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AUTH.NAME AUTHOR AFFILIATIONONSTAD,D. Arizona Public Service Co. (formerly Arizona Nuclear PowerWILSONiR. Arizona Public Service Co. (formerly Arizona Nuclear PowerGALLANT,R. Arizona Public Service Co. (formerly Arizona Nuclear Power

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1810 West Adams .. - ARIZONA POSER AUTHO - Phoenix, AZ 85007

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

Dear Recipient:

The 34th Annual Report ofthe Arizona Power Authority is enclosed. We arerequesting your assistance in updating our mailing list for it. Please fillin thenecessary information, fold this sheet on the fold lines on thefron, tape it closedand return to us.

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:

Title:

Company:

Address:

City/State/Zip Code:

Thank you for your consideration. We sincerely appreciate it.

David O. OnstadAdministrator

';,9303i80133,92i231 ~-

'P R,'DOCK .05000528"'DR'

Arizona Power Authority1810 West AdamsPhoenix, AZ 85007-2697

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ARIZONAPOWER AUTHORITY

34TH ANNUALREPORTDof:ketch ~+Accession 0 9

d/EAZ3'ats

4 ~/ of LtrA6IIUlatary Do t File

ARIZONAPOWER AUTHORITYSTAFF

David OnstadAdministrator

Richard WilsonAssistant Administrator

Rita GallantAuthoritySecretary

James BartlettAuthorityAttorney

Frank BonfiliChiefAccountant

Rose~nary AnhaltFiscal Services Specialist

Donna Robi~isAdministrative Secretary

Donald EsgarCustomer Services andContracts Manager

Evelyn MaqiussonPublic Utihties Specialist ~

Theodore MossPower Manager

David South+orthComputer Programmer

CONTENTS

Report of the Commission 2

Letter to the Governor

Page 2

Members of the Commission 4

Integrated Resource Planning 5

Customer Survey

Technology for the 21st Century 8

Bureau ofReclamation 10

Page 5 Western Area Power Administration 12

Briefs 14

Schedule of Power and Energy Sales 16

Financial Data Section 17

Page 8Independent Auditors'eport 32

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REPORT OF THE COMMISSION

Pj'g /"

/, jjAn overriding concern of the

Commission this year was holdingthe lid on rates charged ourcustomers for power from theHoover powerplant. It is expectedthat the aging Hoover powerplantand related facilities in operationfor nearly 60 years must bemodernized and expanded to meettoday's demands.

Historically, rates for federalhydroelectric power have beenrelatively stable. Rate adjustmentsto cover annual fluctuations inpower generation (due to 1

variations in snow melt andscheduled outages) and operationsand maintenance costs have stayedwell below 20 percent.

Acombination offactors changed thescenario during the past year. First,snow melt into Lake Powell was lighterthan usual. Less water through Hoovergenerators meant less energy for sale,and rates had to be adjusted to continueto meet commitments on previouscapital improvements.

Second, because federal statutesrequire the Arizona Power Authority(Authority) and other Hooverpowerplant customers to pay theirportion of replacement costs incurred

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at Hoover Dam and on relatedtransmission facilities, power customersin Arizona, Nevada and SouthernCalifornia are paying for a new visitorscenter at the Dam. They are also payingfor expansion of transmission facilitiesat the Parker-Davis and the PacificNorthwest-Pacific Southwest Intertie.

Itis unfortunate thatrate increases topay for these costs are occurring in ayear when cotton prices are down and awhite flyinfestation has reduced cottonproduction by 30 percent.

To help counter the impact of these

increased costs, the Authority isworking closely with its customerson programs to improve energyefficiency and water conservation.The Authorityalso aggressivelyrepresents its customers at ratenegotiations and continues to playan active role in the Hoover

, Engineering and Oversight: Committee, which was organizedI several years ago to monitor

Bureau of Reclamation ORMexpenditures at Hoover Dam.

The Commission isdisappointed that the proposedHoover Modification Project toincrease peak power capacity at

" the dam by 500 megawatts isstymied by lack of immediatecustomers. We see itas one of the lastopportunities to develop low-costhydroelectric capacity.

One of the most satisfyingachievements of my tenure on theCommission has been the HooverUprating Program, which has increasedpower output by 30 percent. Generatoruprating willbe completed in 1993.

As chairman of the Commission, itismy mission to maintain what we haveachieved and aggressively fight for ratesacceptable to our customers.

AIFIIzoinI8I

Powveir AIUIQIhoirIItyP.O. BOX 6708, PHOENIX, AZ 85005 ~ (602) 54M63 ~ FAX 253-7970 ~ 1810 W. AOAMS ST. ~ PHOENIX, AZ 85007-2697

December 29, 1992

The Honorable Fife SymingtonGovernor ofArizonaState CapitolNinth I'loor, West WingPhoenix,AZ 85007

Dear Governor Symington:

Improved communication describes a major Arizona Power Authority achievement during thefiscal year ended June 30, 1992. Under the leadership ofAuthorityAdministrator David Onstad,customers are better informed about impending changes that willaffect them and given theopportunity to participate in the outcome.

The 34th Annual Report of the Authority highlights several activities that have enhancedinteraction and understanding among the Authority, its customers, and the government agenciesthat operate and maintain power generation and transmission facilities. These activities include:

~ Acustomer survey to guide future conservation efforts~ Increased communication with customers, including cities, towns

and rural electric cooperatives~ Meetings with the Western Area Power Administration to explore new ways to hold

down rates~ Expansion of the role of the Hoover Engineering and Oversight Committee~ Exploration ofnew types of contracts with power wheeling entities~ Active participation on behalf ofour customers in the Colorado River Energy

Distributors'ssociation

The professional staff and commissioners of the Arizona Power Authority attempt to look at thebig picture to find solutions appropriate to today's world.

We believe effective, two-way communication with many diverse entities is essential to theAuthority's continuing commitment to provide dependable, low-cost power to its customers in thestate of Arizona.

Sincerely,

Robert P. CasillasChairman

COMMISSION

ROBERT CASILLAS JEWELL LEWIS

CHAIRMAN VICE CHAIRPERSON

J.S. FRANCIS, JR. RICHARDWALDEN JAMES HENNESS

DAVID O. ONSTAD

ADMINSTRATOR

STAFF

RITA K. GALLANT

SECRETARY

MEMBERS OF THE COMMISSION

The Authority Commission meetsthe third Tuesday ofeach month toreview Authorityactivities and provideguidance on issues affectingcustomers.*

Robert P. CasillasChairman

Bob Casillaswillserve aschairmanthrough January1994. Firstappointed to theCommission in1985, he wasreappointed in

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Jewell M. LewisVice4halrperson

Dr. Lewis wasappointed to theCommission in1986. Formerly ateacher for 20years in the

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)+ Anzono schoolsystem, she ischairperson of

the board of Media America Corp.,which owns IGVKChannel 3, PhoenixMagazine, KESZ Radio, and DesertProduction Center. Dr. Lewis is amember of the Arizona Perinatal BoardofTrustees, the University ofArizonaAlumni Board, and co-chair of theOrpheum Theatre RenovationFoundation.

1990 for a second term. Anative ofMiami, Arizona, Chairman Casillas,along ivithhis brother, founded C.C.Foods, Inc., a tortilla manufacturing anddistributing firm in Phoenix, Arizona.He is a former director of the GlobeLions Club and is a member of theGlobe-Miami Economic DevelopmentCommittee.

Richard S. WaldenDickWalden

is the immediatepast chairman.Appointed to theCommission in1984, Walden isserving hissecondconsecutive six-year term. Mr.

Walden heads the Farmers InvestmentCo., a family-owned pecan and cottonroduction and processing firm

ieadquartered in Sahuarita, Arizona. Heis a director of the First Interstate Bank,and the National Pecan ShellersAssociation.

