ML18192A384

Salt River Project, Annual Report 1976

ML18192A384
Person / Time
Site:	Palo Verde
Issue date:	12/31/1976
From:	Salt River Project
To:	Office of Nuclear Reactor Regulation
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Download: ML18192A384 (28)

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~ Fit,E RECORDS FACILITYBRANCH SALT RIVER PROJECT ANNUALREPORT 1976

Page Highlights &, background. 1 Letter from management. 2 Review of the year 3 Financial section ll Statistical review 20 and 21 Board and Council members. 23 and 24 Project service area, watershed-map ..... inside back cover

highlights 8 background OPERATIONS 1976 1975 Assessed water accounts. 166,048 163,869 Water runoff (acre-feet). 817,679* 870,203 Water storage, year-end (acre-feet) .................. 976,725 1,039,004 Water diverted into canals and pumped (acre-feet). 1,190,720 1,194,212 Number of power customers ........................... 257,941 248,926 Average annual use per residential customer (kwh) . 12,597 12,843 Average annual kwh cost per residential customer (cents). 3.51 3.29 Energy generated, pnrcgaaedt Integrc attend, and wheeled (kwh). 9,260,530,000 9,046,629,000 load for Project customers (kw) .........'.<.. 1,732,000 l'eak 1,634,000 REVENUES Electric......

Water and l J

C'..........................

irrigation...........;:............................

$ 220,961~215 4,307,032

$ 211,016,136 2,821,516 Total operating revenQe)(............................ $ 225,268,247 $ 213,837,652 Taxes and tax equivalerits>.. $ 30,869,31 i $ 26,278,119 Total operating expenses.

Net revenues...............g.

Plant investment, year-end, gross ....................

182,662,201 11,287,259 1,229,617,294

'1 180,048,472 0,413,662 984,756,114 Long-term debt 1,186,565,170 796,569,943 "Based on U.S.G.S~provisional records and subject to adjustment .

BACKGROUND The Salt~River Project, the first multi-purpose project authorized under the Federal Reclamation Act of 1902, is comprised of the Salt River Project Agricultural Improvement and Power District and the Salt River Valley Water"Users'ssociation.

The District is an agricultural improvement district organized'under the laws of the State of Arizona. It operates the Salt River Project,~under contracts with the United States of America, and provides electric service to residential, commercial, industrial and agricultural power users in a 2,900 square-mile service territory in parts of Maricopa, Gila and Final counties.

The Association, a private Arizona corporation, encourages and participates in the management of the 13,000 square-mile watershed of the'Salt and Verde rivers, in cooperation with the U.S. Forest Service. The Association administers water rights of the Project's 250,000 acre area, and operates and maintains the irrigation transmission and distribution system which provides Project w'ater for agricultural, municipal and industrial uses.

Following the longstanding reclamation principle, the Project uses electric revenues to support its water and irrigation operations, thereby keeping water delivery charges at reasonable levels. At the same time, tlte Project maintains competitive rates for the electric service it provides.

management letter Salt River Project entered the final quarter of the 20th Century on a solid foundation. The energy mix used to produce electricity continued to change in ways designed to keep power production costs to a minimum and promote energy independence.

This was accomplished through completion of two new coal-fired generating units, continued construction of four more, and the start of construction of the Project's first nuclear power source.

At the same time the Project's program to promote load management appeared to produce beneficial results. This was reflected by the fact that the 1976 weather-adjusted peak demand was below the forecasted level. Several large industrial customers shifted their energy use to off-peak periods, taking advantage of a new time-of-day rate instituted by the Project. Many residential customers also reduced their usage at time of peak. Average annual use by residential customers declined by 246 kilowatt-hours (kwh).

SRP municipal revenue bonds were accorded higher ratings, reflecting the Project's strong financial position. At the beginning of the year Standard 8t, Poor's Corporation increased the Project's rating from "A" to "A+" and Moody's Investors Service, Inc., raised their rating from "A-1" to "Aa." The ratings helped reduce the interest rates SRP will pay on the $ 405 million of revenue bonds sold during 1976.

The year's operating revenues exceeded $ 225 million, operating expenses totaled more than $ 182 million, and net revenues topped $ 11 million.

Although residential customers'verage annual electric usage decreased slightly, electric bills were considerably below originally projected levels due to negative fuel cost adjustment factors in effect throughout all of 1976.

In keeping with the reclamation principle, a basic operating tenet followed by the Project since its inception in 1903, a relatively small percentage of power revenues was.applied to defray costs of operating the water system. Despite this, water charges had to be increased an average of 42 percent to keep up with rising operating costs.

There were no electric rates increases during the year. However, in December the board authorized a rate increase to be effective in February 1977. The increase is designed to produce additional revenues of approximately $ 48 million in 1977 to meet increasing operating costs and to aid financing of the very substantial future construction programs.

The composition of the SRP service area continued to change. At year-end almost 49 percent of land within the Project was dedicated to urban use, while land used for agriculture decreased to slightly more than 51 percent.

Responding to this change, the state legislature enacted a law which added four new members to the Power District's board. Two of those were appointed in 1976 and will be up for reelection in 1978; the other two will be elected in 1980. All four new members will be elected at large on a one landowner, one vote basis, ensuring that the decision making of the District's board will continue to reflect the needs of the growing urban population.

A second law passed in 1976 codified steps the Project must take when changing electric rates.

Both laws were supported by Project management.

Many problems face SRP during the years ahead. They include the availability of fuel and the huge quantities of capital needed to finance facilities to m'eet the needs of our customers. To meet these future challenges SRP is involved in extensive research and planning efforts.

In 1976 those efforts were coupled with the solid financial and operational background the company developed during the first threeguarters of the century. Together they will enable SRP to adapt to its changing environment so that it can continue to deliver water at reasonable charges and serve its electric customers with a reliable supply of competitively priced power. I 1

si left to right:

A. J. Pfister, wlto became General hfanagcr July l, 1976 Karl F. hbcl, Prcsidcnt John R. Lassen, Vice President (p,

'P /i

ment, in 1982 Colorado-Ute will purchase an addi-tional 30 percent of the unit capability from SRP.

The Project and Colorado-Ute then will share the unit evenly.

Coal leads as 19'76 energy source During 1976, 60 percent of the energy delivered to Project electric customers was generated by coal-fired generating units, compared to about 48 percent in 1975. The increase reflects the Project's plan to use coal because of its low cost in comparison to oil and its availability in the Southwest.

The portion of SRP energy produced by oil decreased to 12 percent in 1976, compared to 18 percent in 1975. The Project's use of oil to produ'ce electricity declined from 2.84 million barrels during 1975 to 2.07 million barrels in 1976. Fuel oil is used in thermoelectric generators in the Valley primarily to meet intermediate and peak load requirements.

Unexpected availability of natural gas resulted in an increase in the percentage of power produced using that fuel; during 1976 seven percent of the Project's power was produced by natural gas, com-pared to four percent in 1975. Natural gas remains the least expensive fuel for SRP's generators in the Salt River Valley. However, its availability is limited and oil is the predominant fuel for those generators.

The remaining energy for both years came from The year 1976 was characterized by moderate hydroelectric production.and purchases.

growth. The number of power customers increased by By filling the majority.'f customers'resent 9,014, bringing the total at year-end to 257,941. energy needs with coal-fired power and relying on They used a total of 8.1 billion kilowatt-hours (kwh) nuclear energy for a substantial portion of power in compared to 8 billion kwh in 1975. Demand on the the future, the Project is striving to keep energy costs Project's electrical system reached a new peak in in line and is working toward national energy July 1,732,000 kilowatts (kw). Average annual use independence.

by residential customers declined from 12,843 kwh in 1975 to 12,597 kwh in 1976. The average cost per kwh for those customers rose from 3.29 cents in 1975 to 3.51 cents in 1976. PROJECT FUEL SOURCES Actual 1976, Estimated 1977-1982 Good planning helped SRP keep pace with in-Misc.

creases in customers and their electrical needs as two Year I Hydro Gas Oil Coal Nuclear Purchases coal-fired units were added to SRP's generating capability in 1976.

