AMENDMENT NO. 14 TO THE
ARIZONA NUCLEAR POWER PROJECT
PARTICIPATION AGREEMENT
1. PARTIES:
The Parties to this Amendment No. 14 to the Arizona Nuclear Power
Project Participation Agreement, hereinafter referred to as "Amendment
No. 14," are: ARIZONA PUBLIC SERVICE COMPANY, a corporation organized
and existing under and by virtue of the laws of the State of Arizona,
hereinafter referred to as "Arizona"; SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district
organized and existing under and by virtue of the laws of the State of
Arizona, hereinafter referred to as "Salt River Project"; SOUTHERN
CALIFORNIA EDISON COMPANY, a corporation organized and existing under
and by virtue of the laws of the State of California, hereinafter
referred to as "Edison"; PUBLIC SERVICE COMPANY OF NEW MEXICO, a
corporation organized and existing under and by virtue of the laws of
the State of New Mexico, hereinafter referred to as "PNM"; EL PASO
ELECTRIC COMPANY, a corporation organized and existing under and by
virtue of the laws of the State of Texas, hereinafter referred to as
"El Paso"; SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, a joint powers
agency organized and existing under and by virtue of the laws of the
State of California, doing business in the State of Arizona as SOUTHERN
CALIFORNIA PUBLIC POWER AUTHORITY ASSOCIATION, hereinafter referred to
as "SCPPA"; and DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS
ANGELES, a municipal corporation organized and existing under and by
virtue of the laws of the State of California, hereinafter referred to
as "LADWP," hereinafter individually referred to as "Party" and
collectively as "Parties."
2. RECITALS:
2.1 Arizona, Salt River Project, Edison, PNM, El Paso, SCPPA and
LADWP are parties to a certain agreement entitled Arizona
Nuclear Power Project Participation Agreement, dated as of
August 23, 1973, as amended by Amendment No. 1, dated as of
January 1, 1974, Amendment No. 2, dated as of August 28, 1975,
Amendment No. 3, dated as of July 22, 1976, Amendment No. 4,
dated as of December 15, 1977, Amendment No. 5, dated as of
December 5, 1979, Amendment No. 6, effective as of October 16,
1981, Amendment No. 7, effective as of April 1, 1982,
Amendment No. 8, executed as of September 12, 1983, Amendment
No. 9, executed as of June 12, 1984, Amendment No. 10,
executed as of November 21, 1985, Amendment No. 11, effective
January 10, 1987, Amendment No. 12, effective August 5, 1988,
and Amendment No. 13, effective June 15, 1991, hereinafter, as
so amended, referred to as the "Participation Agreement."
2.2 The Parties wish to establish procedures through this
Amendment No. 14 for allocating the costs associated with
Postretirement Benefits other than Pensions in accordance with
the Statement of Financial Accounting Standards (SFAS) 106
adopted by the Financial Accounting Standards Board.
Revised: 02/16/01
1
3. AGREEMENT:
For and in consideration of the premises and the mutual obligations of
and undertakings by the Parties as hereinafter provided in this
Amendment No. 14 to the Participation Agreement, the Parties agree as
follows:
4. EFFECTIVE DATE:
This Amendment No. 14 shall become effective after it has been executed
by all Parties. The procedures for allocating costs that are associated
with this Amendment shall be applied retroactively to January 1, 1993.
5. DEFINED TERMS:
5.1 The italicized words and phrases used in this Amendment No. 14
shall have meanings ascribed to them in Section 3 of the
Participation Agreement as amended by this Amendment No. 14.
5.2 All references to a "Section" or "Sections" in this Amendment
No. 14 shall mean a Section or Sections of the Participation
Agreement unless the text expressly states otherwise.
6. AMENDMENTS TO THE PARTICIPATION AGREEMENT MADE BY THIS AMENDMENT NO.14:
6.1 Section 3 - DEFINITIONS is amended by:
6.1.1 The addition of new Section 3.44A, which reads in its
entirety as follows:
3.44A Postretirement Benefits: As defined in SFAS
106, all forms of benefits, other than
retirement income, provided by the Operating
Agent to its retirees.
