,978 895,118 Sources of water for deliveries (acre-feet) 1,010588 861,537 993591 1,222,376 Gravity supply 926,757" 541,347" 928,053" 994,294" Groundwater supply (pumping by SRP) 74,330 313,516 50,482 337,424 Groundwater supply (pumping by others) 9501 6,674 15,056 14,690 Use of water (acre-feet) 932,427 767/55 870,658 896802 Agricultural 280,103 240,906 290,572 440,047 Urban 445,157 397,653 395,158 381,457 City domestic 329,016 291,149 284,192 265,002 Subdivision irrigation 66,127 60,406 60,877 62,908 Other nomgriculturaI irrigation (schools, parks, churches, etc.) 50,014 46,099 50,089 53547 Decreed deliveries 52,038 50,949 47,963 64,431 Contract deliveries 155,130 78,347 136,965 108,358 Seepage and evapotranspiration 78,161 93,682 122,933 228,082 Canals, total (miles) 135 135 133 131 Lined 107 104 91 70 Latemls, total (miles) 922 916 892 884 Uned and piped 841 834 792 758 Drainage and waste ditches (miles) 230 229 240 243 Lined and piped 92 91 82 63 Assessed area (acres) 238,400 238,400 238,170 238,221 Number o I assessed accounts 180991 182,053 181,894 178,796 Number o f times water delivered to users 498,440 470,840 471i845 456,129

"'l'uter statistics are computed on a calendar year basis.

Based on USGA provisional records are subject to adjustment.

12 Months Ended April 30 1992 1991 1986 f~g5,:~..-g-",

Portter [

Energy sources (ktVh)

Net nuclear generation 4,231,935,000 4,319,603,00D 149,186,614 Net steam generation'et 12,993,864,000 11,920,255,000 10,957,903,000 10,385,225,000 combustion turbine generation 4,657,000 26,160,000 45,396,000 62,336,000 Net combined cycle generation 85,965,000 444,673,000 813,684,000 4,110,000 4 Net run of river generation 643,390,000 216,841,000 451,783,000 468,174,000 Pumped storage generation 137,635,000 177,622,000 236,545,000 118,324,000 Total net 18,097,446,0DO 17,105,154,000 12,654,497,614 11,038,169,000 generation'urchased 1,417,919,068 1,538,829,970 3,207,390,046 2,098,800,868 Mc Interchange received 83,103,204 140,058,289 106,666,000 145,837,000 Wheeling received 229,197,108 226,753,768 11,912,340 9,793,314 Total energy sources 19,827,665,380 19,010,796,027 15,980,466,200 12,292,600,000 Energy disposition (kWh)

Residential 6,216,045,662 6,210,629,730 4,889,987,668 3,674,758,035 Commercial & Industrial 7,799,730,361 7,621,306,068 5,931,148,985 4,430,656,608 Irrigation pumping 113,013,697 143,902,088 248,577,084 243,257,760 Street & highway lighting 117,619,607 111,496,635 88,327,881 43,203,039 Public authorities 336,570,420 316,957,058 257,127,813 351,055,276 Interdepartmental 95,669,413 188,805,110 72,022,538 80,008,412 Sales for resale 3,593,342,026 2,834,223,162 3,016,789,686 3,205,534,954 Total sales ] 8,271,991,186 17,427,319,851 14,503,981,655 12,028,474,084 interchange delivered 126,066,380 173,794,225 93,772,000 245,224,000

'tVheeling delivered 221,971,185 219,492,091 10,891,950 9,024,579 Energy losses 1,0] 1,017,629 949,024,860 1,033,899,395 840,845,337 jl Energy for pumped storage operation 196,619,000 241,165,000 33?,921,000 169,032,000 Total disposition of energy 19,82?,665,380 19,010,796,027 15,980,466,000 13,292,600,000 Peak overall power system (ktV) 3,570,000 3,729,000 2,971,000 2,386,000 Date and time (MFQ Aug. 26, 4 p.m. July 19, 4 p.m. July 9, 5 p.m. Aug, ll, 6 p.m. Pggq>~~.g~

