Memorandum of Agreement
This Memorandum of Agreement is made with an Effective Date of April 25, 1998,
between Arizona Public Service Company (hereinafter referred to as APS) and Salt
River Project Agricultural Improvement and Power District (hereinafter referred
to as SRP). By signing this Memorandum of Agreement, it is the intent of the
parties to bind themselves to certain obligations and to recommend certain items
to their respective governing boards for approval.
The parties further understand that apart from those provisions of this
Memorandum of Agreement which impose bilateral obligations that can be uniquely
addressed by contract, the remaining provisions relating to legislation and
regulatory policies only affect the positions that each party will assert before
these legislative and regulatory bodies. They do not and can not prescribe any
particular outcome to be reached by said bodies; indeed, in reaching this
Memorandum of Agreement, each party acknowledges the risk that any such
legislative and/or regulatory decision may differ significantly from one or more
of the positions outlined herein.
RECITALS
These facts form the basis of this Memorandum of Agreement:
1. APS is an Arizona corporation engaged in the electric utility business
in the State of Arizona. One hundred percent of the common stock of APS
is owned by Pinnacle West Capital Corporation (hereinafter "Pinnacle
West").
2. SRP is an agricultural improvement and power district of the State of
Arizona and is engaged in the electric utility business in the State of
Arizona.
3. APS and SRP have characteristics in common but have also differed on a
number of issues outlined below.
4. In 1955 APS and SRP entered into two agreements known as the Territorial
Agreement (dated August 31, 1955) and the Power Coordination Agreement
(dated September 15, 1955). Among other things, the Territorial
Agreement provides for exclusive retail electric service territories as
between SRP and APS under the policy of the State of Arizona regarding
the provision of electricity. The Power Coordination Agreement provides
for certain electric system coordination and power sales.
5. APS and SRP also are participants in several jointly-owned electric
generating facilities, some of which are operated by APS and some of
which are operated by SRP.
6. Many states in the United States, including Arizona, are enacting rules
and legislation which will require electric utilities to open their
service territories to competition in the retail sale of electric power
supply and other non-distribution services.
7. The parties wish to amend the Territorial Agreement to eliminate it as a
barrier to competition in order to permit full and unfettered
competition between APS and SRP in the sale of electric power supply and
other non-distribution services as authorized or permitted by law,
according to such time schedules and terms that are applicable to other
electricity suppliers.
8. Disputes have arisen between the parties regarding the future
enforceability of the power purchase obligations of the Power
Coordination Agreement, which the parties wish to resolve by an
amendment to the Power Coordination Agreement. The price set by the
agreement is currently above market price. APS has argued, inter alia,
that it may terminate the power purchase obligations on the start of
retail competition arguing that the power purchase obligations are tied
to the exclusive right to serve certain territories. SRP has argued,
inter alia, that the wording and intent of the agreement is that the
power purchase obligation will continue. The parties wish to resolve
this dispute by adjusting the terms of the Power Coordination Agreement.
9. The parties have identified certain operational opportunities which
would give a net benefit to both parties, and that they wish to address
through the framework of this Memorandum of Agreement.
10. Other disputes have arisen between the parties which result from the
transition to a competitive electricity market, and which the parties
wish to settle by this Memorandum of Agreement.
11. The parties wish to permit vigorous and full competition between them
under the terms and conditions of applicable laws.
12. The parties wish to resolve the other issues identified herein so as to
permit such competition to take place in a fair and equitable manner and
at the earliest practical date.
Page 2
AGREEMENT
Now, therefore, the parties agree as follows:
1. Amendment of Territorial Agreement
SRP and APS agree to present to their governing boards at the first reasonable
opportunity, and to recommend that their governing boards approve, a second
amendment to the Territorial Agreement in the form attached hereto as Exhibit
One. It is the intent of this amendment to change the terms of the territorial
agreement only to the extent necessary to permit full and unfettered competition
between APS and SRP, on the same terms as may be applicable to other retail
electricity suppliers who sell into the distribution territory of APS or SRP.
With this amendment, the parties reaffirm the Territorial Agreement. In the
event that the amendment set forth as Exhibit One is not approved by the SRP or
APS governing board, then the parties shall renegotiate in good faith the terms
of this entire Memorandum of Agreement, with the objective of reaching a
substitute agreement acceptable to the governing boards of each party. If the
parties are unable to reach an agreement in such event, this Memorandum of
Agreement may be terminated by either party by written notice to the other.
2. Amendment of the Power Coordination Agreement
SRP and APS agree to present to their governing boards at the first reasonable
opportunity, and to recommend that their governing boards approve, an amendment
to Service Schedule A of the Power Coordination Agreement in the form attached
hereto as Exhibit Two. With this amendment, the parties reaffirm the Power
Coordination Agreement. In the event that the amendment set forth as Exhibit Two
is not approved by the SRP or APS governing board, then the parties shall
renegotiate in good faith the terms of this entire Memorandum of Agreement, with
the objective of reaching a substitute agreement acceptable to the governing
boards of each party. If the parties are unable to reach an agreement in such
event, this Memorandum of Agreement may be terminated by either party by written
notice to the other.
3. Identification of Future Savings
The parties agree to use their best efforts to execute an agreement or
agreements by October 15, 1998, providing for the implementation of various
measures that will provide APS and SRP each with net cost savings of at least
$15 million in net present value (calculated at an 8.7% discount rate) between
January 1, 1999 and December 31, 2006. Such measures may include, but shall not
be limited to , joint generation operation, fuel procurement activity, spinning
reserves, scheduling of the APA load/Xxxxxx generation, the use of additional
delivery points for transmission, future joint ventures, trenching cable
replacement programs, and other beneficial generation, distribution, and
transmission activities. The appropriate senior executives from APS and SRP
shall personally
Page 3
participate in the efforts to reach such an agreement, shall meet at least
weekly, and shall devote such resources as are necessary for successful
completion of the task.
4. Dispute Resolution
With respect to all future substantive disputes which reasonably relate to the
subject matter of this Memorandum of Agreement, and which are not covered by any
other agreement between APS and SRP, the parties will, where lawful and
reasonably feasible, meet and confer and attempt in good faith to resolve any
such matters, before taking a public position on the matter.