J. S. Francis, Jr.

Jack Franciswas appointed tothe Commissionin 1984 andserved as itschairman from1988-90. He isalso serving asecond six-yearterm. Mr. Francis

is chairman of the board ofValleyIndustries, a familywwned cottonginning company in Glendale, Arizona.He is president of the Cotton CouncilInternational, vice-president of theNational Cotton Council and serves onthe boards of the Arizona CottonGrowers Association and the SupimaAssociation ofAmerica.

James K. HennessJim Henness

has served onthe Commissionfor 12 years andwas chairmanfrom 1984-86.His second termends in 1994. Acotton farmerfrom CasaGrande, Arizona,

Mr. Henness is active in manyagribusiness, environmental andcommunity organizations including theNational Association of ConservationDistricts and the Arizona CottonGrowers Association.

'The Govenior appoints individualsto serve on the Authority'sfive-meinberCommission, subject to confirmation bytlie state Senate. To provide continuity intlie administration and operation oftlieAutliority,inembers are appointed tostaggered terms ofsixyears eacli. TlieCommission elects from its membership acliainnan and a vice-cliainnan who holdonce for two years, beginning and endingon tliefirstMonday inJanuary.

IINIEMIRNEOREGOuaCE PVNNINt'IG~E HumQIF IREVIGEO CONGEHMION PHCGIKM

For the past six years, the ArizonaPower Authority (Authority) hassuccessfully complied with the WesternArea Power Administration's (Western)Conservation and Renewable Energy(CE:RE) program, required ofall powercustomers benefiting from federal firmpower contracts. The goal of theprogram is the efficient use of federalpower. A revised program proposed byWestern would more directly linkhydroelectric resource allocations andthe efficient use ofenergy.

'"The Authority's C&IKeffort hasbeen exceptional," said Randy Manion,area conservation officer for Western'sPhoenix Area Office.

Highlights of the Authority's CEzIKprogram include:

~ Customer education and informa-tion dissemination through sitevisits, promotion ofWestern-sponsored C8:RE workshops, andpresentation ofAuthority-sponsored workshops.

~Technical assistance to improveirrigation pump efficiency throughdemonstrations and pump testing.(Economic analyses demonstratedthe cost effectiveness of repair-ing/replacing pumps that testedless than 50 percent efficient.)

~ Two infrared cameras, on loan fromWestern, that customers have usedto detect "hot spots" in electricalequipment, resulting in timelyrepairs and thousands ofdollars insavings.

~ Power factor studies and imple-mentation of corrective measuresreducing transformer power loss toa minimum on customer distribu-tion systems.

~ An energy conservation retrofitprogram at Authorityheadquartersconsisting of improved insulation, asetback thermostat, and higherefficiency lighting, cooling, andheating systems.

Western requires the Authority toupdate its CARE program every twoyears. 'The Authority's most current

CE:RE program, submitted to us in May1992, looks even more enthusiastic,"Manion said. It includes the followingactivities:

~ Agricultural efficiency technicalassistance and informationdissemination

4 Irrigation pump testing4 Infrared testing and technical

assistance< Circuit rider program+ Bulk contracting

"We'e excited about the new circuitrider program," said the Authority'sDon Esgar, who promotes the CErREprogram among Authoritycustomers.The circuit rider program, which isbeing jointlyfunded by Western and theArizona Energy Office, calls upon theservices ofa technician from the EnergyOffice.

"The circuit rider willprovide sitevisits to help our customers withenergy conservation programs such asload management and integratedresource planning," explained Esgar.

New ProgramWestern has proposed an Energy

Planning and Management Program(EPAMP) to replace the Guidelines andAcceptance Criteria that shape theCgiRE program. The revised program

establishes a linkbetween Western'smarketing of power and lang-termplanning by Western customers.Integrated Resource Planning (IRP) isthe cornerstone of the new program.

The revised program, which is basedon two years ofpublic input, willbedocumented in a draft environmentalimpact statement and the FederalRegister, possibly in December 1992.Western willimplement the programthroughout its five areas.

As currently envisioned, the newprogram willrequire Authoritycustomers either to perform integratedresource planning or participate withothers in cooperative IRP planning.

The Authority's 38 customers rangefrom entities requiring as little as 10megawatt-hours a year to large utilitiesusing 17,000 megawatt-hours a year. Toaccommodate this diversity, EPAMPprovides enough flexibilityto embracethe needs of even the smallest utility.

According to Western's Manion,"Integrated resource planning is abeneficial tool for any size customer."He explained, however, that factorssuch as the size, type and end-use ofacustomer's load willimpact the level ofbenefit. "Itis only through the IRPprocess," said Manion, "that a utilitycan truly identify the level ofachievablebenefits."

Power Marketing InitiativeAsignificant EPAMP component is

the Power Marketing Initiative givingexisting customers 25-year extensionsof98 percent of the resource availablewhen their existing contracts expire.Authoritycustomers are notimmediately affected by this initiativebecause their current contracts aregood through 2008 and 2017.

The objective is to encouragecustomers'fficient usage through long-term resource planning. Westernreserves the right to make adjustmentson fiveyears'otice in response tochanges in hydrology and river

operations. The remaining two percentof the nonextended resources willbeavailable for allocation to newcustomers.

Integrated Resource PlanningThe IRP process requires all long-

term firm power customers to developand implement an integrated resourceplan, submit an updated plan every fiveyears, and submit a progress reportannually. Western envisions that theplans willresult in enhanced energyservices, cost savings, measurableenergy and capacity benefits, andenvironmental benefits. The plans mustinclude:

1. Load forecasts2. Supply-side resource assessment3. Demand-side resource assessment4. Environmental effects5. Resource evaluation6. Short-term action plan7. Long-term action plan8. Consumer and governing board

involvement"Part ofour mission," said Western's

Manion, "is to encourage customers tochoose the best resource for their givenoperation." Western believes IRP is thetool that willhelp them make thatchoice.

CUSTOMER SURVEY

users to help planand implementenergy efficiency.

The Authorityasked severalcustomers toelaborate on theirresponses to thesurvey for thebenefit of annual

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Van" Tenney

The Authority queried its customersthis summer through a written surveyto help determine the best time to holdthe firstannual customer meeting andfor opinions about ongoing and newenergy conservation activities.

To comply with the wishes of mostcustomers, the Authority is schedulingthe annual meeting this winter todiscuss the Authority's role in theCgrRE program.

Other questions dealt with theperceived usefulness of a newsletter,infrared cameras, pump testing, bulkcontracting, irrigation watermanagement, and a new circuit riderprogram.

In the circuit rider program, atechnician from the Arizona EnergyOffice would "ride the circuit" amongAuthoritycustomers and their end-

reportreaders."I think a newsletter has merit,"

offered O.L 'Van" Tenney, generalmanager ofElectrical District No. 3(ED-3). "We need a process to makesure information flowfrom Western tothe Authority also goes to thecustomers, and this could be theconduit."

Tenney praised the Authority for itsletters to customers and specialcustomer meetings during the past year,and especially for its efforts to allowcustomer input.

He feels thecircuit riderprogram willallowsmall districts tohave expertise nototherwiseaffordable. "Likeanything else," hesaid, "the successwould de endDeiVayne Justice Plargely on who you

hire."Although DeWayne Justice, manager

of the Electrical District No. 7 IED-7),has some reservations about the circuitrider program, he believes "the pumptesting program, over a period of time,

gives you a good look at trends. Whenwe have the time to seta norm;" he said,"pump testing willmake a difference."He said, however, that "the infraredprogram doesn' provide a tremendousopportunity for us where our pumps areconnected to transformers."

On the other hand, WilliamPetty,assistant general manager of theRoosevelt Water Conservation District(RWCD), said his district saved enoughenergy using the Authority's infraredcamera to buy one. In one instance,RWCD used the camera to identify a hot

wire in time to savea $5,000 starter.

