ML17303A548

Salt River Project,1986-87 Annual Rept.

ML17303A548
Person / Time
Site:	Palo Verde
Issue date:	12/31/1987
From:	Boulais M, Lassen J, Pfister A SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT & POWER
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ML17303A547	List: ML17303A546 ML17303A548 ML17303A552
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NUDOCS 8709170199
Download: ML17303A548 (32)

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DEADLINE RETURN DATE RECORDS FACILITYBRANCH S7O9X70iW 86~~~~~8 OMOOMB PDR ADOCK I I

Background

River Project is named S for alt the major river which supplies water to the Phoenix metropolitan area. SRP plays a significant part in the growth of the Salt River Valley, providing water and power to residents through bw organizations the Salt River Valley Water (the Association) and Users'ssociation the Salt River Project Agricultural Improvement and Purpose of Salt River Project: Poiver District (the District).

The Association is a private Provide a reliable and adequate supply of water and Arizona corporation. It ad-electricity at the lowest reasonable cost ministers water rights of SRP's 240,000-acre area and operates and maintains the irrigation transmission and distribution

~

system which carries water to municipal, industrial, agricultural and residential users. In coopera-

~~<hvt~ tion with the U.S. Forest Service, it participates in the management of the 13,000-square-mile water-sheds of the Salt and Verde SALTRIVER PROJECT rivers.

PUIILISIIER SRP Communications The District is a public power i'ublic Affairs Department utility and a political subdivision EDIIR Heather Cllsby DESICJI Larry i~tacLcan of Arizona. It operates under PHO?OGRIt PHV Chet Snellback, Ed contracts with the United States

'tbllmr, Jere Grms and Joe and provides electricity to Qulhuls commercial, in-residential, COhtPUTER CRrlPHICS Jeff Stanley dustrial and agricultural power users in a 2,900-square-mile ser-vice area in parts of Maricopa, Gila and Pinal counties.

In line with the long-standing reclamation principle, SRP uses a portion of its electric revenues to help support its water opera-tions. This practice helps keep waterdelivery charges to cities, farmers and homeowners at reasonable levels. At the same time, SRP maintains electric rates that are competitive with those of other utilities in the area.

On the couer-Another beautiful Arizona sunset silhouettes part of SRP's Eyrene Receiving Station in 'ibmpe.

Contents Message from Management ....................... 2 P ower o ~ o ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o 4 Water .......................................8 C ommumty

~ ~

...................................12 F manctal.................... ~ ~.............. 16 Combined Financial Statements...................18 Notes to Combined Financial Statements............22 Statistical Review... '........................... 26 Board Members and Council Members..............28 Highlights REVENUES/EXPENSES (See Page 20) Fiscal 1987 Fiscal 1986 Total operating revenues ($ 000) 888,506 848,618 Total operating expenses ($ 000) 706,377 642,963 Net operating revenues ($ 000) 182,129 205,655 Financing costs (less AFUDC) ($ 000) 105,293 42,337 Other expenses, net ($ 000) . 2,075 5,002 Reinvested ($ 000) . 74,761 158,316 POWER OPERATIONS (See Page 27)

Energy customers at year end . 487,321 457,489 Total kilowatt-hour sales (000). 15,566,478 14,503,982 Average annual kWh usage per res. customer 12,440 12,175 Avg. annual kWh revenue/res. customer (cents) 7.54 7.56 WATER OPERATIONS (See Page 26) Calendar 1986 Calendar 1985 Assessed water accounts ............. 181,894 181,645 Water runoff (acre-feet) 1,774,667 1,070,214',691,741 Water in storage, Dec. 31 (acre-feet) . 1,671,535 Water deliveries (acre-feet) . 870,658 1,016,612 SELECTED OTHER DATA (See Page 26) Fiscal 1987 Fiscal 1986 Gross plant investment ($ 000) . 4,814,087 4,481,667 Long-term debt ($ 00(hSee Page 19) . 2,986,737 2,880,407 Taxes 6 tax equivalents ($ 000) . 103,097 83,864 Electric-revenue contributions to support water operations ($ 000) 15,9?5 12,384 Employees at year end. 5,735" 5,468"

'ased

" on V.S.G.S. provisional records and subject to adjustment.

Does not include temporary employees.

To Our Shareholders and Bondholders:

a small amount of capital for in-T his past year we witnessed our 50th anniversary as the Salt River Project Agricultural Im-headquarters will consist of five buildings on 40 acres est of the present headquarters. The first quality and institute practices to ensure that SRP water meets all applicable standards. We initiated vestment.

After the end of the fiscal year, provement and Power District. component, the Information meetings with all cities we serve to approximately $ 22.3 million in We'e seen a lot of changes in the Systems Building, is scheduled for seek solutions to mutual water mini-bonds were sold. Some were past 50 years. Through it all we'e completion in late 1988. In addi- problems. As population increases, interest-bearing mini-bonds for continued to supply a reliable tion to the corporate headquarters, the cities will be faced with an in- $ 500 each and, for the first time, source of energy and water at the 484 surrounding acres of SRP- creasing demand for water. By we sold capital appreciation bonds lowest reasonable cost. .owned land will be available for working with the cities, we can for $ 200 each. These bonds vvill lease and development by others share information and avoid cost-Research shows our custom- pay $ 488.05 if held to maturity in and will be called Papago Park ly duplication of efforts. 2002.

ers are happy with our service. One Center. Income from this develop- Under the Safety of Dams Act, of last year's goals was to achieve Our employees were the ment will be used to supplement preliminary engineering and ex-an overall quality of service rating strength of this year's corporate electric revenues, offset operating cavation work began on Theodore of 90 percent from our customers. theme, "The People Behind the expenses and hold down electric Roosevelt Dam and Stewart Moun-We received a 97 percent rating. Spirit." Their commitment to ex-bills. tain Dam. During 1986, we entered Customers saw a small decrease cellence was shown in their work Water supplies were sufficient into agreements with the U.S. and in their many volunteer ac-in their electric bills as we passed Bureau of Reclamation to add and remarkably well managed. tivities in their communities.

on a decrease in fuel costs. For several maintenance items to residential customers, the average Although inflows from the Salt and Verde rivers were only 87 percent necessary dam safety modifications Their efforts are, in large cost per kilowatt-hour (kWh) was measure, the reason this past year of average, heavy summer rains scheduled at Stewart Mountain 7.54 cents compared to 7.56 cents was successful for Salt River Pro-kept reservoirs fuller than normal. Dam. The proposed changes will per kWh in the previous year. enhance operating and main- ject. Through our Storage at the end of 1986 totaled employees'alents, During the year, we added 1,691,741 acre-feet (a0 or 84 per- tenance facilities at the dam. expertise and dedication, 29,832 new electric customers for cent of capacity. This was 139 per- we expect to be able to meet the Financially, it vvas another good challenges of the coming year.

a total of 487,321 customers in all cent of normal. year for SRP. Careful management classes. The new customers con- Challenges will include meeting tributed to a new system peak of For the third time in four years, of SRP resources, healthy financ-plenty of water in storage reduced ing opportunities and a strong financial capital requirements 2,785 megawatts (MW) on August caused by new construction. These groundwater pumping to less than local economy contributed to the

20. capital requirements are expected 7 percent of deliveries. Project success. Our debt service coverage However, plenty of power is groundwater pumping totaled on- increased from 1.85 to 2.0, aided to cause our debt ratio to rise.

available. The first two units of the ly 65,538 af, aiding our efforts to by a 4.7 percent increase in gross However, through all of the Palo Verde Nuclear Generating Sta- conserve this essential resource. revenues. Hot weather and the year's activities i~e'll be working tion have begun commercial opera- almost 30,000 new customers closely with Valley communities

'Ibtal water deliveries hit a tion, providing SRP with 444 MW helped to build an increase in gross and all levels of government, con-10-year low of only 870,658 af, of generating capacity. Future revenues to $ 888.5 million, up tinuing to be a strong presence in compared to 1,016,612 in 1985.

power supplies are being deeloped from the previous year's revenues the Valley we serve. We'l be here, Agricultural use was less than nor-at St. Johns, where the third 350 of $ 848.6 million. providing a reliable supply of water mal due to land sales and govem-MW unit of the coal-fired Cor- totaled $ 74.8 and electricity for our customers, ment set-aside programs which Net revenues onado Generating Station is under for another 50 years to come.

reduced the quantity of crops million during fiscal year 198M7.

contruction.

grown. Municipal use was less due As a public power utility, our net On a per-customer basis, our to summer rains which curtailed revenues are reinvested to replace operations and maintenance costs the usual amount of lawn watering. equipment and to help finance dropped to $ 1,422. That is $ 114 construction of new facilities.

Land and vvater use continued less than our Project goal of to shift. A total of 7,165 acres was Maintaining a healthy financial

$ 1,536.

~

converted from agricultural use to status resulted in our bonds con-As the number of customers in- urban use. By year's end, 68.6 per- tinuing to receive high investment. John R. Lassen creased, many located near the cent of the 238,170 acres in SRP grade ratings of AA and Aa by the outer edges of the SRP service was urbanized, while 31.4 percent nation's leading rating services. We area. To better accommodate customers on the east and est sides of the Valley, we opened the remained in agriculture.

SRP's Water Group faced a ma-jor reorganization. Reid W. lteples have sold investment-grade bonds for more than 20 years.

For the first time in ffive years,

&i~g. Marcel J. Boulais Tolleson Service Center and broke retired as head of the Water Group we sold bonds on a competitive bid ground for the Mesa Service after 39 years with SRP. He was basis. In October 1986, SRP sold Center. Regional service centers succeeded by D.S. Wilson, Jr. A $ 100 million in tax-free electric enhance operations by reducing reorganization of three depart- system revenue bonds. The bonds travel time and expense of reaching ments was completed to increase were sold in $ 5,000 denominations the customer. eficiency and to provide better ser- at an effective interest rate of 7.34 A.J. Pfister vice to customers. percent.

In an effort to eliminate use of leased office space and to con- A new department was Mini-bonds retained their solidate administrative functions, formed, the Water Quality and popularity. Mini-bonds are bonds we broke ground for a new corpo- Geohydrology Department. sold for $ 500 or less, which makes rate headquarters. Eventually, the SRP staff will monitor water them appealing to the investor with

(From left) Salt River Project General Manager A.J. Pfister, President John R. Lassen and VIce President Marcel J. Boulais.

Officers Elected Officers John R. Lassen President Don G. Parlett Associate General hlanager, Stanley E. Hancock Assistant General Marcel J. Boulais Vice President Corporate Services Croup h1anager, Communications & Public Affairs Paul G. Ahler Assistant Ceneral h1anager, D. Michael Rappoport Assistant Ceneral Principal Officers and Other Executives Human Resources h1anager, Government Affairs AJ. Pfister General h1anager James L. Swartz Assistant General h1anager, Richard H. Silverman Assistant General John R. NcNamara Associate Ceneral Operations Services h1anager, Law & Land h1anager, Corporate Engineering and Ibiver Carroll N. Perkins Associate Ceneral C.A. Howlett Assistant Ceneral Nanager, Group Nanager, Customer, Financial &Information Special Rejects Robert J. Conlon Assistant General Nanager, Services Group Paul D. Rice Corporate Secretary Corporate Engineering John D. Jacobs Assistant General Manager, Trent O. Neacham Assistant General Information S>stems h1anager, lbwer Construction &Naintenance Oren D. Thompson Assistant General John O. Rich Assistant General hlanager, hlanager, Customer Services Power Operations Mark B. Bonsall Corporate 71easurer, D.S. Wilson, Jr. Associate General Nanager, Financial Services Consultants IVater Croup Leroy Michael Jr. Associate Ceneralh1anager, LegalAdvisers Jennings, Strouss 4 Salmon Richard Juet ten Assistant General Nanager, Planning & Resources Auditors Arthur Andersen 6 Co.

