.. ACCEI ERAT DOCUMENT DIST VTION SYSTEM

REGULATORY INFORMATION DISTRIBUTION SYSTEM (RIDS)

ACCESSION NBR:9404250256 DOC.DATE: 93/06/30 NOTARIZED: NOFACIL:STN-50-528 Palo Verde Nuclear Station, Unit 1, Arizona Publi

STN-50-529 Palo Verde Nuclear Station, Unit 2, Arizona PubliSTN-50-530 Palo Verde Nuclear Station, Unit 3, Arizona Publi

AUTH.NAME AUTHOR AFFILIATIONCASILLAS;R.P. Arizona Power Authority

RECIP.NAME RECIPIENT AFFILIATIONI

SUBJECT: "Arizona Power Authority 35th .Annual Rept."DISTRIBUTION CODE: MO04D ,COFIES RECEIVED:LTR J ENCL J SIZE:TITLE: 50.71(b) Annual'inancial Report

NOTES:STANDARDIZED PLANTStandardized plant.Standardized plant.

DOCKET050005280500052905000530

I

D

05000528 A0500052905000530

D

RECIPIENTID CODE/NAME

PDIV-3 LAHOLIAN, B

COPIESLTTR ENCL

1 1. 1 1

RECIPIENTID CODE/NAME

PDIV-3 PDTRAN, L

COPIESLTTR ENCL

1 11 1

D

INTERNAL: AEOD/DOA

EXTERNAL: NRC PDR

1 1

1 1

FILE 01 1 1

D

D

NOTE TO ALL"RIDS" RECIPIENTS:

PLEASE HELP US TO REDUCE WASTEI CONTACI'HE DOCUMENT CONTROL DESK,

ROOM Pl-37 (EXT. 504-2065) TO ELIMINATEYOUR NAME FROM DISTRIBUTION

LISTS FOR DOCUMENTS YOU DON'T NEEDlTOTAL NUMBER OF COPIES REQUIRED'TTR 7 ENCL 7

D

4

~ ..~-X~8'810

West Adams St. - ARIZONA POWER AUTHORITY- Phoenix, AZ 85M7

Document Control Desk

U.S. Nuclear Regulatory CommDocument Control Desk Pl-37Washington, DC 20555

In order to help conserve our natural resources, we are once again requesting your assistancein updating our mailing listfor the Arizona Power Authority's Annual Report. Please fillinthe necessary information, fold this sheet on the fold lines on thefron, tape it closed and returnto us. We hope you enjoy this, our 35th Annual Edition.

Continue sending the Annual Report as printed above.

Remove my name (and/or my company) from the list.

Make the following changes and continue sending.

Name:

17tle:

Company:

Address:

City/St/ZIP:

Thank you for your consideration. We sincerely appreciate it.

David O. OnstadAdministrator

\ '

940425025b 930b30PDR ADOCK 05000528

PDR .

4

Sl ill

4

~ ~

~~

I' % ~

'

I ~

'( (

1r

0'ith

the Times

'II

~ II'I ~

~ '

~ I

~ <

(

~ 'I

4 (

1C

I ~

VI

Zoo things that will '

never change are man's '

V

c

AI

I t* 'eed for agp'culture

I

'nd

agriculture

needI"

for Idw-cost energy. /~ 1

I

1

J

's ~ (sigh o ~

h ~)fig)gg~h

Qn8Nmv

h4hh JhbHM~RHR~BS~h

~ gf

QJIRClohhh69

h

ggbmhhgy h

~' ' '

~' I

f ~

Drumbcr 28, 1993

, 1992-93 fiscal year, the

Arizona Power Authorityeither instituted or con-

tinued to develop several

programs critical to thc

welfare of'Authority cus-

tomers. Key among the

stafPs activities were ef-

forts to stabilize the costsI

of operations and mainte-

nance at Hoover Dam.

By law, these 08cM costs

are passed along to.

power customers in/

~ Arizona, Nevada, Rnd

California in the form ofrate increases. To stem

the accelerating pace of./cost increases:

~ The Engineering and

Operating Committee

continued to meet quar-

terly with U.S. Bureau of.

Reclamation (Reclama-

-'ion) staff to review and

make recommendations

concerning scheduled

OttiM and replacements,~ Authority Administrator

David Onstad, AuthorityAttorneyJam'es Bartlett,

and o0ier'taff have ne-

gotiated with representa-

tives from Nevada,and

California to reach agree-

ment with Reclamation

and the Western Area

Power Administration on

procedures to establisll

the lowest possible power

rates for Hoover Dam

that meet sound businessI I

~

principles. ~

The Commission

feels encouraged that/

methods other. than

'ower hikes willbe es-

tablished to pay a portion

of the debt service on the .

pew &hoover Dam Visi-

tors Center that has devi-'ted sharply from the

'acility envisioned in the

1984 legislation.

'To respond to some'referencepower cus-

tomers'ltered power

demands because of the

availability of Central

Arizona Project (CAP)I

water, the Authorityimplemented a one-'year

trial program allowing

these customers to "lay-

off" the power, making it.availablc to those who

do need it, without los-

ing lo'ng-term rights to.

the power.

The Commission 'ih

'confident tliat measures

are in place to protect

and enhance the long-!

standing commitments'o

Authority customers.=

'Sincerely,

.:~g~r~Robert P, Casillas

1Chairman

,r

rI

r

1

"The Commission2

believes... the Authorily

moist be tgble to adapt to

c

p 2

'ofSacramento. This'I - evaluation of current"and.

future needs resulted in,s

womajorachieve- . Customershad „amissiohto improve.ments in my second year expressed concern, that Authority leadership,

as Arizona Power Author- we were not letting the'm communications, and

ity Chairman were the 'now in a timely way relationship's. In addition-

.refinancing ofAuthority " abo'ut Commission deci-, to the communfcations

b'onds, which willsave sions and activities. 'The measures I mentioned

our customers approxi- Authority staff has taken above, key~ctions beingr

mately $ 1.1'million, and the initiative to increase considered include:

the continuing improve-< communication through n peeking opportunities for2

ment of commumcations letters and memos, tele- the Authority to'partici-

with our custoiners. phone conversations, and pate as an equity stake-

;meetings. We have re- holder in projects that/

.~c~~~~~ --. -,. y -,",, " ~'~ - '- ~'elved several letters dur'-;could benefit customers.

ing the year commepding 'Actively monitoringthe Ant/ority for its im- transmission access devil-,

Pg i pj'j J~ proved responsiveness. opments at the federal~'der '""'

DQ I 't~ .I/I~ "'he Commission is 'nd regional>eve>a, and

>)'~~",~... >. ',<> ~+l;~Qd '.$

,

'encouraged that the ex- aggressively evaluating

perimental power-layoff transmission oivnership „

proaram appears to be - issues to determine how

working as planned. The, Authority customers are

g ''rogram allows power . best served withrespect

that is not needed by'o service reliabilityand

power customers to be, -. costs./sold to other customers ~ Creating a policy position

who do need it, without ~ to guide Authority in-

the layoffcustomers for- „volvement in research,

f91 feiting their ongoing right planning, and develop-'s d 4'vc»W

.'h.'t»i ~ - -'

to that power. We are also ment of renewable energy'lvery pleased to report the projects,.

tt, s

Salt River Project contin- The Co'mmission's

*»pe . i, p~».','-. ",.'" „.'< „',.<4~@>', ~.'~~ h. 'es to provide'excellent goal continues to be thath

. service as the Authority's of providing guidance

power scheduling entity. 'hat willinvigorate the'I

The. Commission Authority's position as we

.believes that to survive' move totverd the 21st

nrmlg', I and continue to serve century. This is the time'\,

v Artzona's preference . to begin developing/

~ power community, the. constituencies that will*so ', ~I'uthority'must be able to provide political support

h,+ . ",, - -'- ='-.-.,- -. ~~~.~".~"='.''dapt to changing needs. for future changes benefi-

With our sights focu'sed cial to the Authority and

..on the long-term, the its customers.

Commission approved as

strategic plan prepareds

by Resource Manage-

ment International, Inc.

~ ~

. ~

TlicAuthority Commission

mccls thc third Tuesday

ofeach month to rcvicto

rluthorily activities and

Provide guidance on issues

a+ecting customers."

I,*

I~rmers Investment Co.,

a family-owned pecan

and cotton growing andn

processing lirm head-

quartered in Sahuarita,'rizona.He is a director ~

of the First Interstate

Bank, and vice-chairman

of the National Pecan

Shellers Association.-~f fW

Gila County supervisor' for eight years, and was

chairman three of those

years. He is a former

director of the Globe

. Lions Club and is a mem-

ber of'tlie Globe-Miami

Economic Development

Committee.Richard S. Walden

Dick Walden is the imme-

diate past chairman.

Appointed to the Com-

mission in 1984, Wakien

is serving his second con-

secutive six-year term.