These were the Navajo Power Project's third 1976 15% 7% 12% 60% 6%

750,000 kw unit and a 261,000 kw unit at Hayden 1977 12 1 17 62 8 Generating Station in northwest Colorado. 1978, 12 17 68 3 SRP is construction manager and operating agent 1979 12 7 78 3 for the Navajo Generating Station, which has six 0 1980 12 2 83 3 participants. SRP owns 21.7 percent of the station, 1981 11 2 84 3 located near Page. 1982 10 2 77 8 3 SRP owns 80 percent of Hayden Generating Station's second unit. Colorado-'Ute Electric Associa- 11ncludes hydro purchases tion, operator of the station, owns the remainder.

However, under the terms of the participation agree-

<~Ifnfl KKEKQQ /PE~ New dispatching system shows least expensive Q'7p gP power sources Finding the least expensive source of energy and dispatching it to customers were simplified in 1976 with the installation of a new computerized system to aid power operations.

The system serves two main functions. The first part of the system, called automatic generation control (AGC), helps dispatchers determine available power and its cost, and control the amount of power pF being produced at Valley generating stations.

The second part, called supervisory control and data acquisition (SCADA), makes it possible for P

p dispatchers in the Power Operations building to open and close substation circuit breakers by remote control. This means more rapid restoration of electric service, should interruptions occur.

Installation of the new system was a move to improve service to customers in 1976 and future years.

g Messages support load management, safety programs w(

The main thrust of messages to customers in 1976 A tv computerized system wasinstalled in 1976 to improve service to SRP electric customers. Onc function of this multi faceted system is to was toward load management shifting power use help popover dispatchers determine the least expensive sources of elec- from times of peak demand. Characteristically, this tricity avai!able at any time. peak period has been from 3 to 8 p.m. during summer months. The Project's "Power Saver Time" campaign encouraged customers to shift power use to before 3 Fuel cost adjustments p.m. or after 8 p.m. Messages to customers also reduce power bills encouraged conservation with the slogan, "Save a Little for Tomorrow."

The Project's continuing marketing programs also No rate increases were necessary in 1976, and focused on load management. These included:

negative fuel cost adjustments in 1976 reduced the the Remarkable Energy Value Home Program, a effect of the previous year's 25 percent increase to joint effort of the electric utility and home building 13-15 percent. industries to increase the energy efficiency of new Reasons for the negative fuel cost adjustments homes; were: industrial development programs, designed to Increased reliance on coal-fired generation; attract high load factor industries; and A warm winter and a cool spring, which reduced programs promoting heat pumps, re-insulation the quantity of costly oil required to produce and security lighting.

electricity for heating and cooling; Other messages during the year emphasized water Good runoff into reservoirs and, consequently, and power safety. The Project was instrumental in abundant availability of hydroelectric power from formation of Arizona Life Preservers, a coalition of other utilities in the West; organizations- involved in lifesaving, recreation or Conservation efforts, and shifting of electrical water storage and distribution, and dedicated to safe usage from peak demand periods. use of water for recreation.

j Power past, present and future: (left) an 800 kilowatt (kw generator used at the Soutii Consolidated Canal power plant in the early l900'st (right( one of iVarajo Generating Station's three 750,000 kw generators; (abovej an artist's rendering of the first l,270,000 kw unit of the Palo Verde Nuclear Generating Station.

Coal, nuclear power to fillfuture electrical needs Construction progressed on Coronado Generating Salt River Project is a 29 percent participant in this Station, SRP's wholly owned source of coal-fired $ 585.1 million station, which will consist of two power near St. Johns. 380,000 kw units, scheduled to be operational in Rights of way were secured for deep wells and a 1979.

pipeline to supply water to the station. Associated The Arizona Nuclear Power Project, of which SRP work included design of the 21-mile Concho field is a 29.1 percent participant, in May received ap-pipeline, completion of three production wells, proval from the Nuclear Regulatory Commission to drilling of four more wells to observe the effects of begin construction. The first of three 1,270,000 kw pressurized water nuclear reactor units is scheduled to pumping on the groundwater supply, installation of be in operation in 1982, with the other two units 10.9 miles of pipeline, and construction of roadways.

following in 1984 and 1986. Cost of the station is Coronado's first 350,000 kw unit is scheduled for estimated at $ 2.8 billion.

commercial operation in April 1979, the second in Voters expressed their approval of nuclear power April 1980. Cost of the station's first two units is in Arizona when they defeated an anti-nuclear initia-expected to be $ 646.7 million. The long-range plan tive in November elections by a margin of 70 percent includes possible addition of a third unit about 1993. to 30 percent. Nuclear power will further decrease Transmission lines and substations needed to bring reliance on oil and natural gas as energy sources.

power from Coronado to the Valley are expected to Participants in the Montezuma Pumped-Storage cost about $ 90 million. Project mutually agreed to defer construction Construction continued on the coal-fired Craig indefinitely due to reduced load growth and other Generating Station in the Yampa Valley in Colorado. economic factors.

Environment-an important concern I

A sizeable percentage of generating construction I costs is attributed to environmental protection. More than $ 200 million was spent at the Navajo Generating K,4 Station for this purpose.

Pollution control equipment and installation costs will add more than $ 200 million to the cost of Coronado Generating Station.

Electrostatic precipitators, water processing, solid waste disposal and noise abatement equipment account for $ 35.5 million, or approximately 30 percent of the total cost of Unit 2 of the Hayden Generating. Station in Colorado. Expenditures for pollution control equip'ment at Craig Generating Station will account for an estimated $ 150 million of 'r i j ~<,.,,

~i the station's $ 585.1 million total cost. (

Due to enuiromnental considerations, qadi'onstruction SRP transmission lines have taken on a new lookin ntany areas.

u started on Coronado-Kyrene transmission line During 1976 construction began on SRP's 500 kilovolt (kv) power transmission system from Coronado Generating Station to the Valley.

Right of way clearing and tower staking began in the Superior area along the 100-mile, north-south transmission corridor which will be shared by Arizona Public Service Co. (APS) and SRP. The corridor runs from APS's Cholla Generating Station, located north-west of Coronado. By. sharing a portion of this corridor, SRP intends to reduce the environmental impact. associated with separate line construction activities, as well as the costs of right of way.

A contract for 156 miles of the transmission system was awarded. One line covered by the 1 contract runs from Coronado to APS's Cholla plant west of Holbrook. This line will help to intertie generating sources for system reliability. The other section runs from Coronado to the SRP-APS common transmission line corridor. Construction on these two r

segments of the line is expected to begin in March I 1977 and should be finished by June 1978.

The" remainder of the Coronado transmission sys-tem is scheduled for completion by January 1, 1979. , 9 Environmental considerations for the 26.5 mile sec-tion of the line running through the Valley have fI added approximately $ 2.1 million to the cost of the t .'s' line, based on 1976 estimates.

New facilities built to deliver additional power Existing transmission and distribution facilities were updated to meet additional requirements resul-ting from customer growth in 1976 and future years.

Work included: addition of 640 cable miles of underground distribution lines; installation of two new substations; and increasing the capacities of four substations.

The investment in new transmission and distribu-tion facilities in 1976 totaled $ 31.5 million, com-pared to $ 26.9 million in 1975.

Construction improves

~ater service SRP continued its program for improving its water distribution system to reduce the quantity of water lost to seepage and facilitate more accurate measure-ment and control.

Major water construction and maintenance projects completed in the Valley in 1976 included installing 10.5 miles of irrigation pipeline, 4.9 miles of slipform lining and 145 lateral turnout structures.

One and one-half miles of the Arizona Canal were lined and a new radial gate structure was installed in the canal during its annual dry-up. During dry-up of canals south of the Salt River, structural improve-ments were made to improve the delivery of water to customers. Also during this period SRP relocated a portion of the Tempe Canal to accommodate a planned extension of the Superstition Freeway. This project was carried out in cooperation with the Arizona Department of Transportation, which paid design and construction costs.

SRP's cost of work performed during fall dry-ups totaled approximately $ 465,000.

SRP made the right of way of the Old Crosscut Canal available to the Maricopa County Flood Control District. The canal, which SRP no longer used for normal water delivery, was modified by the county organization and the City of Phoenix to become part of the flood control system.