Elizabeth Story,administrator of theTonopah IrrigationDistrict (TID), said

- sheliked theideaof)

a newsletter,"assuming itwould

Elizabeth Story deal specificallywith Arizona

irrigation issues." Although her districthas not used the infrared camera, Storysaid "pump testing is the economicthing to do" and her customersroutinely perform pump tests.

"Sharing information is always

useful," said StanAshby,superintendent ofthe RooseveltIrrigation District(RID). "IftheAuthority does anewsletter, it

l > Q should focus onproblems germaneto Arizona," he said.

Ashby's district performs pump teststwice a year. "It'svery effective becausewe'e able to rebuild pumps before theybreak down," he said. "Ifthe Authorityhad a person to assist us, we'd probablybe interested ifitwas cost effective."

The revised energy conservationprogram proposed by the Western AreaPower Administration includes a

process called "integrated resourceplanning." To learn how best to tailorintegrated resource planning for smallentities, Western sponsored ademonstration with ED-3 and ED-7.

"Integrated resource planning worksfor customers like the SIP and APS whohave the staff to compile analyses,"observed ED-3's Tenney. "For us, theprocess has to be clean, swift andsimple."

He believes the program willbehelpful in demonstrating to the publicthat a federal resource is being usedefficientlyand effectively. "Itwillbe agood tool for us," said Tenney, "iftherequirements developed are workablefor a small district."

"We could spend 40-50 percent ofour08~M on this activity, which is beyond

question," said Justice of ED-7."Western recognized our difficulties,"he said. "We tried to identify someuseful items for small customers."

'"The analysis proposed implies youhave a lot ofchoices," observed Story."The process is too complicated for asmall entity likeTonopah with nogeneration and littlecontrol over enduse. We are currently limited bycontract to the Authority and APS assuppliers."

The final wording ofWestern'srevised energy conservation programwillbe officialearly next year.

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Don Esgar foreground) and IhickeyeIrrigation District Water Master KenCraig perforni a test using a flour meterto evaluate pump efficiency. Authoritystaff Esgar and Evelyn Magnusson,make field trips and conduct ivorlishopsin support ofthe CErRF program.

Arizona farmers do not expect anyrevolutionary changes in the way theyirrigate their crops between now andthe end of the century. Most willcontinue to use some type of floodirrigation, but willincorporate moisturemeasurement devices and othertechnology to avoid costly overwatering.

Authoritycustomers are participatingin numerous programs to both conservewater and develop alternative energy

sources to pump irrigation water.Cotton growers already practice

conservation out of necessity. Reducedwater usage is one of the few ways tosignificantly cut costs in an increasinglytough market. One irrigationmanagement expert put it this way:"Those farmers who aren't irrigatingefficientlywon't be in business verylong."

"Irrigation efficiency" is the ratio of

the amount ofwater a crop actually usesto the amount ofwater applied to a field.Irrigation efficiency in central Arizonaaveraged about 60 percent in 1985 whenmost farmers used the sloped-furrowirrigation method. The state goal is 85percent efficiency by the year 2000, a 25percent efficiency gain based primarilyon application of level-basin technology.

Used in Arizona for more than adecade, level-basin irrigation is achieved

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Irrigation ofa level basin is similar to any flood irrigation:water is applied at a rapid rate through a ditcli at one end oftliefield. Itflows across tliefield infiirroivs. Fast delivery ratesand level furroivs result in a more even distribution oftliewater. Level4asin technology saves up to tu o acre feet ofwaterper acre per year compared witlislopedfiirrow irrigation. Atan

average cost of$50 an acre footforwater, tliat is a savings of$'100 an acre.

Drawbachs to leveling a fieldare soil compaction and tliecostly earthmoving procedure, whicli may remove top soil on tlieliigliend ofa field and thereby reduce crop yield tliereforseveralyears.

with laser-guided earthmovingequipment to remove contours and leavea field virtuallyflat. By eliminating theslope, irrigation water flows moreuniformly across the field.

Maximum efficiencies ofcurrentirrigation technologies are: 60-70 percentfor slope, 75 percent for modified slope,85 percent for level basin, 85 percent forsprinkler, and 85 percent for drip.

Because ofhigh capital and OAMcosts associated with sprinkler and dripirrigation, most experts expect variationsof level-basin irrigation technology toprevail in Arizona into the next century.

Acontinuing trend willbe theintegration ofsophisticated tools toimprove decision making. Weather andsoil moisture measurementinstrumentation tied into automatedwater management systems willhelpdetermine how much and when to applywater for greatest crop yields and watersavings.

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A solarpowered prrrrrp installedin tire desert east ofTucson is helping to determinetirefeasibility ofirrigation pumpirrg using pirotovoltaic equipment. Srrclr facilitiescould be used in renrote areas mirere tire cost ofpower lirre constnrction is prohibitive.

Trico Electric CooPerative arid Arizona Electric Power CooPerative (AEPCO) areparticipatirrg in tire demonstration projects whicir pumps 85 gallons ofrvell rvater perday from a depth of560 feet. Stored in a 3,000gallon tank, the water feeds into atrorrgir mirere itsustains wildlife. (A standard irrigation pump pumps 800 gallonsper minute.)

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Sundance Fanr p in Coolidge, Arizona, began experimentingwitirsubsurface driP line irrigation in 1980. Sundance lradalready achieved higirer crop yields rrsing a surface drip systemand lralfthe mater required in traditional flood irrigation.W7iat they needed next was a system tirat rvould allow them totill,plant, and cultivate witir irigir-speed, tractor-mountedimplemerrts. Tiris led to experimentation rvith buried drip hnes

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and development offarm equipment to automate tireprocedures.

Shown irere is a Sundance Irrigation Tape Injector uriricirimplants up to six irrigation tubes simultaneously in depths upto 14incires. Tirefarm currently cultivates Iralfits4,000 acresusing this subsurface drip system to grow rotating crops ofcotton, watermelon, peppers, conr, and milo.

BUREAU OF RECLAMATION

The federal agency providing waterresource development and management

ln the arid West

The U.S. Bureau of Reclamation(Reclamation) was created by Congressin 1902 as a division of the Departmentof Interior. Its mission was to reclaimthe arid lands of the West throughirrigation and to stimulate thesettlement and economic developmentof the region.

Reclamation is probably best knownfor its dams and powerplants, includingHoover Dam on the Colorado River.Altogether, Reclamation's 52hydroelectric powerplants supply nearly14,000 megawatt-hours/year. The saleof that power returns $675 millionannually to the federal treasury.

Today, Reclamation stands at thecrossroads. The major rivers have beenharnessed and facilities are in place orbeing completed to meet the mostpressing water demands. No major newproject has been authorized byCongress since 1968. Environmentaland budgetary constraints have mademajor agricultural water and powerprojects increasingly difficultto justify.

The key to Reclamation's future liesin its ability to make an orderlytransition from a major constructionagency to one of resource management.

Operation and maintenance ofexisting facilities assumes new stature.Priorities at federal power plants includeinstallation ofcomputer systems thatenhance power generation and decreasecosts, the uprating ofgenerators toprovide more output, and preventivemaintenance.

One of Reclamation's last bigconstruction projects is the new visitorcenter under way at Hoover Dam.These facilities willaccommodate thenearly one millionannual visitors to thedam. They willinclude a five-storyparking structure, an interpretivecenter, theater, and two 50 passengerelevators that descend 506 feet into therock, deep into the dam.

Meet Robert J. TowlesA48-year veteran of the Bureau of

Reclamation, Bob Towles has served asLower Colorado regional director sincemid-1991. Until his appointment, he wasproject manager for five years of theArizona Projects Office, where he hadprimary responsibility for completion ofthe Central Arizona Project (CAP) canal.