6.1.2 The addition of a new Section 3.51B, which reads in
its entirety as follows:
3.51B Return on Assets: The earnings on the
investments of the plan assets intended for
the post retirement health and welfare
benefits trusts.
6.1.3 The renumbering of Section 3.52A to 3.52B and the
addition of a new Section 3.52A which reads in its
entirety as follows:
3.52A SFAS: Statement of Financial Accounting
Standards of the Financial Accounting
Standards Board.
6.1.4 The renumbering of Sections 3.54K and L to 3.54L and
3.54M, respectively, and the addition of a new
Section 3.54K, which reads in its entirety as
follows:
Revised: 02/16/01
2
3.54K Transition Obligation: The unrecognized
amount of the (i) accumulated Postretirement
Benefits obligation in excess of (ii) the
fair value of plan assets plus any
recognized accrued post-retirement benefit
cost or less any recognized prepaid
post-retirement benefit cost as of the date
of adoption of SFAS 106.
6.2 Appendix E - Cost of Operating Work and Capital Improvements,
is amended by the deletion of Sections E.1.6, E.5.1 and E.5.2
and the substitution in lieu thereof of new Sections E.1.6,
E.5.1, and E.5.2, which reads in their entirety as follows:
E.1.6 The portion of the Operating Agent's employee
pensions and benefits expenses as defined under FPC
Account 926 (including the Transition Obligation and
related interest and the Return on Assets), which is
the sum of the amounts determined by (1) applying the
Benefits Ratio computed in accordance with Sections
E.5.1 and E.5.2 hereof to the total labor charges of
ANPP operating and maintenance expenses, including
without limitation the labor portion of expenses
chargeable to ANPP pursuant to Sections E.1.1, E.1.2,
E.1.3 and E.1.4 hereof, (2) the Transition Obligation
and related interest pursuant to Sections E.7A.1,
E.7A.2 and E.7A.3 and (3) the Return on Assets
pursuant to Sections E.7B.1 and E.7B.2.
E.5.1 The Benefits Ratio set forth below shall be applied
to the labor expense portion of the ANPP operations
and maintenance expenses, to the Operating Agent's
direct labor charges incurred in effecting Capital
Improvements, and to the labor expenses included in
the Operating Agent's supervisory and administrative
and general expense accounts. Estimated and actual
Benefits Ratios shall be determined, adjusted and
used in the manner set forth in Section E.10 hereof.
Benefits Ratio = B
---
L
Where:
B = The Operating Agent's total system employee
pensions and benefits (as defined in FPC Account 926,
excluding the Transition Obligation and related
interest and the Return on Assets) including Payroll
Taxes and worker's compensation expense on labor
charged to employee pensions and benefits. The
Transition Obligation and related interest will be
billed separately and the expected Return on Assets
will be credited separately to the Participants.
L = The Operating Agent's total labor distributed,
including accruals less labor charged to pensions and
benefits, less labor charged to injuries and damages.
E.5.2 The following example sets forth the method to be
employed by the Operating Agent to determine the
Benefits Ratio:
Revised: 02/16/01
3
EXAMPLE COMPUTATION
OF BENEFITS RATIO
(Based on Operating Agent's 1997 Expenses)
Pensions and Benefits Labor Total
----- -----
Employee Pensions and Benefits $2,542,461 $ 60,804,375
Payroll Taxes on Labor at 7.067% 179,676
Total Labor Rate
Compensation Insurance at 0.502% 12,775
Total Labor Rate
Less the Transition Obligation related to Postretirement 17,141,515
Benefits and Interest on the Transition Obligation,
billed outside of the Benefits Ratio
Less expected Return on Assets (8,706,403)
------------
Total Employee Pensions and Benefits net of the $ 52,561,714
============
Transition Obligation and Related Interest and Expected
Return on Assets
Labor Base
Labor charged to operation and maintenance, $323,082,848
construction and miscellaneous general ledger
accounts
Less total labor charged to Pensions and Benefits 1,799,288
Less total labor charged to Injuries and Damages 399,809
------------
Total applicable labor $320,883,751
============
Benefits Ratio: $52,561,714/$320,883,751 16.38%
6.3 Appendix E - Cost of Operating Work and Capital Improvements,
is amended by adding the new Sections E.7A, E.7B and E.7C
which read in their entirety as follows:
Revised: 02/16/01
4
E.7A Transition Obligation
E.7A.1 The Operating Agent's Transition Obligation at
January 1, 1993 is $182,918,448, of which $43,000,000
is allocable to Palo Verde. Future changes in
corporate-wide benefit plan levels covered under SFAS
106 that may affect the level of the Operating
Agent's Transition Obligation, shall be applied to
Palo Verde at the rate of 23.508%. Any such changes
to the Transition Obligation will be reflected in the
year that the actuarial valuation reports such
changes.
