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S7O9X70iW 86~~~~~8 ADOCK OMOOMB I PDRI Background

alt River Project is named S for 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)Users'ssociation and 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- ~~

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

Message from Management ...... 2

Power o ~ o ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o 4 Water ...... 8 Commumty~ ~ ...... 12

Fmanctal...... ~ ~...... 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:

his past year we witnessed headquarters will consist of five quality and institute practices to a small amount of capital for in- our 50th anniversary as the buildings on 40 acres est of the ensure that SRP water meets all vestment. T initiated Salt River Project Agricultural Im- present headquarters. The first applicable standards. We After the end of the fiscal year, we serve provement and Power District. component, the Information meetings with all cities 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 in- continued to supply a reliable tion to the corporate headquarters, the cities willbe faced with an $500 each and, for the first time, SRP- source of energy and water at the 484 surrounding acres of creasing demand for water. By we sold capital appreciation bonds we can lowest reasonable cost. .owned land will be available for working with the cities, for $200 each. These bonds vvill lease and development others share information and avoid cost- Research shows our custom- by pay $488.05 ifheld to maturity in and will be called Papago Park ly duplication of efforts. ers are happy with our service. One 2002. Center. Income from this develop- of last year's goals was to achieve Under the Safety of Dams Act, ment will be used to supplement Our employees were the an overall quality of service rating preliminary engineering and ex- electric revenues, offset operating strength of this year's corporate of90 percent from our customers. cavation work began on Theodore "The expenses and hold down electric theme, People Behind the We received a 97 percent rating. Roosevelt Dam and Stewart Moun- 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. in their electric bills as we passed and in their many volunteer ac- and remarkably well managed. Bureau of Reclamation to add on a decrease in fuel costs. For tivities in their communities. Although inflows from the Salt and several maintenance items to residential customers, the average Verde rivers were only 87 percent necessary dam safety modifications Their efforts are, in large cost per kilowatt-hour (kWh) was of average, heavy summer rains scheduled at Stewart Mountain measure, the reason this past year 7.54 cents compared to 7.56 cents kept reservoirs fuller than normal. Dam. The proposed changes will was successful for Salt River Pro- per kWh in the previous year. main- ject. Through our Storage at the end of 1986 totaled enhance operating and 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 This was 139 per- we expect to be able to meet the cent of capacity. Financially, itvvas another good a total of 487,321 customers in all challenges of the coming year. cent of normal. year for SRP. Careful management classes. The new customers con- For the third time in four years, of SRP resources, healthy financ- Challenges willinclude meeting tributed to a new system peak of of water in storage reduced ing opportunities and a strong financial capital requirements 2,785 megawatts (MW) on August plenty groundwater to less than local economy contributed to the caused by new construction. These 20. pumping 7 percent of deliveries. Project success. Our debt service coverage capital requirements are expected 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 ofthe 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 'Ibtal water deliveries hit a closely with Valley communities tion, providing SRP with 444 MW helped to build an increase in gross 10-year low of only 870,658 af, and all levels of government, con- of generating capacity. Future revenues to $888.5 million, up compared to 1,016,612 in 1985. tinuing to be a strong presence in power supplies are being deeloped from the previous year's revenues We'l Agricultural use was less than nor- the Valley we serve. be here, at St. Johns, where the third 350 of $ 848.6 million. land sales and govem- providing a reliable supply ofwater MW unit of the coal-fired Cor- mal due to ment set-aside programs which Net revenues totaled $74.8 and electricity for our customers, onado Generating Station is under of millionduring fiscal year 198M7. for another 50 years to come. contruction. reduced the quantity crops 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 AAand 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 remained in agriculture. have sold investment-grade bonds for more than 20 years. customers on the east and est SRP's Water Group faced a ma- &i~ we the g. sides of the Valley, opened jor reorganization. Reid W. lteples For the first time in ffive years, Marcel~J. Boulais Tolleson Service Center and broke retired as head ofthe 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 ofreaching 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, Consultants D.S. Wilson, Jr. Associate General Nanager, Financial Services 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