IVater Resources & Services Arnold L. Schwalb Director, Corporate Bond Counsel Nudge Rose Guthrie Robert W. Mason Director, Water Croup Planning Alexander 4 Ferdon Nanagement Staff Darrell E. Smith Director, Resource Planning Financial Consultant Lazard Freres 6 Co.

3

SRP linemen continually upgrade and repair SRP's power lines, such as this high voltage line between H'yrene and Silver King receiving stations.

Electric customers benefit from decreased fuel costs, increased power i t was a golden year SRP's Power District.

for In the 50th year since the for-customers in each of the past four years including a record 34,715 customers in fiscal year rates contain a basic amount for fuel, but fuel costs can change on a daily basis. Fluctuations be-Transmission system completed under budget SRP's work on the Palo Verde mation of the Salt River Project 1985-86. Because of continuing tween the amount paid for fuel Nuclear Generating Station's Agricultural Improvement and growth, the number of customers and the amount collected from transmission system was com-Power District, the District: by the end of the next fiscal year customers are refunded or is expected to easily surpass the pleted ahead of schedule and $ 3 recovered on bills through

~ 500,000 mark.

million under budget. The Added nearly 30,000 new periodic fuel cost adjustments.

13-year project was completed in electric customers, including Of the increase in last year' SRP starts receiving October 1986, at a cost of $ 95 several major industrial customers, 27,153 were residen- low cost power from million.

customers tial and 2,245 were commercial Unit 2 of Palo Verde

~ Passed and industrial. Other electric The high-voltage transmission on a slight decrease Some of the power re- system includes 165 miles of 500 in fuel costs to customers, reduc- users, including municipal street quirements of customers were kilovolt (kV) power lines which ing their cost of electricity light contracts and irrigation met with electrici-

~ pumps, increased by 434.

Began receiving low-cost ty from the first power from the second unit of Several new industrial hvo units of Palo Palo Verde Nuclear Generating customers, including B.F. Verde Nuclear PROJECT ENERGY SOURCES Station Goodrich, Hamilton-Avnet, Generating Sta- Year Parker Hannifin and Hexcel, ac- tion. Both began April Ending busc

~ Completed the Palo Verde 30 Hpb'o Gas Oil Cnal Nuclear Purch.

counted for about 8,000 kilowatts commercial opera-transmission system to the Phoenix Metropolitan area, on- (kW) in new load, nearly 800,000 tion in calendar 1984 15.8 3.9 0.5 78.6 0 1.2 time and under budget square feet of manufacturing year 1986, the first 1985 12.8 8.9 0.4 76.2 0 1.7 space and more than 1,000 new unit on January 1986 11.0 103 0 683 1.0 9.4

~ Brought on-line a new com- 1987 10.0 8.6 0 58.4 12.4 10.6 jobs in the area. 30, 1986 and the 1992 63' puter, the Energy Management 1 0 67.6 21.0 0 Each new customer increased second unit on $prnjeded)

System, to control SRP's electric September 20, 'inc&As bybo purchases demand on the electric system.

system 1986. bill numbers m prnraroprsl Electric customer use reached a

~ And continued construc- peak of 2,785 megawatts (MW) SRP is one of tion of the third coal-fired unit of on August 20, 1986. This peak seven owners of the nuclear link Palo Verde Nuclear Gener-the Coronado Generating demand surpassed the previous powered station 50 miles west of ating Station with Phoenix and Station. high of 2,658 MW reached on Phoenix. SRP owns 17.49 per- other moor cities and the elec-August 29, 1985. 'Ibtal kilowatt- cent of Palo Verde's three 1,270 trical grid connecting the Further luster was added to hour (kWh) sales to customers MW units. With the commercial Western states.

the golden jubilee when SRP's during the year increased by operation of the first two units, District improved service to our SRP gained 444 MW of Meanwhile, construction 1.06 billion kWh to 15.56 billion began on the Papago Buttes-customers by building a new kWh from 14.50 billion kWh the generating capacity. Pinnacle Peak 230-kV transmis-regional service center; esta- previous fiscal year. sion line. The line will strengthen blished a demand side implemen- The third unit of Palo Verde . SRP's transmission system and tation program; and formulated Electric bills drop slightly Nuclear Generating Station is ex- increase electric reliability to the a balanced strategy approach to During the )mr, SRP was able pected to be in commercial growing number of customers in resource planning. to pass on to customers a slight operation by the end of 1987. the Scottsdale and Tempe area.

decrease in fuel costs, thereby This unit will provide another SRP's service area The line is expected to be com-lowering the cost of electricity. 222 MW of capacity to SRP. The remains a high-growth area pleted in early 1989.

For residential customers, the U.S. Nuclear Regulatory Commis-The number of SRP average cost per kWh was 7.54 sion issued an operating license During the fiscal year, SRP customers continued to grow. cents, compared to 7.56 cents per for the unit in March 1987. That added a total of 15 miles of 69 Electric customers, totaled kWh the previous year. The license allows plant operator kV subtransmission line and 39 487,321 at year's end, compared reduction was due to a decrease Arizona Public Service Company miles of overhead distribution to 457,489 the year before. SRP in the fuel cost adjustment fac- to load nuclear fuel and begin the lines. SRP also installed 1,403 has added about 30,000 tor applied to bills. SRP's electric prescribed testing process. miles of primary underground

distribution lines and 513 miles unit is expected to begjn com- Generating Station. areas are evaluating the potential of secondary underground distri- mercial operation by 1991. benefits, including deferral of new SRP completed the first phase bution lines. Also, five new generating units, improved effi-SRP expects to spend about of its statewide study of potential residential distribution substation ciency, enhanced reliability and

$ 670 million in direct costs for locations for a new coal-fired better system coordination.

sites were opened and 15 new the unit, about $ 50 million less generating station. However, substations were installed. than the 1985 estimate. SRP is since current projections show Regional service centers one of a few U.S. utility compa- that another large, coal-fired provide faster service Energy Management System nies building a generating unit of generating station won't be is installed needed until aiter the year 2000, to customers this size and is benefitting from SRP's ability to control its competitive prices for equipment and it takes about 10 years to Regional service centers, new-power nebvork increased dramat- and materials. Supervision of plan and build a large coal-fired ly opened or now under con-ically with the arrival and instal-lation of the Energy Management System (EMS), a new computer system installed in February SALT RIVER PROJECT ELECTRIC SERVICE AREA 1987. EMS is a power network control system with which dis-patchers monitor and direct the flow of power from generating fa-cilities to customers. Thus far, about 70 SRP substations are fflfVf8 operated by the new system. All oP

~A 170 substations in the SRP elec-tric system are projected to be on C APACHE J

~0 ~

EMS by late 1987. Phoenix E

MIAMI ~ ~ GNBE

~ F The new system is far more ~G ~ SUPERIOR advanced and efficient in every 8/vga FNREIICE JCT.

respect from the old control sys-tem, which SRP had outgrown. ~ H In addition to features of the old system, the EMS has powerful statecf-the-art computer analysis capabilities designed to help pow-er dispatchers react faster to sys-tem disturbances and make i

better decisions regarding alloca-tion of generation resources.

Besides the ability to quickly identify, analyze and determine the cause of power outages, advantages include an in-EMS'ther creased ability to analyze the best time to buy and sell electricity, and to quickly analyze demand O Electric Service Area Served Exclusively by Salt River Project.

Salt River Project Provides Full Po>>vr Requirements of Arizona D

Public Service for Resale.

on the system. As a result, the new system increases SRP's relia- Salt River Project Provides Full Electric Service Areas Not Semd by PoNer Requirements of Arizona Salt River Project bility and cost effectiveness. Public Service for Resale. Project Makes Direct Sales to Customers for SRP sent nine engineers and All Mining Loads.

their families to Minneapolis for three years to supervise the build-ing of the computer and its soft-ware. Including installation, the contruction by SRP engineers station, the study probably won' struction, are bringing SRP new system cost $ 28 million. also is keeping costs down. be resumed until the early 1990s. closer to its customers. Service SRP will continue to study sever- centers in the western and Meanwhile, SRP is testing a Construction continues al options for meeting its cus- eastern part of the Salt River Val-potential source of new coal for on Coronado 3 tomers'lectric demand. ley enhance operations by reduc-Coronado Generating Station.

ing travel time and expenses.

In January 1986, construction SRP has acquired leases for coal-When customers need service, resumed on the third 350 MW bearing properties in western One option under study is a construction or repair, crews are unit of the Coronado Generating New Mexico. lhsting of 100,000 high voltage transmission line to able to respond quickly because Station at St. Johns, Arizona. By tons of coal will help SRP decide connect the Desert Southwest they are closer to the work site.

the end of May 1987, construc- if that coal could be a future and the Pacific Northwest. SRP tion was 8 percent complete. The source of fuel for Coronado and 26 other utilities in the bvo 6

The new Tolleson Service Center, opened in January 1987, is headquarters for 300 I,'/)

employees who serve the growing west Valley. By 1995, SRP pro-jects that it will be serving 200,000 electric customers in that area.

SRP is building a similar regional service center in east Mesa to serve the growing east t

)

Valley. About 350 SRP employees will work at the center when it opens in 1988, with ap-proximately 150,000 electric customers expected to benefit.

Customer service centers in Glendale and in the southeast Valley are also planned. SRP opened its first service center in New electric customers, such as Westcourt In the Buttes hotel manager (right), receive personal Tempe in September 1983. assistance about the/r power needs from an SRP commercial customer representative.

SRP emphasizes demand-side planning allow customers to take greater tioners or heat pumps with new balanced strategy planning, to SRP continually is looking for control over the cost of their elec- high<fficiency air conditioners or plan methods of meeting pro-ways to reduce its costs and pass tricity. heat pumps. SRP offered cash in- jected electric demand. This ap-along its savings in the form of SRP's Board of Directors centives of between $ 50 and proach reflects SRP's least-cost lower electric bills to its cus- voted in March 1987 to allow an $ 100 a ton for the new planning philosophy. Its goal is to tomers. 'Ib provide customers additional 10,000 SRP customers equipment. find the best combination of with more opportunities to to participate in the time-of-day SRP's Energy Efficient Home demand-side load reductions and reduce their electric bills and to program, increasing the number (EEH) program achieved new future power additions resulting bring about beneficial changes to of potential customers in the pro- heights in market penetration last in the lowest possible cost, while the pattern of system demand, gram from 3,000 to 13,000. year. Currently, six out of 10 new maintaining SRP's high level of SRP established the Demand- homes in SRP's service area are customer service.