Growth in the Valley has dictated an increase in construction and maintenance activities. Reinforcing steel bars (above J begin to give form to the Palo Verde nuclear Generating Station. Dredgers like this one centerJ removed silt frotn Pro(ect waterways in SRP's earlier days.

oday, modern equipment (belowJ is used to clear canals. Then the bottoms are covered with concrete and the sides gunited to conserve precious water and to improve flow.

Research and development look to the future During 1976 SRP participated in several projects to research future sources of power, develop present sources, and study power system loads. The Project was directly involved in four major programs and contributed to several others.

The four programs in which the Project partici-pated directly were: JW) fV A research program to analyze the nature of electrical loads. It is designed to answer questions relating to the quantity of high energy use appliances,

~)~

when they are used most, and to what degree combinations of their use affect SRP's system peak. Ou A distribution transformer load management program, in its third year. Purpose of this continued program is to determine areas of growth in SRP's electric service area, and help the Project plan facilities to deliver power to those areas in the future.

A small area load forecasting and distribution modeling program, which seeks better ways to predict system loads in areas as small as a quarter section (160 acres) and to plan SRP's distribution system to meet these loads. Electric Power Research Institute (EPRI) is funding the three-year program, which began in June 1975. EPRI commissioned Westing-house Electric Corporation for this program. SRP, Technological developments have facilitiesand equipment, acting as subcontractor to Westinghouse, will receive

'mproved but people continue to be important

$ 159,341 for its work on the program in 1976. in providing the services needed by the growing number ofSRP power and water customers.

A program designed to monitor solar radiation.

SRP has ordered approximately $ 12,000 worth of equipment for two stations to measure the sun' energy. Utilities in Arizona, California, New Mexico, Colorado and Nevada are participating in the project, which will include 40 to 50 such stations. The program is being coordinated by Western Energy Supply and Transmission (WEST) Associates. In 1976 Contracts ensure SRP contributed $ 6,700 to WEST for development of solar monitoring equipment specifications and soft-work force stability ware necessary to analyze the data, as well as for On January 1, 1976, new two-year labor contracts other WEST research and development programs. went into effect between Salt River Project and In addition, Salt River Project made a $ 566,349 International Brotherhood of Electrical Workers contribution to EPRI to support a broad spectrum of Local 266. The agreements provided for: changes in research and development of present and future work practices to improve efficiency of SRP opera-energy sources such as: coal gasification; fusion; solar; tions; increased medical coverage; establishment of geothermal; and nuclear power. Other research'n- dental coverage; an additional holiday; improved cluded studies of electro-chemical and thermal- early retirement benefits and retirees'ife insurance; mechanical energy conversion and storage. The funds and wage increases comparable to those throughout also support EPRI efforts in transmission and distri- the utility industry.

bution research. The total number of employes increased from SRP made its fifth contribution of $ 108,023 as 3,205 at year~nd 1975 to 3,325 at the end of 1976.

part of a 10-year pledge to aid development of the Most of the additional employes were hired for nation's first liquid metal fast breeder reactor positions at Navajo Generating Station, which began demonstration plant. fullccale operation in 1976.

I h o~'ater

'; shows continuing use

. II urbanization Water deliveries for 1976 totaled 804,964 acre-feet (af), compared to 767,869 af. in 1975. Of the total water required during 1976, 71.3 percent was from Providing a reliable supply of seater at reasonable charges to consumers Project lakes.

in the Valley of the Sun vvas thc Project's prime purpose in the early 1900's. It still is. Water storage in Project lakes declined slightly in 1976. Reservoirs contained 50.1 percent of their 2,072,050 af capacity at the beginning of the New legislation year'nd were 47.1 percent full at year-end. This repre-sents a difference of about 64,500 af in storage.

affects SRP Reduction in the amount of storage was due to Legislation passed in June 1976 enlarged the Power increased water use and decreased runoff, which District's board from 10 to 14 members and extended resulted from reduced precipitation on the Project's the terms of office for District board members from watershed. Runoff for 1976 totaled 817,679 af, 88 two to four years. Two of the four new board percent of the yearly average.

members were appointed to their seats in October SRP water used for non-agricultural purposes, 1976, in accordance with the law. Their positions will including municipal and industrial uses, and parks, be up for election in 1978. The other two seats are to playgrounds and residential irrigation, totaled be filled in the SRP election in April 1980. All four 295,123 af in 1976, compared to 265,591 af in 1975.

new board members will be publicly elected at large Deliveries to cities during 1976 totaled 187,044 af on the basis of one landowner, one vote. The compared to 160,998 af the previous year. Other remaining 10 members will continue to be publicly non-agricultural uses required 108,079 af during the elected on a debt-proportionate basis of one acre, one year, up from the 104,592 af,used in 1975.

vote, with one member representing each of the 10 Of the cities, Phoenix used the greatest amount of geographic voting areas in the District. The law, water, consuming 135,808 af, up 14.5 percent from which applies to the Power District and not to the 1975. Mesa, which consumed nearly 6,000 af in Association, staggers the terms so that at any given 1975, almost tripled its domestic water use for a total election only half the board will be elected. The law also states that candidates for president and vice of 15,520 af in 1976, while Chandler used 41.5 percent less water. Other cities (Tempe, Glendale, president will run for four-year terms beginning in Scottsdale, Peoria and Gilbert) received about the 1978. same amount of water from SRP as they did in 1975.

Another law passed in 1976 formalized the actions SRP has been taking when changing electric rates. Water used by decreed lands, which include Indian reservations, totaled 58,464 af.

Agricultural water orders for 1976 totaled 451,377 riOMI=.S riC V W.rEn a>SE af, compared to 44/,042 af in 1975.

in acrc.fcct The Project's role as a major contributor to the

/o of Salt River Valley's economy was reinforced by the 1976 1975 Change values of crops and livestock produced, largely made Phoenix .......... 135,807.97 118 606.64 14.5 possible through the Project's dependable supply of Tempo .......,.... 20,85631 20,938.93 (0 4) water. Although the amount of water delivered to Glendale....... 9,446.18 9,462.58 (0.2) agricultural accounts decreased, the combined values Mesa ............... 15,519.81 5,978.03 159.6 of crops and livestock increased 9.5 percent from Scot tsdaic ....... 2,491.91 2,791.76 (12.0) $ 131.3 million in 1975 to $ 143.8 million in 1976.

Chandler ......... 1,064.27 1,506.25 (41.5) A total of 2,693 acres was converted from agricul-Peoria ............. 983.73 890.87 10.4 tural to urban use during 1976, compared to 1,289 Gilbert............ 874.12 823.41 6.2 acres in 1975 and 9,033 acres in 1974. At year-end Totul........... 187,044.30 160,998.47 11.1 there were 121,761 acres in the Project area being used for agricultural purposes and 116,505 acres being used for other purposes.

Assessments and other water charges rise to keep pace with costs Water assessment and delivery fees were increased an average of 42 percent in 1976. The increases, which took effect in January 1976, produced an additional

$ 1.1 million in water revenues. This offset increases in water operating costs and helped to reduce the contribution of power revenues to water operations.

Electric revenues contributed to water operations decreased from $ 10.5 million in 1975 to $ 10.4 million in 1976. The effect was a reduction in the water subsidy from 4.9 percent of electric revenues in 1975 to 4.7 percent in 1976.

The SRP board set the 1976 water assessment at

$ 7.50 per acre 30 percent higher than in the 1975 assessment of $ 5.75 per acre. Since 1969, SRP water assessments have increased 200 percent, from $ 2.50 to $ 7.50 per acre.

Charges for water delivered to the cities also increased during 1976. The Project delivers water to eight cities in the Valley, in accordance with munici-pal water contracts. Cities, under these contracts, pay each account's assessment plus a shareholder fee, which was increased from 50 cents to 75 cents per account, a 50 percent increase. Cities, rather than property owners, pay the assessment for land no longer receiving irrigation. Then, acting as agents for his cool, clear water, deliuercd by SRP to the new Val Vista lUater the Project, cities deliver treated water to city rcatment Plant in Mesa, ls trcatcd and then deliuered to homes in the consumers. Valley. SRP supp!les morc than half thc water used by Valley cities.