Peak Project customers (kW) 3,176,000 3,373,000 2,658,000 2,057,000 Date and time (MST) Aug. 8, 6 p.m. June 26, 5 p.m. Aug.,29, 5 p.m. July 28, 5 p.m.

s Generating capability (kW)*'uclear

~>-~Wgv (l +gWg0I 641,000 641,000 2,386,000 2,386,000 2,201,115 1,919,250 Steam'ombustion turbines 397,000 397,000 393,000 393,000 Combined cycle 292,000 292,000 288,0DO 288,000 Hydroelectric conventional 94,000 94,000 96,400 95,000 Hydroelectric pumped storage 148,000 148,000 137,000 137,000 Total operating 3,958,000 3,958,000 3,329,245 2,832,000 capability'ontract purchase at peak 514,000 512,000 410,547 329,547 Total 4,472,000 4,470,000 3,739,792 3,161,797 resources'lectric customers year<nd***

Residential 498,06? 487,841 414,410 305,870 Commercial & Industrial 42,143 41,535 34,973 22,771 Other 8,883 8,938 8,376 1,610 Total 549,093 538,314 457,489 330,251 Average annual kWh use/residential customer" 12,628 12,954 12,175 12,310 Average annual residential revenues/kWh (cents) 8.54 847 7.56 5.78

'Includes SRP panicipation injointly otvned projects.

"Unit capabilities during summer peak.

'*'Energy disposition klVh through total sales, electn'c customers yearwnd, average klVh use and average annual revenue are estimated ligures

Comhineil Balance Sheets Salt River Project as of April 30, 1992 and 1991 (thousands of dollars) 1992 1991

~k~ 4t)j)gtf I+tt Assets 8+'b$

UTILITY PLANT, at historical cost (Notes 2, 5 and 6):

Plant in service:

.y r gggag~ljig4 Electric $ 4,915,800 $ 4,797,885 Irrigation 135,036 131,398 Common 382,530 359,779 Total plant in service 5,433,366 5,289,062 Less-Accumulated depreciation on plant in service (1,525,512) (1,398,894) 3,907,854 3,890,168 Plant held for future use (Note d) 92,824 90,727 Construction work in progress 244,760 267,459 Nuclear fuel, net 49,801 58,437 4,295,239 4,306,791 OTHER PROPERTY AND INVESTitIENTS:

Non.utility property and other investments 69,878 55,168 Segregated funds, net of current portion (Notes 2 attd 6) 123,939 123,232 193,817 178,400 CURRENT ASSETS:

Cash and cash equivalents, at cost (Note 2) 130,676 168,448 Investments 170,838 132,631 Current portion segregated funds (vote 6) 90,264 88,055 Receivables, including unbilled revenue, net (sate 2) 89,485 84,658 Fuel stocks, at last-in, firstwut cost 68,142 63,076 Materials and supplies, at average cost 92,858 89,850 Other current assets 16,002 11,099 658,265 637,817 DEFERRED CHARGES AND OTHER ASSETS (Notes 2. r and 6) 241,632 222,036

$ 5,388,953 $ 5,345,044 77te accompanying notes are an integral part of these combined balance sheets.

1992 1991 Capitalization and Liabilities LONG-TERM DEBT (Note 6):

Electric system revenue bonds, net of current portion $ 3,292,056 $ 3,278,324 Commercial paper and other 3?5,000 380,580 3,667,056 3,658,904 ACCUMULATED NET REVENUES:

Balance, beginning of year 1,223,154 1,441,497 Net revenues (loss) for the year 40,228 (218,342)

Balance, end of year 1,263,382 1,223,155 TOTAL CAPITALIZATION 4,930,438 4,882,059 CURRENT LIABILITIES:

Current portion, long. term debt (Note 6) 55,565 41,815 ACCOuntS payable (Note 2) 102,885 97,776 Accrued taxes and tax equivalents 72,528 70,912 Accrued interest 74,107 75,598 Customers'eposits 37,113 32,596 Other current liabilities 33,549 37,714 Accrued reorganization costs (Note to) 1,329 23,000 377,076 379,411 DEFERRED CREDITS AND OTHER NON.CURRENT LIABILITIES(Notes 2, 8 and 9) 81,439 83,574 COMMITMENTS AND CONTINGENCIES (Notes 6, 8 and 9)

$ 5,388,953 $ 5,345,044 The accompanying notes are an integral part of these combined balance sheets.