Side Implementation Department Other demand-side programs include a cash incentive program built by contractors in the EEH The balanced strategy plan last year. program. The program requires calls for commercial operation Demand-side programs can for businesses, schools, or chur-ches which install thermal energy builders to meet 12 building of the third unit of Coronado moderate the rate of growth in specifications for a total-electric Generating Station by 1991, a storage systems, rather than con-peak demand and bring about a home. 200 MW purchase and a sales ventional air conditioners. A more constant demand for elec- EEH homes are more energy contract recapture, plus a reduc-thermal energy storage system tricity throughout the year. This efficient and thus cost less to tion in projected peak load up to uses electricity at night to form lower rate of growth means SRP operate for the owner. 400 MW by the year 2006 ice or liquid which is used to cool does not have to build as many through demand-side programs the building during the day, in- Resource planning aimed new generating plants, thus keep- This plan allows SRP to delay stead of a conventional refrigera- at reducing cost ing down rising costs associated construction of additional un-tion system.

with new construction. More During the fiscal year, SRP committed coal units until after constant demand means SRP Customers who replaced gas used a new approach, called the turn of the century.

can make more efficient use of its furnaces with high existing generating system. efficiency heat pumps last year Last year the new department, received $ 200 ELECTRIC CUSTOMERS in cooperation with other depart- from SRP for the (ALL CLASSES) ments, continued a program switch. The $ 200 evaluating customers'esponses incentive was to the time-of-day program. boosted from a Within the time-of-day program, $ 100 incentive of-begun in March 1980, par- fered when the ticipating customers pay lower program began in 4oo,ooo rates during off-peak hours. Con- March 1985. 2pp ppp versely, they pay higher rates dur- Another incentive ing on-peak hours, when offered was to electricity demand is great. customers who Results from the study will help replaced old, inef- 1977 1982 1987 1992 1997 2001 SRP plan rate alternatives that ficient air condi-

SRP demonstrates a vital interest in hydraulic engineering projects at Arizona State University's SRP Hydraulic Engineering Laboratory.

Water Group reorganization reflects changing needs of the Salt River Valley RP's Water Group under-S went major changes last year to satisfy changes in laws, practices of industry, agriculture and municipalities.

determine the relative water rights of all lands within the Gila In response to the act and River basin, including SRP community attitudes and the member lands, and the land on other laws and regulations needs of water customers. the watersheds of the Salt and relating to water quality, SRP formed its Water Quality and Verde rivers.

Last year, SRP's Water Group:

Geohydrology Department. One of SRP's primary duties

~ saw retirement of its top ex- Members of the department will is to ensure protection of water ecutive monitor the quality of SRP's rights for lands within the SRP

~ formed a new department water resources and institute water service territory. Those and reorganized three others practices to ensure water man- rights were established under the

~ participated in several city aged by SRP meets all applicable Kent Decree in 1910 and other and SRP long-range water plan- Reid M %epics standards. court actions. By protecting the ning forums SRP's Water Group also water rights, lands in the SRP

~ completed canal mainte- reorganized three departments to water service area are assured a nance work to decrease water provide better service related to portion of the water in SRP Reid Teeples retires reservoirs. As a result, the water losses water rights administration and

~ In January, Reid W. Teeples water construction and supply of lands within SRP and worked with Valley retired after 15 years as the head maintenance. boundaries is more secure than cities to build an intertie between SRP canals and the Central of the Project's Water Group. the water supply for many other Tt.epics, who joined SRP in 1948, Water rights administration is portions of the Valley.

Arizona Project canal. expected to be particularly im-was replaced by D.S. Wilson, Jr.

portant during coming years as The Project also was involved Urban land use increases the Gila River Water Rights Ad-During his tenure, Teeples in discussions over a potential in water service area judication progresses through the coordinated the largest well- joint groundwater storage and The character of the area drilling program in SRP's history courts. The adjudication will recovery project, meeting with served by SRP continued to and established the Project's change during the past year. A Groundwater Department. He total of 7,165 acres was converted also was responsible for standar- COMPONENTS OF SRP WATER DEMAND from agricultural use to urban dizing many of SRP's practices use. By year's end, 68.6 percent while heading the Civil Engineer-of the 238,170 acres of SRP ing Department. 1986 PLANNING CASE member lands was urbanized In addition to his work at 2005'RBAN while 31.4 percent was used for SRP, he served in various leader- IRRIGATION ll'Yo URBAV IRRIGATION agriculture. 111,000 ABYR 97700 ABYR ship capacities with the Colorado 1244 SRP estimates that essential- River Water Users'ssociation, SYSTE>1 LOSSES 12% SYSTE'V LOSSES the National Water Reclamation 122.900 ABYR 121~ AF/YR ly all acreage within SRP bound-aries will be out of agricultural Association and various other OTHER OTHER VALLEYCONTRACIS VALLEYCONTRACIS production by the >mr 2015. groups. 184~ AF/YR 2494 90900 AF/YR Wilson joined SRP in 1967.

Water deliveries also have He was manager of Water AGRICULTURE 29%

AGRICULTURE 252,900 AF/YR reflected the changes in land use. Resource Operations for eight 290.800 AF/YR During the past year deliveries for years before being named to suc-urban uses totaled 395,158 acre- ceed 'keples. 46% 0HMCIPAL feet (ao while deliveries for 4 Bil)USTRIAL New department formed NlMCIPAL 29% 470.000 AF/YR agricultural purposes totaled 4 INDUSTRIAL 284200 AF/YR 290,572 af. During the previous Arizona's Environmental year, urban use totaled 396,228 Quality Act, passed last year, TOTAL DE41AND 993,600 AFIYR 'IIALDEbfAND 1.033.000AFIYR af and agricultural use was placed stringent water quality re- AF (ACR&F0071 %$ 880 CALLOVS 381,341 af. quirements on the water use

the City of Mesa and the Arizona of adequate supplies now and in years, an abundance of surface Tbtal water deliveries to the Municipal Water Users Associa- the future throughout the Valley. water allowed SRP to keep cities during the year totaled tion (AMWUA).SRP is consider- Also, the cities and other pro- groundwater pumping to less 284,192 af, an increase of slight-ing groundwater storage to viders will find it easier to than 7 percent of deliveries. lbtal ly less than one percent from recharge Salt and Verde river comply with the conservation Project groundwater use was 1985's total of 281,464 af.

waters during above-normal requirements of Arizona's 65,538 af.

runoff years. The underground Groundwater Management Act. SRP coordinates stored water would then be Combined surface and construction with cities recovered for use during below- During the year SRP organ- groundwater produced for Pro- As more and more streets and normal runoff years. ized a regional water planning ject use totaled 993,591 af, which freeways are built, the rights of forum with the cities it serves, was 90 percent of the median for way often conflict with those of SRP increases efforts to assist to identify and address long- the last 10 years. Depending on SRP wateiways. In 1986 SRP met cities with water planning range water planning issues. Four surface water supplies, ground- with Valley cities, the Arizona As the number of people water planning groups were water historically has satisfied Department of itansportation, living in the Valley continues to established, each led by an SRP between 5 percent and 40 per- and the Maricopa County grow, the cities here are faced facilitator, to inform each other cent of SRP customers'nnual Highway Department to discuss with an increasing demand for about the cities'nd SRP's needs water demand, or 55,000 af to ongoing design and construction water. During the past year, SRP and limitations and to avoid 440,000 af each year. Reduced projects. More than 30 meetings continued its meetings with the duplication of efforts. pumping helps eliminate over- were held resulting in improved City of Phoenix coordination behveen SRP and and expanded the agencies on irrigation-related those meetings to projects where facilifles of bvo or include other cities more entities are involved.

in its water service Interagency coordination area to seek solu-saved time and money by reduc-tions to mutual ing the impact of residential and problems. By freeway construction on SRP's working ivith the ability to supply water to homes, cities, individually businesses, municipalities and and as a group, all farms.

involved can share information and SRP continued its commit-avoid costly ment to water conservation by duplication of ef- lining 7.4 miles of canals and in-forts in planning stalling 98 lateral structures last ways to meet water year. Lining canals decreases demand. water system losses for a savings of thousands of acre-feet of water Among the ef- each year.

forts worked on by SRP was institu- SRP also completed a tion of a Valley- beautification project along part wide water conser- SRP Is a recognized world authority on water systems. These Egyptians were of the Arizona Canal which in-vation effort. SRP, among nearly 600 visitors from 58 countries who toured SRP facilities In cluded improving the appearance 1986, During SRP visits, Egyptian participants received handswn training In of the canal by extensive brush along with other the operations, maintenance and management of the Project's irrigation system.

members of and tree removal, and tree trim-AMWUA encour- ming. Similar projects are aged the cooperation of local Water storage above normal drafting supplies. The Arizona planned for other canals.

broadcasters, under the leader- SRP began the year with Groundwater Management Act ship of KPHO 'klevision, on an calls for pumping to be limited to Congress funds 1,671,535 af of water in storage.

extensive campaign called Water the quantity recharged by dam improvements Inflows from the 13,000-square-Wise." Each month a water con- mile watershed to the SRP reser- January 1, 2025. Under the Safety of Dams Act, servation tip is communicated voirs totaled 1,070,214 af during Congress appropriated $ 3 1 through public service an- the year, which was 87.0 percent Tbtai water deliveries hit a million for safety improvements nouncements carried by local of average. Inflows during 1985 10-year low. Deliveries totaled at Theodore Roosevelt Dam and television and radio stations. A totaled 1,7?4,667 af. Unusually 870,658 af compared to $ 3.9 million for work at Stewart printed version of the tip is heavy summer rainfall on the Salt 1,016,612 af in 1985 and 881,009 Mountain Dam.

distributed through ABCO and Verde watersheds contri- in 1984. Agricultural use was less Markets Inc., Bashas and Lucky buted to runoff that kept reser- than usual due to government Shortly after the end of the grocery stores. set-aside programs which re- fiscal year, Arizona's congres-voirs fuller than normal. Storage duced the quantity of crops sional delegation negotiated an at year-end totaled 1,691,741 af grown. Summertime municipal agreement with environmental By working together toward or 84 percent of capacity. This use declined because of greater groups concerning Plan 6. Under the common goal of conserving was 139 percent of normal. 'otal than normal summer rainfall the agreement, CliffDam will not water, customers can be assured For the third time in four which reduced laivn irrigation. be built. In return, environmen-10

tal groups agreed not to oppose baffic from the to SALT RIVER PRO JECT IRRIGATED AREA the remaining elements of of the dam.

Plan 6.

Intertie will link The plan will provide Central SRP canals and CAP Arizona Project water storage @+LE and regional flood control and Locally, SRP dam-safety modifications. Other worked with six ecoOl elements are an enlarged Theo- Valley cities to ob-dore Roosevelt Dam and modifi- tain agreement on cations to Stewart Mountain Dam on the Salt River. Construction a plan to build a

$ 3.1 million struc- Ql outside the SRP reservoir system included New Waddell Dam on ture that would link SRP's canal Imk the Agua Fria River. system with the Central Arizona During 1986 SRP entered Project Q~~~o&

(CAP) into agreements with the U.S.

aqueduct. The in-Bureau of Reclamation to add tertie, which will several maintenance items to carry up to 800 necessary dam safety modifica-cubic-feet-per-tions scheduled at Stewart Moun-second of water, tain Dam. The proposed changes will transport water will enhance operating and from the CAP maintenance facilities at the dam.

aqueduct near For 1987 SRP contributed Granite Reef Diver-about $ 1.5 million in safety modifications. SRP is prepared to contribute an additional $ 5 million to the U.S. Treasury in fiscal 1988. The Project's involve-ment is through a local cost-share sion Dam to SRP's main canals for delivery to CAP users.