5. State Political Issues
With respect to state issues relating to competition between public power and
investor owned utilities, at this time the parties have reached these specific
agreements:
a. The parties will jointly support an amendment of HB 2663 on the
Senate floor or otherwise, as has been previously agreed to by the
parties and will support passage of HB 2663 as so amended. The
amendment is attached as Exhibit Three. The parties agree to reasonably
cooperate with each other in the event of political difficulty in
advancing part or all of the amendment. If HB 2663 as so amended is not
enacted into law, the parties agree to jointly support passage of such
legislation in the future.
b. SRP will not take a position on additional amendments to HB 2663
which may be proposed by APS, as have been previously disclosed to SRP,
relating to Title 40 waivers and electric and irrigation districts.
c. APS will support the development of an intergovernmental agreement
between the Corporation Commission and SRP which will primarily
coordinate the activities of the Commission and SRP in opening SRP's
service territory and the service territory of APS and other public
service corporations to electricity competition.
d. Upon request APS shall provide SRP with an estimated amount of APS's
remaining total stranded cost compiled using assumptions and methods
both parties find reasonably acceptable, the amount of APS's then
unrecovered regulatory assets pursuant to ACC decision number 59601,
and information regarding the implementation of any stranded cost
recovery mechanism approved by the ACC. APS further agrees that while
such regulatory assets are being recovered as part of its customers'
bills, said bills shall disclose that regulatory asset recovery is
contained therein.
Page 4
e. APS and SRP will support constitutional and legislative amendments
that eliminate unnecessary regulation of competitive electric services,
but still provide for effective state certification of retail
electricity suppliers.
f. SRP will propose and continue to support before its Board of
Directors, and APS will continue to propose and support before the
Arizona Corporation Commission, the stranded cost methodology described
in Exhibit 4. The parties understand that the ultimate decisions will
be made by the SRP governing board and the Arizona Corporation
Commission.
g Neither APS nor Pinnacle West will knowingly participate, financially
or otherwise, with any splinter group or organization which is designed
for the overriding purpose of taking a position adverse to the
generally known or understood interests of SRP at the state or local
level. SRP will not knowingly participate, financially or otherwise,
with any splinter group or organization which is designed for the
overriding purpose of taking a position adverse to the generally known
or understood interests of APS at the state or local level. The
requirements of this Section 5(g) shall begin on the Effective Date of
this Memorandum of Agreement and shall end on December 31, 2006.
h. APS will not take a position before the Arizona Corporation
Commission on efforts by SRP or its affiliate New West Energy to
compete in the current markets of public service corporations, nor will
APS challenge the right of SRP and New West Energy to compete in the
current markets of public service corporations or public power
entities. SRP will not challenge the right of APS (or its affiliates)
to compete in the current markets of public service corporations or
public power entities. However, nothing in this section shall preclude
either party from raising issues regarding the terms and conditions of
competitive entry which are generally applicable to electricity
suppliers, or the other party's compliance with laws generally
applicable to electricity suppliers.
i. Neither APS nor SRP shall take any public position on state issues
contrary to the specific terms or the manifest spirit of this
Memorandum of Agreement, or attempt to change the fundamental structure
or powers of the other, as existing on the Effective Date. The
requirements of this Section 5(i) shall begin on the Effective Date of
this Memorandum of Agreement and shall end on December 31, 2006.
6. Federal Political Issues
With respect to federal issues relating to competition between public power and
investor owned utilities, at this time the parties have reached these specific
agreements:
Page 5
a. In a timely manner upon execution of this Memorandum of Agreement,
APS will prepare a letter to Senator Xxxxx Xxxxxxxxx satisfactorily
indicating that SRP and APS have resolved differences related to
capital cost issues, and indicating that APS will not oppose those
private use regulations currently pending before IRS.
b. In a timely manner upon execution of this Memorandum of Agreement,
APS and SRP will jointly communicate, and make joint personal visits
where appropriate, with trade association(s) and federal policy makers
to be reasonably identified by SRP. APS will convey the messages set
forth in point (a) above.
c. Beginning on the Effective Date of this Memorandum of Agreement, APS
and SRP will affirmatively support the right of public power and
investor-owned utilities to seek tax-exempt pollution control bonds to
the same degree in the future, as that issue may arise at the federal
level during deliberations on electric industry deregulation.
d. APS and SRP will work together to facilitate the formation of an
interim organization for purposes of auditing system operations and
resolving system constraints on the Arizona transmission system. The
employees of this organization would report to a subset of the
Southwest Regional Transmission Association until Desert Star or some
other independent system operator mechanism is satisfactorily defined
and in operation. The parties will financially support the formation of
said organization and will propose that the costs of organizing and
operating the transition organization will be shared by all Arizona
market participants.
e. Neither APS nor Pinnacle West will knowingly participate,
financially or otherwise, with any splinter group or organization which
is designed for the overriding purpose of taking a position adverse to
the generally known or understood interests of SRP at the federal
level. SRP will not knowingly participate, financially or otherwise,
with any splinter group or organization which is designed for the
overriding purpose of taking a position adverse to the generally known
or understood interests of APS at the federal level. The requirements
of this Section 6(e) shall begin on the Effective Date of this
Memorandum of Agreement and shall end on December 31, 2006.
f. APS will limit its comments to the Federal Energy Regulatory
Commission in regard to SRP's safe harbor filing to concerns related to
code of conduct issues, and will otherwise indicate that it takes no
exception in that proceeding to the economic issues therein.
g. Neither APS nor SRP shall take any public position on federal issues
contrary to the specific terms or the manifest spirit of this
Memorandum of
Page 6
Agreement, or attempt to change the fundamental structure or powers of
the other, as existing on the Effective Date. The requirements of this
Section 6(g) shall begin on the Effective Date of this Memorandum of
Agreement and shall end on December 31, 2006.
7. Transmission and Distribution Prices and Terms
To the extent not contrary to future state or federal regulatory requirements
(1) SRP and APS shall allow access to their respective electric power
transmission and distribution facilities under rates and terms and conditions of
service that are nondiscriminatory, cost based, just and reasonable, and
comparable to those charged by themselves respectively for their own use of the
same facilities, (2) in determining rates and terms of transmission and
distribution service, SRP shall follow the procedures set forth in Exhibit
Three, and (3) SRP shall propose and advocate pricing for transmission services
that utilizes pricing procedures and methodologies that conform to the Federal
Power Act and the Federal Energy Regulatory Commission's applicable published
decisions, policies and regulations, to the extent legally possible. SRP's
proposed rates and terms and conditions for distribution and transmission
service shall be filed in sufficient time for their adoption by January 1, 1999,
or by the start of competition in both the APS and SRP service territories,
whichever is later. APS shall not object to the inclusion in transmission or
distribution rates of costs necessary to support SRP's water delivery operations
in amounts consistent with historic practices. APS shall propose distribution
and transmission rates and terms and conditions of service consistent with the
above principles. However, both parties recognize that such rates and terms and
conditions are subject to regulation by the Arizona Corporation Commission and
the Federal Energy Regulatory Commission.
8. Obligation to Meet and Confer
In the event of a claimed breach of the provisions of Sections 3, 5, or 6 of
this Memorandum of Agreement, the parties, on demand of either party, shall
timely meet and attempt, in good faith to resolve the dispute in a timely manner
before instituting litigation.