Combined Statements of Net Rwennes egAf '>g4'i Salt River Project for the years ended April 30, 1992 and 1991 (thousands of dollars) 1992 1991 OPERATING REVENUES (Notes t aod 2):

Electric $ 1,175,379 $ 1,142,494 Water and irrigation 7,970 9,503 Total operating revenues 1,183,349 1,151,997 OPERATING EXPENSES:

~+-"o@4~PI Power purchased 55,445 38,428 Fuel used in electric generation 227,625 226,072 Other operating expenses 217,566 235,869 Maintenance 98,746 102,262 Depreciation and amortization 170,489 159,038 Taxes and tax equivalents 163,745 163,118 Total operating expenses 933,616 924,787 Net operating revenues 249,733 227,210 OTHER INCOME:

Interest income 30,426 37,612 Other income (deductions), net 31 (1,954)

Total other income 30,457 35,658 Net revenues before financing costs 280,190 262,868 FINANCING COSTS:

Interest on bonds 226,235 225,044 Amortization of bond discount issue and refinancing expenses

~ 8,357 7,459 Interest on other obligations 17,592 22,563 Less-Allowance for funds used during construction (6,222) (5,540)

Net financing costs 245,962 249,526 NET REVENUES BEFORE UNUSUAL ITEMS 34,228 13,342 UNUSUAL ITEMS:

Writedown of Coronado Unit 3 (Note 4) (203,684)

Expenses of corporate reorganization program tNote to) 6,000 (28,000)

NET REVENUES (LOSS) $ 40,228 $ (218,342)

~ <~>~q)44 ~ The accompanying notes are an integral part oi these combined statements.

34

Combined Statements of Cash Flows Salt River Project for thc years cndcd April 30, 1992 and 1991 (thousands of dollars) 1992 1991 NET CASH FLOWS FROM OPERATING ACTIVITIES:

Net revenues (loss) $ 40,228 $ (218,342)

Non<ash items included in income:

Depreciation and amortization 170,489 159,038 Amortization of bond related expenses 8,357 7,459 Gain on sale of property (421) (683)

Write down of Coronado Unit 3 203,684 Decrease (increase) in Fuel stocks and materials and supplies (8,074) (14,958)

Other assets (49,738) (82,528)

Increase (decrease) in-Accounts payable 5,109 29,112 Accrued taxes and tax equivalents 1,616 13,250 Accrued interest (1,491) (925)

Accrued reorganization costs (21,671) 17,765 Other liabilities, net (605) 31,190 Net cash flow provided from operating activities 143,799 144,062 CASH FLOtVS FROM iNVESTING ACTIVITIES:

Additions to utility plant, net of AFUDC (173,061) (238,844)

Allowance for funds used during construction (6,222) (5,'540)

Additions to non-utility plant (14,710) (18,895)

Increase in long-term investments (13,000)

Proceeds from sale of plant 1,323 779 Net cash used by investing activities (205,6?0) (262,500)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds of bond issues, net of offering costs 333,528 209,556 Repayments of other long-term debt, net (1,238) (1,959)

Repayment of principal on bonds (41,?84) (25,445)

Increase in segregated funds (2,916) (8,127)

Deposits into escrow for bond defeasance (281,757) (132,519)

Contributions in aid of construction 18,266 18,063 Net cash provided by financing activities 24,099 59,569 NET DECREASE IN CASH AND CASH EQUIVALENTS (3?,772) (58,869)

BALANCE AT BEGINNING OF YEAR IN CASH AND CASH EQUIVALENTS 168,448 227,317 BALANCE AT END OF YEAR IN CASH AND CASH EQUIVALENTS $ 130,676 $ 168,448 SUPPLEMENTAL INFORMATION:

CASH PAID FOR INTEREST $ 242,336 $ 246,682 The accompanying notes are an integral parr o/ these combined statements.