Salt Riwr Project Irrigated Area O 13,000 Sq. &tile Project Watershed The Central Arizona Project agreement for completion of is a water-delivery system being Plan 6. DOMESTIC WATER DELIVERIES constructed by the Bureau of The federal government has Reclamation to deliver water 1986 1985 change Chandler 7,936 6,700 + 10.39%

accepted $ 371 million in local from Lake Havasu on Arizona's Gilbert 4,357 3,125 + 39.44%

funds in exchange for a federal western border to Maricopa, Glendale 25,222 23,982 5.17%

commitment to complete all Pinal, and Pima counties in cen- Mesa tral and southern Arizona. Cur-44,391 41,476 + 7.03%

elements of Plan 6 by 1997. SRP Peoria 4,028 4,351 + 7.47%

pledged $ 52 million of the local rently, construction is complete Phoenix 156,412 160,876 2.77%

funds as its share of dam-safety to just north of 'Ittcson. Scottsdale 3,478 3,843 9.50%

modifications. The federal Although SRP hasn't con- Tempe 38,367 37,172 + 3.38%

government is responsible for the tracted for CAP water, SRP may Total 284,192 281,464 + 1.00%

balance. need the intertie to receive CAP ilit numtpers are in acre feet, crcept percents of change Work to be performed on water for use when Roosevelt Theodore Roosevelt Dam in- Lake is drawn down for construc-cludes raising the overall height tion of the federally mandated of Engineering and Applied Through efforts coordinated of the dam by 77 feet. The safety modifications. Science exemplifies the business- by the office, SRP helped install modifications to the dam will CAP received record levels of education partnership SRP four radial gate structures in enable it to provide flood control, funding from the 99th Congress, strives to maintain. The new Egypt. The installation was part dam safety and additional water despite the pressure of the equipment in the laboratory will of the ongoing Professional conservation storage on the Salt Gramm-Rudman deficit reduc- be used by students to study the Employee Exchange Program River. tion law. For fiscal year 1987, mechanics and engineering pro- (PEEP) with Egypt's Ministry of blems associated with water and Irrigation. Also, a seminar on Modifications to Theodore CAP received $ 202.8 million.

other fluids. telemetry was presented to the Roosevelt and Stewart Mountain ASU dedicates Ministry of Irrigation by SRP dams are included in the Plan 6 Work with representatives student laboratory from countries around the world personnel.

agreement.

Continuing its longtime tradi- was continued through SRP's Also under PEEP, tm Cairo The Arizona Department of tion of supporting higher educa- Office of International Affairs. University students completed a Transportation will begin con- tion, SRP provided grants to The office hosted nearly 600 15-week summer study program.

structing a bridge on the Arizona State University's SRP visitors from 58 countries, held One student worked in SRP's upstream side of Roosevelt dam Hydraulic Engineering Labor- 20 on- the-job training programs Civil Engineering Department in 1987 to be finished by 1990. atory. The joint endeavor and conducted seminars for 160 and the other in Water Resources The bridge will remove the between SRP and ASU's College representatives of 15 nations. and Services'ydrology Division.

a f ~ I~

~'

1 t

46 erat

,t

. +'4y;:.I '~

, j~;p I

~ I",1 I IE .

P The Salt River Pete water safety program teaches half a million children in 2D years. water safety to school children. The award-winning program has reached more than

Salt River Project's service extends beyond water and power S Behind putthe 'TheSpirit' RP employees to People their customers forts of SRP employees, Valley teenagers last year learned more attracted 440 participants and resulted in a donation of $ 1,640 donations and in-kind services.

Employees also hold key posi-

'ontinued about the free-enterprise system to the St. Johns Senior Citizens tions on the foundation board.

and their communities first. And through SRP-sponsored Junior Association.

it showed. SRP recognizes the value of Achievement companies.

The annual Page Attacks excellence in education. Last In fiscal year 1986-87: 'fhsh program received first year, SRP honored 61 seniors Employees helped raise

~ 97 percent of customers $ 106,000 during February 1987's place in the statewide 'hke Pride during its fifth annual Spotlight rated SRP service as "good" or Junior Achievement Telephone in America" competition spon- on Excellence program. Honored "excellent" Campaign. A total of 97 sored by the Commission on students were graduating seniors

~ Volunteer work by SRP volunteers, representing 33 com- Arizona's Environment and se- from Maricopa County, Page and employees reached new heights panies, called area businesses cond place in the national com- St. Johns areas in which 8RP

~ Business requesting donations for Junior petition sponsored by the U.S. has electric facilities. Honorees .

offices were Department of Interior. Each Achievement. SRP volunteers were selected by their school moved, improving customer service raised $ 12,242, the second >m; the community effort has in- principals for academic achieve-volved more than 75 percent of ment and all-around excellence.

~ And SRP's Better Way and highest amount of any business Page's 6,500 residents.

Quality Circle programs meant during the telephone campaign. For younger students, SRP savings for SRP and its The money went toward pro- Page Attacks %ash started in and APS co-sponsored the an-customers. grams and operational support 1981 as a city-wide cleanup pro- nual Ener@ Fair. The fair at-for the organization. gram sponsored by SRP's Nava- tracted 200 entries for "Energy SRP receives high marks jo Generating Station (NGS) and Changes and Challenges."

In a joint effort, SRP and the Glen Canyon National Kindergarten through 12th grade "The People Behind the Arizona Public Service Company Recreational Area. The Page students participated. Russell Spirit" kept up SRP's tradition of (APS) raised more than $ 8,700 Kiwanis Club and Elks Lodge Moreland of Willis Junior High giving first-rate customer service. for needy citizens in the fourth have helped to coordinate the School, Chandler, made the win-Nearly all of SRP's electric and annual S.H.A.R.E. Affair event in recent years with help ning entry.

~ater customers polled last year 10-kilometer run January 10. A from NGS employees. Last year' were very satisfied with the quali- record 835 people participated in Ten outstanding employees participants collected 212 tons of and one retiree were honored for ty of service they received from the fund-raising event, which also trash.

the Project, according to monthly included a two-mile fun run and their service to civic and com-surveys. SRP's goal was for 90 a five-mile walk. SRP's organizational and munity organizations in Arizona percent of its customers to rate monetary involvement in Page At- with SRP's Karl F. Abel Volunteer Proceeds were donated to the awards. Named for SRP's im-overall quality of service good or tacks Thrash, along with other Salvation Army, which ad- anti-litter efforts, was honored by mediate past president, these excellent. The Project exceeded ministers the Service to Help awards are presented each year that goal with the 97 percent an award from Arizona Clean and Arizonans with Relief on Energy to employees who devote their rating. Beautiful, the state arm of the na-(S.H.A.R.E.). Formed by SRP tional Keep America Beautiful time and energy to their com-Employees'ommunity and APS in 1982, Project munities.

campaign. SRP was distin-involvement remains high S.H.A.R.E. provides funds guished as the most outstanding Saundra Reedy, administrative through the Salvation Army for business in the state with regard SRP employees showed pride assistant at Coronado Generating energy-related bills and home in their communities by donating to its anti-litter efforts. Station, was named St. John' repairs of needy families.

their time, money and energy to Outstanding Chamber of Com-SRP customers donated The Delta Gamma National merce member in 1986. She was community-related projects. Pro-

$ 114,313 to the S.H.A.R.E. pro-Foundation for the Blind honored for her efforts in several ject employees pledged a total of honored SRP with an award Chamber of Commerce activities

$ 326,772 to 52 non-profit agen- gram last year. Customers donate through their monthly electric recognizing the Project's support promoting the St. Johns area.

cies. And Project employees bills. of the Foundation for Blind donated approximately 480 pints SRP honored for Children. The award recognized of blood last year to a statewide Meamvhile at St. Johns, the two safety programs SRP as a long-time supporter of blood service.

seventh annual Coronado the organization through SRP received two moor safe-Thanks to the volunteer ef- Generating Station benefit run employee volunteering, financial ty awards last year. They were 13

grams include SRP's where Speakers'ureau, employees volunteer to make presentations to organizations or groups.

'lbpics range from the early beginning of the Project through the most up-to4ate activities of the utility.

During fiscal year 1986-87, Ittdta $I

'd IO StttOO SRP made about 2,300 presen-

> $ tt, ttttt tlt tttl tations to audiences totaling

~t i I

IO n II I 87,343 persons.

SRP also conducted programs about microwave cooking, com-puter equipment safety, and energy conservation, SRP's Power Saver Store opened last year at Westridge Mall. Nothing is for sale. Instead, employs offered fire, expert ad-vice about the efficient use of water and power.

Customer business offices moved for greater convenience

'le customer business offices An SRP employee shows the tools of his trade to his son during an open house at the new 'Iblleson were moved for greater speed and Regional Service Center. The regional service center Is designed to speed servIce to customers. more ease in helping customers.

The Mesa Business office was third place in the American nual safety contest to draw atten- tion in the community. SRP is moved in May to a larger facility, Public Power Association's tion to the importance of safe the first utility to receive this and customers in the Fountain (APPA) Electric Safety Award working habits in the electric honor. Hills area found it more con-contest and the Arizona Safety utility industry, and to recognize SRP's public safety programs venient to receive help at the Association's Howaid Pyle Award. excellence in that area. extend to construction workers, Fountain Hills office's new school children, professional law location.

APPA is a national organiza- The Arizona Safety Associa-enforcement officers, firefighters Courteous, helpful and quick tion representing more than tion is a chapter of the National and others. replies to customer inquiries are 1,750 publicly owned electric Safety Council. The Howanl Pyle Award recognizes safety promo- Additional public service pro- goals at SRP. Tb increase the utilities. APPA conducts the an-OOO~ number of calls handled, SRP's O IM$$ $ ICr phone center began opening at 7:00 a.m. instead of 7:30 a.m.

The phone center was remod-Customer service representative Elaine Spencer is one of eled and expanded to provide several SRP employees who 12 additional work positions. By volunteer their time to rescheduling existing personnel needy organizations throughout to work during peak periods, an the state. additional 90,437 calls were answered without hiring addi-tional people. Last year Project employees received more than 1.2 million calls.

A major billing system change was implemented in February 1987 to bill accounts by route in-stead of by billing districts.