9. Remedies Upon Breach of This Memorandum of Agreement
a. Remedies for breach of the obligations set forth in Section 1 of
this Memorandum of Agreement: The only obligation under Section 1 of
this Memorandum of Agreement is for the management of APS and SRP to
present the amendment to their respective governing boards. In the
event that the amendment is not approved by both governing boards, the
parties shall attempt to renegotiate this entire Memorandum of
Agreement, as provided in Section 1.
b. Remedies for breach of the obligations set forth in Section 2 of
this Memorandum of Agreement: The only obligation under Section 2 of
this
Page 7
Memorandum of Agreement is for the management of APS and SRP to present
the amendment to their respective governing boards. In the event that
the amendment is not approved by both governing boards, the parties
shall attempt to renegotiate this entire Memorandum of Agreement, as
provided in Section 2.
c. Remedies for breach of the obligations set forth in Sections 3, 4
and 8 of this Memorandum of Agreement: Remedies shall be limited to
specific enforcement of the obligation or injunctive relief.
d. Remedies for breach of the obligations set forth in Sections 5 and 6
of this Memorandum of Agreement:
i. Breach by APS - In the case of a material breach by APS or
any action by Pinnacle West which, if performed by APS would
constitute a material breach of the obligations set forth in
Sections 5 and 6 of this Memorandum of Agreement, the changes
to Schedule A of the Power Coordination Agreement, as set
forth in Exhibit Two, shall terminate after APS has been given
notice and has failed to cure the material breach after a
reasonable opportunity to do so. In the event that APS
disputes the breach, then SRP shall continue to comply with
the changes to Service Section A of the Power Coordination
Agreement as set forth in Exhibit Two. until a final judgment
or resolution determining a material breach. Upon final
judgment or resolution determining a material breach, SRP will
be owed damages from APS in the amount of the difference
between the Exhibit Two prices, and the contract without
Exhibit Two, from the date of material breach until the final
judgment or determination. SRP shall otherwise have no remedy
at law or equity for such breach.
ii. Breach by SRP - In the case of a material breach by SRP of
the obligations set forth in Section 5 and 6 of this
Memorandum of Agreement, APS shall have a thirty day option to
terminate Schedule A of the Power Coordination Agreement,
after SRP has been given notice and has failed to cure the
material breach after a reasonable opportunity to do so. In
the event that SRP disputes the breach, then APS shall
continue to comply with Schedule A until a final judgment or
resolution determining a material breach. Upon final judgment
or resolution determining a material breach, APS will be owed
damages from SRP in the amount of the difference between the
market prices, and the contract price, from the date of breach
until the final judgment or determination. APS shall otherwise
have no remedy at law or equity for such material breach.
e. SRP or APS may bring a judicial action to enforce Section 7 of this
Memorandum of Agreement and shall have such remedies as provided by law
and equity.
Page 8
10. Miscellaneous Provisions
a. The provisions hereof shall extend to and bind the successors and
assigns of the parties hereto, and those subsidiaries of each
substantially engaged in the generation, transmission, distribution or
sale of electricity.
b. The failure by SRP or APS at any time or times hereafter to require
strict performance by the other of any of the undertakings, agreements
or covenants contained in this Memorandum of Agreement shall not waive,
affect or diminish any right of SRP or APS hereunder to demand strict
compliance and performance therewith. None of the undertakings,
agreements or covenants of SRP and APS under this Memorandum of
Agreement shall be deemed to have been waived unless such waiver is
evidenced by an instrument in writing signed by the party to be charged
specifying such waiver.
c. All notices shall be in writing and deemed properly given or made
upon receipt if delivered by registered or certified mail, postage
prepaid to the following addresses:
If to APS to:
Arizona Public Service Company
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn. Corporate Counsel
Telecopy Number (000) 000-0000
Telephone Number (000) 000-0000
If to SRP to:
Salt River Project Agricultural Improvement and
Power District
X.X. Xxx 00000
Xxxxxxx, Xxxxxxx 00000
Attn: Corporate Secretary
Telecopy Number (000) 000-0000
Telephone Number (000) 000-0000
Page 9
AGREED TO AS OF THE EFFECTIVE DATE:
APS
ARIZONA PUBLIC SERVICE COMPANY
By XXXXXXX XXXXX
------------------------------
Xxxxxxx Xxxxx
Chairman of the Board
Date 4/25/98
----------------------------
By XXXXXXX X. POST
------------------------------
Xxxxxxx X. Post
Chief Executive Officer
Date 4/25/98
----------------------------
SRP
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
By XXXXXXX X. XXXXXXXXX
------------------------------
Xxxxxxx X. Xxxxxxxxx
General Manager
Date April 25, 1998
----------------------------
Page 10
Exhibit One
SECOND SUPPLEMENTAL AGREEMENT
-----------------------------
THIS SECOND SUPPLEMENTAL AGREEMENT, made by and between ARIZONA PUBLIC
SERVICE COMPANY ("APS"), and SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND
POWER DISTRICT ("SRP");
WITNESSETH:
WHEREAS, the parties hereto heretofore entered into an Agreement of
August 31, 1955, providing, inter alia, certain restrictions in regard to areas,
customers and types of electric load to be served by each;
WHEREAS, the parties executed a Supplemental Agreement, dated December
1, 1972, removing any restrictions regarding sales, donation or delivery of
electric power and energy at wholesale;
WHEREAS, the parties desire to further amend the Agreement of August
31, 1955, and the December 1, 1972 Supplemental Agreement (hereinafter
collectively referred to as the "Agreement");
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
party hereto, the parties hereby agree as follows:
AGREEMENT:
1. Notwithstanding any other provision of the Agreement to the
contrary, nothing in the Agreement shall prohibit either party from providing
any electric supply or other non-distribution service to the extent authorized
or permitted by law. For purposes of this Amendment, the term "distribution
services" shall have the definition given the term "local distribution" and
"local distribution ancillary services" under Federal Energy Regulatory
Commission order number 888 [Order No. 888, 61 Fed. Reg.
21,540 (May 10, 1996)].
2. The provisions of Article X of the Agreement shall not apply to any
electric generation, transmission or other non-distribution systems, facilities
or assets.
3. The provisions of this Second Supplemental Agreement will become
effective as of January 1, 1999.
4. Except as expressly provided in this Second Supplemental Agreement,
the Agreement will remain unchanged and in full force and effect.
Page 11
IN WITNESS WHEREOF, the respective Parties have caused this Second
Supplemental Agreement to be executed on their behalf this ____day of
____________, 1998.
ARIZONA PUBLIC SERVICE COMPANY
By _________________________________
President
ATTEST:
----------------------------------
Secretary
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
By _________________________________
President
ATTEST AND COUNTERSIGN:
-----------------------------------
Secretary
Page 12
Exhibit Two
Supplement No. 4
to Service Schedule A
of the Power Coordination Agreement
of September 15, 1955
This Supplement Number 4 is agreed upon as a part of Service Schedule A of the
Power Coordination Agreement between Salt River Project Agricultural Improvement
and Power District and Arizona Public Service Company, dated September 15, 1955,
as previously supplemented.