As of April 30, 1992 1 Basis of Presentation: used in 1992 and 1991, respectively.

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

The Salt River Project Agricultural Improvement and Power The depreciation rate in effect for fiscal year 1991-1992 resulted District (the District) is an agricultural improvement district, in provisions approximating an average rate of 3.01 percent on organized under the laws of the State of Arizona, which provides the average cost of depreciable electric plant, an average rate of electric service in a 2,900 square-mile service territory in parts 2 42 percent on the average cost of depreciable irrigation plant of Maricopa, Gila and Pinal Counties in Arizona. The District and an average rate of 9.49 percent on the average cost of provides electric service to mining customers and wholesale depreciable common plant.

power in an additional area of 2,400 square miles in Pinal and The cost of property that is replaced, removed or abandoned, Gila Counties.

together with removal costs, less salvage, is charged to The Salt River Valley Water Users'ssociation (the accumulated depreciation.

Association), predecessor of the District, was incorporated in SRP charges to maintenance expense the cost of labor, Arizona in Februaty 1903 as a result of the passage of the National materials and other expenses incurred in the repair and Reclamation Act. In 1937, the Association transferred all of its replacement of minor items of property.

rights, title and interest in the Salt River Project to the District.

In 1949, the original agreement was amended so that the District Bond Expense would assume construction, operation and maintenance Bond discount, issue and refinancing expenses are being responsibilities for both the electric and irrigation systems. The amortized over the terms of the related bond issues. Losses District then delegated to the Association operation and associated with bond defeasance transactions are deferred and maintenance of the irrigation and water supply system of the amortized over the lives of the defeased debt in accordance with project. the rate-making policies of the Board. Induded in deferred charges and other assets are unamortized losses associated with bond Principles of Combination defeasances of $ 126,304,000 and S103,753,000 as of April 30, The combined financial statements indude the consolidated 1992 and 1991, respectively.

accounts of the District and its subsidiaries, and the Association, together referred to as Salt River Project (SRP). The District's Nuclear Fuel subsidiaries are Papago Park Center, Inc. (PPCI), a real estate Under the provisions of the Nudear Waste Act of 1982, the management company, and Salt River Generating Company which District is charged one mill per kwh on its share of net energy is currently inactive. All significant intercompany transactions Iiave ~

generation at the Palo Verde Nudear Generating Station (PVNGS) been eliminated. for the cost to dispose of the fuel.

The District amortizes the cost of nuclear fuel, including its Regulation disposal, to fuel expense using the unit of production method.

Under Arizona law, the District's Board of Directors (the Board) serves as its regulatory and rate setting agency. Decommissioning The total estimated cost to decommission the District's share EIectric Rates of PVNGS is $ 133 million in 1989 dollars. Decommissioning funds Under Arizona law, the Board has the exdusive authority to of approximately $ 16,829,000, stated at cost, as of April 30, 1992 establish electric rates. SRP is required to follow certain are maintained in an external trust. This amount is dassified as procedures, including public notice requirements and holding a segregated funds in the accompanying combined balance sheet.

special Board meeting, before implementing changes in standard The corresponding liability is classified. in other noncurrent electric rate schedules. In January 1992, a 2.9 percent standard liabilities.

rate increase became effective.

Fuel Costs 2 Si nificant Accountin Policies: The District maintains a fuel adjustment clause balancing Basis of Accounting account to adjust operating revenues for variations between the The accompanying combined financial statements are recorded cost of fuel and purchased power and revenue presented in accordance with generally accepted accounting designated for recovery of such costs. At April 30, 1992 and 1991, principles promulgated by the Financial Accounting Standards over-recovered fuel costs totalled S35,783,000 and $ 36,326,000, Board and reflect the rate-making policies of the Board. respectively, and are recorded as accounts payable.