Mr. Walden heads the

c

Jewell M. Lewis1

i Vice-ChairpersonDr. Lewis was first

appointed to the Commis-

sion in 1986 and has been

reappointed ror a second

term. Formerly a, teacher

Robert P. Casillas 'in the Phoenix school

Chairman syslem, she is chairperson

Bob Casillas willserve of the board of Media

as chairman through America Corp., which

January 1994. First owns KTVKChannel 3,

. ~ appointed to the Phocnist Maga@inc, KESZ

Commission in 1985, he Radio, and Desert Pro

was reappointed in 1990 duction Center. Dr. Lewis

. forasecondterm.A 'samemberofthenative of Miami, Arizona, Arizona Perinatal Board

Chairman Casillas, along . ofTrustees, the University

with his brother, founded ofArizona A,lumni Board,

C.C. Foods, Inc., a tprtilla and co-chair of the

manufacturing and dis- Orpheum Theatre

tributing firm in Phoenix, Renovation Foundation.

Arizona. He served as a

I,

) James K. Henness

Jim Henness has served" on the Commission for

12 years and was

J. S. Francis, Jr.

Jack Francis was

appointed, to the Commis-

sion in 1984 and served

as its chairman from

1988-90. He is also

serving a second six-year

term. Mr. Francis is

chairman of the board of

Valley Industries, a fam-

ily-owned agribusiness in

Glendale, Arizona, which

is celebrating its 70th

anniversary. He serves on

the boar'ds of the National

Cotton Council, the

Arizona CottonGrowers'ssociation,

and the

SuPima Association. ofh

America. He is chairman

,of the" Arizona Cotton

Growers Association *

State Support Committee.

chairman from 1984-86.

His second term ends in1994. A cotton farmer

from Casa Grande,

Arizona, Mr. Henness is

active in agribusiness,

environmental and com-

munity organizations, in-

eluding the Agri-Business'ouncilofArizona, the

National Association ofrConservation Districts, ~

and the Arizon'a Cotton

Growers Association.

"27u'Governor appoints individu-als toscrocon thcAuthority'sfioc-mnnbcr Commission, subj ca to

conjirmation by lhc stats Snurtc.

To provide continuity in lhc ad-

ministralion and opcralion ofthc

ct uthority, mnnbcrs arc appointedlo staggcrcd terms ofsiss years

cath. Thic Commission ckclspomits mcmbcrship a chairman and a

vice.chairman who hold ojfcccfortioo years, beginning 'and cndirlg

"on lhcji'rst htonday inJanuary.I

~ I'

Agribusiness inArizonaAgriculture is Arizona's

fourth Iargest indust'g"

after manufacturing, but they have to over- ~

tourism, and mining. Al- come the continuingthough irrigated farmland plague of whiteflies

is de'clining in the state, 'nd boll weevils, the'I

the industry is far from - —, > depressed worldwidedead: Arizona's climate is ~

~ I market fear cotton, and'ideal for a variety oE the stigpia of subsidjcs..crops and worldwide the ~ r While there is nodemand for agricultural . alternative to agriculture, ~

products is growing. Some recent refief "alternative agriculture"

Agribusiness is came in the form of is the contemporarysometimes referred to as fowered costs for Central buzzword. Agriculture is

a "hidden industry", . Arizona Project (CAP) taking on greater market .because its integral link in water. To help ke'ep orientation. It is not what

I

the world econoniy is so farmers int business, the farmers grow but whor

often overlooI'cd.. Central Arizona Water they grow lt for. "Niche

Agriculture provides Conservation District, farming" to explore newlife's basic necessities. which operates the CAP, opportunities is advo-

Almost any'crop will voted'to subsidize the, catcd by.the Agri-Busi-

grow in Arizona. And a - price of water. It willbe ness Council ofArizona,-I

market oP60 million — sold to irrigation districts .Inc. A gradual shift, fromr

'people lies within a for 817 an acre-foot, " central Arizona's4radi-'tivo-day truck haul. Why which is about a quarter- tional reliance on cottonthen are Arizona farmers of the market rate. is putting crops like

struggling? Because low The lower price will jojoba, childpeppers,'otton

prices, increasing help, but it willnot solve roses, durum wheat,

power and water costs, the farmers'inancial and.organically grownmother nature, bad press, dilemma. Some have had, produce into the market.and urban spra~t'rl Pave to remortgage their farms Thc trend is toward mak-

many farmers backed' to build canals that bring ing agricultuie indepen-into a corner. ', CAP iirigation water to den'tly sustainable in a

their land and to pay competitive marketplace./increased irrigation-

I

district tax assessments.

While only a thirdofArizona farms not on

Indian reservations are

dependent on CAP ivater,

there are, other challeng-

ing circumstances.4

Authority customers in~' the west Valley do not

have access to CAP water,

aul Pearcc and hip wife Marie farmA

r2,000 acres in the Eloy-Casa Grande area in

partnership with son Gale. They'vc been

farmers.all their lives. He came from Oklahoma

in 1936 and she's from h Texas cotton farrrf.

Pcarce's farming career has embraced many

years of civic and family commitment.

A board member of Electrical District No.4

for 35 years, he also served as mayor of Eloy

for 12,years. During October and November, hc

is a guide for the Sunland Visitor Centei "tag-

alo'ng" tours of.area cotton picking and ginning ~

operations. Mostly city folks sign up for theI

Wednesday morning tours that Pearce enthusi-

astically narrates for tourists who debark from

their: own cars at strategic points to learn about

the cotton industry. Pearce heads a close-knit

family of two sons', a daughter and-nine grand-

children who'all live near'Casa Grande.E

Poarcc.Farms has cultivated more than

cotton. Paul has planted lettuce, alfalfa and

grain "when the market is good" and as part of

the rotation program to improve the soil. ~

"Long staple yields have been down because of

'pinkies'pink boll worms], whitefiies and

several years. of extended high temperature,"

Pearce said.

"We'e had 'our ups and downs in the past

40 years," hc said. '<The farmer is going to haveI

to look at market potential for a crop more now.

than in th6 past."/ ~

~ iP

Both his sons are agribusiness college.

graduates, which Pearce said allows them td

understand the market better. "Grain buyersh

want dur'um wheat for pasta and cattle feed

and will pay a good price, for it," he said.

A.drawback to,switching from cotton to grain isr

.. the'fact that most farmers can't get financing to

produce a wheat crop.

"The Authority has done a great Job keep-

ing us supplied with reasonably'priced power to

pump water," Pearce said. "We'e fought hard'o

hold on to preference power," he said. "Now

, it's difficultto convince people we need it."

"Authorit'y,customers signed a 30-year

contract to pay for Hoover Dam, which wasI

paid out in 1987," explained Pearce.'"It

„'oesn't seem right that others should now be

able to take this power."i

Although Eg 4 & 5 farmers are using

mostly CAP water today because the new CAP

repayment agreement makes it affordable,

they don't want to lose their privileges for

, buying Hoover power. The

experimental power-layoff

program preserves this

preference privilege.

g i

6l '>.'<~

iil

"Thefarmer is going to

have to look at market

potentialfor a crop more

noro than in thepast."

It,lg „, ) /jg

4

"Power layogs alloro

the schedulers to take

the overall resource

/

and prom'de it rohere

'I

lt s needed most."

»

l

'~qI

'J

0

0

1

I \i[i I,

i

l

v

'i

»I,

all ls an especially busy season for

DeWayne Justice, vice-chairman and manager'fElectrical District No. 7. Not only is he

harvesting citrus crops on his own 30 acres and

$ 00 acres for other owners, and sending beef to/

market, he is also very involved with developing/

p'olicy issues with the Arizona Farm Bureau

to be lobbied in the state legislative session

commencing in'anuary.

Justice is'a native of the Waddell area,

where he earned his first farm wages at the age

of eight. A lifelong farmer and owner-operator- for 24 years, he is chairman of the

Arizona'arm

Bureau Water Committee, "The issues are

similar to those'of the Arizona Power Author-

ity," observed Justice. He said faimers must

continually try to correct misconceptions about

Arizona agriculture.

"There are so~e people who don't want/

federal water and power used for agriculturei"

he said. ED 7 depends solely on pumped»

groundwater. As'a result, Justice pointed out,-the Authority's ability to hold down costs Is

/vital. '„'The Authority's only source of revenue is

its customers," he said, "and they can stay in

business only as long as their-customerS can ~

pay their bills."

The experimental power-layoff program

benefits ED 7 by allowing the Dis-

trict to use the most economically g

priced resource available. "Power layoffs allow

power schedulers to redistribute the resources

from areas where customers are willingto

temporarily lay off Hoover power and provide it

temporarily to districts that have a.shortage,"

he said.'

Two common misconceptions that annoy"

Justice are charges that cattle'razing destroys

public lands ahd that farmers negligently use

pesticides. "The desert tortoise is threatened by

subdivisions not by. livestock," he said. "Buffalo

grazed western lands in much the same way

cattle do today. Properly managed ranches are

proven to be bettei'stewards of the land than

the stagnation of nonuse." As for pesticides,

'ustice said farmers are very concerned. "For

one thing, we live on the land," he said, "and/

4

we don't want our land and families poisoned."I

Also, pesticides are expensive. "Economics dic-

tate that we use as little as'possible," he'said.

Justice pointed out that-young people

in their twenties today are two generatidns

removed from the farm. "That's a problem

because they think food is producect in the

backroom of the grocery store," he said. "They

fail to recognize that the U.S.-has the cheapest,

safest, most abundant food supply in the world.