SRP water delivery charges for irrigation water increased from $ 18 to $ 25 for active field accounts and from $ 10 to $ 14 for active subdivision accounts.

A.I. Pfister AJ. Pfister named general manager 1976 was a year of top management changes. A. J.

Pfister, former deputy general manager, succeeded Rod J. McMullin, who retired after serving 19 years as Qhp general manager. In other executive management changes, Robert F. Amos was promoted to deputy general manager and John R. McNamara was promo-ted to associate general manager for power.

10

made possible by an actual decrease of $ 14.8 million (compared with 1975) in the cost of fuel and purchased power. This was due in part to the Project's continuing program of converting to coal-fired power generation to replace higher cost oil-fired generation. In addition, there was increased availability of low-cost hydroelectric power from outside sources and greater availability of natural gas than had been planned. These lower fuel costs were passed along to customers during the year through negative fuel cost adjustments.

All other operating expenses were higher than in 1975. Depreciation expenses totaled $ 27.1 million, an increase of $ 4.1 million or 17.9 percent. Taxes and tax equivalents rose by 17.5 percent to $ 30.9 million.

Other operation expenses were up 16.4 percent to

$ 38.8 million. These included costs for salaries, wages, supplies and services. Maintenance costs increased by 20.3 percent to $ 19.6 million. The higher maintenance cost is largely the result of new C coal-fired generating units going into service and the increasing costs to maintain the older facilities already in service. However, in 1976 maintenance costs declined to 2.1 cents per dollar of plant in service, compared with 2.2 cents in 1975.

Plant value exceeds S1 billion Uncertainties in the national economy during 1976 Gross investment in plant and equipment, including were reflected in the results of Project operations. construction in progress, was $ 1.2 billion, up 24.9 Sales of electric energy were only slightly higher percent from 1975. Funds required for additions to than in 1975. Although there was a substantial plant amounted to $ 234.0 million, a 51.6 percent improvement in the fuel cost picture, other costs increase from 1975. Of the funds required, $ 199.4 continued to show the effects of inflation. million, or 85.2 percent, came from new financing.

Expenditures for capital improvements reached a new The remaining 14.8 percent came from accumulated high as work continued on facilities required to meet net revenues.

estimated future loads. The Project retained its high credit rating and successfully marketed $ 405 million Financing costs up of revenue bonds.

Financing costs, less allowance for funds used Operating revenues increase during construction, were $ 31.1 million in 1976, an increase of $ 7.2 million, or 30.4 percent, since 1975.

Operating revenues for 1976 totaled $ 225.3 Interest on long-term debt rose by $ 18.5 million, an million, up $ 11.4 million from 1975. Electric sales increase of 44.5 percent over 1975. This was partially provided $ 221.0 million, an increase of $ 10.0 million offset by an increase of $ 5.3 million in interest or 4.7 percent over 1975. Water revenues grew 52.6 earned on temporary investments. Repayments of percent from last year and totaled $ 4.3 million. The long-term debt required $ 10.5 million in 1976 modest increase in electric revenues was the result of compared with $ 11.1 million in 1975.

the lowest energy sales and customer growth rate in recent years coupled with various weather factors and Net revenues increase slightly consumers'fforts to conserve.

Net revenues for the year were $ 11.3 million, an The large increase in water revenues was due increase of $ 874,000, or 8.4 percent, over 1975. The primarily to an increase in water charges.

increase, though modest, shows that earnings have been maintained by moderating operating costs in the Operating expenses reach face of economic uncertainties, lower growth rates

$ 182.7 million and continued inflation. The results help to fulfillthe Operating expenses of $ 182.7 million were only expectations held for increasing energy independence

$ 2.6 million, or 1.5 percent, greater in 1976 than in as the Project continues its transition to more 1975. This very modest increase in expenses was coal-fired generation.

ll

COM'BIiNEDg TATEMENT OF net revenues Salt River Frojeet Agricultural Improverueiit and Power District and-its'agent, Salt River Valley Wpfcr Users'ssociation I'or the years ended December 31, 1976 and 1975 OPERATING REVENUES: 1976 1975 Electric. $ 220,961,215 $ 211,016,136 Water and irrigation. 4,307,032 2 821 516 Total operating revenues . $ 225,268,247 $ 213,837,652 OPERATING EXPENSES:

Power purchased $ 18,103,516 $ 32,230,873 Fuel used in electric generation. 48,285,472 49,007,365 Other operation expenses. 38,786,480 33,309,186 Maintenance .............................................. 19,562,273 16,265,728 Depreciation and amortization (Note I). 27,055,149 22,957,201 Taxes and tax equivalents (Note 5) 30,869 311 26 278 119 Total operating expenses. $ 182,662,201 $ 180 048 472 Net operating revenues $ 42,606,046 $ 33,789,180 FINANCING COSTS:

Interest on bonds at coupon rates. $ 60,074,044 $ 41,585,531 Amortization of bond discount 657,176 544,801 Amortization of bond issue expense. 167,854 151,228 Interest on other obligations 294,059 1,064,051 Interest earned on investments and deposits..... (12,775,619) (7,517,472)

Net financing costs. $ 48,417,514 $ 35,828,139 Less-Allowance for funds used during construction (Note 1),. (17,357,802) (12,007,218)

Financing costs less allowance for funds used during construction. $ 31,059,712 $ 23,820,921 OTHER DEDUCTIONS (REVENUES), NET -" 259,075 (445,403)

NET REVENUES FOR THE YEAR S '11,287,259 $ 10,413,662 The accompanying notes to combined financial statements are an integral part of this statement.

COMBINED ST E';EN g OF / .,i ~

sources'o, fiends or~dditions to,utihty plant J

.v:Salt Ritjcr rojcct Aprtcnttdral Improvement and Power District o and s agent;Salt River Valley )Va cr Users'ssociation o r'ordthe years ended December 3, 19 6 and l975 GROSS ADDITIONS TO UTILITYPLANT, 1976 1975 excluding allowance for funds used during construction. $ 234,011,818'154,321,134 FUNDS GENERATED FROM OPERATIONS:

Net revenues for the year. S 1 I,287,259 $ 10,413,662 Add Depreciation and other charges not requiring current funds 29,919,879 26,737,369 Deduct Allowance for funds used during construction not providing current funds. (17,357,802) (12,007,218)

Total fiinds generated from operations before retirement of debt $ 23,849,336 $ 25,143,813 Less Repayment of long-term debt. 10,527,234 11,121,486 Net funds generated from operations . $ 13,322,102 $ 14,022,327 FUNDS OBTAINED FROM FINANCING:

Proceeds of bond issues $ 398,749,762 $ 168,108,201 Advances from U.S. Government for rehabilitation of irrigation plant. I,'126,874 1,704,239 Other advances and contributions, in aid of construction. 3,062,146 2,746,483 Other long-term obligations. 108,649 Short-term borrowings, net of repayments. 40,000 000 (20,000,000 Total fiinds obtained from financing. $ 362,938,782 $ 152,667,572 Less Increase in segregated funds set aside for debt service ... (16,023,299) (10,747,293)

Increase in segregated funds set aside for construction (96,825,635) (473,402)

Increase in temporary investments held primarily for construction (50,652,353) (10,026,145)

Net funds obtained from financing. $ 199,437,495 $ 131,420,732 CHANGES IN QTI-IER ITEMS AFFECTING FUNDS:

Reduction in advances for dedicated capacity in electric plant $ 12,627,615 Increase in deposits for payment of accrued interest on bonds. (11,122,078 (6,458,315)

Increase in accrued interest payable ............... 10,991,331 6,046,033 (Increase) Decrease in fuel stocks and materials and supplies. . r.............. 7,416,227 (3,192,102)

(Increase) Decrease in cash . 6,544,295 (115,599)

Increase in accounts payable 6,888,304'34,142 4,313,309 Decrease (increase) in other assets and liabilities, net ... (4,342,866)

Net changes in other itenis $ 21,252,221 $ 8,878,075 FUNDS USED FOR ADDITIONS TO UTII.ITYPl ANT $ 234,011,818 $ 154,321,134 Thc accompanying notes to combined financial statcmcnts arc an integral part of this statcmcnt.