In consideration of the resolution of disputes between the parties as to the
effect of the institution of competition in the electric industry on the
territory and contingent power purchase obligations under the Power Coordination
Agreement pursuant to the Memorandum of Agreement dated April 25, 1998, the
parties agree as follows:
1. The Effective Date of this Supplement No. 4 shall be the later of January 1,
1999, or the first day of the next month following the Start of Competition,
which is defined as the date upon which both APS and SRP have opened any part of
their retail load to competition in the sale of electricity.
2. The parties confirm the power purchase obligations and pricing formulas set
forth in Service Schedule A, subject only to the demand charges and the revised
methodology of calculating territorial equivalent power capacity set forth in
Attachment One to this Supplement No. 4. Beginning on the Effective Date, and
ending on December 31, 2006, demand charges shall be calculated as provided in
Attachment One to this Supplement No. 4. The parties further agree, beginning on
the Effective Date, to calculate territorial equivalent power capacity as
provided in Attachment One to this Supplement No. 4.
3. If control of APS or Pinnacle West, or any successor to such control pursuant
to this section, changes by merger, purchase, acquisition of voting securities
by one or more affiliated persons or entities, or other event or series of
coordinated events, the successor or affiliated successors to such control will,
within ten days after acquiring such control, deliver to SRP a written
agreement, reasonably satisfactory to SRP, to be bound by all of the provisions
of the Memorandum of Agreement, failing which the demand prices agreed to in
this Supplement No. 4 shall thereafter revert back to the level that would have
been in effect absent this Supplement No. 4 to Service Schedule A of the Power
Coordination Agreement. For this purpose, "control" means possession of the
power, however exercised and without regard to shareholder meeting requirements,
staggered terms of director office or similar considerations, to elect a
majority of the directors of the corporation in question (APS, Pinnacle West or
successor).
Page 13
4. Beginning on December 31, 2006, APS shall have an option to terminate the
territory and contingent power purchase obligations upon five years written
notice.
5. SRP may not exercise its existing three year option to terminate the
territory and contingent power purchase agreement until after December 31, 2003
(which would result in the earliest possible termination date of December 31,
2006).
6. Except as provided herein, Service Schedule A, as previously supplemented,
shall remain in full force and effect.
7. This Supplement No. 4 and Schedule A are subject to termination as provided
in the Memorandum of Agreement between APS and SRP dated April 25, 1998.
ARIZONA PUBLIC SERVICE COMPANY
By _________________________________
President
ATTEST:
----------------------------------
Secretary
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
By _________________________________
President
ATTEST AND COUNTERSIGN:
-----------------------------------
Secretary
Page 14
Attachment One
to
Supplement Number 4
Service Schedule A
Power Coordination Agreement
Future Capacity Requirements and Estimated Demand Charges
---------------------------------------------------------
--------------------------------------------------------------------------------
Calendar Jan-May Jan-May June-Dec June-Dec
Year Demand MWs Demand $/kW-Mo Demand MWs Demand $/kW-Mo
--------------------------------------------------------------------------------
1999 316 0.79 322 0.87
2000 322 1.46 329 1.54
2001 329 2.13 336 2.21
2002 336 2.81 343 2.87
2003 343 3.45 350 3.50
2004 350 4.10 357 4.14
2005 357 4.48 364 4.52
2006 364 4.84 372 4.88
--------------------------------------------------------------------------------
1. This chart is an estimate of future demand prices. The estimate is based on
an assumed $5.23 base on January 1, 1999, and an assumed 4.1% annual escalation
rate thereafter.
2. Actual prices will be adjusted based on the actual escalation rates pursuant
to Schedule A, Section 8 of the Power Coordination Agreement.
3. The territorial equivalent power capacity will be 254 MW beginning with the
6/1/98 - 5/31/99 contract year and will escalate at 2.5% thereafter, including
during the periods after December 31, 2006.
4. Until the first of the next month following the Start of Competition, demand
rates will be calculated according to Schedule A, Section 8 of the Power
Coordination Agreement. The APS demand charge for the revised billing period
will be paid monthly. The demand payment will be equal to the territorial demand
plus the contingent demand, multiplied by a per kW -month demand charge
calculated as specified above.
5. The demand charges after December 31, 2006 will be calculated according to
Schedule A, Section 8 of the Power Coordination Agreement.
6. Energy charges are not changed by this Supplement No. 4.
Page 15
Exhibit Three
APS/SRP AMENDMENT TO HB 2663 ELECTRIC POWER COMPETITION
Page 4
Line 5 after the period insert "NOTWITHSTANDING SECTION 30-803(A), A PUBLIC
POWER ENTITY MAY COORDINATE THE OPENING OF ITS SERVICE TERRITORY TO
COMPETITION WITH THE SCHEDULE SET BY THE COMMISSION FOR PUBLIC SERVICE
CORPORATIONS."
Between lines 5 and 6 insert "B. WHEN DETERMINING TERMS AND CONDITIONS FOR
CUSTOMER SELECTION, COMPLAINT RESOLUTION, CONSUMER PROTECTION,
STRANDED COST, DISTRIBUTION SERVICE RATES AND CHARGES, SYSTEM BENEFIT
CHARGES, AND OTHER RELATED MATTERS AS DETERMINED IN THE REASONABLE
DISCRETION OF THE GOVERNING BODY OF THE PUBLIC POWER ENTITY, THE
GOVERNING BODY OF THE PUBLIC POWER ENTITY SHALL, AT A MINIMUM:
1. PROVIDE PUBLIC NOTICE OF PROPOSED TERMS AND CONDITIONS STATING:
a. THAT THE POWER ENTITY IS ADOPTING TERMS AND CONDITIONS FOR
COMPETITION IN THE RETAIL SALE OF ELECTRIC GENERATION
SERVICE.
b. THAT THE INFORMATION IN SUBSECTION 2 OF THIS SECTION IS
AVAILABLE FOR INSPECTION.
c. THAT THE GOVERNING BODY OF THE PUBLIC POWER ENTITY WILL HOLD
A SPECIAL MEETING AS REQUIRED BY SUBSECTION 3 OF THIS
SECTION AND STATING THE DATE, TIME AND PLACE OF THE MEETING.