Regionalized billing has leveled the flow of customer traffic into the business offices, reducing customer lines and thereby pro-

// viding faster service. Reduced travel time to customers'eters also has resulted in increased

SRP's newly remodeled History Center appeals to all ages. Through displays and vIdeos, the Center depicts the development of water usage In the Phoenix area from prehlstorlc times to the present.

productivity and reduction of cur- Under special legislation ly unlimited through the Better million in research activity, involv-rent and future costs. passed in 1963, SRP, as a Way program. As long as SRP ing dozens of SRP employees Continuation of that excellent political subdivision of the state, employees continue to think went toward 29 major research customer service was enhanced makes voluntary contributions in creatively and submit sugges- and development products. Pro-last year when SRP and Local lieu of property taxes to school tions, the Project will continue to jects included studies of thermal Union 266 of the International districts, cities, special districts, realize greater savings and energy storage and solar Brotherhood of Electrical counties and the state. employees will be rewarded for resources, which could help Workers signed a three->mr labor Employee programs their creativity. customers save on their electric agreement. This longer-term con- save money bills. Projects also included im-tract enables management to SRP's Quality Circle program proved precipitation forecasting, more accurately predict future Sixty-seven ideas from entre- uses a group approach to pro- which could help assure ade-labor costs, provides employees preneurial employees saved the blem solving. Employee groups quate water supplies and reduce with greater stability in wages and Project $ 423,000 in first-year sav- develop consensus and report to potential for floods.

benefits, and provides SRP ings through the Better Way pro- management. Since 1983, SRP's gram. The Better Way program A program at Arizona State customers with reduced exposure Quality Circle program has University has meant multiple to a work stoppage. uses employee suggestions that saved $ 3 million and improved deliver real dollar savings to SRP. benefits for SRP and the com-service to customers. Also, the munity. SRP sponsors the Elec-Counties get monetary Once a dollar savings is esta- program helps develop problem-blished, a percentage of the sav- tric Pope Research Laboratory boost from SRP solving skills and an enhanced ings is paid to the employee who (EPRL), which is in its third year SRP contributed $ 35.8 sense of value for individual submitted the idea. Last year at ASU. SRP contributes million of in-lieu property taxes employees. $ 100,000 per year to EPRL to employees received $ 34,000 in to seven Arizona counties during awards. Research and development fund research for power genera-fiscal year 198687. In effect, SRP projects at SRP provide technical tion projects conducted by ASU is the state's third-largest property The potential for savings to information that could benefit students, professors and SRP taxpayer. SRP and its customers is virtual- SRP's customers. More than $ 3 engineers.

15

SRP mini.bonds are proving to be popular investments. Some bonds can be purchased for only S200.

Management, economy combine to produce strong financial position

~ SRP bonds maintained 1986-87 raised SRP's debt ser- allows SRP bonds to continue to areful management of Salt vice coverage to 2.00. That com- be rated highly by the nation's River Project resources, their AA and Aa ratings pares with last year's ratio of 1.85. leading rating agencies. SRP first healthy financing opportunities

~ Gross revenues increased; The debt service coverage ratio issued Electric System Revenue and a strong local economy con- but net revenues fell reflecting ac-measures the number of times Bonds in 1973. The bonds have tributed to another good finan- counting transactions related to the sum of principal and interest been rated investment grade-cial year for SRP. the start-up of Palo Verde due on outstanding debt during those suitable for purchase by Nuclear Generating Station.

the year is covered by revenues prudent investors ever since.

During fiscal year 1986-87: Debt service coverage rises available after payment of Currently, the bonds are rated operating expenses. AA by Standard 6 Poor's and Aa

~ The debt service coverage A 4.70 percent increase in by Moody's Investor Services, Inc.

ratio increased from 1.85 to 2.00 gross revenues in fiscal year Keeping healthy financially

Gross revenues increase its first unit went into commer- The time was right for a com- $ 290 million by 1992 on the first Hot weather and nearly cial operation. petitive sale because interest two of the five buildings. The 30,000 new customers increased With commercial operation of rates were relatively low and corporate headquarters will be enerib sales, helping to build a the first unit in January 1986, the, stable and the then<urrent sup- the focal point of Papago Park 4.7 percent increase in gross trade took place. SRP reduced its ply of municipal bonds was Center, a business park on the revenues to $ 888.5 million, up share of Palo Verde to 17.49 per- limited. Salomon Brothers, Inc., adjacent 484 acres. SRP will from the previous year's revenues cent and regained 100 percent of New York placed the winning coordinate development of the of $ 848.6 million. Average an- ownership of Coronado Gener- bid. Three other groups also of- center which will be opened to nual use for residential customers ating Station. At that time, fered bids. private and commercial develop-increased from 12,175 kilowatt- LADWP also paid SRP a partial SRP, as a special-purpose im- ment. Revenues from the sale or hours (kWh) to 12,440 kWh. payment of $ 90.65 million in provement district, sells tax- lease of facilities in the center will recognition of the greater cost of exempt revenue bonds to finance help offset the costs of providing Although gross revenues in- Palo Verde. A second payment of new construction and im- electricity to SRP customers.

creased, so did the cost of doing $ 74.75 million (including in- provements to its electric system. In May, SRP estimated savings business. Operating expenses in- terest) was received during fiscal Tax-exempt financing and SRP's of $ 30 million over a 20-year creased 9.9 percent to $ 706.4 198647. solid credit ratings help keep million from $ 643.0 million the period due to the operating effi-Despite the decline in net financing costs relatively low. ciencies gained through central-previous year.

revenues, SRP's debt ratio dipped This, in turn, can help delay rate izing administrative operations.

SRP produced $ 74.8 million slightly from 68.06 percent in the increases. Low financing costs in net revenues during fiscal year previous fiscal year to 67.67 could also minimize rate in-1986-87. That was a substantial percent. creases.

Compensation funds set aside decrease from the $ 158.3 million for APS customers in fiscal year 198546. The SRP set aside $ 3 milhon last decrease resulted from account- DEBT SERVICE COVERAGE RATIO year to compensate certain ing transactions related to the Arizona Public Service Company start-up, of the Palo Verde 984==85 1986-87 (APS) electric customers who are Nuclear Generating Station.

1983 84==2:=={) 9M988 86==-2:= SRP shareholders. Qualified SRP Specifically, when the first unit ==92:= =1===.85= = ==1:==:.85::

00 shareholders are those in-of the Palo Verde Nuclear dividuals who own and live on Generating Station began com- land within the boundaries of the mercial operation in January Salt River Valley Water 1986, SRP stopped making en- Some receive elec-Users'ssociation.

tries to record the allowance for tricity from APS.

funds used during construction. A comparison of 1986 electric Instead, these finance costs were bills from SRP and APS in-listed as expenses. At the same dicated that some SRP time, SRP began recording shareholders paid APS at least 15 depreciation, operating and percent more than they would maintenance expenses for the have paid SRP for the same unit. System sales did not in- amount of electricity.

crease commensurate with the SRP's obligation to make commercial operation of the first As a public power utility, SRP SRP sold approximately payments to some APS cus-unit, resulting in a decrease in does not issue stock or pay $ 18.70 million in interest-bearing tomers is the result of a 1928 net revenues. dividends. Net revenues are mini-bonds for $ 500 each and SRP bylaw which protects Palo Verde's second unit was reinvested in SRP to help replace $ 3.60 million in capital apprecia- residential landowners residing treated the same way when it equipment and finance construc- tion bonds. The capital apprecia- within SRP boundaries, but began commercial operation. tion of new facilities. Such tion bonds were purchased for served by APS, from paying sub-The same format will follow for reinvestment reduces the need to $ 200 per bond and will pay stantially more for electricity than the third unit when it goes into issue bonds, thus keeping rates $ 488.05 if held 'to maturity in if they were served by SRP. In commercial operation. Iow. 2002. The sale closed May 15, 1967, the courts defined substan-Bonds sold on 1987. tial as 15 percent or more.

Commercial operation of the first Palo Verde unit also trig- competitive basis Construction begins on SRP shareholders in 1984 gered an exchange of capacity For the first time since 1981, corporate headquarters voted to grandfather the right to with the Ias Angeles Deparbnent SRP sold bonds on a competitive In January 1987, SRP began compensation to those share-of Water and Power (LADWP). In bid basis. For the past five years, construction on the first building holders who received electric ser-1977, LADWP purchased 30 per- SRP has used negotiated sales. vice on or before Dec. 31, 1984, of a planned five-building cor-cent of SRP's Coronado In October 1986, SRP sold $100 and also voted to end the com-porate headquarters in north Generating Station near St. million in tax-free electric system pensation program in 1994.

Tt.mpe. The corporate head-Johns, Arizona. LADWP agreed revenue bonds. The bonds were quarters, on 40 acres, is ex-to trade its share of the station sold in $ 5,000 denominations at pected to be completed by 2010.

for 5.70 percent of Palo Verde an effective interest rate of 7.34 Nuclear Generating Station when percent. SRP expects to invest about 17

Salt River Project Agricultural Improvement and Power District and its agent, Salt River Valley Water Users'ssociation Combined Balance Sheets As of April 30, l987 and 1986 Assets ($ 000) 1987 1986 UTILITYPLANT, at historical cost (bootes 1, 2, 3 and 4):

Plant in service-Electric $ 3,721,898 $ 3,132,867 Irrigation 92;127 87,503 General 166,559 143,021 3,980,584 3,363,391 Less - Accumulated depreciation on plant in service 861,043 738,283 3,119,541 2,625,108 Construction work in progress . 740,767 1,025,680 Nuclear fuel, net of amortization (¹te 1) 92,736 92,596 3,953,044 3,743,384 SEGREGATED FUNDS, consisting of cash and U.S.

Government obligations set aside in accordance with resolutions of bond issues:

Debt service funds, excluding $ 61,916,000 in 1987 and $ 51,032,000 in 1986 for payment 94,769 of accrued interest (¹te 5) . 99,318 Construction fund. 49,652 23,000 148,970 117,769 CURRENTASSETS:

Cash and temporary investments, at cost 111,412 108,967 Deposit in debt service fund for payment of accrued interest on bonds . 61,916 51,032 Trade and other accounts receivable, less reserves of $ 1,207,000 in l987 and

$ 1,120,000 in 1986 for doubtful accounts... 46,754 61,071 Note receivable (Arote 4) 28,969 90,653 Fuel stocks, at last-in, firstwut cost 81,144 55,522 Materials and supplies, at average cost 69,297 4?,095 Prepayments, interest receivable and other . 13,433 8,119 412,925 422,459 DEFERRED CHARGES AND OTHER ASSETS

(¹tes 1 and 57 l86,181 169,60?

$ 4,701,120 $ 4,453,219 The accompanying notes are an inlegrai part of these combined balance sheets.

18

Capitalization and Liabilities ($ 000) 1987 1986 LONGTERM DEBT (Pote g:

Electric system revenue bonds $ 2,626,709 $ 2,541,383 Commercial paper and other (h'ote 8) 360,028 339,024 2,986,737 2,880,407 ACCUMULATED NET REVENUES:

Balance, beginning of year 1,351,904 1,193,588 Net revenues for the year 74,761 156,316 Balance, end of year 1,426,665 1,351,904 4,413,402 4,232,311 CURRENT LIABILITIES,excluding $ 26,140,000 in 1987 and

$ 17,775,000 in 1986, representing current portion of long-term debt which is to be paid from segregated funds:

Accounts payable.... 85,428 66,657 Accrued taxes and tax equivalents 41,434 36,142 Accrued interest .. 63,761 52,628 Customers'eposits 21,462 '17,619 Other liabilities. 24,881 24,223 236,966 197,269 DEFERRED CREDITS AND RESERVES (Ãote 7). 50,752 23,639 COMMITMENTS AND CONTINGENCIES (Notes 3, 5 and 7j

$ 4,701,120 $ 4,453,219

Salt River Project Agricultural Improvement and Power District and its agent, Salt River Valley Water Users'ssociation Combined Statements of Net Revenues For the Years Ended April 30, 1987 and 1986

($ 000) 1987 1986 OPERATING REVENUES (Note 2):

Electric $ 881,340 $ 841,936 Water and irrigation 7,166 6,682 Total operating revenues .. 888,506 848,618 OPERATING EXPENSES:

Purchased power . 49,086 181,331 49,151 216,083 Fuel used in efectric generation .