t was a golden year for customers in each of the past rates contain a basic amount for Transmission system SRP's i Power District. four years including a record fuel, but fuel costs can change on completed under budget In the 50th for- 34,715 customers in fiscal year a daily basis. Fluctuations be- year since the SRP's work on the Palo Verde 1985-86. Because of continuing tween the amount paid for fuel mation of the Salt River Project Nuclear Generating Station's growth, the number ofcustomers and the amount collected from Agricultural Improvement and transmission system was com- Power District, the by the end of the next fiscal year customers are refunded or District: pleted ahead ofschedule and is expected to easily surpass the recovered on bills through $3 million under budget. The ~ Added nearly 30,000 new 500,000 mark. periodic fuel cost adjustments. 13-year project was completed in electric customers, including Of the increase in last year' SRP starts receiving October several major 1986, at a cost of $ 95 industrial customers, 27,153 were residen- low cost power from million. customers tial and 2,245 were commercial Unit 2 of Palo Verde The high-voltage transmission ~ Passed on a slight decrease and industrial. Other electric Some of the power re- system includes 165 miles of500 in fuel costs to reduc- users, including municipal street customers, quirements of customers were contracts kilovolt (kV) power lines which ing their cost of electricity light and irrigation met with electrici- pumps, increased 434. ~ Began receiving low-cost by 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 Ending busc ~ Parker Hannifin and Hexcel, ac- tion. Both began Completed the Palo Verde April 30 Hpb'o Gas Oil Cnal Nuclear Purch. counted for about 8,000 kilowatts commercial transmission system to the opera- (kW) in new load, nearly 800,000 in 1984 15.8 3.9 0.5 78.6 0 1.2 Phoenix Metropolitan area, on- tion calendar square feet of manufacturing year 1986, the first 1985 12.8 8.9 0.4 76.2 0 1.7 time and under budget 1986 space and more than 1,000 new unit on January 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 63' puter, the Energy Management 1992 1 0 67.6 21.0 0 Each new customer increased second unit on prnjeded) System, to control SRP's electric $ demand on the electric September 20, 'inc&As bybo purchases system system. Electric customer use reached a 1986. bill numbers m prnraroprsl ~ 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 operation of the first two during the year increased by units, Meanwhile, construction District improved service to our SRP gained 444 MW of 1.06 billion kWh to 15.56 billion began on the Papago Buttes- customers by building a new generating capacity. kWh from 14.50 billion kWh the Pinnacle Peak 230-kV transmis- regional service center; esta- previous fiscal year. sion line. The line willstrengthen blished a demand side implemen- The third unit of Palo Verde Electric bills drop . SRP's transmission system and tation program; and formulated 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 the potential distribution lines and 513 miles unit is expected to begjn com- Generating Station. areas are evaluating 1991. benefits, including deferral ofnew ofsecondary underground distri- mercial operation by the firstphase SRP completed generating units, improved effi- bution lines. Also, five new about of its statewide study ofpotential SRP expects to spend ciency, enhanced reliability and residential distribution substation $670 million in direct costs for locations for a new coal-fired new better system coordination. sites were opened and 15 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 of a few U.S. utility compa- that another large, coal-fired one provide faster service Energy Management System a unit of generating station won't be nies building generating to customers is installed this size and is benefitting from needed until aiter the year 2000, SRP's ability to control its competitive prices for equipment and it takes about 10 years to Regional service centers, new- now under con- power nebvork increased dramat- and materials. Supervision of plan and build a large coal-fired ly opened or ically with the arrival and instal- lation ofthe 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 ofpower from generating fa- cilities to customers. Thus far, about 70 SRP substations are fflfVf8 operated by the new system. All oP 170 substations in the SRP elec- ~ A C tric system are projected to be on APACHE J ~ 0 ~ E EMS by late 1987. Phoenix 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 better decisions regarding alloca- tion of generation resources.