2. PROVIDE THAT FOR A PERIOD BEGINNING WITH THE PUBLIC NOTICE AND
UNTIL TEN DAYS AFTER THE CLOSE OF THE MEETING PRESCRIBED IN
SUBSECTION 3 OF THIS SECTION, THE PUBLIC POWER ENTITY SHALL MAKE
AVAILABLE TO INTERESTED PERSONS, AT ITS MAIN OFFICE, PERTINENT
INFORMATION, INCLUDING:
a. MANAGEMENT'S RECOMMENDATION FOR PROPOSED TERMS AND
CONDITIONS.
b. RELEVANT FINANCIAL AND OTHER INFORMATION AS MAY BE PERTINENT
AND UPON WHICH THE MANAGEMENT PROPOSAL IS BASED. THE PUBLIC
POWER ENTITY SHALL TIMELY SUPPLEMENT SUCH INFORMATION AS MAY
BE REASONABLY REQUESTED BY ANY INTERESTED PERSON AND
Page 16
WILL ANSWER REASONABLE QUESTIONS POSED BY ANY INTERESTED
PERSON.
c. CURRENT TERMS AND CONDITIONS, IF ANY.
d. REPORTS OF CONSULTANTS, IF ANY.
3. PROVIDE THAT INTERESTED PERSONS MAY FILE WRITTEN COMMENTS WITH
THE PUBLIC POWER ENTITY AT ANY TIME DURING THE PERIOD PRESCRIBED
IN SUBSECTION 2 OF THIS SECTION. A MEETING OF THE GOVERNING BODY
OF THE PUBLIC POWER ENTITY SHALL BE HELD NO SOONER THAN THIRTY
DAYS AND NO LATER THAN NINETY DAYS AFTER THE PUBLIC NOTICE
REFERRED TO IN SUBSECTION 1 OF THIS SECTION. AT THE MEETING, THE
GOVERNING BODY OF THE PUBLIC POWER ENTITY SHALL:
a. AFFORD REPRESENTATIVES OF MANAGEMENT OF THE PUBLIC POWER
ENTITY AN OPPORTUNITY TO EXPLAIN THE PROPOSED TERMS AND
CONDITIONS, THE CRITERIA FOR SUCH TERMS AND CONDITIONS AND
ANSWER QUESTIONS.
b. AFFORD ANY CONSULTANTS RETAINED BY THE PUBLIC POWER ENTITY
AN OPPORTUNITY TO COMMENT UPON THE PROPOSED TERMS AND
CONDITIONS.
c. AFFORD INTERESTED PERSONS A REASONABLE OPPORTUNITY TO SUBMIT
WRITTEN COMMENTS AND QUESTIONS OR MAKE ORAL PRESENTATION OF
VIEWS, QUESTIONS AND COMMENTS.
4. FOLLOWING REVIEW OF THE INFORMATION AND COMMENTS GATHERED IN THE
COURSE OF THE PROCEDURES DESCRIBED IN SUBSECTION 3 OF THIS
SECTION THE GOVERNING BODY OF THE PUBLIC POWER ENTITY SHALL MAKE
ITS DECISION ON THE PROPOSED TERMS AND CONDITIONS.
C. ALL FINAL DECISIONS OF THE GOVERNING BODY OF THE PUBLIC POWER ENTITY
REGARDING TERMS AND CONDITIONS FOR CUSTOMER SELECTION, COMPLAINT
RESOLUTION, CONSUMER PROTECTION, STRANDED COST, DISTRIBUTION SERVICE
RATES AND CHARGES, SYSTEM BENEFIT CHARGES, AND OTHER RELATED MATTERS
AS DETERMINED IN THE REASONABLE DISCRETION OF THE GOVERNING BODY OF
THE PUBLIC POWER ENTITY SHALL:
1. BE IN WRITING
2. STATE THE FACTUAL AND LEGAL BASIS FOR THE DECISION, AND
3. STATE THE EFFECTIVE DATE OF THE DECISION, IF ANY.
Line 12 before the period insert ", TO ELECTRICITY SUPPLIERS CERTIFICATED
BY THE COMMISSION PURSUANT TO SECTION 40-207"
Line 13 strike "EXISTING", before "SERVICE" insert "EXCLUSIVE DISTRIBUTION"
Line 17 after "CONTINUE" insert "TO HAVE THE EXCLUSIVE RIGHT"
Page 17
After line 19 insert "D. PUBLIC POWER ENTITIES SHALL PERMIT THE AGGREGATION
OF LOADS OF MULTIPLE CUSTOMERS."
Strike lines 20 through 22
Page 5
Line 11 strike "A PEAK DEMAND OF TWENTY KILOWATTS"; after "WITH" insert "AN
ANNUAL USAGE OF ONE HUNDRED THOUSAND KILOWATT HOURS"
Line 20 after "PRACTICES" insert "OF PUBLIC POWER ENTITIES"
Page 6
Line 21 strike "PEAK DEMAND IS TWENTY"
Line 22 strike "KILOWATTS" and insert "ANNUAL USAGE IS ONE HUNDRED THOUSAND
KILOWATT HOURS"
Line 28 strike "AGGREGATED PEAK LOAD IS TWENTY KILOWATTS" and insert
"ANNUAL USAGE IS ONE HUNDRED THOUSAND KILOWATT HOURS"
Line 37 after "FAILURE" insert "OF A PUBLIC POWER ENTITY"
Page 7
Line 40 strike "AN"; after "GIVE" insert "A MATERIAL"
Page 8
Line 2 after the period insert "DETERMINATIONS MADE BY PUBLIC POWER
ENTITIES UNDER THIS SECTION MAY BE CHALLENGED THROUGH THE PROCEDURES
PROVIDED IN SECTION 39-121.02."
Between lines 2 and 3 insert three new sections:
Section ___. Section 30-810, Arizona Revised Statutes is inserted:
30-810 Application for rehearing; effect; decision
A. AFTER ANY FINAL DECISION IS MADE BY THE GOVERNING BODY OF THE PUBLIC
POWER ENTITY REGARDING TERMS AND CONDITIONS FOR CUSTOMER SELECTION,
COMPLAINT RESOLUTION, CONSUMER PROTECTION STRANDED COSTS, DISTRIBUTION
SERVICE RATES AND CHARGES, SYSTEM BENEFIT CHARGES, AND OTHER RELATED
MATTERS AS DETERMINED IN THE REASONABLE DISCRETION OF THE GOVERNING
BODY OF THE PUBLIC POWER ENTITY, OR REGARDING COMPLIANCE WITH AN
INTERGOVERNMENTAL AGREEMENT MADE UNDER THE PROVISION OF THIS CHAPTER,
ANY PARTY TO THE ACTION OR PROCEEDING OR THE ATTORNEY GENERAL ON
BEHALF OF THE STATE MAY APPLY FOR A REHEARING OF ANY MATTER DETERMINED
IN THE ACTION OR PROCEEDING AND SPECIFIED IN THE APPLICATION FOR
REHEARING WITHIN TWENTY DAYS OF ENTRY OF THE DECISION. UNLESS
OTHERWISE ORDERED, THE FILING OF SUCH AN APPLICATION DOES NOT STAY THE
Page 18
DECISION OF THE GOVERNING BODY OF THE PUBLIC POWER ENTITY. IF THE
GOVERNING BODY OF THE PUBLIC POWER ENTITY DOES NOT GRANT THE
APPLICATION WITHIN TWENTY DAYS, IT IS DEEMED DENIED. IF THE GOVERNING
BODY OF THE PUBLIC POWER ENTITY GRANTS THE APPLICATION, THE GOVERNING
BODY OF THE PUBLIC POWER ENTITY SHALL PROMPTLY HEAR THE MATTER AND
DETERMINE IT WITHIN TWENTY DAYS AFTER THE FINAL SUBMISSION.