Only 16 percent of our disposable income goes

toward food. If taxes and regulations'drive

American agriculture out of business, our

nation will be dependent on foreign govern-

ments for its food'supply. A food embargo is a

frightening concept." ~

r

Justice fives in Waddell, Arizona, with his

wife Pam, daughter Terra, 17, and son'Selwyn, 4.

Experimental,Power-LayoffProgram Under WayThe Authority initiated a

power-layoff program in

July/August 1993 when it'ecameapparent that

there would be excessive

banked energy by the

end of the operating

year (September 30). To

alleviate thc situation, the-

Authority announced

that it would treat all

unscheduled banked..

energy for the remainder.'f

the 1993 operating

year as relinquished—

power for resale.'n

other words,

Hoover Schedule "A"

custoiners must sell their,excess power rather than

bank it. This procedure.

gives customers who can

use more than their allo-

cated amount of the

Hoover resource the

opportunity to schedule

and purchase the excess

(laid-ofi) capacity and/or

energy for the remainder

of the operating year.

As a result, on

October 1, 19P3, a dne-

year experimental layoff

program began for

Authority customers ofHoover Schedule "A"

power. The. Commission

authorized such custom-'rs

to lay offa portion

of their Hoover "A".

capacity and/or energy

making it available for

other Hoover customers

to purchase.

The Commission's

decision?s in keeping.

with the Authority's

energy conservation

objective ofusing the

Hoover r'esourcc in the

L

most efficient and

economical fashion. By

releasing Hoover "A"cus-

tomers from power

commitments they may

not need, other Authoritycustomers benefit from

this now-available source

of low-cost energy and

power.

i

/j-JL I ', lip

The proaram does

not relieve the customer

of its obligations for

purchase under its Power

Sales Contract. However,

the Authority willbilland attempt to collect forall. laid-offcapacity and/

or energy initiallyfrom

the customer(s) to whom

the laid-offpower was

sold. Layoffand'purchase

agreements between cus-

tomers must extend fora'minimumof one month.

A healthy resale

marketing etfort allowed

Hoover "A"customers to

layoff34,288,000 kilo-

watt-hours for the current

operating year ending

September 30, 1993. The

Autfioritywillmonitor

and evaluate the'layoff

program to determine its

merits and whether or

not to contique the pro- Igram after September 30,

1994.

Water and Power, South-

ern California Edison and

a number'of cities insouthern California. The

delegation seeks agree-

ment to control costs and

to Msure funding for. cer-'ain

operations and main-

tenance costs.

The delegation's

objective is a united frontto secure economic relief

by raising awareness ~

about the impact of rising

power rates onpreference'ower

customers.0

Asdt stands now,

Hoover power custonlers

, must pay for the entire

visitors facility, the cost ofwhich has ballooned fromthe original 832 millioricustomers agreed to in

1985 to more than $80

million today, plus inter-

est during construction.,

Negotiations Aimto Hold DownCustomer Costs

Representatives of the ~

power and water indus-

tries froin Arizona, ',

California, and Nevada

have met regularly for the„,

past year trying to reach, ~ ~ 4'"'~'..'t Novada

califosnla *

agreement on 11 issues of—.concern to Hoover power

Arizona

users. These efforts have

resulted in a settlement

proposal that willbe pre-.,

vented to the Bureau of . A spinoff advantage

. Reclamation and the of stabilizing costs would- Western Area Power Ad- be reliable funding for

ministration, the fegeral Reclamation and West-'

Agencies that generate, ~ em. This steady but con-

market and transmit fed- . trolled source of revenueI'rally produced power. should allow Reclamation

Two point's covered by to operate with greater ef-

the proposal. are measures ficiency.

,to control costs for 'he three-state del-

replacements at Hoover egation includes members

Dam, and a request that from the Arizona Power'n increment in the fee to Authority, the Coloradobci charged for admission River Commission

to the new. Hoover Dam (CRC), the MetropolitanVisitors Center bo used Water District ofSouth-

ta help cover the cast of em California, the Los

the center. „Angeles Department of/

4

reg Pierce, vice-chairman of Electric@i

District No. 8, is a fourth generation Arizona

farmer who has farmed in the west Valley far

20 years. He is a tenant on the Paloma Ranch,

the biggest ranch in the state. During the past

year, he,cultivated 4,500 acres of cotton, 2,500.

acres of wheat, and 300 acres of alfalfa. ED 8

has no access to CAP water and relies on

pumped groundwater.

Pierce believes the cotton industry is

more important than the Arjzona legislature ra-I

alizes. "They think we'e out there wasting "

I

water," he said. "Actually, we'e gotten much

mare efficient. We'e laser leveled our fielcfs

which saves us one to two acre-feet per field

ea'ch year," said Pierce. Ha explained that

10-row cultivators have replaced 4-row

cultivatars with the result that fewer farm

hands and tractors are needed. And better

pesticide management is saving dollars.

. For.example, "by regularly. field checking

the density of the whitefly papuiation with a/

trap-pan sampler," he said, "we can spray when

the flies are 30 per square inch, not 10 per

square inch. This reduces spraying frequency toI

those times when it's mast yffective."

8

~ ~

pr

h

.Arizona farmers have had to become~ t

—;"lean and mean" out of necessity„said Pierce,, ~ '

explaining tifat the selling price of cotton has'

'onefrom a.high of 90 cents lint/pound in ther

1970s to only 53 cents in 1993.

"What disturbs me,".he said, "are the

inefficiencies at Hoover Dam"—things like the ~

tripling in cost. of the new visitors'center and

ioutine maintenance being performed on-peak

rather than off;,peak. "The Authority is in tune

, with what our needs are and has represented 'rour desires in'trying to hold down costs," he

!

said. "Dave Onstad has been out to some of our.'

Jmeetings. They have done a,g'ood job."'o

what is the outlook for Arizona agricul-

ture? "I think it's'favorable ifwe can keep our .

hydropower, and ifwe can get whitdflies underI !

I

~ t'"27se Authority is in

tune with rohat our needs

're and has represented

'

Iourdesi'res ih hying -

„

= to hold doron costs." ~

control," said Pierce'\

/Pierce and his wife Kimb'erly live in

I'>~, ', ~ Buckeye, with their son Jason, 16,

I- and daughters Amber, 13, and

Tiffany, 6.-Ii

'!

.Il~+3 g g ,f~ p

III

Ll

IiiOJ

1

I

I

, gi,>i

U

C

>h 'he >.-~( >~/</

/8f

~I

I ~ r

~~ I ~

/ I/

r

!'rr

)"t>

I

r~

~r

"Reasonably priced

electricity willbe there

for indushy

that looksfor it."

I-' i- I )t"

'3

4

'

c ) ~J

,'.g(g

l~~, a~4v>.@~ -+

ater pricing in Electrical District,

No. 2 is complicated by the variety of surface

water sources, available in addition to ground~

water. Central Ariz'ona Project water is just one

of the several sources.

"The 517-an acre-foot price of CAP waterI

(compares with $ 25 af for well water) will/

impact pumping," predicted Tom Martin,

general manager of'ED 2 shortly after the CAP

pricing agreement was reached in OctoberI

1993. "The delivery rate for CAP in our area is

'imitedby the canal capacity," he said.

"Although the farm load is declining in

ED 2, farmers may need to turn on their electric

pumps to meet peak agricultural demands,"

said Martin, "because municipal and industrial

user's have first priority.on CAP water." Unlike

most, of the Authority's rural customers, ED 2

also serves residential, commercial, and indus-

trial load.'We

have to ensure we have the power

capacity for the few days that pumps are used,"

explained Martin, who. is a registered

professional electrical, engineer. *

He said the District often I Q< (

buys supplemental power

Q~G

10

ibecause it uses mbre power than it can get

from the Authority.

Martin, who moved to Coolidge from

Anchorage four years ago, f6resees very slow

development in Pinal County o0er the'ext five

to seven years. There is potential in the long

term for some big industries, like paper

recycllng, between Phoenix and Tucson.

"Reasonably priced electricity will be there forn

industry that looks for it," he "said.

"We see, wild swings iri Hoover capacity,

from month to month," said Martin, whd sees

the gngineering and Operating Committee/

playing an itnportant role ip decisions about

when a unit is taken out for'service. "The EEOC

,may be a new voice to help control the outages

that pile up on the Arizona side," Martin said.

"Since Hoover capacity is non-firm, when a unit/

isn't operating, there'.no power. Replacement

power can be'quite expensive. The Authority's operating<he best it can given that it has .

little control over the Bureau of Reclamation's

operating decisions," he said.

Born, in Oregon, Martin grew up In

Denver, graduated„from California, State Poly--

technic University, and worked in San Francisco'for

PG&E) and Sacramento (for R.W. Beck)

prior to spenliing seven years in Anchorage,

Alaska as director'of planning and rates for an

electric cooperative.

He iand his wife Toby are. avid scuba

divers. Most recently they.dove off Australia's

Great Barrier Reef, where they vacationed with

'daughter Jessica, 10, and son Colin, 5.