Utility Plant, Depreciation and Maintenance Taxes 'ncome Utility plant is stated at the historical cost of construction. The District is exempt from federal and state income taxes.

Construction costs indude labor, materials, services purchased Cash Equivalents under contract, and allocations of indirect charges for engineering, The District treats short-term temporary cash investments with supervision, transportation and administrative expenses. maturities of three months or less as cash equivalents.

An allowance for funds used to finance construction work in Recognition of Unbilled Revenues progress (AFUDC) is capitalized as a part of the electric and SRP estimates and accrues revenue for electricity delivered general plant. This allowance is deducted from net financing costs to customers that have not yet been billed.

in the combined statements of net revenues and added to utility plant. AFUDC rates of 5.28 percent and 5.2'4 percent were

Reclassifications 6 Lon -Term Debt:

Certain 1991 amounts have been reclassified to conform to Long-term debt consists of the following:

the current year presentation.

Interest 3 Possession and Use of Utility Plant: Rate 1992 1991 The United States of America retains a paramount right or (thousands of dollars) claim in SRP which arises from the original construction and Revenue Bonds opemtion of certain of SRP's facilities as a federal reclamation (mature through 2031) 4.8-9.3% $ 3,451,296 $ 3,419,677 project. SRP's right to the possession and use of, and to all Unamortized Bond Discount (108,036 99,557 revenues produced by these facilities is evidenced by contractual Total Revenue Bonds arrangements with the United States.

Outstanding 3,343,260 3,320,120 4 Coronado Unit 3: Commercial Paper 2.6-3.5% 375,000 375,000 Other 6.9% 4,361 5,599 In 1991, management re-examined its long-mnge resource Total Long-term Debt $ 3,722,621 $ 3,700,719 plans as a result of the increased availability of PVNGS, continued excess capacity in the Southwest and the reduced load growth in its service territory. As a result, management determined that The annual maturities of long-term debt (excluding commercial additional constructed baseload capacity should not be required paper and unamortized bond discount) as of April 30, 1992, due until fiscal year 2010. Due to technological, environmental and in the fiscal years ending April 30, are as follows:

economic concerns regarding the future construction of Unit 3, SRP wrote down its investment to its estimated net realizable value (thousands ot dollars) in fiscal year 1990-91. SRP currently is attempting to find a buyer 1993 S 55,565 for the assets. Management continues to review the value of the 1994 53,716 assets on hand and is confident that they are recorded at a 1995 58,339 realizable value at April 30, 1992.

1996 59,899 (5) Interests in Jointly Owned Electric 1997 68,297 Utility Plants: Thereafter 3,159,841

$ 3,455,657 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 Revenue Bonds must provide for the cost of its ownership share. The District's Revenue bonds are secured by a pledge of, and a lien on, share of expenses of the jointly owned plants is included in the revenues of the electric system after deducting operating operating expenses in the combined statements of net revenues. expenses, as defined in the bond resolution. Under the terms The following table reflects the District's ownership interest of the bond resolution, the District is required to maintain a debt in jointly owned electric utility plants as of April 30, 1992: service fund for the payment of future principal and interest.

Included in segregated funds is approximately $ 189,541,000 and Plant $ 188,186,000 of debt service related funds as of April 30, 1992 Ownership In Accumulated and 1991, respectively.

Plant Name Share Service Depreciation CWIP The District has $ 246,313,000 of mini-revenue bonds (thousands ot dolhrs) outstanding which can be redeemed at the option of the Four Corners (NM) bondholder under certain circumstances. SRP has a $ 50,000,000 (Units 4&5) 10.00% $ 88,248 S (31,455) S 8,068 'evolving credit agreement available to refinance these bonds in Mohave (NV) 10.00 48,034 (23,031) 3,186 the event significant redemption requests occur. Based on Navajo (AZ) 21.70 225,894 (108,109) 2,961 historical redemptions made on these bonds, management is Hayden (CO) confident that this credit agreement is sufficient.