Other operating expenses ~ ........... 151,308 122,304 Maintenance.... , 88,231 133,324 80,985 90,576 Depreciation and amortization (Note 1) .

Taxes and tax equivalents. 103,097 83,864 Total operating expenses... 706,377 642,963 Net: operating revenues ., 182,129 205,655 FINANCING COFIS:

Interest on bonds. 179,109 179,928 Amortization of bond discount, issue and refinancing expenses (Note 1) ....., ........... 6,089 2,387 Interest on other obligations... 16,081 17,864 Interest earned on investments, deposits and other. (36,08() (37,681)

Net financing cos(s 165,195 162,498 Less - Allowance for funds used during construction ir (59,902) (120,161)

(AFUDC) state 1) ~ 6 v ~ ~ ~ ~ ~ ~ e ~ ~ ~ ~ w ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 6 ~ ~ ~ ~ w ~

Financing costs less AFUDC .............. ..... 105,293 42,337 OTHER EXPENSES, net 2,075 5,002 NET REVENUES $ 74,761 $ 158,316 The accompanying notes ar)e an integral part'f these combined statements 20

Salt River Project Agricultural Improvement and Power District and its agent, Salt River Valley Water Users'ssociation Combined Statements of Cash Flows For the Years Ended April 30, 1987 and 1986

($ 000) 1987 1986 NET CASH FLOWS FROM OPERATING ACTIVITIES:

Net revenues . $ 74,761 $ 158,316 Noncash items included in income:

Depreciation and amortization. 133,324 90,576 Amortization of bond related expenses. 6,089 2,38?

Increase in fuel stocks and materials and supplies (47,824) (14,234}

Increase in other assets, net (8,897) (21,967)

Increase (decrease) in accounts payable . 18,771 (67)

Increase in accrued taxes and tax equivalents 5,292 1,781 Increase (decrease) in accrued interest ll;133 (9,587)

Increase in other liabilities, net .

~

9,317 6,375 Gain on sale of property (96) (4,268)

Net cash provided from operating activities 201,870 209,312 NET CASH FLOWS FROM INVESTING ACTIVITIES:

Gross additions to utility plant, net of AFUDC . (309,356) (352,993)

Allowance for funds usia during construction . (59,902) (120,161)

Gross additions to nonutility plant (10,812) (658)

Proceeds from sale of plant 972 194,192 Decrease (increase) in note receivable . 61,684 (90,653)

Contributions in aid of construction 25,395 19,181 Net cash used by investing activities. (292,016) (351,092)

NET CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds of bond issues 120,814 596,143 Other long-term borrowings, net of repayment . 21,845 30,318 Repayment of principal on bonds and U.S. debt. (18,867) (18,917)

Defeasance of revenue bonds (472,692)

Deferred loss on defeasance of bonds (81,168)

Net cash provided by financing activities........ 123,792 53,684 NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS AND SEGREGATED FUNDS...... 33,646 (88,096)

BALANCE AT BEGINNING OF YEAR IN CASH AND TEMPORARY INVESTMENTS AND SEGREGATED FUNDS.... ~........ 226,736 314,832 BALANCE AT END OF YEAR IN CASH AND TEMPORARY INVESTMENTS AND SEGREGATED FUNDS....... $ 260,382 $ 226,736 The accompanying notes are an integrai part of these combined stalemenls.

21

Salt River Project Agricultural Improvement 6 Power District and its agent, Salt River Valley Water Users'ssociation Notes to Combined Financial Statements For The Years Ended April 30, 1987 and 1986 Summary of Significant Accounting are adjusted periodically for changes in costs of fuel and (1) purchased power. Revenues from water and irrigation operations Policies: are recorded when earned.

(a) Principles of Combination The combined financial statements include the accounts of (I) Electric Rates the Salt River Project Agricultural Improvement and Power Under Arizona laiv, the District's Board of Directors has the District (the District) and the accounts of its agent, the Salt exclusive authority to establish electric rates. The District is River Valley Water Users'ssociation (the Association) and a required to follow certain procedures, including certain public wholly-owned subsidiary, Salt River Generating Company, notice requirements and holding a special Board meeting, before together referred to as the Salt River Project (the Project). All implementing any changes in the standard electric rate significant intercompany transactions have been eliminated. The schedules. The District is currently studying the need for an Project follows the accounting principles promulgated by the additional rate increase to be effective in October 1987. Such Financial Accounting Standards Board. increase is anticipated to be approximately 6e/o. The current rates have been in place since October 1985.

(b) Regulatory Agency The District's Board of Directors serves as its regulatory (g) Nuclear Fuel The District amortizes nuclear fuel to fuel expense on a unit agency.

of production method.

Utility Plant, Depreciation and Maintenance Under the provisions of the Nuclear Waste Act of 1982, the (c)

The accounting records of the Project are maintained District is charged one mill per kilowatt-hour (kWh) on its share substantially in accordance with the Uniform System of Accounts of electricity produced by Palo Verde Nuclear Generating Station prescribed for electric utilities by the Federal Energy Regulatory (PVNGS) Units 1 and 2. The District records this charge as a Commission. Utility plant is stated at the historical cost of current year expense.

construction. Construction costs include labor, materials, services (h) Decommissioning purchased under contract, and allocations of indirect charges for The District began reserving for the cost of decommissioning engineering, supervision, transportation, and administrative PVNGS Units 1 and 2 commencing with their dates of expenses. commercial operation. The estimate to decommission the An allowance for funds used to finance construction work in District's share of PVNGS Units 1 and 2 of $108 million is progress (AFUDC) is capitalized as a part of the electric and based upon an outside engineer's study. The estimated costs will general plant. This allowance is deducted from net financing be reviewed and adjusted periodically. Decommissioning funds costs in the combined statements of net revenues and added to collected from the ratepayers will be deposited in a separate utility plant. Capitalization rates of 10.7/o and 9.7/o were used bank account which is classified as part of the general fund.

in 1987 and 1986, respectively.

Depreciation expense is computed on the straight-line basis (i) Income ihxes over estimated useful liam of the various classes of plant. Rates The District is exempt from federd and state income taxes.

in erect resulted in provisions approximating 3.37'/o and 3.31/e (j) Reclassifications for 1987 and 1986, respectively, on the average cost of Certain 1986 amounts have been reclassified to conform to depreciable electric plant, and 1.42'/o and 1.39/o for 1987 and the current year presentation.

1986, respectively, for depreciable irrigation plant. When property representing a retirement unit is replaced, removed, or abandoned, the cost of such property is credited to the (2) Possession and use of utility plant:

appropriate utility plant account, and such cost, together with The United States of America retains a paramount right or removal costs less salvage, is charged to accumulated claim in the Project which arises from the original construction depreciation. and operation of the Project's facilities as a Federal Reclamation The Project charges to maintenance expense the cost of Project. The Project's right to the possession and use of, and to labor, materials, and other expenses incurred in the repair and all revenues produced by, these facilities is evidenced by replacement of minor items of property. contractual arrangements with the United States.

(d) Bond Expense Bond discount, issue and refinancing expenses are being (3) Construction program:

amortized over the terms of the related bond issues. Balances shown for construction work in progress (CWIP) represent expenditures for new facilities required to service (e) Revenues anticipated customer needs, and consist of:

Meters for residential, commercial and small industrial Plillions) customers are read cyclically and sales recorded only when 1987 1986 billed. This system of billing results in estimated earned but unbilled revenues which amounted to $ 20,273,000 and Electric generating facilities ............., .. $ 529 $ 873

$ 22,100,000 at April 30, 1987 and 1986, respectively. For large Transmission and distribution Irrigation plant 124 16 80 12 industrial customers, meters are read near month-end and Other construction . 72 61 billings recorded on the accrual basis. Electric revenue billings Total S741 S1,026 22

Construction expenditures planned for fiscal years 1988 On January 29, 1986 the District exchanged 5.7% interest in through 1992 are shown below. PVNGS for the Los Angeles Department of Water and Power's (LADWP) 30% share of the Coronado Generating Station Units (hlilllons) 1 and 2. Of the net cash settlement, $ 162.4 million has been Construction AFUDC Total received by the District. The remaining due from LADWP of

$ 28.9 million (including accrued interest) has been withheld.

1988 $ 404 $ 47 $ 451 1989 629 LADWP claims that the amount of AFUDC charged to PVNGS 34 663 1990 491 39 530 construction is excessive. It is the opinion of management and 1991 360 39 399 legal counsel that the AFUDC amount is in agreement with the 1992 296 14 310 contract exchange agreement, Federal Energy Regulatory Regulations and past and current practices. At this time These expenditures will be financed primarily by funds negotiations are continuing; however, legal action may be currently on hand, future net revenues and the sale of revenue required to settle the matter.

bonds. The District acts as the operating agent for the participants Construction of PVNGS Unit 3 is proceeding on a schedule in the Navajo Project. As operating agent, the District utilizes for commercial operation in late 1987. PVNGS Units 1 and 2 advanced billings to the participants, based on ownership were placed into commercial operation in January and Sept- percentage, to pay the cost of operations. A separate operating ember of 1986, respectively. fund is maintained by the District to process Navajo Construction of Coronado Unit 3, a planned 350,000 kw transactions.

coal-fired unit is proceeding on a schedule for commercial The District's share of direct. expenses of the jointl~wned operation in the spring of 1991. The total estimated plants is included in operating expenses in the combined construction costs for Unit 3, including AFUDC, is approx- statements of net revenues.

imately $ 790 million.

Projected construction expenditures include contingency allowances to reflect potential cost increases. (5) Long-term debt:

At April 30, 1987, commitments had been entered into for (Millions) delivery of materials and services on construction projects. In Interest Rate 1987 1986 Maturitles

~

addition, various firm commitments exist under coal and fuel oil supply contracts. Electric System The Project had committed to spend approximately $ 50 Revenue Bonds..... 4.7-11.5% $ 2,716 $ 2,633 1988-2025 Unamortized Bond million over the next eight years for its share of a project to Discount ...,...... (89) (92) build or modify dams on the Salt, Verde and Agua Fria rivers Total Revenue for flood control, to ensure dam safety and provide water Bonds Outstanding 2,627 2,541 storage associated with the Central Arizona Project. Recent U.S. Government actions by legislators will result in significant changes to the Non Interest Bearing Debt....... 8 9 1987-2004 project. Management has not yet been able to determine the Commercial Paper... 350 325 impact upon the construction program, however it is not 6.5-7.7%

3.44.9'ther,............