Engineering andOperating CommitteeTechnical representatives

from water and-power

agencies in Arizona, Ne-

vada, and California be-

came formalized nearlythree years ago as the En-

* gineering and OperatingCommittee (EEOC). The

committee meets withBureau of Reclamation

"

engineering and manage-

ment staff four times a

year to review Hoover

powerplant operations

and maintenance plans.

David Onstad and Don

Esgar represent the

Authority at these meet-

ings which are generally

held at McCarran

Airport in Las Vegas.

p< ~'Y~".c'e

In addition to

covering routine O&Mprocedures, Reclamation

identifies any extraordi-

nary capital improve-

ments or replacements

that require advanced

planning and significant

~/k .'t ~~investment. The E8c6C/has the opportunity to

question Reclamation

about its methods forcontammg costs and to

offer suggestions.i

The largest recent

item in this category was

the Programmable Master

Supervisory Control

(PMSC) system, which

automates and improves

specific powerplant

operations while, at.

the same time, reducing. labor costs.

The E&OC helped

monitor the final ye'ars ofthe Hoover UpratingProgram, wh'ich began in,the early 1980s and was

completed in%ay of1993. This modernization

of Hoover Dam genera-

tors increased electric

output by 500 megawatts.

11

12

down costs."

From kgb:

Dave Onslad,

James Bartlett

k

~)

i/

0

staff'is constantly refin-

ing its programs to help

customers survive in a

'ompetitive market-

place.

Today, small power

users are at the greatest

risk economically and

politically. The Autho,-

ing efforts between the

Authority and the West-

em Area Power Adminis-

tration to Ifold downt

costs. Western is the

federal agency respon-

'ible for transmitting and

marke'ting federally pro-

duced power. Western

has brought its customersc

including the Authority,into the process of devel-

oping a 10-year plan for

substations, transmission;

and joint transmission.

As a follbwup to this

effort, the Authonty'has

established customer

committees to work in

partnership with Western.

rity's strengthens the way

it serves small usersby'rovidingthem with

I II

he Arizona Power responses to legal, techni-

Authority receives cal, and programmaticpArizona's entitlement to changes.

hydroelectric pow'er The Authority's re-

generated at the Hoover sources include dedicatedr

powerplant and markets staff with capabilities tor

this power and energy to maintain a reference

38 eligible A'rizona enti- library, producepublica.'We'e

been improving ties, 3l ofwhifh areeur= tions and newsletters,

rently purchasing pow'er provide field services and

on a regular basis. The ~ '.total electric planning for

our working relationship Authority's customers in- smaller systems, includ-„

elude electrical, irriga- ing demand side manage-

tion, and inter conser- ment, integration of

roith Western'/o get a vation districts and cities. resources, and financing.

Since being creyted Throughout its rela-

in 1944 by the Arizona tionships with otherI /

better handle on holdtng, legislature, the Authority federal and state agencies

has evolved to sert e its and with customers, theI

customers in an ever- words partnership, cmpow-"

changing political envi- crmcnt, and quality set the

ronment. The Authority tone for communication

and cooperation.r<'~'I" Nowhere is this more

,1~l)) 'vident than in the ongo-

Arizona Power

Authority Staff

David O.'Onstad

Administrator

'ita Gallant

. Authority Secretary

James Bartlett

Legal Counsel

Frank Bonfili

ChicfAccountant-

Rosemary Anhalt

Fiscal Scrviccs'Specialist

Donna Robins

Administrative Secretary

Donald Esgar

Customer Services and

Contracts Managerc

Evelyn Magnusson

Pmcr Manager

Theodore Moss

Consulta'nt Supcrvisqr

David Southworthl

Computer Analyst

\ i

As the ESA legisla-iD 'ion currently stands, the

director of the Fish andeauthorization 'ildlifeService or the

of the 1973 Endangered Secretary of Interior canSpecies Act (ESA) is'a ~ autonomously designate

/majorland and water

" ., critical habitat'areas.Noissue facing the 103rd public review of their

'.S.Congress. The out-,, decisions fs required,come'ofthislegislation . Itisthe Authority'scould sigdificantly impact 'osition that the environ-

'

~ hydroelectric operations mental and economic/

on the Colorado River. „'mpacts of such a desig-I

The Authority sup- "critical habitat." Critical nation are so wide-rang-ports meaningful reform habitat contains the physi- ing and pignificant that anof the ESA which would cal and biological features environmental impact

-balance the goals of essential to conserve a statement sliould be pre-protecting and;conserving species and includes space pared before the processthreatened and endan- ~ for growth and normal, can be finalized. Zhe Au-gered species with the behavior, water, air, - thori(y is actively seeking'country's need for'contin- ~ light, minerals, and sites'hanges in the reauthori-/ued growth and 'develop> for breeding and rearing zation bill to ametitl whatment of natural resources. offspring. In the case of it sees as shortcomings.

II I \The U.S. Fish and the four identified fish, - Specifically, the Au-

WildlifeService has iden- this critical area encom- 'hority is very concernedtified four fish native to passes more than 2,000 about the economic im-the Colorado River as river miles. pact of critical habitat de-'being endangered. /he ~, Designation of criti- termination that couldspecies are the, Razorback cal habitat does not create ~ affect the cost, availabil-Sucker, Bonytail Chub, a wildliferefuge or close ity, and usefulness of hy-Colorado Squaiv'fish, and .the area to human i dropower as a reliable,Humpback Chub.. activity. It applies only to renewable energy, source.

= When a species is federal agencies that pro-

proposed for listing as en- pose to carry out acfivitihs,dangered,'areas of habitat that may adversely

I

considered essential to its modify the designated/conservation may be pro- critical habitat. Althoughposed for designation as .the exact constraints on

federal hydropowerI operations and their im-

pacts are not yet known,

the Authority anticipates

pressures to flatten flows

-, at all the Colorado, River.dam facilities similar to

the constraints imposedat'Glen

Canyon'Dam.

Razorback Su'cker

The U.S. Fish'and Wild-life Service is proposing15 river reaches'as criticalhabitat'. This represents

',824miles of, river or

52 percent of its historical

habitat.

I

Bonytail ChubThe U.S. Fish and Wild-life Service is proposingfive river reaches as criti- .

cal habitat. This repre-I /

sents 344 miles uf river or15 percent of its historical

habitat.

Colorado SquawfishThe U.S. Fish and Wild-life Service is proposingsix river reaches compris-

ing 1,148'miles of river or29 percent of its historical

habitat.

„Humpback ChubThe U.S. Fish and Wild-life Service is proposingI/seven river reaches as

critical habitat or 28

percent of its historical

habitat.

Power and Watero 1

Symposium

The Authority served on

the organizing committee

for the first Arizona

Public Power &WaterI

Symposium held at the

.Registry Resort inScottsdale in midJanuary

1993. The fwo-day

program brought together

government and industry*

policymakers, managers,

staff, and consultants. The

objective was to heighten

,

'warenes's among

Arizona customers that

the public power and wa-

ter organizations servmg

them are good stewards'fthe resources tlleymanage and deliver.

Speakers described

the challenges ahead and

expliined hoiv power and

water agencies may need

to respond. A second

Symposium willbe helP

in the spring of 1994.I

EPAMP rWestern's proposed

Energy Planningand'a'nagementProgram

(EPAMP) environmental

impact study is still being

considered for approval

by the U.S. Department

of Energy (DOE). After

DOE releases the draft ofEPAMP, possibly in

Dece'mber '1993, there

willbe a series of meet-

'ngs for public comment

oit the EIS, followed bydraft rules and regula-

tions to implement

EPAMP.

Western expects to

have 'the public process

and the necessary final .

documents completed for

implementation bySeptember 30, 1994.

'At that time, all Western

customers, including the

Authority and its custom-

ers, 1vill have 12 months

to submit to Western an

Integrated Resource Plan

(IRP). As currently

envisioned,-EPAMP willrftquire Authority cus-

tomers to perform inte-

grated resource planning.

The A'uth'ority's

customers who are

eligible for submitting an

IRP range from entities

requiring as little as 10

megawatt-hours a year to/large utilities using 17,000

'megawatt-hours a year.

To accommodate this

diversity, EPAMP pro-

vides enough Qexibillty

to embrace the needs ofeven the smallest utility.

According to West-

em's Robert N. Fullerton

at Western's customer

meeting in Las Vegas on

October 19, 1993> the

changes proposed to the

original EPAMP pro-

posai willnot designate a

preferred afternative, nor

willit include a link to

the power marketing op-

tion. Also, the perfor-

mance IIlan willbe

dropped.

She RPG grew out

of customers'esire for,a

user-friendly tool'to aid iin integrated resource

planning. It includes .

workbooks and computer

software incoiporating-diagrams and charts to

show 1vhat the IRP

process involves. Western

estimates that manually.

completing the workbook

takes approximately

32-40 hours, while the

computer version can be

completed in about four

hours.

Resource Planning

Guide

The Western Area Power

Administration has

helped develop a Resource

Planning Guide (RI'G)

designed to assist small-to

mid-sized power custom-

ers to perform the analy-

ses necessary to develop

an integrated resource

plan. The RPG project

willinclude workshops,

technical 'assistance, and

a hotline to support the

final, products. Western

anticipates creating a-users'roup to encourag

networking and peer

support.