Ij baI l',

'a'I Salt River Project'Ag it } vementa aid its ageht, SaltI Riv t0.0 r'Va Cl t I' iDeccntber;,31; 197, = e e- '97 Assets l976 1975 UTILITYPLANT, at original cost (Notes I, 2 and 3):

Plant in service Electric $ 812,169,386 $ 626,893,594 Irrigation. '

62,549,894 60,513,571 General. 39483,750 37,431,992 Total plant in service .S 914,203,030 $ 724,839,157 Less Accumulated depreciation on plant in service..... 192,839 319 167 179 412 S 721,363,711 S 557,659,745 Construction work in progress. 315,414,264 259 916 957

$ 1,036,777,975 S 817,576,702 SEGREGATED FUNDS, consisting of cash and U.S Government obligations set aside in accordance with resolutions of bond issues:

Debt service funds excluding $ 33,481,000 in 1976 and

$ 22,359,000 in 1975 for payment of accrued interest (Note 10).: S 86,902,964 $ 70,879,665 Construction funds.. 97,582,811 757,176 S 184,485,775 $ 71,636,841 CURRENT ASSETS:

Cash S '99,692 S 6,943,987 Temporary investments, at cost, held primarily for construction 106,090,055 55,437,702 Deposit in debt service fund for payment of accrued interest on bonds 33,481,367 22,359,289 Accounts receivable from insurance carriers (Note 9) 1,887,870 Trade and other accounts receivable, less reserves of $ 967,000 in 1976 and $ 927,000 in 1975 for doubtful accounts. - IS,325,360 21,149,691 Fuel stocks, at average cost 11,133,659 18,549,886 Materials and supplies, at average cost 15,296,886 15,186,066 Prepayments, interest receivable and other. , 7,788,908 3,074,780 S 194,403,797 $ 142,701,401 OTHER ASSETS:

Nonutility plant, less accumulated depreciation of $ 500,000 in 1976 and $ 458,000 in 1975.......... $ - - 2,389,661 $ 2,418,024 Bond expense being arnoitized. 2,725,782 2,201,207 Miscellaneous deferred charges (Note 9) 5,934,333 7,417,115 S -

11,049,776 $ 12,036,346

$ 1,426,717,323 $ 1,043,951,290 14 Thc accompanying notes to combined financial

1 Liabilities and Capitalization I 07(j 1975 LONG-TERM DEBT (Note io):

General obligation bonds. S 278,915,016 S 287,219,590 Electric system revenue bonds. 893,317,068. 495,065,557 Obligations to U.S. Government 12 570 867 12,225,830 Other obligations.. 1,762,219 2,058,966

$ 1,186,565,170 S 796,569,943 ACCUMULATEDNET REVENUES, invested principally in utility plant:

Balance beginning of year.. S 146,394,829 S 135,981,167 Net revenues for the year 11,287,259 10,413,662 Balance end ofyear S 157,682,088 S 146 394.829 Total capitalization, consisting of long-term debt and accumulated net revenues S f,344,247,258 S 942,964,772 CURRENT LIABILITIES,excluding $ 15,260,000 in 1976 and $ 10,491,000 in 1975 representing current portion of long-term debt which is to be paid from segregated funds:

Notes payable to banks (Note 7) . S 1,000,000 S 41,000,000 Accounts payable ......................... 25,461,S03 18,573,199 Accrued taxes and tax equivalents (Note 5) 12,822,109 ~

10,698,544 Accrued interest 33,483,423 22,492,092 Customers'eposits. 3,340,486 2,565,951.

Other current and accrued liabilities. 2,710,770 2,519,269 S 78,818,291 S 97,849,055 DEFERRED CREDlTS AND RESERVES:

Irrigation assessments levied for subsequent year.. $ 2,69'0,66,0 S 2,159,711 Advances for construction. 397,342 473,112 Other. 'S63,7.72 504,640 S 3,651;774 S ',137,463 COMMITMEN1S AND CONTINGENCIES (Notes 3,4,5 and 6) $ 1,426,717,323 $ 1,043,951,290 lj I

statcrncnts are an integral part of this balance shcct. 15

and 1975 resulted in provisions approximating 3.71%

for 1976 and 3.68% for 1975 on the average cost of depreciable electric plant, and 1.90% for 1976 and

~'II~là t 1.90% for 1975 for depreciable irrigation plant. When I" g'~ lk ~kklI "(,

property representing a retirement unit is replaced, lIIlik

/~I I(i i, removed, or abandoned, the cost of such property is credited to the appropriate utility plant account, and

,(,K , kk,'.I.-',>,',I.q,~lkI)] q such cost together with removal costs less salvage is

<<l charged to accumulated depreciation.

l] II,,I,liitrlIg'l< The Project charges to maintenance expense the cost of labor, materials, and other expenses incurred in the repair, restoration of condition and replace-

"""4'i Ail OI ., ll Ik

... llIi IllIrn rlIIIItI I.r'Iuti< r'jht;I~i,l'r!'(Ii'i rid.> ment of minor items of property.

'II'5Q'rIk'IDMp 'QElpI (c) Bond Expense F'INANE>'IA,L'--, I "I II Bond discount, premium, and bond issue expense TFMF are being amortized over the terms of the related bond issues.

Salt River, ProjecIIrkkgricultural Irnprovein'enKhhd .! I

'l 'Pri&er'OiStrlct -and its I agent,,','Salt River Valley,)Vatei 'Users'ssoclatlod (d) Employes'etirement Plan Becekkkber,al, 1916 akkd 3975, The Project has a retirement plan covering substan-tially all employes. The plan is funded entirely from employers'ontributions and the earnings of the invested assets. Thekestimated unfunded past service (I)

SUMMARY

OF SIGN I FI CANT liability, as determined by the plan's actuary using the "entry age norinal cost" valuation method, with ACCOUN riNG POLICIES: frozen initial liability, was $ 7,720,585 as of July 1, (a) Principles Underlying Combined Statements 1976, and is being funded over a period ending in 2001. The employers'ash contributions to this plan The combined financial statements include the totaled $ 4,552,082 in 1976 and $ 4,323,770 in 1975.

accounts of the Salt River Project Agricultural At July I, 1976, the plan's assets exceeded the Improvement and Power District and the accounts of actuarially computed value of the vested benefits at its agent, the Salt River Valley Water the same date.

together referred to as the Salt River Users'ssociation, Project, and a wholly owned subsidiary, Salt River (e) Revenues Generating Company. All significant intercompany transactions have been eliminated. Meters for residential, commercial and small indus-trial customers are read cyclically and sales recorded (b) UtilityPlant, Depreciation and Maintenance only when billed. This system of billing results in earned but unbilled revenues which amounted to The accounting records of Salt River Project are

$ 8,769,000 at December 31, 1976, and $ 8,102,000 maintained substantially in accordance with the at December 31, 1975. For large industrial customers, Uniform System of Accounts prescribed for electric meters are read near month-end and billings utilities by the Federal Power Commission. Utility recorded'n the accrual basis. Electric revenue billings are plant is stated at the historical cost of construction.

adjusted periodically for changes in costs of fuel and Construction costs include labor, materials, services purchased power. Revenues from water and irrigation purchased under contract, and allocations of indirect operations are recorded when earned.

charges for engineering, supervision, transportation, and administrative expenses.

An allowance for funds used to finance construc- (2) POSSESSION AND USE tion work in progress is capitalized as a part of the OF UTILITYPLANT:

electric and general plant. This allowance is deducted The United States of America retains a paramount from net financing costs in the combined statement right or claim in the Salt River Project which arises of net revenues and added to utility plant. A capitali- from the original construction and operation of the zation rate of 6% was used for several years but was Project's facilities as a Federal Reclamation Project.

changed to 7.25% on July I, 1975. The Project's right to the possession and use of, and Depreciation expense is computed on the straight- to all revenues produced by, these facilities is line basis over estimated useful lives of the various evidenced by contractual arrangements with the classes of plant. Rates in effect during the years 1976 United States.