Besides the ability to quickly identify, analyze and determine the cause ofpower outages, advantages include anEMS'ther in- creased ability to analyze the best time to buy and sell electricity, Electric Service Area Served Salt River Project Provides Full and to quickly analyze demand Exclusively by Salt River Project. Po»vr Requirements of Arizona Public Service for Resale. on the system. As a result, the O 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 D All Mining Loads. their families to Minneapolis for three years to supervise the build- i 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 willcontinue to study sever- centers in the western and Meanwhile, SRP is testing a al options for meeting its cus- eastern part of the Salt River Val- Construction continues potential source of new coal for tomers'lectric demand. ley enhance operations by reduc- on Coronado 3 Coronado Generating Station. ing travel time and expenses. SRP has acquired leases for coal- In January 1986, construction When customers need service, bearing properties in western One option under study is a resumed on the third 350 MW construction or repair, crews are New Mexico. lhsting of 100,000 high voltage transmission line to unit ofthe Coronado Generating able to respond quickly because Arizona. tons ofcoal willhelp SRP decide connect the Desert Southwest Station at St. Johns, By 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 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 willwork at the center I,'/) 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 oftheir elec- high

RP's Water Group under- practices of industry, agriculture determine the relative water S went major changes last and municipalities. rights ofall lands within the Gila year to satisfy changes in laws, In response to the act and River basin, including SRP community attitudes and the other laws and member lands, and the land on needs of water customers. regulations relating to water quality, SRP the watersheds of the Salt and 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 portion of the water in SRP nance work to decrease water Reid Teeples retires provide better service related to losses water rights administration and reservoirs. As a result, the water In January, Reid W. Teeples of lands ~ and worked with Valley water construction and supply within SRP retired after 15 years as the head boundaries is cities to build an intertie between maintenance. more secure than of the Project's Water Group. the water supply for many other SRP canals and the Central Water rights Tt.epics, who joined SRP in 1948, administration is portions of the Valley. Arizona Project canal. expected to be im- was replaced by D.S. Wilson, Jr. particularly portant during coming years as The Project also was involved Urban land use increases During his tenure, the Gila River Water Rights Ad- in discussions over a in water service area Teeples potential coordinated the largest well- judication progresses through the joint groundwater storage and The character of the area drillingprogram 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 CivilEngineer- of the 238,170 acres of SRP ing Department. 1986 PLANNING CASE