Integrated Resource I'lan

Screenlna of Screen)ac ofItemand'Side Supply.SideAlternatives Alternatives

Resource PlanOptlmlaatlon

'CF

Financial/RateAnalyses

External Influences Rlslr Analysis/

PlanImplementation

'cheduling EntityAgreementSince 1988, as authorized

under'the Authority-

Western Power Sales

Contract, the Salt River

e Project (SRP) has sched-

uled Hoover power to

Arizona customers

through an interim agree-/

ment with the Authority.

Prior to that; the Western1

Area Power Administra-

tion served as the sched-

uling agent..

By the Authoritydesignating SRP as its

scheduling entity, Author-

ity customers have

'eceived b'enefits far

beyond expectations.

Specifically, the morithly

and seasonal load re-

quirements ofAuthoritycustomers were met more

compatibly without

impairing the rights ofAuthority customers to

receive Hoover power.

In ollter words, the

Authority and SRP have

arrived jt a contractual

scheduling agreement

that provifles AuthorityI

customers with the,I

flexibilityto use Hoover

power when they need it.

SRP absqrbs Author-

ity customers'nused

Hoover power during the

winter months'and banks

(saves) it in a deviation- account, for Authonty

customers,to tap when

they require additional

energy. Authority- customers must, however,

consume their fullHoover allotment by the

end of the operating year.

Hoover UpratlngProgram

The program, which be-

gan in 1981 to uprate the

original generators at the

Hoover powerplant,'illbe fullycompleted in

1995. As of this year, all

17 generators have been

mprated and are operating

as envisioned. The re-

.mainder of the pro'gram,

to be completed by 1995,

is the Programmable

Master Supervisory Con-

trol. This control system'illenable Reclamation

'o

coritrol all generating

units, including those at

Davis and Parker'ams,'roinone central point at „

the Hoover powerplant.

The AuthorityCommission regards the

Uprating Program as one

of its major accomplish-'entsin the past decade.

The upratigg-rewinding

using modern technol-—

ogy-of 17 generators

adds 528 megawatts ofgenerating capacity.

1

'~gji igCi

C

PCREDA ActivitiesThe Colorado River

Energy Distributors

Association (CREDA)

participates, on behalf ofits members, in environ-

mental impact studies offluctuating releases from

Glen Canyon Da'm on

downstream recreation,

beaches, wildlife,and

power. produced at Glen

Canyonpowerplant.'he

Authority is a

member of CREDA,whose members are pri-

marily power customers

of Western's Colorado "

River Storage Project

(CRSP). The proposed

modified flow,patterns

from Glen Canyon Dam

would impact CRSP cus-

tomers by dramatically

increasing power rates

and diminishing the use-

fulness of the electri'c re-

source. Many Authoritycustomers purchase

CRSP power to supple-

ment the energy they re-

ceive from the A'uthority.

. Other CREDA ac-

tivities during the past

yea'r included: 1) moni-

toring national energy

legislation, 2) workingwith Reclamation and

Western on issues affect-

ing the availability and

price of wholesale elec-

tric power, 3) monitoring,operation, maintenance

and replacement costs at

Reclamation and West-

ern power facilities to

control costs, 4) repre=

senting members'nter-

ests in efforts to preserve

the integrity of the

Grand Canyon, and

5) securing replacement

power for customers.

rs le-j ~„,

~ '

Power OperationsOn June 30, 1993, thewater stored in Lake

Mead was 21,258,000

acre-feet at a lake eleva-

tion of 1,188 feet. Duringthe 1992-93 fiscal year,

7,308,000 acre-feet ofwater released through

Hoover turbines

produced 3,372,000

megawatt-hours of en-

ergy. During that period,. ~

the Authority's share ofthe energy was 636,712

megawatt-hours.~The Authority

purchased 1,248 mega-'itt-hoursof thermal-

/geneiated energy under

wholesale power pur-chase contracts with the

Arizona Electric Power

Cooperative, Arizona

Public Service Companyand the Salt River Project.

The Authority sold this -"I

power wholesale to its

„customers.

g /

15

Agency of thy State ofArizon4

\'1 ~ r Schedut

July 1, 19

e of Power and Ene

92 throughJune 30, 19

rgy93,

,. Sale of Hydro PowerrAquiliIrrigation District

Avra Valtcy.Irrigation Ec,Drainage District'Bu'ckeye Water Conservation DistrictC.A.W:C.D.

Chandler Heights Citrus Irrigation District

Cortaro-Marana Irrigation District

Electrical District No.'1, Pinal

Electrical District No. 2, Pinal

Electrical,District-No..3, Pinal

"Electrical District No. 4, Pinal

Electrical District No. 5,,Pinal

Electrical District No. 5, Maricop'a .Electrical District No. 6, Pinal =-.

Electrical Distpct No. 7, Maricopa'lectricalDistrict-No. 8, Maricopa

Harquahala Valley Power District *

, ~

"~

'rr

Maricopa County Municipal Water District @1

'. McMullen Valley Water Conservation R Drainage District

Ocotillo Water Conservation District"

., Queen Creek Irrigation DistrictRoosevelt Irrigation District*

Roosevelt Water Conservation District

Salt River Project "

San Tan Irrigation Dis'trict

Silveibell Imgation 8r, Drainage District ~

Tonopah Irrigation DistrictWellton-Mohawk Irrigation 8r. Drainage District .

City OfMesa

,, City of Page.

City ofSafford,Town ofThatcher

Town ofWickeiiburg, ~

Ak-Chin IndianrCommunityArizona Electric Power

Cooperative''rizona

Public Service Co.

4

r4

Sales

Year EndingJune 30, 1993

r )r

Average MillsBilling 'elivered Per

Dcinand kW k)Vh 'morm, kWh

r4

3.887 9,358,000 . $ , 274,108 '9.29454 1,091,00D 32,332 29.63

2,284 4,332,000 128,873'9.75,53,081 '87;833,000 3;798,321

'3.24''07

" 2,766,000 59,612. 21.55

3,757 ',440,0DD',, '70,721 28.68

~ 0 '..0 .0 0.00

'3,428 62,551,00D 1,325,496 „'2L10, 11)530 43,645,000 ., 983,767 22.54 ~

, 3,038r,

10,415,000r" . 361,246 '4.693,159 ~ 10,713,00D, 323,077 30.16

.229 1,185,000 ' '24,340 20.54

4,641 — 25,899,00D 544,584 'L038,268 '4,470,000 * '64,485 2 32.10 .

14,163,, 39,491,000 - ',056,339 ' 26.75

'1,501'2, 38,000 . 97530 ', 35.62

7,233 ~, 13,669,000' '28,999 '" ',31:38

3,685' 13,612;000, 355,228; " 26.10

1,098 .. 4,321,000, . 107,588, '4.901,304 7;441,000; r .149,570, ', 20.10

3,148. 10,303,000: . 242,751... 23.56',90928,827,000.„', 567,250;" . '.19.68

$8)779 163,231)000 '. 3,402,633' 20.85

236 ', 877,000 . 24,177 27.57

388 " 1,362,000, 33,391 '24.52

1)009 5)106)000 '09)933 2' 21 53

2,654' 11,629,000 ~ 249,916 ' '21.49

219 ',866,000. '7,556 ' 20.13

444 991,000 34305'34.62

972; 4,063,000 99,932 —,24.60

49 367,000 " 7,727 r 21.05

146 -,,f)245,000 ~ 25,058, 20.13

1,047. " 6,507,000' 149,041, 22.90

Citfzens Utilities Co

Tohono 0'odham Utilities Authority

' 160,, 1,244)000 24,199

127 755,000 '6,36319.45

21.67

'an Carlos Irrigation Project

Tucson Electric Power Co.

110 933,000

428 3,806,00D

18,774

75,205

) 20.12

19.76

Total r

Sale of Thermal Power: Total Thermal Pawcr Sales

Other Electric Revenues'

Total 0 eratin .Revenues

194,382"

611,615,000 $ 16,012,695 ' 26.18

24 115 1 248 000, $ 1,050,770

$ '8,230$ , 17,101,696,

16'h r 'r

4 ~

An Agency of the State of Arizona

Table of Contents

Financial Section

APA General Fund, Hoover Uprating Fund and Combined Balance Sheets,

Junc30, 1993and 1992

APA General Fund, Hoover Uprating Fund and Combined Statements of Operations,Years EndhdJunc 30, 1993 and 1992

18

20

APA General Fund, Hoover Uprating Fund and Combined Statements of Changes in Fund Equity,Years Ended Junc 30, 1993 and 1992 21

APA General Fund, Hoover Uprating Fund and Combined Statement of Cash Flows,

Years EndhdJunc 30, 1993 and 1992 22

Notes to Financial Statements

Supplemental Schedule I —Statement of Operations of the Hoover Uprating Fund—

Individual Funds and Accounts, Year Ended Junc 30, 1993

Supplemental Schedule II—Debt Service Coverage Ratio of the Hoover Uprating Fund,

Year EndhdJunc'0, 1993 (Unaudited)

28

30

Independent Auditors'eport

17

An Agency of the State of Arizona

APA General Fund, Hoover Uprating Fund and Combined Balance Sheets

junc 30, 1993 and 1992

APA General Fund

1993 1992

Hoover Uprating Fund

1993 1992

Combined

1993 1992

Assets

Property, Plant and Equipment- Net (Note 3) $ 459,999 $ 535, 135

Advances for Hoover UpratingProject (Notes 2 and 6)

$ 459)999 $ 535,135

$ 53,658,364 $ 44,853,871 53,658,364 44,853,871

Current Assets:

Cash (Note 5)

Accourits receivable—

customers'ower purchases

Interest receivable

Prepaid purchased power

and other

4,768,911

21,234

26,703

1,411

4,593)036

319,622

78,076

1)905,326

5191185

1,535,489

853,451

1,926,560

545,888

1,855,111

931,527

991,714 993,125

6,524,760 6,256,404 11,293,671 10,849,440

Total current assets 4,818,259 4,990,734 9,940,985 - 8,645,344 14,759,244 13,636,078

Total $ 5,278,258 $ 5,525,869 $ 63,599,349 $ 53,499,215 $ 68,877,607 $ 59,025,084

See notes to combined financial statements.