Towles is a graduate of the UniversityofArizona where he earned a degree incivilengineering. His career withReclamation has taken him toCalifornia, Texas, Colorado, Arizona,and most recently to Boulder City,Nevada, where the Lower ColoradoRegion is headquar tered.

'The Authority is the liaison betweenits customers and Reclamation in thereview of power rates," explainedTowles. "One of the key changes since1987 is the Authority's closeinvolvement in operation andmaintenance of the Hoover powerplant.There's openness and a willingness to

share in order to reduce costs andimprove efficiency at the plant," he said.

Through their rates, Authoritycustomers are asked to pay upfront theirportion ofany maintenance parts. Anengineering and oversight committeewas organized several years ago tomonitor Reclamation's 0&Mactivitiesat Hoover.

'The main improvements today arein the transformation ofelectricity anduprating generators to make them moreefficient," said Towles. "The Authority isa partner in the decision makingprocess on when and what to schedule."

The Hoover powerplant employs 200people, mostly maintenance staff, onthree shifts, 365 days a year.

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Lake Mead

HOOVERDAMLake Mohave

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Lake Havasu

PARKER DAM

NEW WADDELL

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Ihe Lower Colorado Region of the U.S. Bureau of Reclamation. Future Reclamation priorities are operation andmaintenance, water quality and environmental enhancement, total system optimization, dam safety programs, andgroundwater management.

WESTERN AREA POWER ADMINISTRATION

The federal agency that markets andtransmits federally produced power

Established in 1977 as part of theU.S. Department of Energy, theWestern Area Power Administrationoperates and maintains 16,664 miles oftransmission lines, 265 substations, andother associated power facilities. Theagency is headquar tered in Golden,Colorado, and operates five area offices,one ofwhich is in Phoenix.

Western transmits power to nearly800 wholesale power customers in 15central and western states. TheAuthority is one of those customers. Inaddition to providing efficient andreliable electrical service to itscustomers, Western is responsible forprotecting the environment, promotingenergy conservation, and developingand marketing renewable energyresources.

Western sets the rates for the powersold to the Authority, who, in turn,passes costs along to its customers. Rateadjustments reflect the Bureau ofReclamation's costs ofoperating andmaintaining the Hoover powerplant andWestern's transmission system 0&Mcosts at the Parker-Davis and the PacificNorthwest-Pacific Southwest Intertieprojects.

Western also administers theConservation and Renewable Energy(C&RE) program.

With the Hoover PowerPlant Actof1984, C&RE became mandatory. EveryWestern customer who benefits from along-term allocation offederal powermust have a C&RE program. Theprogram provides a basis for evaluatingan individual customer's energyconservation efforts.

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Meet Thomas A. BineTom Hine has been area manager for

the Phoenix Area Office since 1983. Heis responsible for the operation andmaintenance ofWestern's powertransmission system and for marketingthe power produced by federal facilitiesin the Lower Colorado River Basinstates and a small amount ofpower fromthe Salt Lake City Integrated Projects.

Hine began his federal career withthe Department ofInterior as a solicitorprogram attorney. He moved to theDepartment ofEnergy in 1978 tobecome general counsel at Western'sheadquarters in Golden. Hine receivedhis law degree from the University ofDenver, where he specialized in naturalresources law.

Holding rates down is one of Hine'smain objectives. "It's a fairlyhecticprocess to assure that a rate is adequate

to pay the bills butnot more thanadequate," explained Hine, referring torecent adjustments needed to coverconstruction projects at Hoover Damand on the transmission system.

''We understand that when we raise arate by a significant amount itaffects thecustomers," Hine said. "We try tomitigate the impact."

Hine pointed out that becauseHoover Dam improvements arefinanced on a revolving fund basis, therate adjustments to cover them must bemade in a single increase.

Rate hikes to pay for projects atParker-Davis and tlie Intertie can beintroduced in steps.

Hine said his law background ishelpful in handling the numerouscontractual aspects ofhis position and ininterpreting the many statutes.

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The Phoenix Area Office of the Western Area Power Administration is resPonsible for 79 customers consisting of28irrigatio>> districts, 17 municipalities, 15 federal agencies, 6 industrial customers, 5 investorwumed utilities, 5 rural electriccooperatives/associations, and 3 state agencies.

New Rules And RegulationsThe Authority's Rules and

Regulations, firstadopted in 1952, haveundergone various amendments overthe years. Aftermany meetings withcustomers over the past two years, theCommission presented a completerevision of the rules to the Governor'Regulatory Review Council during 1992and offered them for formal publiccomment and adoption.

In its new Rules, the Authority hasattempted to modernize and clarify themanner in which entities may apply forand obtain a supply of electric powerfrom the Authority.The new Rules alsoupdate the Rules of Practice andProcedure governing administrativeand quasi-judicial hearings before theAuthority Commission.

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Scheduling Entity AgreementSince 1988, the Salt River Project

(SRP) has scheduled Hoover power toArizona customers through an interimagreement with the Authority. Prior tothat, the Western Area PowerAdministration served as thescheduling agent.

The Authorityand SRP are in theprocess ofnegotiating a contractualscheduling agreement providingAuthoritycustomers with the flexibilityto use Hoover power when they need it.

For example, SRP absorbs Authoritycustomers'nused Hoover powerduring the winter months and saves it ina deviation account forAuthoritycustomers to tap when they requireadditional energy. Authoritycustomers

must, however, consume their fullHoover allotment by the end of the year.

Hoover Uprating ProgramThe uprating program got under way

in 1981. It involves rewinding theoriginal generators at the Hooverpowerplant and willbe completed in1993. The Authority Commissionregards this program as one of its majoraccomplishments in the past decade.The uprating—rewinding using moderntechnology —of 17 generators adds 528megawatts ofgenerating capacity.

Hoover Modification ProjectLack of immediate interest by

qualified customers has caused theAuthority to rethink its plans forconstruction ofArizona's share of theHoover Modification Project. Theproject, which would increase peakcapacity at Hoover Dam by 500megawatts, entails the addition of twolarge generators in a new powerhouseinstalled downstream from the base ofthe dam.

The Authorityand Nevada'sColorado River Commission continue toseek potential users for the additionalcapacity. Atpresent, Arizona's potentiallarge users have adequate poweravailable through 2007 and are notwillingto make the commitment for theModification Project as planned.

Arizona's share would be 250megawatts, and Nevada's would be 250megawatts.

I II 'll Ill.

cIC ~

CREOA ActivitesThe Colorado River Energy

Distributors'Association (CIKDA),onbehalf of its members, participates instudies of the environmental impact offluctuating Glen Canyon Dam releaseson downstream recreation, beaches,wildlife,and power produced at GlenCanyon powerplant.

The Authority is a member ofCREDA, whose members are primarilypower customers ofWestern's ColoradoRiver Storage Project (CRSP).

The proposed modified flowpatternsfrom Glen Canyon Dam would impactCRSP customers by dramaticallyincreasing power rates and diminishingthe usefulness of the electric resource.Many Authoritycustomers purchaseCRSP power to supplement the energythey receive from the Authority.

Other CREDA activities during thepast year included: 1) monitoringnational energy legislation, 2) workingwith Reclamation and Western on issuesaffecting the availability and price ofwholesale electric power, 3) monitoringoperation, maintenance andreplacement costs at Reclamation andWestern power facilities to control costs,and 4) representing members'nterestsin efforts to preserve the integrity of theGrand Canyon.

Power OperationsOn June 30, 1992, the water stored in

Lake Mead was 19,497,000 acre-feet at alake elevation of1,175 feet. During the1991-92 fiscal year, 8,269,000 acre-feet ofwater released through Hoover turbines

produced 3,773,000 megawatt-hours ofenergy. During that period, theAuthority's share of the energy was707,690 megawatt-hours.