member lands was urbanized 2005'RBAN In addition to his work at while 31.4 percent was used for SRP, he served in various leader- IRRIGATION ll'Yo URBAV IRRIGATION agriculture. 111,000 ABYR ship capacities with the Colorado 97700 ABYR 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 groups. VALLEYCONTRACIS VALLEYCONTRACIS production by the >mr 2015. 184~ AF/YR 2494 90900 AF/YR Wilson joined SRP in 1967. Water deliveries also have AGRICULTURE He was manager of Water AGRICULTURE 29% 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 4 Bil)USTRIAL feet (ao while deliveries for New NlMCIPAL 29% 470.000 AF/YR agricultural purposes totaled department formed 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 ofMesa 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 ofslight- 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. SRP coordinates runoff years. The underground Groundwater Management Act. cities stored water would then be Combined surface and construction with 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 ofthe median for way often conflict with those of SRP increases assist efforts to 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 ofresidential 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 all group, 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 ofwater ef- Among the 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 planned other canals. aged the cooperation of local Water storage above normal drafting supplies. The Arizona for broadcasters, under the leader- SRP the with Groundwater Management Act began year Congress funds ship of KPHO 'klevision, on an af of water in storage. calls for pumping to be limited to 1,671,535 dam improvements extensive campaign called Water Inflows from the 13,000-square- the quantity recharged by 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 Tbtai water deliveries a through public service an- hit million for safety improvements the year, which was 87.0 percent 10-year nouncements carried by local low. Deliveries totaled at Theodore Roosevelt Dam and of average. Inflows during 1985 870,658 af compared to television and radio stations. A totaled 1,7?4,667 af. Unusually $3.9 million for work at Stewart 1,016,612 af in 1985 and 881,009 printed version of the tip is heavy summer rainfall on the Salt Mountain Dam. in 1984. Agricultural use was less distributed through ABCO and Verde watersheds contri- than usual due to government Shortly after the end of the Markets Inc., Bashas and Lucky buted to runoff that kept reser- set-aside programs which re- fiscal year, Arizona's congres- grocery stores. 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 or 84 percent of capacity. This By working together toward use declined because of greater groups concerning Plan 6. Under was 139 percent of normal. 'otal the common goal of conserving than normal summer rainfall the agreement, CliffDam willnot 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 willprovide 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 a plan to build a on the Salt River. Construction $3.1 million struc- Ql outside the SRP reservoir system ture that would included New Waddell Dam on link SRP's canal Imk the Agua Fria River. system with the Central Arizona During 1986 SRP entered Project (CAP) Q~~~o& 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 willtransport 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 sion Dam to SRP's modifications. SRP is prepared to main canals for Salt Riwr Project 13,000 Sq. &tile contribute an additional $ 5 delivery to CAP Irrigated Area Project Watershed million to the U.S. Treasury in users. O fiscal 1988. The Project's involve- ment is through a local cost-share 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 accepted $371 million in local from Lake Havasu on Arizona's 6,700 + 10.39% Gilbert 4,357 3,125 + funds in exchange for a federal western border to Maricopa, 39.44% Glendale 25,222 23,982 5.17% commitment to complete all Pinal, and Pima counties in cen- Mesa 44,391 41,476 + 7.03% elements of Plan 6 1997. tral and southern Arizona. Cur- by 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% Tempe modifications. The federal Although SRP hasn't con- 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 education partnership SRP four radial to the dam will CAP received record levels of gate structures in enable to provide strives to maintain. The new The installation was it flood control, funding from the 99th Congress, Egypt. part equipment in the dam safety and additional water despite the pressure of the laboratory will of the ongoing Professional be used students conservation storage on the Salt Gramm-Rudman deficit reduc- by to study the Employee Exchange Program River. mechanics and engineering pro- (PEEP) with Egypt's Ministry tion law. For fiscal year 1987, of blems associated with water and Irrigation. a CAP received $202.8 million. Also, seminar on Modifications to Theodore other fluids. telemetry was presented to the Roosevelt and Stewart Mountain ASU dedicates Work with representatives Ministry of Irrigation by SRP dams are included in the Plan 6 student laboratory personnel. agreement. from countries around the world Continuing its longtime tradi- was continued through SRP's Also under PEEP, tm Cairo The Arizona Department of tion ofsupporting 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

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The Salt River Pete water safety program teaches water safety to school children. The half a million children in 2D years. award-winning program has reached more than Salt River Project's service extends beyond water and power