E.7A.2 Interest on the unamortized Transition Obligation
balance at January 1 of each year will be calculated
using the current year's discount rate per the
current year's actuarial valuation. Since the
actuarial valuation is usually not available until
mid-year, an estimated rate, based on the prior
year's actuarial valuation will be used until the
current year's actuarial valuation is available. At
that time, the interest related to the Transition
Obligation will be trued-up to reflect the current
year's valuation. In the event of removal of one or
more Generating Units from service prior to 2013, an
actuarial study will be completed to recalculate the
remaining Transition Obligation pertaining to Palo
Verde on a stand-alone basis.
E.7A.3 The Transition Obligation will be amortized over 20
years on a straight line basis, starting January 1,
1993. The Operating Agent shall xxxx the Transition
Obligation and related interest for the year on a
monthly basis as set forth below:
TRANSITION OBLIGATION AND RELATED INTEREST
BILLED OUTSIDE OF THE BENEFITS LOAD
TOTAL BILLED TO
COMPANY PALO VERDE
------- ----------
Total Transition Obligation
Fixed At 1-1-93 To Be
Amortized Over 20 Years $182,918,448 $43,000,000
One Year's Amortization Of the
Transition Obligation ("T.O.") 9,145,922 2,150,000
Interest On The Unamortized
Balance Of The T.O. At 1-1-93 15,090,772 3,547,500
----------- ----------
Total 1993 Transition Obligation &
Interest 24,236,694 5,697,500
=========== ==========
Interest On The Unamortized
Balance Of the T.O. At 1-1-93
Unamortized Balance At 1-1-93 182,918,448 43,000,000
1993 Discount Rate 8.25% 8.25%
----------- ----------
Interest On Transition Obligation 15,090,772 3,547,500
=========== ==========
Revised: 02/16/01
5
E.7B Return on Assets
E.7B.1 The current year expected Return on Assets will be
estimated annually by the actuary. Any Return on
Assets related to any trusts established for the
purpose of obtaining preferential tax treatment
(i.e., union versus non-union), shall be allocated by
the actuary to Palo Verde based on the ability of
Palo Verde to participate in such trust.
E.7B.2 As soon as practical after the end of each calendar
year, the actual Return on Assets will be determined
by the actuary and allocated to Palo Verde. The
actuary shall then calculate the allocation of total
trust(s) assets at the end of each calendar year to
Palo Verde based on current year trust(s)
contributions, earnings and distributions. The
allocation of trust assets to Palo Verde will be the
basis for the allocation of expected Return on Assets
annually by the actuary.
E.7C Funding of Postretirement Benefit Costs
E.7C.1 All Postretirement Benefit costs, other than the
expected Return on Assets and the Transition
Obligation and related interest, as defined in SFAS
106, are to be billed through the Benefits Ratio.
E.7C.2 Postretirement Benefits that have been collected
either through the Benefits Load, or as Transition
Obligation and related interest, as adjusted for the
Return on Assets, shall be funded by the Operating
Agent in irrevocable external trusts intended for
postretirement health and welfare benefits. Funding
will occur within an administratively reasonable time
period on approximately a quarterly basis.
7. EXECUTION BY COUNTERPARTS:
This Amendment No. 14 may be executed in any number of counterparts,
and upon execution by all Participants, each executed counterpart shall
have the same force and effect as an original instrument and as if all
Participants had signed the same instrument. Any signature page of this
Amendment No. 14 may be detached from any counterpart of this Amendment
No. 14 without impairing the legal effect of any signature thereon, and
may be attached to another counterpart of this Amendment No. 14
identical in form hereto but having attached to it one or more
signature pages.