The Authoritypurchased 33,941

megawatt-hours of thermal-generatedenergy under wholesale powerpurchase contracts with the ArizonaElectric Power Cooperative, ArizonaPublic Service Company and the Salt

River Project. The Authority sold thispower wholesale to its customers.

(i -—~~

'.H

IN MEMORIAM

Johnny Gregovich, chairman of theArizona Power Authorityfrom 1982-84,died last year at the age of 72.Gregovich's leadership was cliarac-terized by his grasp ofAuthoritybusiness and tempered by his personalstyle, candor and humor. He wasappointed to the Authority in 1977 andreappointed in 1978 to serve a six-yearterm.

Anative of Claypool, Arizona,Gregovich was retired from InspirationCopper Co. and served for 40 years asfire chief of the Tri-CityFire Depart-ment. He served in the U.S. Armyduring WW IIand had been a senator inthe state legislature.

Gregovich was active in state andcommunity affairs, receiving the GoldenService Award in 1976. He served on

the Gas and Oil Commission, the StateCommunity College Board, and theCriminal Code Commission. He waspast president of the Miami SchoolBoard.

15

ARIZONA POWER AUTHORITY

(An Agency of the State ofArizona)

SCHEDULE OF POWERAND ENERGY SALES

YEAR ENDING JUNE 30, 1992

For Period OfJuly 1, 1991 Through June 30, 1992

Sale of Hydro PowerAguila Irrigation DistrictAvra Valley Irrigation A Drainage DistrictBuckeye Water Conservation DistrictChandler Heights Citrus Irrigation DistrictCortaro-Marana Irrigation DistrictElectrical District No. 1, PinalElectrical District No. 2, PinalElectrical District No. 3, PinalElectrical District No. 4, PinalElectrical District No. 5, PinalElectrical District No. 5, MaricopaElectrical District No. 6, PinalElectrical District No. 7, MaricopaElectrical District No. 8, MaricopaHarquahala Valley Power DistrictMaricopa County Municipal Water District ¹1McMullen Valley Water Conservation gz Drainage DistrictOcotillo Water Conservation DistrictQueen Creek Irrigation DistrictRoosevelt Irrigation DistrictRoosevelt Water Conservation DistrictSalt River ProjectSan Tan Irrigation DistrictSilverbell Irrigation 8r, Drainage DistrictTonopah Irrigation DistrictWelton-Mohawk Irrigation &Drainage DistrictCity of MesaCity of PageCity of SaffordTown ofThatcherTown ofWickenburgAk-Chin Indian CommunityArizona Electric Power CooperativeArizona Public Service Co.Citizens Utilities Co.Tohono 0'odham Utility AuthoritySan Carlos Irrigation ProjectTucson Electric Power Co.Total

Sale ofThermal PowerTotal Thermal Power Sales

Other Electric Revenues

Total Operating Revenues

AverageBilling

Demand kW

3,954972

2,511779

5,3940

20,68424,45816,37712,065

29410,41010,08416,1362,8389,2815,4102,0012,7525,1498,536

43,7233,755

4362,0694,8942,260

477954474

1,039487

1,51010,942

1,3361,1251,1304 229

240 925

30 868

DeliveredkWI1

10,115,0002,137,0005,485,0003,133,000

12,877,0000

71,143,00067,720,00055,566,00044,431,000

1,086,00036,609,00024,025,00049,153,000

2,655,00019,440,00014,690,0006,643,0008,517,000

14,229,00022,973,000

155,454,0002,879,0001,402,0006,326,000

14,017,0004,848,0001,290,0002,240,000

964,0002,408,000

883,0003,372,000

22,249,0002,888,0002,146,0002,423,0008 106 000

706 522 000

33 752 000

Amount

$ 214,83649,604

125,73356,972

290,3050

1,359,3701,380,1661,047,576

820,72420,406

684,332526,983972,890

97,276452,483301,185129,807166,384292,181471,551

2,989,60358,96829,127

122,397283,784109,00526,16248,25922,25452,43421,43674,361

512,38964,84451,16254,400

191 72714,173,076

2,469,088

26 991

16 669 155

MillsPerkWh

21.2423.2122.9218.1822.54

0.0019.1120.3818.8518.4718.7918.6921.9319.7936.6423.2820.5019.5419.5420.5320.5319.2320.4820.7819.3520.2522.4820.2821.5423.0921.7724.2822.0523.0322.4523.8422.4523.65

~96

ARIZONA POWER AUTHORITY

(An Agency of the State ofArizona)

Table of Contents

Page

APA General Fund, Hoover Uprating Fund and Combined Balance Sheets,June30, 1992and 1991.............................................................................................. 18

APA General Fund, Hoover Uprating Fund and Combined Statements of Operations,Years Ended June 30, 1992 and 1991 .19

APA General Fund, Hoover Uprating Fund and Combined Statements of Changes In Fund Equity,Years Ended June 30, 1992 and 1991. 21

APA General Fund, Hoover Uprating Fund and Combined Statements of Cash Flows,Years Ended June 30, 1992 and 1991 22

Notes To Financial Statements 23

Supplemental Schedule - Statement of Operations of theHoover Uprating Fund —Individual Funds and Accounts,Year Ended June 30, 1992.. .30

IndependentAuditors'eport .. 32

ARI2ONA POWER AUTHORITY

(An Agency of the State ofArizona)

APA GENERAL FUND, HOOVER UPRATING FUND AND COMBINED BALANCESHEETS

JUNE 307 1992 AND 1991

ASSETS

APA General Fund1992 1991 1992 1991 1992

Combined1991

Property, Plantand Equipment- Net(Note 3) ~535 135 ~605 464 535 135 ~605 464

Preliminary Surveyand InvestigationCosts (Note 4)

Advances For HooverUprating Project(Notes 2 and 6)

892 697 892 697

!

844853871 833190613 44853871 33190613

Investments (Note 7) 2 999 800 2 999800

Current Assets:Cash (Note 5)Accounts receivable-

customers'owerpurchases

Due (to) from other fundInterest receivablePrepaid purchased power

319,622

78,076

252,961 1,535,275 1,547,36133,163 214 (33,163)35,596 853,451 1,006,204

98 182

1,854,897214

931,527

1,800,322

1,041,80098 182

4,593,036 4,381,340 6,256,404 . 6,509,225 10,849,440 10,890,565

Total current assets 4 990 734 4 703 060 8 645 344 9 127 809 13 636 078 13 830 869

Total 85,525,869 $6,201,221 $53,499,215 $45,318,222 $59,025,084 $51,519,443

18

ARIZONA POWER AUTHORITY

(An Agency of the State ofArizona)

1992FUND EQUITY AND LIABILITIES

APA GENERAI. FUND, HOOVER UPRATING FUND AND COMBINED BALANCESHEETSJUNE 30, 1992 AND 1991

APA General Fund1992 1991 1992 '991 Combined

1991

$ 9,000Fund Equity:

Contributed capitalRetained earnings

(Notes 2 and 9):Allocated:

Investment in property,plant and equipment 535,135Property replacementreserve 570,931Preliminary survey andinvestigation costsGeneral reserves 4,000,000

Unallocated 103 540

$ 9,000

605,464

495,827

892,6974,000,000

~52,600

$ 9,000 89,000

535,135

570,931

605,464

495,827

892,6974,000,000 4,000,000

8 (571,145) ~$ 815391) ~467,605) ~867991)

Total fund equity 5 218 606 5 950 388 ~571 145) ~815 391) 4 647 461 5 134 997

Bonds Payable (Note 8)

Less InvestmentsHeld ByTrustee-

Including unamortizedpremium on investmentsof$132,871 and $22,570in 1992 and 1991,respectively (Note 7)

89,820,000 89,820,000 89,820,000 89,820,000

~38514917) ~46488003 ~38514917) ~46488003

Bonds payable - net 51 305 083 43 331 997 51 305 083 43 331 997

Current Liabilities:Accounts payablePower contracts payableAccrued interest payable

(Note 8)Total current

liabilities

307,2634,071 21,162

246,762 1,178,307 1,193,484 1,485,57025,233

1,440,246

1 586 970 1 586 970 1 586 970 1 586 970

307 263 250 833 2 765 277 2 801 616 3 072 540 3 052 449

Total $ 5525869 $ 6,201,221 ~53499215 $ 45,318,222 $ 59,025,084 $ 51519,443

See notes to combined financial statements.