RP employees —'The People forts of SRP employees, Valley attracted 440 participants and donations and in-kind services. S Behind the Spirit' teenagers last year learned more resulted in a donation of $1,640 Employees also hold key posi- to put their customers'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. SRP recognizes the value of it showed. Achievement companies. The annual Page Attacks excellence in education. Last In fiscal year 1986-87: 'fhsh Employees helped raise program received first year, SRP honored 61 seniors ~ 97 percent of customers $106,000 during February 1987's place in the statewide 'hke Pride during its fifth annual Spotlight America" rated SRP service as "good" or Junior Achievement Telephone in competition spon- on Excellence program. Honored "excellent" Campaign. A total of 97 sored by the Commission on students were graduating seniors Arizona's Environment se- from ~ Volunteer work by SRP volunteers, representing 33 com- and Maricopa County, Page and cond employees reached new heights panies, called area businesses place in the national com- St. Johns —areas in which 8RP petition sponsored by the U.S. has electric facilities. Honorees . ~ Business offices were requesting donations for Junior Department of Interior. Each were selected their moved, improving customer Achievement. SRP volunteers by school >m; the community effort has in- principals for academic achieve- service raised $ 12,242, the second volved more than 75 percent of ment and all-around excellence. ~ highest amount of any business And SRP's Better Way and 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 jo Generating Station (NGS) and Changes and Challenges." SRP receives high marks In a joint effort, SRP and the Glen Canyon National Kindergarten through 12th grade "The Arizona Public Service Company People Behind the Recreational Area. The Page students participated. Russell Spirit" SRP's (APS) raised more than $ 8,700 kept up tradition of Kiwanis Club and Elks Lodge Moreland of Willis Junior High first-rate for needy citizens in the fourth giving customer service. have helped to coordinate the School, Chandler, made the win- all SRP's annual S.H.A.R.E. Affair Nearly of electric and event in recent years with help ning entry. 10-kilometer run January 10. ~ater customers polled last year A from NGS employees. Last year' record 835 participated in Ten outstanding employees were very satisfied with the quali- people 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 SRP's percent of its customers to rate monetary involvement in Page At- with Karl F. Abel Volunteer Proceeds were donated to the overall quality ofservice good or tacks Thrash, along with other awards. Named for SRP's im- Salvation Army, which ad- excellent. The Project exceeded anti-litter efforts, was honored by mediate past president, these ministers the Service to Help that goal with the 97 percent an award from Arizona Clean and awards are presented each year Arizonans with Relief on rating. Energy Beautiful, the state arm of the na- to employees who devote their (S.H.A.R.E.). Formed by SRP tional Keep America Beautiful time and energy to their com- and APS Employees'ommunity in 1982, Project campaign. SRP was distin- munities. S.H.A.R.E. provides funds involvement remains high guished as the most outstanding Saundra Reedy, administrative through the Salvation Army for business in the state with regard assistant at Coronado Generating SRP employees showed pride energy-related bills and home to its anti-litter efforts. Station, was named St. John' in their communities by donating repairs of needy families. their time, money and energy to Outstanding Chamber of Com- The Delta Gamma National community-related projects. Pro- SRP customers donated merce member in 1986. She was Foundation for the Blind ject employees pledged a total of $114,313 to the S.H.A.R.E. pro- honored for her efforts in several honored SRP with an award $326,772 to 52 non-profit agen- gram last year. Customers donate Chamber of Commerce activities recognizing the Project's support cies. And Project employees through their monthly electric promoting the St. Johns area. of the Foundation for Blind donated approximately 480 pints bills. Children. The award recognized SRP honored for of blood last year to a statewide Meamvhile at St. Johns, the SRP as a long-time supporter of two safety programs 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 employeesSpeakers'ureau, volunteer to make presentations to organizations or groups. 'lbpics range from the early beginning ofthe Project through the most up-to4ate activities of the utility. During fiscal year 1986-87, Ittdta $I SRP made about 2,300 presen- 'd IO StttOO > $ tt, ttttt tations to audiences totaling ~t i tlt tttl IO I 87,343 persons. I n II 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 customers. Regional Service Center. The regional service center Is designed to speed servIce to more ease in helping customers. The Mesa Business office was SRP is third place in the American nual safety contest to draw atten- tion in the community. 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 con- (APPA) Electric Safety Award working habits in the electric honor. Hills area found it more contest and the Arizona Safety utilityindustry, 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. organiza- The Arizona Safety Associa- APPA is a national enforcement officers, firefighters tion representing more than tion is a chapter of the National Courteous, helpful and quick Howanl Pyle and others. replies to customer inquiries are 1,750 publicly owned electric Safety Council. The promo- service pro- at SRP. Tb increase the utilities. APPA conducts the an- Award recognizes safety Additional public goals 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 billingsystem 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 ofcur- Under special legislation ly unlimited through the Better millionin 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 willcontinue 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 ings through the Better Way pro- management. Since SRP's provides SRP 1983, A program at Arizona State customers with reduced exposure gram. The Better Way program Quality Circle program has uses employee suggestions that University has meant multiple to a work stoppage. saved $3 million and improved benefits for SRP and the com- deliver real dollar savings to SRP. service to customers. Also, the munity. SRP sponsors the Elec- Counties get monetary Once a dollar savings is esta- program helps develop problem- tric Pope Research Laboratory boost from SRP blished, a percentage of the sav- 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. $ employees received $34,000 in 100,000 per year to EPRL to seven to 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 nation's their AA and Aa ratings vice coverage to 2.00. That com- be rated highly by the River Project resources, ratio 1.85. leading rating agencies. SRP first ~ Gross revenues increased; pares with last year's of healthy financing opportunities ratio issued Electric System Revenue but net revenues fell reflecting ac- The debt service coverage and a strong local economy con- Bonds in 1973. The bonds have counting transactions related to measures the number of times tributed to another good finan- been rated investment grade- the start-up of Palo Verde the sum ofprincipal and interest cial year for SRP. those suitable for purchase by Nuclear Generating Station. due on outstanding debt during 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. AAby Standard 6 Poor's and Aa ~ coverage A 4.70 percent increase in The debt service 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