B. NO CLAIM ARISING FROM ANY DECISION OF THE GOVERNING BODY OF THE PUBLIC
POWER ENTITY REGARDING TERMS AND CONDITIONS FOR CUSTOMER SELECTION,
COMPLAINT RESOLUTION, CONSUMER PROTECTION, STRANDED COSTS,
DISTRIBUTION SERVICE RATES AND CHARGES, SYSTEM BENEFIT CHARGES, AND
OTHER RELATED MATTERS AS DETERMINED IN THE REASONABLE DISCRETION OF
THE GOVERNING BODY OF THE PUBLIC POWER ENTITY, OR REGARDING COMPLIANCE
WITH AN INTERGOVERNMENTAL AGREEMENT MADE UNDER THE PROVISION OF THIS
CHAPTER SHALL ACCRUE IN ANY COURT TO ANY PARTY, OR THE STATE, UNLESS
THE PARTY, OR THE STATE, MAKES, BEFORE THE EFFECTIVE DATE OF THE
DECISION, APPLICATION TO THE GOVERNING BODY OF THE PUBLIC POWER ENTITY
FOR REHEARING.
C. THE APPLICATION SHALL SET FORTH SPECIFICALLY THE GROUNDS ON WHICH IT
IS BASED, AND NO PERSON, NOR THE STATE, SHALL IN ANY COURT URGE OR
RELY ON ANY GROUND NOT SET FORTH IN THE APPLICATION.
D. AN APPLICATION FOR REHEARING SHALL NOT EXCUSE ANY PERSON FROM
COMPLYING WITH AND OBEYING ANY DECISION, OR ANY REQUIREMENTS OF ANY
DECISION OF THE GOVERNING BODY OF THE PUBLIC POWER ENTITY THERTOFORE
MADE, OR OPERATE IN ANY MANNER TO STAY OR POSTPONE THE ENFORCEMENT
THEREOF, EXCEPT IN SUCH CASES AND UPON SUCH TERMS AS THE GOVERNING
BODY OF THE PUBLIC POWER ENTITY DIRECTS.
E. IF, AFTER A REHEARING AND A CONSIDERATION OF ALL THE FACTS, INCLUDING
THOSE ARISING SINCE THE MAKING OF THE DECISION, THE GOVERNING BODY OF
THE PUBLIC POWER ENTITY FINDS THAT THE ORIGINAL DECISION OR ANY PART
THEREOF IS IN ANY RESPECT UNJUST OR UNWARRANTED, OR SHOULD BE CHANGED,
THE GOVERNING BODY OF THE PUBLIC POWER ENTITY MAY ABROGATE, CHANGE, OR
MODIFY THE DECISION, AND SUCH DECISION HAS THE SAME FORCE AND EFFECT
AS AN ORIGINAL DECISION, BUT SHALL NOT AFFECT ANY RIGHT OR THE
ENFORCEMENT OF ANY RIGHT ARISING FROM OR BY VIRTUE OF THE ORIGINAL
DECISION, UNLESS SO DECIDED BY THE GOVERNING BODY OF THE PUBLIC POWER
ENTITY.
Page 19
Section ___. Section 30-811, Arizona Revised Statutes is inserted:
30-811 Action to set aside or modify certain decisions of public power
entities; filing; limitation; superior court
A. ANY PARTY IN INTEREST, OR THE ATTORNEY GENERAL ON BEHALF OF THE STATE,
BEING DISSATISFIED WITH A FINAL DECISION BY THE GOVERNING BODY OF THE
PUBLIC POWER ENTITY REGARDING TERMS AND CONDITIONS FOR CUSTOMER
SELECTION, COMPLAINT RESOLUTION, CONSUMER PROTECTION, STRANDED COSTS,
DISTRIBUTION SERVICE RATES AND CHARGES, SYSTEM BENEFIT CHARGES, AND
OTHER RELATED MATTERS AS DETERMINED IN THE REASONABLE DISCRETION OF
THE GOVERNING BODY OF THE PUBLIC POWER ENTITY, OR REGARDING COMPLIANCE
WITH AN INTERGOVERNMENTAL AGREEMENT MADE UNDER THE PROVISIONS OF THIS
CHAPTER, MAY WITHIN THIRTY DAYS AFTER A REHEARING IS DENIED OR
GRANTED, AND NOT AFTERWARDS, COMMENCE AN ACTION IN THE SUPERIOR COURT
IN THE COUNTY IN WHICH THE GOVERNING BODY OF THE PUBLIC POWER ENTITY
HAS ITS OFFICE, AGAINST THE GOVERNING BODY OF THE PUBLIC POWER ENTITY
AS A DEFENDANT, TO VACATE, SET ASIDE, AFFIRM IN PART, REVERSE IN PART
OR REMAND WITH INSTRUCTIONS TO THE GOVERNING BODY OF THE PUBLIC POWER
ENTITY SUCH DECISION ON THE GROUND THAT THE VALUATION, RATE, JOINT
RATE, TOLL, FARE, CHARGE OR FINDING, RULE, CLASSIFICATION OR SCHEDULE,
PRACTICE, DEMAND, REQUIREMENT, ACT OR SERVICE PROVIDED IN THE DECISION
IS UNLAWFUL, OR THAT ANY RULE, PRACTICE, ACT OR SERVICE PROVIDED IN
THE DECISION IS UNREASONABLE. THE ANSWER OF THE GOVERNING BODY OF THE
PUBLIC POWER ENTITY SHALL BE SERVED AND FILED WITHIN TWENTY DAYS AFTER
SERVICE OF THE COMPLAINT, WHEREUPON THE ACTION SHALL BE AT ISSUE AND
READY FOR TRIAL UPON TEN DAYS' NOTICE TO EITHER PARTY. THE ACTION
SHALL BE TRIED AND DETERMINED AS OTHER CIVIL ACTIONS EXCEPT AS
PROVIDED IN THIS SECTION.
B. IF THE GOVERNING BODY OF THE PUBLIC POWER ENTITY RESCINDS THE DECISION
COMPLAINED OF, THE ACTION SHALL BE DISMISSED, AND IF THE GOVERNING
BODY OF THE PUBLIC POWER ENTITY ALTERS, MODIFIES OR AMENDS THE
DECISION, THE ALTERED, MODIFIED OR AMENDED DECISION SHALL REPLACE THE
ORIGINAL DECISION COMPLAINED OF, AND JUDGMENT SHALL BE GIVEN THEREON
AS THOUGH MADE BY THE GOVERNING BODY OF THE PUBLIC POWER ENTITY IN THE
FIRST INSTANCE.