19

ARIZONA POWER AUTHORITY

(An Agency of the State ofArizona)

APA GENERAI. FUND, HOOVER UPRATING FUND AND COMBINED STATEMENTS OF OPERATIONSYEARS ENDED JUNE 30, 1992 AND 1991

APA General Fund Combined1992 1991 1992 1991 1992 1991

OperatingRevenues

Operating Expenses:Purchased powerTransmissionDistributionAdministrative

and generalDepreciationAllocation of

depreciationTotal operating

expenses

2,411,41622,51211,367

1,973,46416,70811,158

11,396,238 9,622,953 13,807,6542,829,341 2,792,022 2,851,853

11,367

11,596,4172,808,730

11,158

49,90575,103

13,58254,408

789,345 740,374 839,25075,103

753,95654,408

62 553 ~42 183 62 553 42 183

2 507 750 2 027 137 15 077 477 13 197 532 17 585 227 15 224 669

~2496 079 ~2070 278 g 14 173 076 L13 387 078 t 16 669 155 ~15 457 356

Operating(Loss) Income ~11 671) 43 141 ~904 401) 189 546 ~916 072 232 687

Other Income(Deductions):

Interest expense(Note 6)

Interest incomeGain on sale of

investmentsPreliminary survey

and investigation costsBad debt expenseOther - netTotal other income

(deductions)

248,584

244

(917,602)

51 33

(3,335,072) (4,322,923)259,631 3,585,885 4,226,923

893,403

(73,105)~88 852 ~431 ~51 773

(3,335,072)3,834,469

893,647

(917,602)

46 906

~720 111 97 674 1 148 647 ~147 773 428 536

(4,322,923)4,486,554

(73,105)~140 625

50 099

Net (Loss) Income S (731,782) S 140,815 S 244,246 S 41,773 S (487,536) S 182,588

20

'L

ARIZONA POSER AUTHORITY

(An Agency of the State ofArizona)

APA GENERAL FUND, HOOVER UPRATING FUND AND COMBINED STATEMENTS OF CHANGES IN FUND EQUITYYEARS ENDED JUNE 307 1992 AND 1991

APAGe eralFu d Hoover U ratin Fund Combined1992 1991 1992 1991 1992 1991

Unallocated RetainedEarnings:

Balance, beginningofyear

Net (loss) incomeNet transfers from

(to) allocatedretained earnings

Balance, end ofyear

$ (903,699)182,588

887 922 ~146 880103 540 ~52 600

887 922 ~146 880

(571,145) (815,391) ~467 60 ~fjL88n

$ (52,600) $ (46,535) $ (815,391) $ (857,164) $ (867,991)(731,782) 140,815 244',246 41,773 (487,536)

Allocated RetainedEarnings:

Balance,beginning ofyear

Net transfers (to)from unallocatedretained earnings

, Balance, end ofyear

5,993,988 5,847,108

~887 922 146 880

5 106 066 5 993 988

5,993,988 5,847,108

~887 922 146 880

5 106 066 5 993 988

Contributed Capital 9 000 9 000 9000 9000

Total Fund Equity ~5218 606 ~5950 388 ~571 145 ~815 391 ~4647 461 ~5134 997

See notes to combined financial statements.

21

ARI70NA POWER AUTHORITY

(An Agency of the State ofArizona)

APA GENERAL FUND, HOOVER UPRATING FUND AND COMBINED STATEMENTS OF CASH FLOWSYEARS ENDED JUNE 30, 1992 AND 1991

APA General Fund Hoover U ratin Fund Combined1992 1991 1992 1991 1992 1991

Operating Activities:Net (loss) income $Adjustments to reconcile

net(loss) income to netcash provided by(used in) operatingactivities:DepreciationAmortization of

premiums anddiscounts oninvestments

Writmffofpreliminarysurvey and investigationcosts

Changes in assets andliabilities:

Preliminary survey andinvestigation costs

Accounts receivableDue to/from other fundsInterest receivablePrepaid purchased powerAccounts payablePower contracts payableHoover credit

Net cash provided by(used in) operatingactivities:

75,103 54,408 75,103

917,602

(155,442) 121,861 (155,442)

917,602

(24,904)(66,661)33,163

(42,480)

(4,070)60,500

3,671181,585(60,862)77,980

(27,603)(178,529)

~4560 352

12,086(33,375)152,75398,182

(21,163)(15,177)

(107,751)60,862

615,178519,491 .

19,188322,220

(24,904)(54,575)

(212)110,27398,182

(25,233)45,323

216 471 ~4368 88 282 110 1 592 822 498 581

(731,782) $ 140,815 $ 244,246 $ 41,773 $ (487,536) $ 182,588

54,408

121,861

3,67173,834

693,158519,491

(8,415)143,691

~4560 352

(22776 065

Investing Activities:Cash from trustee fundsProceeds from maturing

certificates of depositAcquisition ofproperty,

plant and equipmentSale of investmentsNet cash (used in)

provided byinvesting activities:

Financing Activities:Increase in advances forHoover Uprating Project

1,500,000

(4,775) (209,031)

8,128,527 5,963,493 8,128,527

(4,775)&999899

~11 663 258 ~6444 875 ~11 663 258

~4775 1 290 969 11 128 327 5 963 493 11 123 552

5,963,493

1,500,000

(209,031)

7 254 462

6 444 875

NetIncrease (Decrease)In Cash 211,696 (3,077,918) (252,821) 1,111,440 (41,125) (1,966,478)

Cash, Beginning ofYear ~351 5~ ~gg.~ UBKZN 39$M&5t6509225 i108494408 4 593 036 ~4381 340 8 6 256 404Cash, End ofYear

Cash Paid For Interest ~0 ~0. 8 6,347 880 ~6347 880 ~6347 880

l2852AQ

t 10 890 565

~6347 880

22

ARIZONA POWER AUTHORITY

(An Agency of the State ofArizona)

NOTES TO FINANCIALSTATEMENTSYEARS ENDED JUNE 30, 1992 AND 1991

1. SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES

* i -Th 'fU

Arizona Power Authority ("APA") are maintained in accor-dance with applicable provisions of the Uniform System ofAccounts prescribed by the Federal Energy RegulatoryCommission ("FERC").

Pr r and De r cia i n-Propertyisstateatoriginalcost. The costs of property additions and replacementsare capitalized. Replacements ofminor items ofpropertyare charged to expense as incurred. Costs of propertyretired are eliminated from plant accounts, and such costsplus removal expenses less salvage are charged to accu-mulated depreciation.

Depreciation is provided on the straight-line compositemethod based on the estimated useful lives of the proper-ty items.

Pr limin . irv sndlnvesi ai n s-Certainpreliminary costs relating to proposed major capital proj-ects are deferred as long as completion of such projects isconsidered reasonably expected and capitalized as a costof such projects when completed.

A van sf rHo ver ratin Pro't-Proceedsfrombonds payable are advanced by APAfor uprating theHoover Power Plant and are recorded as advances. Suchadvances, including debt issue costs, plus net interestexpense incurred by APA are reimbursed in the form ofcredits on the monthly power bills rendered to APA by theWestern Area Power Administration of the Department ofEnergy ("WAPA").The credits are issued over the 30 yearlife of the bonds. Substantially all net interest expense onthe bonds is charged to the uprating project as amounts tobe recovered from future credits.