Revised: 02/16/01
6
8. SIGNATURE CLAUSE:
The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 14 on behalf of the Party
for whom they sign.
ARIZONA PUBLIC SERVICE COMPANY
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
ATTEST AND COUNTERSIGN:
By:
-------------------------------------
Its:
------------------------------------
Date:
-----------------------------------
SOUTHERN CALIFORNIA EDISON COMPANY
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
Revised: 02/16/01
7
PUBLIC SERVICE COMPANY OF NEW MEXICO
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
EL PASO ELECTRIC COMPANY
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
SOUTHERN CALIFORNIA PUBLIC POWER
AUTHORITY, doing business in the
State of Arizona
as SOUTHERN CALIFORNIA PUBLIC POWER
AUTHORITY ASSOCIATION
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
ATTEST AND COUNTERSIGN:
By:
-------------------------------------
Its:
------------------------------------
Date:
-----------------------------------
Revised: 02/16/01
8
DEPARTMENT OF WATER AND POWER OF
THE CITY OF LOS ANGELES
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this _____ day of _____________________, 1999, before me,
the undersigned Notary Public, personally appeared
______________________________ who acknowledged himself to be the
_________________________ of ARIZONA PUBLIC SERVICE COMPANY, an Arizona
corporation, and that he as such officer, being authorized to do, executed the
foregoing instrument for the purposes therein contained by signing the name of
the company by himself as such ____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
--------------------
Revised: 02/16/01
9
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this _____ day of _____________________, 1999, before me,
the undersigned Notary Public, personally appeared
______________________________ who acknowledged himself to be the
_________________________ of SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND
POWER DISTRICT, an Arizona corporation, and that he as such officer, being
authorized to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the company by himself as such
____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
--------------------
STATE OF CALIFORNIA )
) ss.
County of Los Angeles )
On this _____ day of _____________________, 1999, before me,
the undersigned Notary Public, personally appeared
______________________________ who acknowledged himself to be the
_________________________ of SOUTHERN CALIFORNIA EDISON COMPANY, a California
corporation, and that he as such officer, being authorized to do, executed the
foregoing instrument for the purposes therein contained by signing the name of
the company by himself as such ____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
--------------------
Revised: 02/16/01
00
XXXXX XX XXX XXXXXX )
) ss.
County of Bernalillo )
On this _____ day of _____________________, 1999, before me,
the undersigned Notary Public, personally appeared
______________________________ who acknowledged himself to be the
_________________________ of PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation, and that he as such officer, being authorized to do, executed the
foregoing instrument for the purposes therein contained by signing the name of
the company by himself as such ____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
--------------------
STATE OF TEXAS )
) ss.
County of El Paso )
On this _____ day of _____________________, 1999, before me,
the undersigned Notary Public, personally appeared
______________________________ who acknowledged himself to be the
_________________________ of EL PASO ELECTRIC COMPANY, a Texas corporation, and
that he as such officer, being authorized to do, executed the foregoing
instrument for the purposes therein contained by signing the name of the company
by himself as such ____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
--------------------
Revised: 02/16/01
11
STATE OF CALIFORNIA )
) ss.
County of Los Angeles )
On this _____ day of _____________________, 1999, before me,
the undersigned Notary Public, personally appeared
______________________________ who acknowledged himself to be the
_________________________ of SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY (doing
business in the State of Arizona as SOUTHERN CALIFORNIA POWER AUTHORITY
ASSOCIATION), a California joint powers agency, and that he as such officer,
being authorized to do, executed the foregoing instrument for the purposes
therein contained by signing the name of the company by himself as such
____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
--------------------
STATE OF CALIFORNIA )
) ss.
County of Los Angeles )
On this _____ day of _____________________, 1999, before me,
the undersigned Notary Public, personally appeared
______________________________ who acknowledged himself to be the
_________________________ of DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS
ANGELES, a department organized and existing under the Charter of the City of
Los Angeles, a California municipal corporation, and that he as such officer,
being authorized to do, executed the foregoing instrument for the purposes
therein contained by signing the name of the company by himself as such
____________________________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
--------------------
Revised: 02/16/01
12