C. THE TRIAL SHALL CONFORM, AS NEARLY AS POSSIBLE, AND EXCEPT AS
OTHERWISE PRESCRIBED BY THIS SECTION, TO OTHER TRIALS IN CIVIL
ACTIONS. JUDGMENT SHALL BE GIVEN AFFIRMING,
Page 20
MODIFYING OR SETTING ASIDE THE ORIGINAL OR AMENDED DECISION.
D. EITHER PARTY TO THE ACTION WITHIN THIRTY DAYS AFTER THE JUDGMENT OF
THE SUPERIOR COURT IS GIVEN, MAY APPEAL TO THE COURT OF APPEALS.
E. IN ALL TRIALS, ACTIONS AND PROCEEDINGS THE BURDEN OF PROOF SHALL BE
UPON THE PARTY ADVERSE TO THE GOVERNING BODY OF THE PUBLIC POWER
ENTITY OR SEEKING TO VACATE OR SET ASIDE ANY DETERMINATION OF THE
GOVERNING BODY OF THE PUBLIC POWER ENTITY TO SHOW THAT IT IS UNLAWFUL,
THAT IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE OR THAT THE GOVERNING
BODY OF THE PUBLIC POWER ENTITY ABUSED ITS DISCRETION.
F. EXCEPT AS PROVIDED BY THIS SECTION NO COURT OF THIS STATE SHALL HAVE
JURISDICTION TO ENJOIN, RESTRAIN, SUSPEND, DELAY OR REVIEW ANY
DECISION OF THE GOVERNING BODY OF THE PUBLIC POWER ENTITY, OR TO
ENJOIN RESTRAIN OR INTERFERE WITH THE GOVERNING BODY OF THE PUBLIC
POWER ENTITY IN THE PERFORMANCE OF ITS OFFICIAL DUTIES, AND THE RULES
OR DECREES FIXED BY THE GOVERNING BODY OF THE PUBLIC POWER ENTITY
SHALL REMAIN IN FORCE PENDING THE DECISION OF THE COURTS, BUT A WRIT
OF MANDAMUS SHALL LIE FROM THE SUPREME COURT TO THE GOVERNING BODY OF
THE PUBLIC POWER ENTITY IN CASES AUTHORIZED BY LAW.
Section ___. Section 30-812, Arizona Revised Statutes is inserted:
30-812 Application of antitrust statutes
NOTWITHSTANDING ANY OTHER PROVISIONS OF LAW, THE PROVISIONS OF TITLE 44,
CHAPTER 10, ARTICLE 1 SHALL APPLY TO THE PROVISION OF COMPETITIVE
ELECTRIC GENERATION SERVICE BY PUBLIC POWER ENTITIES.
Page 11
Line 31 strike "CURRENT SERVICE"; before "TERRITORIES" insert "EXCLUSIVE
DISTRIBUTION SERVICE"
Line 38 after "PROVIDE" insert ", ON AN EXCLUSIVE BASIS,"
Page 12
Line 12 strike "PEAK DEMAND IS TWENTY KILOWATTS" and insert "ANNUAL USAGE
IS ONE HUNDRED THOUSAND KILOWATT HOURS"
Line 20 strike "PEAK DEMAND IS TWENTY"
Line 21 strike "KILOWATTS" and insert "ANNUAL USAGE IS ONE HUNDRED THOUSAND
KILOWATT HOURS"
Line 36 strike "MAILINGS FOR"
Strike lines 37 through 41
Page 21
Page 13
Afterline 24 insert "6. PERMIT THE AGGREGATION OF LOADS OF MULTIPLE
CUSTOMERS."
Strike lines 25 through 28.
Line 35 strike "AGGREGATED PEAK"
Line 36 strike "LOAD OF TWENTY KILOWATTS"; and insert "ANNUAL USAGE OF ONE
HUNDRED THOUSAND KILOWATT HOURS"
Page 15
Line 39 strike "EXCEPT"
Line 40 strike "TO THE EXTENT THAT THE CONDUCT OR ACTIVITY IS SUBJECT TO
COMPETITION,"
Line 43 after the period insert "THIS SECTION SHALL NOT APPLY TO THE
PROVISION OF COMPETITIVE ELECTRIC GENERATION SERVICE."
Page 16
Between lines 32 and 33 insert five new sections:
Section ___. Section 41-2531, Arizona Revised Statutes is amended to read:
41-2531 Definitions
In this article, unless the context otherwise requires:
1. "Bidder prequalification" means determining in accordance with rules
adopted pursuant to this chapter that a prospective bidder or offeror
satisfies the criteria for being included on the bidder's list.
2. "CONFIDENTIAL INFORMATION" MEANS TRADE SECRETS OR OTHER PROPRIETARY
INFORMATION BELONGING TO A COMPETING BIDDER OR OFFEROR WHICH IS NOT
PUBLICLY KNOWN, THE DISCLOSURE OF WHICH IS IN THE SOLE DISCRETION OF
THE COMPETING BIDDER OR OFFEROR AND WHICH IS INCLUDED IN A BID OR
PROPOSAL FOR THE LIMITED PURPOSE OF RESPONDING TO THE BID OR REQUEST
FOR PROPOSAL WITH AN EXPECTATION OF CONTINUED PRIVACY. CONFIDENTIAL
INFORMATION MAY NOT BE DISCLOSED WITHOUT THE EXPRESS PERMISSION OF THE
COMPETING BIDDER OR OFFEROR TO WHOM IT BELONGS.
3. "Cost-reimbursement contract" means a contract under which a
contractor is reimbursed for costs which are reasonable, allowable and
allocable in accordance with the contract terms and the provisions of
this chapter, and a fee, if provided for in the contract.
4. "Demonstration project" means a project in which a vendor supplies a
service or material to this state for which the state does not pay but
for which this state may be obligated to provide routine support such
as utility cost and operating personnel.
5. "ESSENTIAL GOODS AND SERVICES" MEANS THOSE GOODS AND SERVICES,
INCLUDING THE PROVISION OF ELECTRIC SERVICE, WHICH ARE NECESSARY FOR
THE OPERATION OF GOVERNMENT
Page 22
AND/OR FOR THE PUBLIC HEALTH, SAFETY AND WELFARE, AND FOR WHICH IT IS
PRESUMPTIVE THAT THE COMPETITIVE BIDDING PROCESS IS NOT PRACTICAL OR
ADVANTAGEOUS TO THE STATE AND FOR WHICH THE COMPETITIVE SEALED
PROPOSAL PROCESS SHALL BE USED IN PLACE OF THE COMPETITIVE SEALED BID
PROCESS.