18

An Agency of the State of Arizona

APA General Fund, Hoover Uprating Fund and Combined Balance Sheets

june 30, 1993 and 1992

APA General Fund

1993 1992

Hoover Uprating Fund

1993 1992

Combined

1993 1992

Fund Equity and Liabilities

Fund Equity:Contributed capital

Retained earnings (Note 9):

Allocated:

Investment in property, plant

and equipment

Property replacement reserve

General reserves

Unallocated

$ oooo $

, 459,999

646,502

4)000,000

145)621

9,000

535,135

570,931

, 4)000,000

103,540 $ 434,406 $ (571,145)

459,999

646,502

4,000,000

580,027

535,135

570,931

4)000) 000

(467,605)

9,000 $ 9,000

Total fund equity

Bonds Payable (Note 8) ~

'iscount on Bonds Payable

5,261,122 " 5,218,606 434,406 (571,145)

81)410,000 89,8201000

(2)285,423)

5,695,528

81,410,000

(2,285,423)

4,647,461

89,820,000

Less Investments Held by Trustee-Including unamortized premium

(discount) on investments

of$ 134,868 and.$ (132,871) in 1993

and 1992, respectively (Note 7) (18,417,312) (38,514,917) (18,417,312) (38,514,917)

Bonds payable —net 60,707,265 51,305,083 60,707,265 51,305,083

Current Liabilities:Accounts payable

Power contracts payable

Accrued interest payable (Note 8)

2,896

14)240 307,263

244,151

1,408,778

804,749

247,047

1,178,307 1,423,018

1,586,970 804,749

1,485,570

1,586,970

Total current liabilities 17,136 307,263 2,457,678 2,765,277 2,474,814 3,072,540

Total $ 5,278,258 $ 5,525,869 $ 63,599,349 $ 53,499,215 $ 68,877,607 $ 59,025,084

19

An Agency of the State ofArizona

Al>A General Fund, Hoover Uprating Fund and Combined Statements of OperationsIears Ended June 30, 1993 and 1992

APA General Fund

1993 1992

Hoover Uprating Fund

1993 1992

Combined

1993 1992

Operating Revenues $ 1,089,000 $ 2,496,079 $ 16,012,213 $ 14,173,076 $ 17,101,213 $ 16,669,155

Operating Expenses:

Purchased power (Note 2)

Western credits (Note 6)

Amortization of Hoover UpratingProject costs

Transmission

DistributionAdministrative and general

Depreciation

Allocation of depreciation

1>010,900

16,652

6,631

95,590

75,571

(61,744)

22>512

11,367

49,905

75,103

(62,553)

6,162,064

2,740,611

1,104,818

61,744

5,421,165

2,829,341

789,345

62,553

6,162,064

2,757,263

6,631

1,200,408

75>571

5,421,165

2,851,853

11,367

839,250

75,103

2>411,416 11,181,149 11,396,238 12,192,049 13,807,654

(6>162>064) '5>421>165) (6>162>064) (5>421>165)

Total operating expenses

Operating (Loss) In'come

Other Income (Deductions):Interest expense (Note 8)

Deferred interest expense

Interest income

Gain on sale of investments

Preliminary survey and

investigation costs

Other —net

1,143,600

(54,600)

167,571

(23,225)

(47,230)

2,507>750

(11>671)

248,584

244

(917,602)

(51,337)

15,088>322'23,891

(6,260,961)

3,625,982

2,532,543

180,380

3,716

15,077,477

(904,401)

(6,235,072)

2,900,000

3,585,885

893,403

4,431

(6,260,961)

3,625,982

2,700,114

180,380

(6,235;072)

2,900,000

3,834,469

893,647

(23,225) (917,602)

(43,514) (46,906)

16>231,922 17,585,227

869,291 (916,072)

Total other income (deductions)

Net Income (Loss)

97,116 (720,111) 81,660 1,148,647 178,776 428,536

$ 42,516 $ (731,782) $ 1,005,551 $ 244,246 $ 1,048,067 $ (487,536)

See notes to combined financial statements.

20

An Agency of the State of Arizona

APA General Fund, Hoover Uprating Fund and Combined Statements of Changes in Fund EquityYears EnChdJunc 30, 1993 and 1992

APA General Fund

1993 1992

Hoover Uprating Fund

1993 1992

Combined

1993 1992

Unallocated Retained Earnings:Balance, beginning ofyear $

Net income (loss)

Net transfers (to) from

allocated retained earnings (435) 887,922

103,540 $ (52,600) $ (571,145) $

42,516 (731,782) 1,005,551

(815,391) $

244,246

(435) 887,922

(467,605) $ (867,991)

1,048,067 (487,536)

Balance, end of year 145,621 103,540 434,406 (571,145) 580,027 (467,605)

Allocated Retained Earnings:

Balance, beginning of year

Net transfers from (to)

unallocated retained earnings

Balance, end of ear

5,106,066 5,993,988I

435 (887,922)

5,106,501 5,106,066

5,106,066

435

5,106,501

5,993,988

(887,922)

5,106,066

Contributed Ca ital 9,000 9,000 ~ 9,000 9,000

Total Fund E ui $ 5 261 122 $ 5 218 606 $ 434 406 $ 571 145 $ 5 695 528 $ 4 647 461

See notes to combined financial statements.

21

An Agency of the State of Arizona

APA general Fund, Hoover Uprating Fund and Combined Statements of Cash Flows

Years EndedJunc 30, 1993 and 1992

APA General Fund

1993 1992

Hoover Uprating Furid

1993 '992 Combined

1993 1992

Operating Activities:Net income (loss)

Adjustments to reconcile net in-

come (loss) to net cash prbvided

by (used in) operating activities:

Depreciation

Amortization of premiums and

discounts on investments

Write-offof preliminary survey

and investigation costs

Changes in assets and liabilities:

Preliminary survey and

investigation costs

Accounts receivable

Due'from (to) other funds

Interest receivable

Prepaid purchased power and other

Accounts payable

Power contracts payable

Accrued interest payable

75,10375,57175,10375)571

(155,442)

917,602

(268,169)(155,442)(268,169)

917>602

(24,904) ~

(66,661)

33,375

(42,480)

(24,904)

(54,575)(370,051) (71,663)12,086

(33,375)

152,753

98,182

(21,163)

(15,177)

298,388

$34,266

(1, 154,240)

244,794

392,998

(782,221)

110,273

98,182

(25,233)

45,111

385,638

(1,155,651)

247,690

99,976

(782,221)

51,372 .

(1,4ii)2,896

(293,022)

(4,070)

60,288

$ 42,516 $ (731,782) $ 1,005,551 $ 244,246 $ 1,048,067 $ (487,536)

Net cash provided by (used in)

operating activities 176,310 216,471 (597,072) 282,110 (420,762)"

498,581

Investing Activities:Cash from trustee funds

Acquisition ofproperty,.

plant and equipment

Sale of investments

Net cash (used in) provided byinvesting activities

(435)

(435)

20,365,344 8,128,527 20,365,344 8) 128,527

(4775)

2,999,800

(435) (4,775)

2,999,800

(4,775) 20,365,344 11,128,327 20,364,909 11,123,552

Financing Activities:Increase in advances for Hoover

, Uprating Project

Repayments of bonds

Issuance of bonds

Discount on bonds issued

(8,804,493)

(89,820,000)

81,410,000

(2,285,423)

(11,663,258) (8,804,493)

(89,820,000)

81,410,000

(2,285,423)

(11,663,258).

Net cash used in financing activities (19,499,916) (11,663,258) (19,499,916) (11,663,258)

Net Increase (Decrease) in Cash 175,875

Cash, Beginning of Year „ 4,593,036

21'1,696 268,356

4,381,340 ~ 6,256,404

(252,821)

6,509,225

444,231 (41,125)

10,849,440 10,890,565

Cash, End of Year $ 4,768,911 $ 4,593,036 $ 6,524,760 $ 6,256,404 $ 11,293,671 $ 10 849 440

Cash Paid for Interest

22

$ 6,260,961 $ 6,347,880 $ 6,260,961 $ 6,347,880

An Agency of the State ofArizona

Notes To Financial StatementsYears Ended June 30, 1993 and 1992

1. Summary of SignificantAccounting Policies

System of Accounting —The accounting records of the Arizona Power Authority ("APA")are main--

tained in accordance with applicable provisions of the Uniform System ofAccounts prescribed by the

Federal Energy Regulatory Commission ("FERC").I

Property and Depreciation —Property is stated at original cost. The costs ofproperty additions and

replacements are capitalized. Replacements of minor items ofproperty are charged to expense as in-

curred. Costs of property retired are eliminated from plant accounts, and such costs plus removal ex-

penses less salvage are charged to accumulated depreciation.