-C i l ~statements have been reclassified to conform to the cur-rent year presentation.

2. FUND ACCOUNTING

-Phh P Ph Aof 1984 ("Hoover Act") authorized the United StatesGovernment to increase the capacity of, i.e., "uprate",existing generating equipment at the Hoover Dam PowerPlant ("Uprating Project"). Instead ofappropriating fur-ther federal funds for the Uprating Project, Congressimplemented an advancement of funds procedure where-by prospective non-federal purchasers of the upratedHoover capacity and associated energy contribute to tliefinancing of the Uprating Project. APA financed a portionof the total Uprating Project by issuing bonds (Note 8).

The Hoover Uprating Fund accounts for advances by

3. PROPERTY, PLANTAND EQUIPMENT

Property, plant and equipment of the APA General

APA in connection with the Uprating Project. EffectiveJune 1, 1987, APA executed new power contracts withWAPAand APAcustomers which expire in 2017. The rev-enues and expenditures applicable to the sale and trans-mission of power and energy received by APA from WAPAunder these contracts are accounted for in the HooverUprating Fund.

-APA'

h happlicable to the Hoover Uprating Fund are accounted forin the APA General Fund. The purchase of steam powerand the sale and transmission of such power to APA's cus-tomers comprise the majority of this fund.

Fund at June 30, 1992 and 1991 are as follows:

1992 1991

Transmission and distribution plantGeneral plant

TotalLess accumulated depreciation

439,391666,675

1,106,066570,931

$ 439,391661,900

1,101,291495,827

Property, plant and equipment- net S 535,135 S 605,464

The transmission and distribution plant is com-prised of a substation and related equipment.

Purchased power is delivered over transmission facili-ties owned by WAPA.

24

4. PRELIMINARYSURVEYANDINVESTIGATIONCOSTS

APA had signed a participation agreement with theColorado River Commission of Nevada, Bureau ofReclamation ("Bureau" ) and WAPAfor the planning ofthe Hoover Modification Project. Ifconstructed, theproject would have increased the power generatingcapacity of the Hoover Power Plant by installing a newpower plant. In June 1992 itwas determined that theproject would not be pursued any further due to lack ofcustomers willingto sign contracts for capacity gener-ated by the project. Therefore, APAexpensed alldeferred costs, totaling $917,602, associated with thisproject in June 1992. The retained earnings allocatedfor the project were transferred to unallocated retainedearnings, substantially offsetting the current year lossrecorded in unallocated retained earnings.

5. CASH

In 1990, APA transferred their cash balances to theState ofArizona Treasurer for pooled investment pur-poses. Statutes require the State Treasurer to investthese pooled funds in obligations of the United StatesGovernment. Allinvestments are carried at cost.

6. ADVANCESFOR HOOVER UPRATING PROJECT

Advances for the Hoover Uprating Project werescheduled to be reimbursed by WAPA through creditson APA's power bills in the amounts of$5,421,165 and$4,926,013 for the years ended June 30, 1992 and 1991,respectively. Of those amounts, only $1,286,378 and$4,512,534 of the credits were actually granted forthose respective years due to cash flowproblems atWAPA. APA expects to receive the remaining creditswithin the next 5 years as WAPAresolves its cash flowproblems through increased rates. During the yearsended June 30, 1992 and 1991, interest expense on thebonds issued to finance the Uprating Project exceededinterest revenue and net accumulated gain on sale ofinvestments by approximately $2,900,000 and$2,025,000, respectively. These amounts, including, in1992, certain previously incurred debt issue costs werecharged to the Project advances as amounts to be sub-stantially recovered from future credits.

25

7. INVESTMENTS

Investments are carried at cost, which approximatesmarket value at June 30. Investments as ofJune 30 are

as follows:

1992 1991

United States government securitiesRepurchase agreementsMoney market

$ 12,726,63124,244,798

1,543,890

$ 17,196,77132,252,484

38,548

Total investments $ 38,515,319 $ 49,487,803

On December 18, 1990, APA entered into a masterrepurchase agreement with Prudential-BacheSecurities Inc. ("PBS"), wherein APA agreed to effect a

series of repurchase transactions with PBS in permit-ted investments. Permitted investments are defined asUnited States Treasury Securities, GovernmentNational Mortgage Association Securities, FederalHome Loan Mortgage Corporation Securities, FederalHousing Authority Securities and Student Loan

8. BONDS PAYABLE

Marketing Association Securities. The securities areheld by the Valley National Bank ofArizona, asTrustee, forAPA. Ifat any time the aggregate marketvalue of all purchased securities is less that APA's

aggregate margin amount (calculated using a percent-age of 102%), then APAmay require PBS to transfer toAPA cash or additional securities, at PBS'ption, sothat the cash and aggregate purchased securities willequal or exceed APA's aggregate margin amount.

APA issued $98,425,000 in variable rate short-termrevenue bonds on December 19, 1985 to obtain fundingfor the Hoover Uprating Project. On April1, 1987,

$89,820,000 of these bonds were remarketed and the

remainder retired. The new bonds bear interest rangingfrom 5.4% to 7.2% and are due serially from 1993

through 2017 as follows:

199319941995Thereafter

$ 800,000880,000975,000

87,165,000

Total $ 89,820,000

9. REI'AINEDEARNINGS

Allocations of retained earnings for specified pur-poses are authorized by the Arizona Power AuthorityCommission ("Commission" ), APA's governing board,under provisions of the Arizona Power AuthorityAct of

1944, as amended. The general reserves shown on theaccompanying balance sheets are comprised of the fol-lowing at June 30:

APA General Fund 1991

Resource Development- Hoover Modification ProjectOperations fundPower contractsSystem improvement and repairs

$ 3,500,000200,000100,000200 000

$ 3,500,000200,000100,000200 000

Total $ 4,000,000 $ 4,000,000

10. RETIREMENTAND PENSION PLANS

AllAPA full-time employees are required to partici-pate in the Arizona State Retirement Plan (the "Plan"),a multiple-employer, cost-sharing pension plan adminis-tered by the Arizona State Retirement System (the"ASRS"). The payroll for employees covered by thePlan for the year ended June 30, 1992 and 1991 was$374,200 and $380,537, respectively; APA's total payrollwas $378,524 and $383,140, respectively.

ASRS provides for retirement, disability, death andsurvivor benefits. Retirement benefits are calculatedon the basis of age, final average salary and servicecredit. Members are eligible for retirement benefits onthe first day of the calendar month following: 1) theattainment of age 65; 2) the attainment of age 62 andten years ofcredited service; or 3) the date when ageplus total credited service equals 80. The benefit isbased on 2% of final average salary multiplied by theyears of service credit. Final average salary is definedas the period of 36 consecutive months during which aparticipant receives the highest compensation withinthe last 120 months of service during which theemployee made retirement contributions as requiredby law. The compensation does not include vacation or

annual leave, sick leave, compensatory time or anyother form of termination pay. Persons who havereached age 50 with at least five years of total creditedservice may take an early retirement which entitlesthem to a reduced retirement benefit. Retirement ben-efits vest after five years of service.

Effective July 1, 1988, members ofASRS became eli-gible for a disability benefit in the event they becomeunable to perform their work. Aparticipant continuesto earn credit of up to a total of25 years ofservice dur-ing the period of disability.

Upon termination ofemployment, a member maywithdraw contributions made to ASRS. The acceptanceof a refund cancels the individual's rights and benefitsin ASRS. Employers'ontributions to the System arenot refunded.