2 5 1988-1989 believed the previously committed amount will increase Total Long-Term significantly. Debt........... $ 2,987 $ 2,880 (4) Interests in jointly-owned electric Electric system revenue bonds are secured by a pledge of, utility plants: and a lien on, the revenues of the electric system after The District has entered into various agreements with other deducting operating expenses, as defined by the bond electric utilities for the joint ownership of electric generating resolution, subject to amounts due the United States of and transmission facilities. Each participating owner in these $ 7,768,532.

facilities must provide for the cost of its ownership share. The The debt service coverage ratio, as defined in the bond following schedule reflects the District's ownership interest (at resolution is used by bond rating agencies to help determine the cost) in jointly-owned electric utility plants at April 30, 1987: financial health of the District and other bond issuers. For the years ended April 30, 198?, and 1986, debt service coverage was (Millions) as follows:

Ownership Plant Share In Accumulated Plant Name Percent Service Depreciation (Millions, except for ratios)

Four Corners 1987 1986 (New Mexico) ...........10.00Yo $ 81 $ 16 $ 4 Mohave (Nevada) ........10.00 43 16 1 Revenues Available for Debt Service.......: $ 399 $ 365 Navaio (Arizona) ........21.?0 212 77 7 Total Debt Seince Requirements 200 197 Hasten (Colorado).......50.00 67 24 Craig (Colorado) ........29.00 225 50 Debt Service Coverage Ratio ~..... 2.00 1.85 Palo Verde (Arizona) .. ..17.49

~ 1,106 42 414

$ 1,734 $ 225 $ 426 23

The annual maturities of long-term debt (excluding The discount rate used in determining the actuarial present commercial paper) as of April 30, 1987, due in the fiscal years value of the projected benefit obligation was 9.0%. The rate of ending April 30, are as follows: increase in future compensation levels used varies from 9.0% to 5.5%, on a graded scale, based on the age of the participant (Millions) The expected long-term rate of return on assets is 9.75%.

1988 $ 26 The following schedule reconciles the funded status of the 1989 29 Plan with amounts reported in the Project's combined financial 1990 32 statements as of April 30, 1987:

1991 31 1992 37 (Millions)

Thereafter 2,571 82,726 Plan assets at fair value $ 259 Actuarial present value of projected benefit obligation:

Vested bendit obligation. (111)

Interest and amortization of discount on the various issues Nomested benefit obligation .. (12) results in an effective rate of approximately 7.18% over the Accumulated benefit obligation.......,............ (123) remaining terms of the bonds. Excess of projected benefit obligation At April 30, 1987, The Project has authority to issue over accumulated benefit obligation,............., . (45) additional electric system revenue bonds totaling $ 131,426,260 Projected benefit obligation . 068) principal amount and electric system refunding revenue bonds Plan assets in excess of projected totaling $ 806,840,000 principal amount. benefit obligation 91 On April 1, 1986, the District defeased $ 486,150,000 of Unrecognized net assets . (65)

Unrecognized net gain (21) electric system revenue bonds, resulting in lower future debt Prior service cost not )et recognized service requirements as well as a loss of $ 81,168,089. The in net periodic pension cost.

District's Board of Directors determined that such loss should be s 6 recovered from the ratepayers during the period of reduced debt Prepaid Pension Cost .

service requirements. Accordingly, under the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, the loss is being amortized on a monthly basis over the life of the In addition to providing pension benefits, the Project provides Electric System Refunding Revenue Bond Issue, 1986 Series C. certain health care and life insurance bendits for retired On February 9, 1984, the District refunded its then persons. Substantially all of the Project's employees may become outstanding General Obligation Bonds. Although the refunding eligible for those benefits if they reach normal retirement age constituted a legal defeasance of the prior lien on revenues while working for the Project, retire from the Project, are which secured said bonds, the General Obligation Bonds eligible for pension benefits, and have completed a minimum of continue to be general obligations of the District, secured by a 5 years regular employment. The cost of retiree health care and lien upon the real property included in the District, a guarantee life insurance benefits is recognized as expense as the premiums by the Salt River Valley Water Users'ssociation, and by the and/or deposits to the mustee are paid. For 1987 and 1986, District's taxing authority. As of April 30, 1987 the amount of those costs totaled $ 1,361,170 and $ 1,172,077, respectively.

defeased general obligation bonds outstanding was $ 129,705,000.

(7) Litigation and other contingencies:

(6) Employees'etirement Plan Environmental:

The Project has a retirement plan covering substantially all Various pending litigation or administrative proceedings employees. The Plan is funded entirely from Project involving environmental matters could affect the Project and its contributions and the income earned on invested assets. present and proposed generating facilities. In general, these Contributions to the Plan were $ 2,181,799 and $ 9,515,491 in lawsuits seek to impose higher air quality standards for fiscal years 1987 and 1986, respectively. The Project recorded generating plants. If ultimately decided adversely to the interest income of $ 4,098,777 for fiscal year 1987 and expense of of the Project, the lawsuits could result in increased

$ 6,264,699 for 1986 related to the Plan. Plan assets consist construction costs, increased future operating costs or possible primarily of common stocks, U.S. obligations and corporate loss in the operational reliability of certain generating plants.

bonds. Such increased costs would be passed on to customers through In '1987, the Project adopted Statement of Financial increased electric rates.

Accounting Standards No. 87, Employers'ccounting for Pensions. Net periodic pension cost under that statement is Other Litigation:

In the normal course of business, the Project is a defendant made up of the components listed below as determined using the projected unit credit actuarial cost method. (No comparable in various litigation matters. In management's opinion, the analysis is required to be made for 1986): ultimate resolution of these matters will not have a significant adverse effect on the Project's financial position or results of (Millions) operations.

Service cost .....,.................... $ 8 Payments to Certain Property Owners in the Association's Interest cost...,............,...,..... 13 Actual return on assets... ~ ~..... ~ . . (45) Service Areas Now Provided Electric Power by Others:

Net amortization and deferral .... ...,. 20 The Articles of Incorporation of the Association provide for the indemnification of certain property owners in the Net periodic pension income......... S (4)

Association's service areas now provided electric power by others 24

4 if they are required to pay substantially more for power than liquidity support for the Promissory Notes. Under the terms of they would if they were furnished electric power by the the Agreement, the District may borrow up to $ 350,000,000 Association. A reserve for these payments has been established until October 14, 1988. If the agreement is not: renewed prior which, in the opinion of management, adequately covers the to,October 15, 1987, the District may continue to borrow but Project's liability as of April 30, 1987. must reduce its outstanding borrowings to not more than Navajo taxes; $ 250,000,000 by October 14, 1988 and to not more than In 1977 and 1978 the Nav@o Thbal Council promulgated $ 150,000,000 by October 14, 1989. Following October 14, 1989, three tax resolutions affecting electric generating stations, in the District may not make additional borrowings and must repay which the District has an interest. The District and other all outstanding borrowings by October 15, 1990. As of April 30, participants in the affected generating stations filed lawsuits 1987, the District had no borrowings outstanding under the challenging the resolutions on grounds the 1Nbal Council had Agreement.

previously approved generating station leases containing The indebtedness of the District evidenced by the Promissory covenants not to tax. In 1981 the lawsuits were mooted by the Notes and/or borrowings under the Agreement is an unsecured enactment of a Thbal Council Advisory Committee resolution obligation of the District payable from the general funds of the reaffirming the convenant not to tax. District lawfully available therefore, subject in all respects to the In the fall of 1984 the Navajo Ve Commission notified the prior lien of the United States, the Revenue Bonds, and other District of its enactment of amended tax resolutions, which indebtedness of the District secured by revenues or assets of the contained provisions purporting to repeal any prior waiver of the District. The Promissory Notes and borrowings under the power to tax. The District responded by reminding the Agreement are not payable from taxes, Commission of the prior resolution, reaffirming its tax covenants. The District's Board has limited the total amount of The District has recently received a ruling by'he indebtedness evidenced by the borrowings under the Agreement Commission, denying the contractual claim of immunity from and Promissory Notes to an aggregate of $ 350,000,000.

taxation under the covenant not to tax contained in the Navajo Generating Station Lease. The District is unable to predict the ultimate outcome of this action. However, management believes (9) Irrigation and water operations:

that the District has a valid immunity from such taxation and if Irrigation and water operations expenses, including necessary will challenge the Nav@o Tax Commission ruling. In depreciation, exceeded the assessments, delivery fees, and other addition, the Board of Directors of the District has approved an revenues therefrom by approximately $ 15,975,000 for 1987 and action allowing it to recover from its customers the amounts of $ 12,384,000 for 1986. These amounts do not include such taxes if the payment thereof is ultimately required. expenditures for additions and improvements to irrigation plant and for repayment of long-term debt.

(8) Revolving credit agreement/commercial paper program: (10) Subsequent events:

On May 26, 1987, the District entered into a revolving credit The District's Board has authorized the issuance of up to agreement with Fuji Bank, Limited to provide support for the

$ 350,000,000 of short-tenn promissory notes (the Promissory District's mini-bond program. Under the terms of the agreement, Notes), which are sold in the tax-exempt commercial paper the District may borrow up to $ 30,000,000 at the Federal Funds market. The Promissory Notes will mature in no more than 270 Rate plus one-quarter to one-half percent, based on length of days from the date of issuance and in no event after October time outstanding. The agreement expires November 15, 1988.

15, 1990. As of April 30, 1987, the District had $ 350,000,000 On May 15, 1987, the District sold approximately of the Promissory Notes outstanding at an average interest rate

$ 22,300,000 of 1987 Series A and B Mini-Bonds. The proceeds to the District of 4.30/0.

were used to refund the costs of construction pursuant to the The District maintains a revolving credit agreement (the District's capital improvement program and to pay financing Agreement) with a consortium of bventy-two banks to provide expenses.

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 examined the combined balance sheets of SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT (a political subdivision of the State of Arizona) and its agent, SALT RIVER VALLEY WATER together referred to as the SALT RIVER PROJECT, as of April 30, 1987 and 1986 and the related USERS'SSOCIATION, combined statements of net revenues and cash flows for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the financial statements referred to above present fairly the financial position of the Salt River Project as of April 30, 1987 and 1986 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

Arthur Andersen k, Co, Phoenix, Arizona, June 26, 1987.

25

Statistical Review

($ 000)

PROJECT GENERAL 12 Nonths Ended December 31 12 Months Ended April 30 1987 1986 1976

$ 888,506 $ 848,618 $ 539,669 $ 225,268 Operating revenues .

881,340 841,936 534,357 220,961 Electric 7,166 6,682 5,312 4,307 Water and irrigation.

706,3?7 642,963 400,323 182,662 Operating expenses interest....., .. 105,293 42,337 47,460 31,060 Net financing costs less capitalized Other deductions (revenues), net...,............. 2,075 5,002 (1,644) 259 11,287 Net revenues 74,761 158,316 93,530 Gross additions to plant, excluding allowances for funds used during construction Utility plant, gross .

309,356 4,814,087 5,468'981 352,993 4,481,667 302,702 2,843,247 234,012 1,229,617 Contributions of electric revenues to support water operations. .. 15,975 12,384 4,8?0 58,134 7,341 30,869 Taxes and tax equivalents 103,097 83,864 Employees at )mr-end. 5 735 4,580 3,325

'Does not include temporary employees.