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 51,032 of accrued interest on bonds . 61,916 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 169,60? (¹tes 1 and 57 l86,181

$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

ACCUMULATEDNET 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: 49,151 Purchased power . „ 49,086 Fuel used in efectric generation . 181,331 216,083 151,308 122,304 Other operating expenses ~ ...... Maintenance.... „, 88,231 80,985 Depreciation and amortization (Note 1) . 133,324 90,576 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 (120,161) ~ ~ ~ ~ ~ ~ ~ ~ r w ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 6 ~ ~ ~ ~ w ~ (59,902) (AFUDC) state 1) ~ 6 v ~ ~ e i 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

(1) Summary of Significant Accounting are adjusted periodically for changes in costs of fuel and 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 District's Directors has the the Salt River Project Agricultural Improvement and Power Under Arizona laiv, the Board of rates. The District is District (the District) and the accounts of its agent, the Salt exclusive authority to establish electric certain public River Valley Water Users'ssociation (the Association) and a required to follow certain procedures, including Board before wholly-owned subsidiary, Salt River Generating Company, notice requirements and holding a special meeting, in the standard electric rate together referred to as the Salt River Project (the Project). All implementing any changes the need for an significant intercompany transactions have been eliminated. The schedules. The District is currently studying October 1987. Such Project follows the accounting principles promulgated by the additional rate increase to be effective in 6e/o. The current Financial Accounting Standards Board. increase is anticipated to be approximately rates have been in place since October 1985. (b) Regulatory Agency The District's Board of Directors serves as its regulatory (g) Nuclear Fuel nuclear fuel to fuel expense on a unit agency. The District amortizes of production method. the provisions of the Nuclear Waste Act of 1982, the (c) UtilityPlant, Depreciation and Maintenance Under share The accounting records of the Project are maintained District is charged one mill per kilowatt-hour (kWh) on its substantially in accordance with the Uniform System of Accounts of electricity produced by Palo Verde Nuclear Generating Station this as a prescribed for electric utilities by the Federal Energy Regulatory (PVNGS) Units 1 and 2. The District records charge Commission. Utilityplant is stated at the historical cost of current year expense. include labor, materials, services construction. Construction costs (h) Decommissioning purchased under contract, and allocations of indirect charges for The District began reserving for the cost of decommissioning administrative engineering, supervision, transportation, and 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 electric and progress (AFUDC) is capitalized as a part of the 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 Reclassifications cost (j) for 1987 and 1986, respectively, on the average of Certain 1986 amounts have been reclassified to conform to and 1.42'/o and 1.39/o for 1987 and depreciable electric plant, 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 Construction program: Bond discount, issue and refinancing expenses are being (3) 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 $873 124 80 and respectively. For large Transmission and distribution .. $22,100,000 at April 30, 1987 1986, Irrigation plant ...... ,...,...... >...... > 16 12 industrial customers, meters are read near month-end and Other construction . 72 61 accrual basis. Electric revenue billings billings recorded on the 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 LADWP claims that the amount of AFUDC 1989 629 34 663 charged to PVNGS 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 rivers Agua Fria Total for flood Revenue 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) 225 ...... 29.00 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%. schedule reconciles the funded status of the 1988 $ 26 The following 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) electric system revenue bonds, resulting in lower future debt Unrecognized net gain (21) 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 recovered from the ratepayers during the period of reduced debt Prepaid Pension Cost . s 6 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 ifthey 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. Litigation and other contingencies: Plan (7) (6) Employees'etirement 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: is a defendant made up of the components listed below as determined using In the normal course of business, the Project the the projected unit credit actuarial cost method. (No comparable in various litigation matters. In management's opinion, have a significant analysis is required to be made for 1986): ultimate resolution of these matters will not 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 Service Areas Now Provided Electric Power by Others: Actual return on assets... ~ ~..... ~ „. „. (45) 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 were if they 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 1987. April 30, 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 all which the District has an interest. The District and other 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 Notes and/or borrowings under the covenants not to tax. In 1981 the lawsuits were mooted by 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 District. contained provisions purporting to repeal any prior waiver of the The Promissory Notes and borrowings under the Agreement are power to tax. The District responded by reminding the not payable from taxes, District's Commission of the prior resolution, reaffirming its tax covenants. The 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 (9) Irrigation and water ultimate outcome of this action. However, management believes 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 market. The Promissory Notes will mature in no more than 270 Funds Rate plus one-quarter to one-half percent, based on days from the date of issuance and in no event after October length of 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. to the District of 4.30/0. The proceeds 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 financing Agreement) with a consortium of bventy-two banks to provide pay 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 AGRICULTURALIMPROVEMENT AND POWER DISTRICT (a political subdivision of the State of Arizona) and its agent, SALT RIVER VALLEYWATER together referred to as the SALT RIVER PROJECT, as of April 30, 1987 and 1986 and the relatedUSERS'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 12 Months Ended April 30 December 31