Depreciation is provided on the straight-line composite method based on the estimated useful lives ofthe property items, which range from 5 to 44 years.

Advances for Hoover Uprating Project —Proceeds from bonds payable are advanced by APA for

uprating the Hoover Power Plant and are recorded as advances. Such advances, including debt issue

costs, plus net interest expense incurred by APA are reimbursed in the form of credits on the monthlypower, bills rendered to APA by the Western Area Power Administration of the Department of Energy("Western" ). The credits are issued over the 30 year life of the bonds. Substantially all net interest ex-

pense on the bonds is charged to the uprating project as amounts to be recovered from future credits.

Reclassifications —Certain amounts in the 1992 financial statements have been reclassified to con-

form to the 1993 presentation.

2. Fund Accounting Hoover Uprating Fund —The Hoover Power Plant Act of 1984 ("Hoover Act") authorized the

United States Government'to increase the capacity of, i.e., "uprate", existing generating equipment at

the Hoover Dam Power Plant ("Uprating Project" ). Instead of appropriating further federal funds for

the Uprating Project, Congress implemented an advancement of funds procedure whereby prospective

non-federal purchasers of the uprated Hoover capacity and associated energy contribute to the

financing of the Uprating Project. APA financed a portion of the total Uprating Project by issuing

bonds (Note 8).

The Hoover Uprating Fund accounts for advances by APA in connection with the Uprating Project.

EffectiveJune 1, 1987, APA executed new power contracts with Western and APA customers which

expire in 2017. The revenues and expenditures applicable to the sale and transmission ofpower and

energy received by APA from Western under these contracts are accounted for in the Hoover

Uprating Fund.

APA General Fund —APA operations other than those applicable to the Hoover Uprating Fund are

accounted for in the APA General Fund. The purchase of steam power and the sale and transmission

of such power to APA's customers comprise the majority of this fund.

An Agency of the State ofArizona

3. Property, Plant and

EquipmentProperty, plant and equipment of the APA General Fund atJune 30 are as follows:

1993 1992

Transmission and distribution plant

General plant

$ 439,391 $ 439,391

667,110 666,675

Total

Less accumulated de reciation

Pro e, Iantand e ui ment-net

1,106,501 1,106,066

646,502 570,931

5 459,999 5 535,135

The transmission and distribution plant is comprised of a substation and related equipment. Purchased

power is delivered over transmission facilities owned by Western.

4. Preliminary Survey and« Investigation Costs

APA signed a participation agreement with the Colorado River Commission of Nevada, Bureau ofReclamation ("Bureau" ) and Western for the planning of the Hoover Modification Project. Ifcon-

structed, the project would have increased the power generating capacity of the Hoover Power Plant

by installing a new power plant. InJunc 1992 it was determined that the project would not be pursued

any further due to lack of customers willingto sign contracts for capacity generated by the project.

Therefore, APA expensed all deferred costs, totaling $917,602, associated with this project inJune

1992. The retained earnings allocated for the project were transferred to unallocated retained earnings,

substantially offsetting the current year loss recorded in unallocated retained earnings.

S. Cash In 1990, APA transferred their cash balances to the State of Arizona Treasurer for pooled investment

purposes. Statutes require the State Treasurer to invest these pooled funds in obligations of the United

States Government. Allinvestments are carried at cost.

6. Advances for Hoover

Uprating Project

Advances for the Hoover Uprating Project were scheduled to be reimbursed byWestern through

credits on APA's power bills in the amounts of $6,162,064 and $5,421,165 for the years ended June 30,

1993 and 1992, respectively. Of the 1992 amount, only $ 1,286,378 of the credits were actually granted.

These credits were repaid from bond proceeds in 1993 (Note 8). During the years ended June 30, 1993

and 1992, interest expense on the bonds issued to finance the Uprating Project exceeded interest rev-

enue and gain on sale of investments by approximately $3,600,000 and $2,900,000, respectively.

These amounts were charged to the cost of the Project.

24

An Agency of the State of Arizona

7. Investments As ofJune 30, 1993 and 1992, investments are insured or collateralized with securities held by APA's

agent in APA's name. Investments are carried at cost, which approximates fair value atJune 30.

Investments as ofJune 30 are as follows:

1993 1992

United States government securities

Repurchase agreements

Money market,

Total investments

$ 7,952,513 $ 12,726,631

10,396,605 24,244,396

68,194 1,543,890

$ 18,417,312 $ 38,514,817

On December 18, 1990, APA entered into a master repurchase agreement with Prudential-Bache

Securities Inc. ("PBS"), wherein APA agreed to effect a series of repurchase transactions with PBS.in

permitted investments. Permitted investments are defined as United States Treasury Securities,

Government National Mortgage Association Securities, Federal Home Loan Mortgage CorporationSecurities, Federal Housing Authority Securities and Student Loan Marketing Association Securities.

The securities are held by Bank One of Arizona, N.A., as Trustee, for APA. Ifat any time the aggre-

gate market value of all purchased securities is less that APA's aggregate margin amount (calculated

using a percentage of 102%), then APA may require PBS to transfer to APA cash or additional

securities, at PBS'ption, so that the cash and aggregate purchased securities willequal or exceed

APA's aggregate margin amount.

B. Bonds Payable On June 3, 1993, APA issued $ 81,410,000 in Revenue Bonds with an average interest rate of5% to

advance refund $89,820,000 of outstanding 1985 Series bonds with an average interest rate of 7%. The

net proceeds of $78,600,000 (after payment of approximately $ 1,700,000 in underwriting fees,

insurance, and other issuance costs) plus an additional $ 18,100,000 of 1985 Series sinking fund monies

were used to purchase U.S. government securities. Those securities were deposited in an irrevocable

trust with an escrow agent to provide for all future debt service payments on the 1985 Series bonds. As

a result, the 1985 Series bonds are considered to be defeased and the liabilityfor those bonds has been

removed from the Hoover Uprating Fund. APA advance refunded the 1985 Series bonds to reduce its

total debt service payments over the next 25 years by approximately $22,100,000 and to obtain an

economic gain (difference between the present values of the debt service payments on the old and

new debt) of approximately $5,700,000.i

P

The new bonds bear interest ranging from 2.8% to 5.6% and are due serially from 1994 through 2017

as follows:

1994

1995

1996

Thereafter

Total

$ 1,115,000

1,190,000

1>280,000

. 77,825,000

$ 81,410,000

25

An Agency of the State of Arizona

9. Retained Earnings Allocations of retained earnings for specified purposes are authorized by the Arizona Power AuthorityCommission ("Commission" ), APA's governing board, under provisions of the Arizona Power

Authority Act of 1944, as amended. The general reserves shown on the accompanying balance sheets

are comprised of the followingatJune 30:

APA General Fund

Resource Development

Operations fund

Power contracts

System improvement and repairs

1993

S 3,500,000 S

200)000

100,000

200,000

1992

3,500,000

200,000

100,000

200,000

Total 0, 4,000,00D 0 4,000,00D

10. Retirement and

Pension Plans

AllAPA full.time employees are required to participate in the Arizona State Retirement Plan (the

Plan" ), a multiple.employer, cost-sharing pension 'plan administered by the Arizona State Retirement

System (the "ASRS"). The payroll for employees covered by the Plan for the year ended June 30, 1993

and 1992 was $332,515 and 8374,200, respectively; APA's total payroll was 8337) 165 and 8378,524) re-

spectively.

ASRS provides for retirement, disability, death and survivor benefits. Retirement benefits are calcu-

lated on the basis of age, final average salary and service credit. Members are eligible for retirement

benefits on the first day of the calendar month following: 1) the attainment of age 65; 2) the attain-

ment of age 62 and ten years of credited service; or 3) the date when age plus total credited service

e'quals 80. The benefit is based on 2% of final average salary multiplied by the years of service credit.

Final average salary is defined as the period of36 consecutive months during which a participant re-

ceives the highest compensation within the last 120 months of service during which the employee

made retirement contributions as required by law. The compensation does not include vacation or an-

nual-leave, sick leave, compensatory time or any other form of termination pay. Persons who have

reached age 50 with at least five years of total credited service may take an early retirement which en-

titles them to a reduced retirement benefit. Retirement benefits vest after five years of service..

EffectiveJuly 1, 1988, members of ASRS became eligible for a disability benefit in the event they. be-

come unable to perform their work. A participant continues to earn credit of up to a total of25 years

of service during the period of disability.

Upon termination of employment, a member may withdraw contributions made to ASRS. The accep-

tance of a refund cancels the individual's rights and benefits in ASRS. Employers'ontributions to the

System are not refunded.