16

notes (3) CONSTRUCTION PROGRAM: partial ownership interests in the Coronado and/or Balances shown for construction work in progress Palo Verde stations, or a delay in construction of the represent expenditures for new facilities required to Coronado Generating Station combined with sales of serve anticipated customer needs, and consist of: excess capacity on a prepayment basis. Management expects that any action taken with regard to these matters would result in full realization of all costs December 31 currently invested in the construction program.

1976 1975 ENVIRONMENTALLITIGATION:

(4)

Electric generating facilities. $ 276,195,260 $ 222,994,877 Various pending lawsuits involving environmental Transmission and matters could affect interests owned by Salt River distribution................ 32,176,139 30,706,351 Project in present generating facilities and in pro-Irrigation plant........... 2,807,137 2,530,106 posed generating facilities and transmission lines. In Other construction..... 4,235,728 3,685,623 general, these lawsuits seek to impose higher air quality standards for generating plants. If ultimately Total.......................... $ 315,414,264 $ 259,916,957 decided adversely to the interest of Salt River Project, the outcome of the lawsuits could result in increased Construction expenditures planned for 1977 construction costs, increased future operating costs, approximate $ 400 million, which includes $ 350 and a possible loss in the operational reliability of million to be expended in 1977 on the major projects certain generating plants. All of these effects would shown below. increase the costs to be passed on to customers At December 31, 1976, substantial commitments through increased electric rates.

had been. entered into for delivery of materials and services o'n construction projects. In addition, various (5) PROPERTY VALUATION firm commitments exist under coal and fuel oil LITIGATION supply contracts. Salt River Project makes voluntary contributions Based on prior agreement, the major portion of to taxing bodies in lieu of payment of property taxes.

advances for dedicated capacity in Unit One of the The Department of Revenue of the State of Arizona Hayden Generating Station was recaptured during has filed lawsuits requesting increases in the values 1975. The remainder, representing common plant used to compute the voluntary contributions for the attributable to Unit Two of the Hayden Generating years 1970, 1971, 1972, 1973 and 1974. No lawsuits Station, was transferred to construction work in or claims have been- filed concerning 1975 and 1976 progress. valuations.

Recent forecasting studies have caused manage- The general effect of the claims made under the ment to reduce projections of future power resources lawsuits would be to increase the contributions for requirements, and to explore possible reductions in the years in dispute by a total of approximately the range of $ 250 million to $ 500 million to the $ 3,650,000. In 1973, in connection with a portion of schedule of construction expenditures shown below. the lawsuits, the Superior Court of Arizona granted a Options presently under consideration include sale of summary judgment in favor of Salt River Project.

EXPECTED CONSTRUCTION ($ 000)

EXPENDITURES (NOte 3) Expected Expenditures In-Service Prior to Expected Expected Date 1977 in 1977 After 1977 Overall Navajo Generating Station....................... 1974-76 $ 142,269 $ 2,678 $ 3,484 $ 148,431 Navajo Railroad.. 1974-76 18,351 309 18,660 Hayden Generating Station-Unit 2......... 1976 93,234 2,520 95,754 Craig Generating Station .............'............ 1979 82,539 51,267 59,715 193,521 Coronado Generating Station.................. 1979-80 131,397 180,557 404,677 716,631 Coronado Railroad 1979 5,189 18,414 22,188 45,791 Coronado Transmission System ............... 1979-80 25,493 38,256 41,453 105,202 Palo Verde Nuclear Generating Station ... 1982-86 42,300 53,975 984,986 1,081,261 Palo Verde Transmission System ............. 1982-86 659 1 625 43 132 45 416

$ 541,431 5349,601 51,559,635 $ 2,450,667 17

notes This summary judgment was later reversed in part in appellate decisions within Arizona, and this reversal is (8) IRRIGATION AND now in process of appeal to the United'tates WATER OPERATIONS Supreme Court. If the reversal is upheld, the claims The expenses, including depreciation, for irrigation will be litigated in Superior Court with the decision and water operations exceeded the assessments, deli-of that court possibly subject to the appellate very fees, and other revenues therefrom by approxi-process. mately $ 7,341,000 in 1976 and $ 7,248,000 in 1975.

Under Arizona law, the amount of each voluntary These amounts do not include expenditures for contribution made by Salt River Project to taxing additions and improvements to irrigation plant.and bodies in lieu of payment of property taxes is subject for repayment of long-term debt.

to review and approval, or disapproval, by the Secretary of the Interior of the United States of (9) OTHER MATTERS:

America. In the opinion of legal counsel, any addi-tional contributions required as a result of the above During 1976, Salt River Project terminated its litigation would be subject to the approval or participation in the Montezuma Pumped-Storage disapproval of the Secretary prior to payment. Generation Project because of projections of reduced No reserve for additional contributions has been capacity requirements. The Board of Directors provided at December 31, 1976. If any liability were approved the deferral of approximately $ 1,800,000 to result from this litigation, management expects of Montezuma Project costs and the amortization of that the amount of such liability would be recovered this charge over a period of five years, with the when paid through increased rates collected from intention that the costs be considered for inclusion in electric customers. amounts to be recovered from consumers over the same five-year period.

(6) OTHER LITIGATION: A receivable from insurance carriers arises from an Principally as a result of certain water flooding in accident at the Kyrene Station. Damage from the 1970 and 1972, various lawsuits and claims have been accident has been fully repaired and billed to the filed against Salt River Project alleging that the carriers. Management believes that the amount billed Project has a responsibility in regard to flood control will be collected.

and a liability in regard to flood damage. The Salt River Project is actively engaged in research ultimate liability, if any, is not determinable, but and development programs related to new energy sources and improved technologies for power genera-management expects that a significant portion of any liabilities which might result from flood damage tion. During 1976, operating expenses included claims will be covered by insurance. approximately $ 1,800,000 related to research and development projects.

(7) LINE OF CREDIT:

The District has a line-of-credit agreement with 13 (10) LONG-TERM DEBT:

banks, which provides for a maximum commitment Bonds outstanding are general obligation bonds of $ 60,000,000 with interest on borrowings at a rate and electric system revenue bonds. In all years to equal to 75% of the banks'rime rate as established date, net electric revenues have been more than from time to time by the lead bank. No compensating sufficient to meet all debt service requirements.

balances nor commitment fees are required under the General obligation bonds are a lien upon the real line of credit; in lieu thereof the District has agreed to property included in the District and are additionally use the full amount of the line for a specified secured by a pledge of revenues from the operation of minimum number of days during the year. The the electric system. If the net electric revenues, as current agreement terminates on October 15, 1977. defined in the bond resolutions, are not sufficient to The line-of-credit borrowings are borrowed in the meet the principal and interest payments, the bonds name of and payable from the General Fund and rank and interest are payable from a levy of taxes on the junior to payments required for the Prior Lien Bonds real property.

and the Revenue Bonds. At December 31, 1976, Electric system revenue bonds are secured by a there were no outstanding borrowings on the line of pledge of, and a lien on, the revenues of the electric credit. Other bank borrowings totaled $ 1,000,000 at system after deducting "operating expenses" as December 31, 1976, and carried an interest rate of defined in the bond resolutions, subject to prior liens 4.17%. The average interest rate on bank borrowings of general obligation bonds and amounts due the for 1976 was 4.69%. On January 21, 1977, the United States. In all years to date electric revenues, District borrowed the full $ 60,000,000 at an interest. after deducting ".operating expenses" as defined in rate of 4.69%, repayable in full on or before October the bond resolutions, have been more than sufficient 15, 1977. to meet all debt service requirements.

18

nofes The annual maturities of bonds and other long- At December 31, 1976, electric system revenue term debt outstanding as of December 31, 1976, due bonds totaling $ 240,000,000 principal amount were in each of the years 1977 through 1981 are: authorized, but unissued.