Covered employees were required by State statuteto contribute 3.6% of their salary to the Plan duringfiscal year 1991-1992 and 3.82% of their salary duringfiscal year 1990-1991. APA is required to match theircontribution. Total contributions made by APA and itscovered employees were $13,470 for each in 1992 and$14,455 for each in 1991.

27

10. RETIREMENTAND PENSION PLANS (Continued)

The pension benefit obligation is a standardized dis-

closure measure of the present value of pension bene-

fits, adjusted for the effects of projected salary increas-es estimated to be payable in the future as a result ofemployee service to date. The measure, which is theactuarial present value of credited projected benefits, isintended to help users assess the public employeesretirement system's funding status on a goingeoncernbasis, assess progress made in accumulating sufficientassets to pay benefits when due, and make compar-isons among such systems. The Plan does not makeseparate measurements of assets and the pension ben-

efit obligation for individual employers. The pensionbenefit obligations at June 30, 1991 for the Plan as a

whole, determined through an actuarial valuation per-formed as of that date, was $7,100,000,000. The Plan's

net assets available for benefits on that date (valued atmarket) were $8,400,000,000. APA's 1991 contributionrepresented less than 1% of total contributions requiredofall participating entities, which were $ 133,364,246each for employers and employees in 1991. (1992 infor-mation not available.)

Ten-year historical trend information showing thePlan's progress in accumulating sufficient assets to paybenefits when due is presented in ASRS'une 30, 1991,

comprehensive annual financial report.

28

11. ADDITIONALBENEFITS

In addition to the pension benefits described, ASRSoffers health care benefits to retired and disabledmembers that are no longer eligible for health carebenefits through their former member employer'sgroup health plan. This program is administered in

accordance with ARS 38-781.03. Retired is defined asactively receiving an annuity benefit and disabled is de-fined as receiving a Long Term disability (LTD) benefitthrough the LTD program administered by ASRS. TheASRS provides the followingmonthly premium benefits:

Years ofCreditedService

5.0-5.96.0-6.97.0- 7.98.0-8.99.0-9.9

10.0+

Percent ofPremiumBenefit

5(S60%

70%

8(%9(No

100%

MemberOnly

Not MedicareEligible

$ 47.50

$ 57.00

$ 66.so$ 76.00

$ 85.50$ 9S.OO

NotMedicareEligible

$ 87.50

$ 105.00

$ 122.50

$ 140.00

$ 157.50

$ 175.00

MedicareEligible

$ 72.00

$ 87.00

$ 102.00

$ 116.00

$ 130.00

$ 145.00

With De endent s MemberOnly

MedicareEligible

$ 32.50

$ 39.00

$ 4s.so$ 52.00

$ 58.50$ 6s.oo

NotMedicareEligible

$ 72.50

$ 87.00

$ 101.50

$ 116.00

$ 130.50

$ 145.00

MedicareEligible

$ 57.50

$ 69.OO

$ 80.50

$ 92.00

$ 103.50

$ 115.00

With De endent s

The Arizona State Retirement System reimbursedapproximately $18,500,000 towards the cost ofgroup

health insurance coverage for the year. This figure rep-resents an increase of 5.09% over the previous year.

29

ARIZONA POWER AUTHORITY

(An Agency of the State ofArizona)

SUPPLEMENTAL SCHEDULE - STATEMENT OF OPERATIONS OF THE

HOOVER UPRATING FUND - INDIVIDUALFUNDS AND ACCOUNTSYEAR ENDED JUNE 30, 1992

Operating Revenues

Operating Expenses:Purchase powerTransmissionAdministrative and generalAllocation of depreciation

Total

Operating Gain (Loss)

Other Income (Deductions):Interest incomeInterest expenseGain on sale of investmentOther - net

Total

Net Income (Loss)Adjustments To Income (Loss)

Under The Power ResourceRevenue Bond Resolution:Add:

Accrued interest income FY 1991Accrued interest expense FY 1992Allocation ofdepreciationAccrued revenue FY 1991Accrued purchased power FY 1992

Prepaid purchased power FY 1991Deduct:

Accrued interest income FY 1992

Accrued interest expense FY 1991Accrued revenue FY 1992Accrued purchased power FY 1991

Deferred asset adjustment

RevenueFund

$ 14,173,076

14,173,076

14,173,076

1,547,361

1,535,275

OperatingAccount

$ 11,396,2382,829,341

789,34562,553

15,077,477

(15,077,477)

183,258

4',431

187,689

(14,889,788)

39,386

62,553

1,178,30798,182

48,092

1,193,484

MonthlyPaymentReserveAccount

$ 258,926

258,926

258,926

62,549

42,267

ConstructionFund

$ 2,216,571

2,216,571

2,216,571

614,088

478,906

Income (Loss) As DefinedUnder The PowerResource Revenue Bond Resolution $ 14,185,162 $ (14,752,936) $ 279,208 $ 2,351,753

30

June 30, 1992 Cash And Investment Balance $ 4. $ 2,791,261

Note: The above supplemental schedule includes all funds and accounts as defined by theAPA Power Resource Revenue Bond Resolution.

$ 3,025,853 $ 26,908,569

DebtServiceAccount

DebtServiceReserveAccount

PowerResource

DevelopmentFund

GeneralReserves

Fund Total

~14 173 076

11,396,2382,829,341

789,34562 553

15 077 477

~904 401)

S 126,698(3,335,072)

8 779,482

893,403

S 16,032 S 4,918 3,585,885(3,335,072)

893,4034 431

~3208 374) 1,672,885 16 032 4,918 1 148 647

(3,208,374) 1,672,885 16,032 4,918 244,246

43,5371,586,970

17,0011,586,970

2 761 995

237,583

261,154

2,288

5,030

6,773

1,001

1,006,2041,586,970

62,5531,547,3611,178,307

98,182

853,4511,586,9701,535,2751,193,4842 761 995

S (5,943,833)

9 1,766 444

9 1,649,314 ~13 290

8 10,058,965 S 294,481

8 10,690 ~2207 352)

S 58,619 S 44,904,192

INDEPENDENT AUDlTORS REPORT

To the Arizona Power Authority Commission:

We have audited the accompanying combined financial statements ofArizona Power Authority ("APA")and theseparate financial statements of the APA General Fund and the Hoover Uprating Fund ofAPA as ofJune 30, 1992and 1991 and for the years then ended, listed in the Table of Contents. These financial statements are the respon-sibilityofAPA's management. Our responsibility is to express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and dis-closures in the financial statements. An audit also includes assessing the accounting principles used and signifi-cant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the combined financial positionofAPA and the financial positions of the APA General Fund and the Hoover Uprating Fund ofAPAat June 30,1992 and 1991 and the results of their operations and their cash flows for the years then ended in conformity withgenerally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as awhole. The supplemental schedule listed in the Table of Contents is presented for the purpose ofadditional analy-sis and is not a required part of the basic financial statements. This supplemental schedule is the responsibility ofAPA's management. Such supplemental schedule has been subjected to the auditing procedures applied in ouraudit of the basic financial statements and, in our opinion, is fairlystated in all material respects when consideredin relation to the basic financial statements taken as a whole.

July 31, 1992Phoenix, Arizona

32

CREDlTS

Cover pliotograpli courtesy ofthe U.S. Water Conservation Laboratory.

Portraits pages 2,4, 6, and 7 by Herna»dez Pliotography.

Pliotograplis pages 5 and 8 courtesy ofthe Supiina Association ofAmerica.

Pliotographs page 9 courtesy ofTrico Electric Cooperative and tlie U.S. Brireau ofReclaination.

Hoover Dain pliotograplis page 14 courtesy ofthe U.S. Bureau ofReclaination.

Copy and design by Pat Lynn Commiinication Services.

Printed by G Fi G Printers.

~ pe Sy~

ARIZONAPOWER AUTHORITY1810 West Adams, Phoenix, Arizona 85007 (602) 5424263