KATER*

1986 1985 1981 1976 Total storage and pumping capacity (acre-feet) 2,889,725 2,863,769 2,891,177 2,841,818 Storage capacity (six reservoirs)................. 2,019,102 2,019,102 2,063,948 2,072,050 Installed pumping capacity 870,623 844,667 815,229 769,768 Water in storage Jan. 1 (acre-feet) ................. 1,671,535 1,781,671 1,480,332 1,040,000 Project storage only 1,445,710 1,543,5?1 1,227,055 771,440 Runoff (acre-feet) 1,070,214" 1,774,667 566,245 817,419 Water in storage Dec. 31 (acre-feet)................ 1,691,741 1,671,535 1,116,338 9?6,725 Project storage only 1,464,978 1,445,710 895,118 711,353 Sources of water for deliveriers (acre-feet)........... 993,591 1,136,429 1,222,376 1,190,720 Gravity supply . 928,053" 1,072,373 870,262 848,734 Groundwater supply (pumping by SRP)........... 50,482 46,593 337,424 335,988 Groundwater supply (pumping by others) ......... 15,056 17,463 14,690 5,998 Use of water (acre-feet) . 870,658 1,016,612 896,802 1,190,720 Agricultural 290,572 381,341 440,047 451,377 Urban . 395,158 396,228 381,457 295,123 City domestic 284,192 281,464 265,002 187,044 Subdivision irrigation. 60,877 60,263 62,908 56,753 Other non-agricultural irrigation (schools, parks, churches, etc.)................ 50,089 54,501 53,547 51,326 Decreed deliveries...... 47,963 52,410 64,431 58,464 Contract deliveries 136,965 186,634 108,358 82,467 Seepage and evapotranspiration ................ 122,933 119,817 240,326 315,632 Canals, total (miles) 133 133 131 131 Lined .. 91 892 87 890 70 884 59 878 Laterals, total (miles) .

Lined and piped 792 783 758 715 Drainage and waste ditches (miles)................. 240 240 243 251 Lined and piped 82 78 63 52 Assessed area (acres) . 238,170 238,170 238,221 238,266 Number of assessed accounts ... 181,894 181,645 178,796 166,048 Number of times water delivered to water users ...... 471,845 468,144 456,129 500,607

" Water on Based statistics are computed on a calendar year basis.

V.S.G.S. provisonal records and are subject to adjustment.

26

PolVER 12 Nonths Ended 12 Nonths Ended April 30 December 31 1987 1986 1981 1976 Energy Sources (kWh)

Net nuclear generation 1,955,479,000 149,186,614 i0 Net steam 9,667,574,000 10,957,903,000 10,385,225 F000 5,637,595,000 generation'et gas turbine generation..., ~.... 2,287,000 45,396,000 62,336,000 93,811,000 Net combined cycle generation ......,...,...... 991,739,000 813,684,000 4,110,000 459,155,000 Net run of river generation . 410,679,000 451,783,000 468,174,000 243,951,000 Pumped storage generation,.......,...,,...... 211 F088,000 236,545,000 118,324,000 89,536,000 1btal net 13,238,846,000 12,654,497,614 11,038,169,000 6,524,048,000 generation'urchased......,...........,............ .. 3,586,056,028

~ 3,207,390,046 2,098,800,868 2,561,076,900 Interchange receimd... 105,3 87'00 106,666,000 145,837,000 162,016,000 Wheeling received 15,091,962 11,912,340 9,793,314 13,389,100 Total energy 16,945,380,990 15,980,466,200 12,292,600,000 9,260,530,000 sources'nergy disposition (kWh)"

'esidential 5,333,601,362 4,889,987,668 3,674,758,035 2,931,444,260 Commercial R Industrial . 6,252,344,184 5,931,148,985 4,430,656,608 3,594,531,963 Irrigation pumping, .. ~...............,....... 233,684,815 248,577,084 243,257,760 282,916,839 Street Ei highway lighting............,......... 98,746,120 88,327,881 43,203,039 36,456,046 Public authorities . 270,239,264 257,127,813 351,055,276 288,417,414 Interdepartmental . 82,902,577 72,022,538 80,008,412 186,729,026 Sales for resale

'Ibtal sales.

... 3,294,959,549 3,016,789,686 3,205,534,954 818,405,306 15,566,477,871 14,503,981,655 12,028,474,084 8,138,900,854 Interchange delimred......................... 104,549,000 93,'772,000 245,224,000 384,440,000 Wheeling delivered, 13,887,031 10,891,950 9,024,579 12,643,696 Energy losses 958,912,088 1,033,899,395 840,845,337 598,785,450 .

Energy for pumped storage operation............ 301,555,000 337I921,000 169,032,000 125,760,000

'Ibtal disposition of energy 16,945,380,990 15,980,466,000 13,292,600,000 9c260i530i000 Peak omrall power system (kW) 3,264,000 2,9?1,000 2,386,000 2,089,000 Date and time (MST) ........,......,......,. Aug. 20, 5 p.m. July 9, 5 p.m. Aug. 11, 6 p.m. July 7, 6 p.m.

Peak Project customers (klV). 2,785,000 2,658,000 2,057,000 1,732,000 Date and time (MST) Aug. 20, 5 p.m. Aug. 29, 5 p.m. July 28, 5 p.m. July 7, 6 p.m.

Generating capability (kW)"

Nuclear Steam',

213,730 2,411,115 0.

2,201,115" " 1,919,250

.0.

1,548,250 Gas turbines . 393,000 393,000 393,000 378,000 Combined cycle................, 288,000 288,000 288,000 288,000 Hydroelectric conventional . 96,400 96,400 95,000 94,000 H>droelectric pumped storage..... 137,000 137,000 137,000 140,000 Total operating capability'. 3,539,245 3,329,245 2,832,000 2,448,250 Contract purchase at peak...,... 605,547 410,547 329,547 325,563 lbtal 4,144,792 3,739,792 3,'161,797 2,773,813 resources'lectric customers->ear end' Residential 441,293 414,140 305,870 238,989 Commercial R Industrial ........, 37,218 34,973 22,771 17,591 Other.......,...., .. 8,810 8,376 1,610 1,361

'Ibtal . 487,321 457,489 330,251 257,941 Average annual kWh use"

.......,,. ~.

'esidential 12,440 12,175 12,310 12,597 Average annual klVh revenue"'esidential (cents/kWh) 7.54 7.56 5.78 3.51

'ncludes

" Unit SRP participation in jointly owned projects capabilities during summer peak

"'nergy

"" disposition kWh through total sales, electric customers pear end, average kWh use, and average annual revenue are, estimated figures.

Decreased due to a rating change at Four Corners Units 4 and 5.

27

Board Members B oard members policies for establish management and conduct of Salt the Improvement and Power District consists of 14 members who serve four-year terms. One River Project's business affairs. District boanl member is elected The 10 members of the Board from each of the 10 SRP voting of Governors of the Salt River divisions, and four members are Valley Water Users'ssociation elected at-large.

are elected every tm years by the 'Iladitionally, members of the shareholders (property owners) of Association board are elected to the Association. similar positions on the District The Board of Directors of the board.

Salt River Project Agricultural Pictured at right are SRP Board Members (lop row from left)

Joe Bob Neely, John L. Burton Jr., William W. Arnett, (bollom mw from lefl) Olen Sharp and John M. Williams Jr.

Pictured below are SRP Board Members (lefl lo right) Fred J.

Ash, Rudolph Johnson and Thomas P. Hurley.

Salt River Project Board Members shown above are Pelt lo right) Clarence C. Pendergast Jr., Stanford F. Hartman and Gilbert R. Rogers.

Pictured at left are SRP Board Members aft lo right) William P. Schrader, Dwayne E. Dobson and Bruce B. Brooks.

District 1 District 7 Rudolph Johnson william P. Schrader District 2 District 8 Clarence C. Pendergast Jr. Joe Bob Neely District 3 District 9 Bruce B. Brooks Olen Sharp District 4 District 10 Gilbert R. Rogers Dwayne E. Dobson District 5 At-large John M. Williams Jr. lVilliam W. Arnett J District 6 Fred J. Ash Thomas P. Hurley John L. Burton Jr.

Stanford F. Hartman

Council Members J V iYQ T he councils enact and amend bylaws relating to the management and conduct of Water Users'ssociation. Three council members are elected to staggered four-~mr terms in each SRP's business affairs, and they of the 10 divisions of the Salt approve negotiated revenue bond River Project Agricultural sales. Improvement and Power District.

Three council members are '&aditionally, Association elected by SRP shareholders to council members seek identical two-year terms in each of the 10 positions on the District council.

areas of the Salt River Valley SRP Council Members pictured at left are aft io righi) Roy W.

• ) ~t Cheatham, John A. Vanderwey, Carl E. Weiler (Chairman),

Jit Wayne A. Hart, James L. Diller, George B. Willmoth, Robert E.

Hurley and Levi H. Reed.

SRP Council Members pictured below are (iop row fiom iefl)

Martin Kempton (Vice-chairman), Lester R. Nowry, Wayne A.

Marietta, (botiom iow from left) Orland R. Hatch, C. Dale Willis, William P. Schrader Jr. and Larry D. Rovey.

V E

))I fi I i

~<<

.r/

f',

Q<<<<V'RP Council Members pictured above are (lop iow fiom lefi)

Dean W. Lewis, James R. Marshall, Edmund Navarro, Michael K. Gantzel, Mark V. Pace, (bottom iow from left) W. Curtis Dana, Emil M. Rovey and Lee L. Tregaskes. C 0

E District 1 District 5 District 8 Robert L. Cook Roy W. Cheatham Michael K. Gantzel Howard W. L>dic Edmund Navarro Martin Kempton, Emil M. Rowy Carl E. Weiler, Vice-chairman District 2 Chaiiman Mark V. Pace Wayne A. Hart District 6 District 9 Larry D. Rovey James L. Diller W. Curtis Dana John A. Vandemey Dean W. Lewis Robert E. Hurley District 3 James R. Marshall Lee L. Iiegaskes James M. Accomazzo District 7 District 10 John E. Anderson EVayne A. Marietta Orland R. Hatch Elvin E. Fleming Lester Mowry William P. Schrader Jr.

District 4 George B. Willmoth C. Dale Willis Lloyd Lee Banning SRP Council Members pictured above are (left to righi) James Levi H. Reed N. Accomazzo, Elvin E. Fleming, John E. Anderson, Robert L.

Cook, Byron IVilliams, Howard W. Lpllc and Lloyd Lee Byron G. Williams Banning.

SALT RIVER PROJECT BULK fA~~

Box 52025, Phoenix, AZ 85072-2025 U.S. POLI'AuE Return requested PAID PHOENIX, ARIZONA Permrt No. 395

~~EWTJ> ~

SALT RIVER PROJECT AN EQUAL OPPORTUIVITY EMPLOYER As a special service, SRP is making this Annual Report Annual Report information available do Salt River Project throru8r the Arizona State Library for Communications 6'r Public Affairs the Blind and Physically llandicapped, Box 52025 1030 N. 32nd St., Phoenix, AZ 85008 Phoenix, AZ 85072-2025 (602) 2554578. (602) 2368240