(Unit 2) 50.00 68,342 (33,838) 478 The debt service coverage ratio, as defined in the bond Craig (CO) resolution, is used by bond mting agencies to help evaluate the (Units 182) 29.00 226,403 (82,166) 2,017 financial viability of the District.'For the years ended April 30, Palo Verde Nuclear 1992 and 1991, debt service coverage was 2.11 and 198, Generating respectively.

Station AZ) 17.49 1,594,783 246,628) 43,562 Interest and amortization of discount on the various issues

'2,251,704 $ 525,227) $ 60,272 results in an effective rate of approximately 708 percent over the remaining terms of the bonds.

At April 30, 1992, the District has authority to issue additional The District acts as the operating agent for the participants electric system revenue bonds totalling $ 124,218,000 principal in the Navajo Genemting Station. amount and electric system refunding revenue bonds totalling SRP retains an option to repurchase up to an additional 5.7 $ 1,184,735,000 principal amount.

percent interest in PVNGS which was previously sold to another In fiscal 1992 and 1991, the District defeased $ 281,757,000 participant. The repurcliase price would be based on reproduction and $ 123,080,000, respectively, of electric system revenue bonds cost new, less depreciation, and can occur no sooner than 2001. resulting in lower future debt service requirements as well as a

loss of $ 26,647000 and $ 12,901,000, respectively. Consistent with The following schedule reconciles the funded status of the the rate-making policies of the Board, the losses have Plan with amounts reported in SRP's combined financial been deferred and are being amortized over the life of the statements as of April 30:

defeased debt.

1992 1991 Commercial Paper (ihousands of dollars)

The District has issued $ 375 million of tax~empt commercial paper at an average interest rate to the District of 3.00 percent. Plan assets at fair value $ 349,063 $ 318,045 The commercial paper matures no more than 270 days from the Actuarial present value of date of issuance and in no event after July 12, 1993. The projected benefit obligation:,

commercial paper has been dassified as long term in connection Vested benefit obligation (213,520) (193,501) with refinancing terms under a revolving credit agreement (the Nonvested benefit obligation ( 7,703) ( 6,706)

Agreement) with a consortium of banks which supports the Accumulated benefit commercial paper. Under the terms of the Agreement, the District obligation (221,223) (200,207) may borrow up to $ 375 million through October 29, 1993.

Excess of projected benefit While the revolving credit agreement contains covenants which could prohibit borrowing under certain conditions, obligation over accumulated benefit obligation ( 59,396) (50,146) management is confident that financing will be available. The District has never borrowed under this Agreement and does not Projected benefit obligation (280,619) (250,353) expect to do so in the future. Alternative sources of funds to Plan assets in excess of support the commercial paper program indude existing funds projected benelit obligation 68,444 67,692 on hand or the issuance of alternative debt, such as revenue Unrecognized net assets (43,359) (47,695) bonds.

The commercial paper is an unsecured obligation of the Unrecognized net gain (1,845) (1,442)

District. Prior service cost not yet General Obligation Bonds recognized in net periodic In 1984, the District refunded its then outstanding general pension cost 5,707 6,170 obligation bonds. Although the refunding constituted an Prepaid Pension Cost $ 28,947 $ 24,725 insubstance defeasance of the prior lien on revenues which secured the bonds, the geneml obligation bonds continue to be Defined Contribution Plans general obligations of the District, secured by a lien upon the SRP maintains two defined contribution plans, the Salaried real property of the District, a guarantee by the Association, and Employees'hrift Plan and the Hourly 401(k) Plan. Both plans the District's taxing authority. As of April 30, 1992 the amount receive employee contributions and partial employer matching of defeased general obligation bonds outstanding was $ 68,070,000. contributions. Employees are eligible for employer matching

? Em loyee Benefit Plans: contributions upon completion of one year of service. SRP contributions to these plans were $ 2,977,000 and $ 2,831,000 Defined Benefit Plan in the fiscal years ended April 30, 1992 and 1991, respectively.