$ 1 5,2 60,000; $ 15,646,000; $ 16,397,000; The debt service portion of segregated funds

$ 17,545,000 and $ 18,324,000 respectively. includes $ 16,896,000 at December 31, 1976, and Interest and amortization of discount on the $ 16,272,000 at December 31, 1975, restricted for various issues outstanding during the year resulted in operating reserve requirements under bond an effective rate of 6.17% for 1976. This rate resolutions.

approximates 6.50% over the remaining terms of the Long-term debt outstanding at December 31, bonds. 1976, and December 31, 1975, was as follows:

LONG-TERM DEBT OUTSTANDING ($ 000)

Interest Issued Outstanding Future Rate In Year 12/31/76 12/31/75 hlaturities General Obligation Bonds Issue No. 4 2-5/8 1950 $ 700,000 $ 1,400,000 1977 Issue No. 5 2-1/2 1951 2,500,000 3,000,000 1977-80 Issue No. 6 2-3/4 to 3-5/8 1953 8,000,000 8,500,000 197742 Issue No. 7 3.1 to 3.4 1956 7,045,000 7,095,000 1977-87 Issue No. 8 3.6 to 3-5/8 1959 3,830,000 3,950,000 197747 Issue No. 9 I to 4.1/4 1960 22,805,000 23,860,000 1977-92 Issue No. 10 I to 3.6 196245 15,730,000 16,575,000 1977-94 Issue No. 11 3.1/4 to 3-1/2 1965 10,900,000 11,400,000 197747 Issue No. 12 3to5 1968.69 37,000,000 38,650>000 1977-99 Issue No. 13 4to5 1969 7,900,000 8,250,000 1977-99 Issue No. 14 3.1/2 to 6 1970.72 165.900.000 368 300 MO 1977-2003

$ 282,310,000 $ 290,980,000 Unamortized bond discount (3,394.984) (3,760,410)

Total general obligation bonds outstanding $ 278915,016 $ 287,219,590 Electric System Revenue Bonds:

1973 Series A 5 to 6.1/2 1973 $ 75,000,000 1977-2010 to 6-1/2 1973 " 75,000,000 1973 Series B 5 75,000,000 1977-2011 1974 Series A 5.7 to 7.2 1974 90,000,000 90,000,000 1983-2012 1974 Series B 6.1 to 7.6 1974 50,000,000 50,000,000 1983-2012 1974 Series C 6-1/2 to 7-3/4 1974 '976'74,210,00040,000,000 40,000,000 1983-2012 1975 Series A 7.1 to 8.1/8 1975 60,000,000 60,000,000 1983-2013 1975 Series B 7.0 to 7.6 1975 75,000,000 75,000,000 1983-2015 1975 Series C 7.2 to 8-1/8 1975 35,000,000 35,000,000 1983-2015 1976 Series A 5.0 to 7.2 1976 100,000,000 1985-2016 1976 Series B 4.7 to 6-5/8 1976 140,000,000 1984-2016 1976 Series C 6.0 to 6-3/4 1976 40,000,000 1982-2016 1976 Series D 4.0 to 6.4 125,000,000 1980-2016

$ 904,210,000 $ 500,000,000 Unamortized bond discount (10,892g32) (4,934,443)

Total electric system revenue bonds outstanding 5 893,3I7 068 $ 495 065 557 Total bonds outstanding SI.I72 232084 $ 782,285,I47 Obligations to U.S. Government for irrigation plant None 1935-/6 12,570,867 12,225,830 1977-2001 Equipment contracts 6-7/8 g$ 7-1/2 1974-75'950 1,728,048 2,013,444 1977 82 Other obligations None 34 37 I 45 522 1977-79 Total long. term debt 5 I, I 86.565.370 $ 796 569 943 To tlic Board of Directors, auditnrs report Salt River Project Agricultural Improvement and Power District, and Board of Governors, Salt River Valley IVater Users'Association:

We have examined the combined balance sheet of SALT RIVER PROJECT AGRICULTURALIhlPROVEhIENT AND POWER DISTRICI'a political subdivision of the State of Arizona) and its agent, SALT RIVER VALLEYWATER USERS'SSOCIATION, together referred to as the SALT RIVER PROJECT, as of December 31, 1976, and Deccmbcr 31, 1975, and the related combined statements of net revenues and sources of I'unds for additions to utility plant for the years then ended. Our examination was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing proccdurcs as we considered necessary in the circumstances.

In our opinion, the financial statements referred to above prcscnt fairly thc financial position of thc Salt River Project as of Dcccmbcr 31, 1976, and December 31, 1975, and the results of its operations and sources of funds for additions to utility plant for the years then ended, in conformity with generally accepted accounting principles consistently applied during the periods.

Arthur Andersen if'o.

Phoenix, Arizona February 23, 1977 19

PROJECT GENERAL 1976 1975 1971 1966 Operating revenues......................... S 225,268,247 $ 213,837,652 $ 85,422,463 $ 47,639,572 Electric. 220,961,215 211,016,136 83,335,209 46,231,776 Water and irrigation. 4,307,032 2,821,516 2,087,254 1,407,796 Operating expenses. 182,662,201 180,048,472 74,856,121 39,862,336 Net financing costs Less capitalized interest................ 31,059,712 23,820,921 5,148,087 2,459,249 Other deductions (revenues), net...... 259,075 (445,403) 193,829 (108,546)

Net revenues. 11,287,259 10,413,662 5,224,426 5,426,533 Construction expenditures ............... 223,448,000 166,328,352 74,702,708 15,647,300 Electric and irrigation plant, gross ... 1,229,617,294 984,756,114 433,573,063 233,213,665 Contributions of power revenues to support water operations ............. 7,341,000 7,248,000 9,600,000 6,000,000 Taxes and tax equivalents................. 30,869,311 26,278,119 9,570,688 3,474,924 Employes at year~nd. 3,325 3,205 2,522 1,959 WATER 1976 1975 1971 1966 Total storage and pumping capacity (acre-feet). 2,841,818 2,869,649 2,896,542 2,843,863 Storage capacity (six reservoirs) ............. 2,072,050 2,072,050 2,072,050 2,072,050 Installed pumping capacity..................... 769,768 797,599 824,492 771,813 Water in storage January 1 (acre-feet). 1,040,000 1,056,410 1,090,552 1,991,240 Project storage only. , . 77j,440 798,815 784,312 1,678,488 Runoff (acre-feet) 817,679"" 870,511 693,147 1,237,127 Released from storage (acre-feet) ............... 826,546" 809,063 729,008 1,128,138 Water in storage December 31 (acre-feet). 976,725 1,040,000 1,014,578 1,667,772 Project storage only 711,353 771,440 723,247 1,341,588 Water diverted into canals and pumping (acre-feet) 1,190,720 1,194,212 1,207,201 1,235,933 From gravity sources.

• 848,734 849,875 723,493 1,059,325 From pumping by Association pumps.... 335,988 337,516 476,924 171,672 From pumping by others........................ 5,998 6,821 6,784 4,936 Contract deliveries (acre-feet)..................... 121,058 112,599 113,004 110,316 From gravity sources. 99,229 91,556 91,368 89,336 From pumping. 21,829 21,043 21,636 20,980 Canals, total (miles).. 131 131 131 138 Miles lined. 59 57 50 47 Laterals, total (miles) 878 876 880 873 Miles lined or piped 715 702 594 444 Drainage and waste ditches (miles) ............. 251 254 279 284 Miles lined or piped 52 53 47 34 Assessed area 238,266 238,264 238,264 238,252 Number of assessed accounts...................... 166,048 163,869 146,541 133,046 Number of individual water deliveries ........ 500,607 469,071 477,079 505,472

<<Based on U.S.G.S. provisional records and subject to adjustment 20

POWER 1976 1975 1971 1966 Sources: (kwh)

Net steam generation. 5,637,595,000* 4,050,267,000* 3,400,750,000* 1,396,832,000 Net diesel generation.