1987 1986 1976

$ 539,669 $ 225,268 Operating revenues . $ 888,506 $ 848,618 Electric 881,340 841,936 534,357 220,961 4,307 Water and irrigation. 7,166 6,682 5,312 182,662 Operating expenses 706,3?7 642,963 400,323 31,060 Net financing costs less capitalized interest....., .. 105,293 42,337 47,460 259 Other deductions (revenues), net...,...... 2,075 5,002 (1,644) 93,530 11,287 Net revenues 74,761 158,316 Gross additions to plant, excluding allowances for funds 302,702 234,012 used during construction 309,356 352,993 5,468'9812,843,247 1,229,617 Utilityplant, gross . 4,814,087 4,481,667 Contributions of electric revenues 7,341 to support water operations. „.. 15,975 12,384 4,8?0 30,869 Taxes and tax equivalents 103,097 83,864 58,134

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 87 70 59 Laterals, total (miles) . 892 890 884 878 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 statistics are computed on a calendar year basis. " Based on 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 -0- i0 Net steam generation'et 9,667,574,000 10,957,903,000 10,385,225 F000 5,637,595,000 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,...... ,...,,...... 211F088,000 236,545,000 118,324,000 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 ... 3,294,959,549 3,016,789,686 3,205,534,954 818,405,306 'Ibtal sales. 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 213,730 0. -0- .0. Steam', 2,411,115 2,201,115" " 1,919,250 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 SRP participation in jointly owned projects " Unit 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

oard members establish Improvement and Power District B policies for the consists of 14 members who management and conduct ofSalt serve four-year terms. One River Project's business affairs. District boanl member is elected The 10 members ofthe 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 ofthe 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. J District 6 Fred Ash Thomas P. Hurley John L. Burton Jr. Stanford F. Hartman Council Members

he councils J V iYQ enact and Water Users'ssociation. Three T amend bylaws relating to council members are elected to the management and conduct of 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), Ji Wayne A. Hart, James L. Diller, George B. Willmoth, Robert E. t 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 I i fi f',.r/

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 C Dana, Emil M. Rovey and Lee L. Tregaskes. 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 above Lloyd Lee Banning SRP Council Members pictured are (left to righi) James N. Accomazzo, Elvin E. Fleming, John E. Anderson, Robert L. Levi H. Reed 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 RIVERPROJECT 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