SRP has a defined benefit phn (the Plan) covering substantially all employees. The Phn is funded entirely from SRP contributions Other Postretirement Benefits SRP provides certain health care and life insurance benefits and the income earned on invested assets. No contributions were for retired employees. Employees are eligible for coverage if required to be made to the Plan in fiscal years 1992 and 1991.

Phn assets consist primarily of stocks, U.S. obligations, corporate they retire at age 65 or older with at least five years of vesting service, or any time after age 55 with a minimum of ten years bonds, real estate funds and a guaranteed investment contract.

of vested service. These benefits are subject to deductibles, Net periodic pension cost (income) as of the dates of the latest actuarial report (April 30) is made up of the components listed copayment provisions and other limitations. SRP may amend or change the plan periodically. Currently, the cost of these below and was determined using the projected unit credit actuarial benefits is recognized as expense as the premiums and/or cost method:

deposits to the trustee are paid. The total cost of postretirement 1992 1991 benefits expensed was $ 3,560,000 and $ 3,860,000 for 1992 (thousands ot dolhrs) and 1991, respectively.

A new standard on accounting for postretirement benefits Service cost $ 8,691 $ 8,944 requires that the expected cost of these benefits must be Interest cost 21,890 19,686 charged to expense during the years that the employees render Actual return on assets (45,493) (28,654) service. The new standard must be implemented no later than Net amortization and deferral 10,691 (5,193 fiscal year 1993-94, and may be adopted ratably over future Net periodic pension income $ 4,221 $ 5,217 periods or through a cumulative catch-up adjustment.

Management has engaged an actuary who has made a The discount rate used in determining the actuarial present preliminary review using 1991 data. Their estimates are subject value of the projected benefit obligation was 8.75 percent for to significant change based on a number of factors, including 1992 and 9.0 percent for 1991. The rate of increase used to possible changes in the assumed health care cost trend rate determine future compensation levels was 5.5 percent for fiscal used in the calculations. Based on their preliminary review, years 1992 and 1991. The expected long-term rate of return the postretirement benefit obligation at April 30, 1992, on assets is 9.75 percent for both 1992 and 1991. measured in accordance with the new standard, is estimated 1 to range from $ 100 million to $ 145 million.

SRP has not decided when it will adopt the new standard, (thousands ol dollars) or if it will adopt the new accounting method ratably or by recording a cumulative catch-up adjustment in the year of 1993 $ 31,660 adoption. However, management expects that the annual 1994 47,916 postretirement benefit expense computed in accordance with 1995 57,148 the new standard will be significantly greater than the annual 1996 57,524 cash payments. 1997 57,736 Thereafter 898,887 8 Commitments: $ 1,150,871 Construction Program Construction expenditures, including contingency Fuel Supply allowances, planned for fiscal years 1993 through 1998 are At April 30, 1992, minimum long-term commitments of shown below:

approximately $ 2.2 billion exist under fuel supply contracts.

During 1989, the District paid approximately $ 59 million to (millions ol dollars) terminate a contract with Kaiser Coal Company. In, accordance District Assoc. Total with the rate-making policies of the Board, the remaining 1993 $ 211 $ 18 $ 229 termination costs of $ 46,232,000 and $ 50,195,000 at April 30, 1994 240 18 258 1992 and 1991, respectively, are induded in deferred charges and 1995 287 19 306 other assets, and are being amortized to fuel expense over the 1996 306 18 324 remaining life of the original contract.