Net combustion turbine generation..... 93,811,000 144,899,000 3,485,000 Net combined cycle generation ........... 459,155,000 706,469,000 Net run of river hydro generation**.... 243,951,000** 297,858,000** 144,635,000** 326,778,000 Pumped-storage generation.................. 89,536,000 81,916,000 24,610,000 Total net generation. 6,524,048,000* 5,281,409,000* 3,573,480,000* 1,723,610,000 Purchased 2,561,076,900 3,515,476,241 2,256,408,845 1,266,859,922 Interchange received. 162,016,000 211,365,000 525,764,177 369,430,884 Wheeling received. 13,389,100 38,378,759 38,802,965 29,360,340 Total energy sources........................ 9,260,530,000& 9,046,629,000* 6,394,455,987* 3,389,261,146 Disposition: (kwh)

Residential . 2,931,444,260 2,878,957,582 1,911,775,663 1,039,717,668 Commercial and industrial................... 3,594,531,963 3,387,045,196 2,362,228,051 1,336,308,822 Irrigation pumping 282,916,839 310,750,959 234,805,839 189,554,725 Street and highway lighting................. 36,456,046 39,259,768 31,507,462 22,614,624 Public authorities. 288,417,414 260,297,826 203,198,169 157,147,272 Interdepartmental 186,729,026 176,855,758 231,383,473 96,908,267 Sales for resale. 818,405,306 988,241,889 850,215,920 93,221,250 Total sales 8,138,900,854 8,041,408,978 5,825,114,577 2,935,472,628 Interchange delivered 384,440,000 279,381,000 105,476,100 187,550,764 Wheeling delivered 12,643,696 34,847,914 421,909,991 26,902,960 Energy losses 598,785,450 574,735,108 35,582,319 239,334,794 Energy for pumped-storage operations ... 125,760,000 '16,256,000 6,373,000 Total disposition of energy ............. ',260,530,000 9,046,629,000 6,394,455,987 3,389,261,146 Peak overall power system (kw) 2,089,000 1,939,000 1,291,000 752,000 Date and time (MST). July 7, 6 p.m. July 10,5 p.m. June 30, 6 p.m. June 16, 6 p.m.

Peak, Project customers (kw) ... 1,732,000 1,634,000 1,120,000 652,000 Date and time (MST). July 7, 6 p.m. Aug. 6,3 p.m. July 28, 6 p.m. July 18, 6 p.m.

I Generating capability (kw) 2 Steam. 1,548,250* 1,181,900* 774,400" 532,200 Diesel. 7,900 Combustion turbine 3378,000 424,800 Combined cycle.............. 3288,000 292,000 Hydroelectric, conventional ................... 3 94,000 94,300 21,200 73,700 Hydroelectric, pumpedctorage............... 3 140,000 147,200 50,000 Total operating capability ...................... 2,448,250~ 2,140,200* 845,600* 613,800 Contracted purchase at time of peak 325,563 450,500 607,410 353,050 Total resources. 2,773,813* 2,590,700* 1,453,010* 966,850 Electric customers, year-end Residential . 238,989 230,712 172,217 124,644 Commercial and industrial...................... 17,591 16,918 13,117 11,134 Other. 1,361 1,296 992 839 Total 257,941 248,926 186,326 136,617 Average annual kwh use-residential ........... 12,597 12,843 11,738 8,522 Average annual kwh price-residential (cents) 3.51 3.29 1.95 1.97 IUnit ratings reported in earlier years werc nameplate capacities.

2208,000 kw added September I, 1976, as Ilayden Unit ll began commercial service.

3Figurcs reported indicate unit capabilities during the summer peak. Combustion turbine and combined cycle capabilities under actual operating conditions proved to be less than previously reported figures, which were based on manufacturers'ata and test conditions. Ilydroclec(ric unit capabilities for 1976 are less than 1975 because tests showed that excessive wear occurs at or near previously reported operating capabilities. These capabilities will be utilized while units are under automatic generation control and may vary periodically due to system requirements and seasonal variations in tcmpcrature.

'Includes SRP participation in jointly owned projects "Includes run of river generation by pumped.storage units 21

financial highlights SOURCES DOLLARS PERCENT Residential energy sales.. $ 102,912,463 45.7%

Commercial and industrial. 85,420,402 37.9 Sales for resale 18,702,594 8.3 Agricultural pumping, street and highway lighting, and public authorities 11,745,596 5.2 Water and irrigation revenues 4,307,032 1.9 Other. 2,180,160 1.0 Total $ 225,268,247 100.0%

USES Fuel used for generation.~...................................... $ 48,285,472 21.5%

Other operating expenses c . 38,786,480 17.2 Purchased power 18,103,516 8.0 Taxes and tax equivalents..........g 30,869,311 13.7 Depreciation and amortization. <....................... 27,055,149 12.0 Net interest on indebtedness ~ . 31,059,712 13.8 Maintenance.....

Total.;:'a 19,562,273 8.7 Reinvested.

Miscellaneous deductions........ ~ ............

11,287,259 259,075

,...,. $ 225,268,247 5.0 0.1 100.0%

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board 8 officers BOARD MEMBERS (Pictured belowJ PRINCIPAL OFFICERS The 10 members of the Board of Governors of the Salt AND OTHER EXECUTIVES River Valley IVater Users'Asrociation are elected biennially A.J. Pfister (l)............ General hfanager from among the shareholders of tire Association. Robert F. Amos (2)..... Deputy General Manager The Boanf of Directors of the Salt River Project Kenneth J. Knaucr .. Treasurer'irector, Agricultural Improvement and Power Distrfct consists of 12 R. B. Ludcman Operations Services E.W. Yorkc.......... Director, Personnel members and will be expanded to 14 in 1980. One District board member is elected from each of tire 10 SRP voting Reid W. Tecples ........... Associate Genenrl hfanager - IVater areas. In addition, the District 's board Includes trvo members Don L. Weesner...... Assistant General hfanager Water Associate Genenrl hfanagcr Power to be elected at large. These board members were appointed to the Distrfct's board in 1976 as prescribed by state Iaw.

John R. hlcNamara (3) ..

Trent O. hleacham ... -

Assistant General hfanager Power Construction and hfaintenance Their positions will be up'for election to four-year terms in John O. Rich............. Assistant General hfanager Power Operations 1978. The new state Iaw also provided that two additional at Vaughan A.Pierce ....... Assistant General Manager -llfarketing and large reprcsentatfves will be added in 1980, bringing the total Commercial Services number ofDfstrict board members to 14. Lcroy hlichacl, Jr. (4).... Assistant General hfanager Law, Resources The boards establish the policies for the managemerrt and and Land conduct of the business affairs of the Project. Stanley E. Hancock ..... Director, Communications and Public Affairs Carroll hl. Perkins........ Director, Proj ect Planning Paul D. Rice (5)............. Secretary COUNCIL MEMBERS (Pictured next pageJ Promoted to position (1) July 1, 1976; (2J July 12, 1976; (3) July 12, Three council members are elected for twoyear terms 1976; (4) hfarch I, 1916. Appointed to position (5J April 1, 1976 from among the shareholders in each of the 10 district areas of the Salt River Valley Water Users'Associatfon and from Consultants among the members In each of the 10 divisfon areas of the Legal Advisors............. Jennings, Strouss & Salmon Salt River Project Agricultural Improvement and Power Auditors........................ Arthur Andersen & Co.

Distrfct. The state law passed in 1976 provides that beginning Consulting Engineers..... Ford, Bacon & Davis Incorporated Bond Counsel.............. Mudge Rose Guthrie & Alexander in 1978 District council members willbe elected to four-year Financial Consultant..... Smith Barney, Harris Upham & Co. Incorporated terms with /raff the council seats up for election every trvo years.

The councils enact and amend bylaws relatfng to the ELECTED OFFICERS management and conduct of business affairs of the Project. Karl F. Abel President ~ ~ ~ John R. Lassen Vice President From thc tops) IUiffiam It?. Arnctt, at large; Thomas P. (From the top:J John S. Hoopes, IVo. 8; INlfam P.

urley, IVo. 6; BillRousseau, IVo. 3; John hf. IVilfiams, Jr., Schradcr, fVo. 7; Germain H. Ball, hfo. 1; John L.

1Vo. 5; Alex hf. Conovaloff, IVo. 2; Lco C Smith, IVo. 4 Burton, Jr., at large; Tom Finley, No. 10; Larkin Fitch, not pictured IVo. 9 not pictured

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SALT RIVER PROJECT P.O. BOX 1980/PHOENIX, AZ. 85001/RETURN REQUESTED SULK RATE US. POSTAGE PAID PHOENIX, ARIZONA Permit No. 395