Coveted employees were required by State statute to contribute 3.59% of their salary to the Plan dur-

ing fiscal year 1992-1993 and 3.6% of their salary during fiscal year 1991-1992. APA is required to

match their contribution. Total contributions made by APA and its covered employees were 811,678

for each in 1993 and $ 13,470 for each in 1992.

26

An Agency of the State of Arizona

The pension benefit obligation is a standardized disclosure measure of the present value of pension ben-

efits, adjusted for the effects of projected salary increases estimated to be payable in the future as a re-

sult of employee service to date. The measure, which is the actuarial present value of credited

projected benefits, is, intended to help users assess the public employees retirement system's funding

status on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits

when due, and make comparisons among such systems. The Plan does not make separate measure-

ments of assets and the pension benefit obligation for individual employers. The pension benefit obli-

gations at June 30, 1992 for the Flan as a whole, determined through an actuarial valuation performed

as of that date, was $8,079,760,531. The Plan's net assets available for benefits on that date (valued at

market) werc $9,437,180,124. APA's 1992 contribution represented less than 1% of total contributions

required of all participating entities, which were $ 132,273,316 each for employers and employees in1992 (1993 information not available).

Ten year historical trend information showing the Plan's progress in accumulating sufficient, assets to

pay benefits when due is presented in ASRS'une 30, 1992, comprehensive annual financial report.

11. Additional Benefits In addition to the pension benefits described, ASRS offers health care benefits to retired and disabled

members that are no longer eligible for health care benefits through their former member employer's

group health plan. This program is administered in accordance with ARS 38-781.03. Retired is defined

as actively receiving an annuity benefit and disabled is defined as receiving a long-term disability

(LTD) benefit through the LTD program administered by ASRS. The ASRS provides the following

monthly premium benefits:

Years ofCredited

Service

MemberPercent of OnlyPremium Not Medicare

Benefit Eligible

With Dependent(s)

NotMedicare

EligibleMedicare

Eligible.

MemberOnly

MedicareEligible

With De endent(s)

NotMedicare Medicare

Eligible Eligible

5.0 —5.9

6.0 —6.9

L 70- 79

~8.0 —8.9

9.0 —9.9

10.0+

50%

60%

70%

80%

90%

100%

$47.50

857.00

86.6.50

876.00

885.50

$95.00

8 87.50

$ 105.00

$ 122.50

8140.00

$ 157.50

817s.oo

$ 72.00

8 87.00

8102.00

8116.00

$ 130.00

$ 145.00

832.50

839.00

845.50

$52.00

858.50

$65.00

8 72so

$ 87.00

81ol.so

$ 116.00

8130.50

8145.00

8 57.50

8 69.00

8 8o.so

8 92.00

8103.50

8115.00

The Arizona State Retirement System reimbursed approximately $23,700,000 towards the cost of

group health insurance coverage for the year. This figure represents an increase of 28.11% over the

previous year.

27

An Agency of the State of Arizona

Supplemental Schedule I - Statement of Operations of the Hoover Uprating Fund-Individual Funds and Accounts Year Ended Junc 30, 1993

RevenueFund

OperatingAccount

MonthlyPaymentReserveAccount

Note: The supplemental

schedule includes all funds and

accounts, as defined by the

APA Power Resource Revenue

Bond Resolution.

Operating Revenues

Operating Expenses:

Purchased power

Western credits

Amortization of Hoover Uprating Project costs

Transmission

Administrative and general

Allocation of,de reciation

8 16,012,213

8 ii,i8i,i49(6, 162,064)

6,162,064

2,740,611

1,104,818

61,744

Total

Operating Gain (Loss)

Other Income (Deductions):,Interest expense

Deferred interest expense

Interest income

Gain on sale of investment

Other —net

Total

Net Income (Loss)

Adjustments to Income (Loss) Under thePower Resource Revenue Bond Resolution:Add:

Accrued interest income FY 1992

Accrued interest expense FY 1993

Allocation of depreciation

Accrued revenue FY 1992

Accrued purchased power FY 1993

Deduct:

Accrued interest income FY 1993

Accrued interest expense FY 1992

Accrued revenue FY 1993

Accrued purchased power FY 1992

Prepaid purchased power FY 1993

Deferred interest expense

174,821

3,716

178,537

16,012,213 (14,909,785)

48,092

1,535,275

61)744

1,408,779

16,942

1,905,326

1,178,307

991,714

15,088,322

16,012,213 (15,088,322)

42,267

16,955

Income (Loss) As Defined Under the Power

Resource Revenue Bond Resolution

June 30, 1993 Cash and Investment Balance

$ 15 642 162 ~$ 15 578 183 $ 25 312

$ 2740062 8 3000000

2B

An Agency of the State of Arizona

ConstructionFund

DebtService

Account

DebtService

ReserveAccount

PowerResource

DevelopmentFund

GeneralReserves'und Total

$ 16,012,213

11,181,149

(6,162,064)

6,162>064

2,740,611

1,104,818

61,744

15,088,322

923,891

S (7,854) S (6,253,107)

3,625,982

2,357,722

180,380

2,530,248 (2,627,125)

2,530,248: (2>627>125)

(6,260,961)

3,625,982

2,532,543

180,380

3,716

81>660

1,005,551

478,906 17,001

804,749

261,154 5,030 1,001 853,451

804,749

61,744

1,535,275

1,408,779

324,395

1,586,970

3,625,982

159,647 1,245 519,185

1,586,970

1,905,326

1,178,307

991,714

3>625,982

$ 2,684,759 $ (7,018,327) $ 101,507 $ 3,785 $ 1;000 $ (4,137,935)

$ 10,724,444 $ 936,781 $ 7,185,017 $ 220,000 '24,807,204

29

An Agency of the State of Arizona

Supplemental Schedule II - Debt Service Coverage Ratio of the Hoover Uprating Fund

Year EnChdJum 30, 1993

(Unaudited)

Net Income $ 1,005,551

Add:Interest expense (1)

Depreciation (1)

Amortization of Hoover Uprating Project costs (1)

Interest income (2)

Accrued interest (3)

Total additions

6,260,961

61,744— 6,162,064

174,821

370,532

13,030,122

Deduct:Interest income (4)

Gain on sale of investments (5)

Deferred interest expense

Total deductions

Income Available for Debt Service

2,532,543

180,380

3,625)982

6,338)905

$ 7,696,768

Debt Service (6)

Debt Service Covera e Ratio

$ 6,439,851

1.20

(1) Interest expense, depreciation expense and amortization of Hoover Uprating Project costs are not

expenses under the Resolution.

(2) Interest income on revenues on deposit in the Debt Service Account and Operating Account.

(3) Added to Debt Service Account from refunding inJune 1993.

(4) Interest income on proceeds of the 1985 and 1993 Series Bonds other than such proceeds in Debt

Service Account and Operating Account is not income under the Resolution.

(5) Gain on sale of investments in the Debt Service Reserve Account is not income under the

Resolution.

(6) Net of capitalized interest.

30

An Agency of the State ofArizona

'IndependentAuditors'eport

The Arizona Power Authority Commission:

We have audited the accompanying combined financial statements ofArizona Power Authority (an

Agency of the State ofArizona) ("APA")and the separate financial statements of the APA General

Fund and the Hoover Uprating Fund ofAPA as ofJune 30, 1993 and 1992 and for'the years then

ended, listed in the Table of Contents Financial Section. These financial statements are the responsibil-

ity of the management ofAPA. Our responsibility is to express an opinion on these financial state-

ments based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit includes examining, on a test'basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes assessing

the accounting principles used and significant estimates made by management, as well as evaluating

the overall financial statement presentation. We believe that our au'dits provide a reasonable basis forour opinion.

In our opinion, such financial statements present fairly, in all material respects, the combined financial

position of APA and the financial positions of the APA General Fund and the Hoover Uprating Fund,'f

APA atJune 30, 1993 and 1992 and the results of their operations and their cash ilows for'he years

then ended in conformity with'generally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements

taken as a whole. Supplemental Schedule I listed in the Table of Contents Financial Section, which is

also the responsibility of the management ofAPA, is p'resented for purposes of additional analysis and

is not a required part of the basic financial statements of APA. Such supplemental schedule has been

subjected to the auditing procedures applied in our audit of the basic financial statements and, in our

opinion, is fairly stated in all material respects when considered in relation to the basic financial state-

ments taken as a whole.

Supplemental Schedule II listed in the Table of Contents Financial Section is presented for purposes ofadditional analysis and is not a required part of the financial statements ofAPA. Such supplemental

schedule has not been subjected to the auditing proce'dures applied in the audit of the financial state-

ments, and, accordingly, we express no opinion on it.

July 31, 1993

Phoenix, Arizona

Credits

Godat/Jonczyk

Design

Pat LynnWriter

Jeff Smith, FotoSmith

Photography

Cnstomcr Projks and

pages 7 and 14

Hernandez Photography

Photography

Commission Portraits

and page 12

U.S. Bureau of Reclamation

Photography

pagcs4, 7, 11, 14and 15

5 peclal Thanks

Prokr International Corp.

Prokr Rccycling, Inc.

Coolidge Plant, page 10

32