1997 310 17 327 Papago Park Center 1998 372 16 388 SRP is currently developing a 350 acre (net), mixed-use commercial park called Papago Park Center in Tempe and These expenditures will be financed primarily by funds Phoenix, Arizona. In connection with the infrastructure currently on hand, future net revenues and the sale of revenue development, the District and the City of Tempe have entered bonds. into an agreement whereby the District will pay an annual In October 1991, the United States Environmental assessment of approximately $ 1.75 million per year for 19 years Protection Agency published a regulation consistent with a to the City of Tempe to pay for its share of street and infrastructure memorandum of understanding that had been reached improvements and right of way acquisitions. The obligation of between the District and several environmental organizations the District to make assessment payments is an unsecured concerning impairment of visibility in the Grand Canyon obligation payable from District general funds. The present value National Park. The regulation requires the installation of of this obligation has been recorded as a noncurrent liability.

certain environmental equipment at the Navajo Generating The District's wholly owned subsidiary, Papago Park Center, Station. Inc., will serve as the real estate management company in Installation will require significant additional expenditures, accordance with the terms of a 99 year lease on the property.

which will be passed on to customers through increased electric rates. The District's six-year construction program 9 Contin encies:

includes the cost of environmental controls at Navajo. Nuclear Insurance Long-Term Power Contracts Under existing law, public liability daims that could arise from The District has entered into four long-term power purchase a single nuclear incident are limited to $ 7.8 billion. PVNGS agreements to supply a portion of its projected load participants currently insure for this potential liability through commercial insurance carriers to the maximum amount available requirements. The first two contracts each provide the District with 100 megawatts (MW) of firm power through 2011. ($ 200 million) with the balance covered by an industrywide The remaining two contracts, both with a participant in retrospective assessment program which is required by the the Navajo Generating Station (NGS), give the District an Nudear Regulatory Commission. The maximum assessment per additional percentage of the output of the station. The reactor per nudear incident under the retrospective program is

$ 63 million subject to a 5 percent surcharge which could be minimum payments shown below assume that the contract will commence May I, 1993 and expire September 30, 2011. applicable in certain circumstances, but not more than $ 10 million Deliveries from May I, 1993 through September 30, 1993 will per reactor may be charged in any one year for each incident.

Based on the District's ownership share in PVNGS, the be 50 MW. Commencing with October I, 1993 minimum maximuln potential assessment would be $ 34.7 million induding payments under these contracts, which have a maximum the 5 percent surcharge, but would be limited to $ 5.2 million annual capacity factor of 8.7 percent, are based on 350 MW of capacity. Minimum payments under these contracts, of per incident in any one year.

approximately $ 25.2 million per year, are unconditionally Environmental payable regardless of the ability of the District to obtain SRP is subject to numerous legislative, administrative and the power. regulatory requirements relative to air quality, water quality, Minimum payments under purchased power contracts are hazardous waste disposal, and other environmental matters. Such as follows for the fiscal years ending April 30: requirements have and will continue to result in increased costs associated with the operating of existing facilities, construction of new facilities, and dean up of existing facilities. The potential costs to SRP cannot reasonably be determined at this time,

however, management does not anticipate that they will have a resolution of these matters will not have a significant adverse materially adverse impact on SRP's financial condition. In addition, effect on SRP's financial position or results of operations.

management expects to recover such costs from the ratepayers.

Indian Matters 10 SRP's Reduction in Force:

From time to time, SRP is involved in litigation and disputes In fiscal year 1991, the Board approved a cost reduction with various Indian tnbes on issues concerning royalty payments, program that included elimination of approximately 450 positions.

taxes and water rights, among others. Resolution of these matters The related estimated severance benefit expense was recorded may result in increased operating expenses which would be as an unusual item in the accompanying 1991 combined statement passed on to customers. of net revenues. In 1992, the estimated sevemnce benefit accrual was reevaluated and the excess accrual was reversed as an Other Litigation unusual item in the accompanying 1992 combined statement of In the normal course of business, SRP is a defendant in various net revenues.

litigation matters. In management's opinion, the ultimate Report of Independent Public Accountants 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 PRCUECI's of April 30, 1992, and 1991, and the rehted combined statements of net revenues and cash flows for the years then ended. These financial statements are the responsibility of the Project'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 includes examining, on 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, 1992, and 1991, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.

Phoenix, Arizona, Arthur Andersen & Co.

June 10, 1992.

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