6. "Established catalogue price" means the price included in a catalogue,
price list, schedule or other form that:
(a) Is regularly maintained by a manufacturer, distributor or
contractor.
(b) Is either published or otherwise available for inspection by
customers.
(c) States prices at which sales are currently or were last made to a
significant number of any category of buyers or buyers
constituting the general buying public for the materials or
services involved.
7. "Invitation for bids" means all documents, whether attached or
incorporated by reference, which are used for soliciting bids in
accordance with the procedures prescribed in section 41-2533.
8. "Multistep sealed bidding" means a two phase process consisting of a
technical first phase composed of one or more steps in which bidders
submit unpriced technical offers to be evaluated by this state and a
second phase in which those bidders whose technical offers are
determined to be acceptable during the first phase have their price
bids considered.
9. "Paper" means newspaper, high grade office paper, fine paper, bond
paper, offset paper, xerographic paper, duplicator paper and related
types of cellulosic material containing not more than ten per cent by
weight or volume of noncellulosic material such as laminates, binders,
coatings or saturants.
10. "Paper product" means paper items or commodities, including paper
napkins, towels, corrugated paper and related types of cellulosic
products containing not more than ten per cent by weight or volume of
noncellulosic material such as laminates, binders, coatings or
saturates.
11. "Post-consumer material" means a discard generated by a business or
residence that has fulfilled its useful life. Post-consumer material
does not include discards from industrial or manufacturing processes.
12. "Purchase description" means the words used in a solicitation to
describe the materials, services or construction for purchase and
includes specifications attached to, or made a part of, the
solicitation.
13. "Recycled paper" means paper products which have been manufactured
from materials otherwise destined for the waste stream and which
contain at least forty per cent recovered wastepaper with ten per cent
of that being post-consumer material.
14. "Request for information" means all documents issued to vendors for
the sole purpose of seeking information about the availability in the
commercial marketplace of materials or services.
Page 23
15. "Request for proposals" means all documents, whether attached or
incorporated by reference, which are used for soliciting proposals in
accordance with procedures prescribed in section 41-2534.
16. "Responsible bidder or offeror" means a person who has the capability
to perform the contract requirements and the integrity and reliability
which will assure good faith performance. IN THE CASE OF ESSENTIAL
GOODS AND SERVICES, RESPONSIBLE BIDDER OR OFFEROR SHALL, IN ADDITION,
MEAN A PERSON WHOSE OFFER MEETS MINIMAL SPECIFIED STANDARDS FOR
QUALITY OF THE GOOD OR SERVICE, WHO DEMONSTRATES PROVEN RELIABILITY
FOR DELIVERY, WHO OFFERS APPROPRIATE WARRANTIES, GUARANTIES AND RETURN
POLICIES, AS APPLICABLE, WHO POSSESSES RELEVANT INDUSTRY AND PROGRAM
EXPERIENCE. IN THE CASE OF ELECTRIC CONTRACTS, RESPONSIBLE BIDDER OR
OFFEROR MEANS AN ENTERPRISE WHICH CAN DEMONSTRATE THAT IT POSSESSES OR
CONTROLS THE REQUIRED RESOURCES TO PERFORM ITS OBLIGATIONS FOR THE
TERM OF THE COMMITMENT.
17. "Responsive bidder or offeror" means a person who submits a bid which
conforms in all material respects to the invitation for bids or
request for proposals.
18. "Unsolicited proposal" means a written proposal that is submitted on
the initiative of the offeror for the purposes of obtaining a contract
with this state and which is not in response to a formal or informal
request from this state.
19. "Wastepaper" means recyclable paper and paperboard, including high
grade office paper, computer paper, fine paper, bond paper, offset
paper, xerographic paper, duplicator paper and corrugated paper.
Section ___. Section 41-2534, Arizona Revised Statutes is amended to read:
41-2534 Competitive sealed proposals
A. If, under regulations promulgated pursuant to this chapter, the
director determines in writing that the use of competitive sealed
bidding is either not practicable or not advantageous to this state, a
contract may be entered into by competitive sealed proposals. The
director may provide by regulation that it is either not practicable
or not advantageous to this state to procure specified types of
materials or services by competitive sealed bidding, except that the
competitive sealed proposal method may not be used for construction
contracts. COMPETITIVE SEALED PROPOSALS SHALL NOT BE REQUIRED FOR THE
PURCHASE OF ESSENTIAL GOODS AND SERVICES.
B. Proposals shall be solicited through a request for proposals.
C. Adequate public notice of the request for proposals shall be given in
the same manner as provided in section 41-2533.
D. Proposals shall be opened publicly at the time and place designated in
the request for proposals. The name of each offeror and
NONCONFIDENTIAL relevant information as is specified by regulation
shall be publicly read and recorded in accordance with regulations
promulgated by the director. All other information contained in the
proposals shall be confidential so as to avoid disclosure of contents
prejudicial to competing offerors during the process of negotiation
AND
Page24
SO AS TO PREVENT DISCLOSURE OF TRADE SECRETS OR OTHER PROPRIETARY
INFORMATION. The proposals shall be open for public inspection after
contract award. Except to the extent the bidder designates and the
state concurs, trade secrets or other proprietary data contained in
the bid documents shall remain confidential in accordance with
regulations promulgated by the director. ANY PERSON WHO IMPROPERLY
DISCLOSES CONFIDENTIAL INFORMATION PROVIDED BY COMPETING OFFERORS
SHALL BE SUBJECT TO A CIVIL FINE OF UP TO $10,000 FOR EACH IMPROPER
DISCLOSURE.
E. The request for proposals shall state the relative importance of price
and other evaluation factors. Specific numerical weighting is not
required.
F. As provided in the request for proposals, and under regulations
promulgated by the director, discussions may be conducted with
responsible offerors who submit proposals determined to be reasonably
susceptible to being selected for award for the purpose of
clarification to assure full understanding of, and responsiveness to,
the solicitation requirements. Offerors shall be accorded fair
treatment with respect to any opportunity for discussion and revision
of proposals, and such revisions may be permitted after submissions
and before award for the purpose of obtaining best and final offers.
In conducting discussions, there shall be no disclosure of any
information derived from proposals submitted by competing offerors.
G. The award shall be made to the responsible offeror whose proposal is
determined in writing to be the most advantageous to this state taking
into consideration the evaluation factors set forth in the request for
proposals, WHICH MAY INCLUDE PRICE OR OTHER VALUE-RELATED TERMS AND
CONDITIONS WHICH, IN THE DIRECTOR'S DISCRETION, PROVIDE AN ADVANTAGE
TO THE STATE. No other factors or criteria may be used in the
evaluation. The amount of any applicable transaction privilege or use
tax of a political subdivision of this state is not a factor in
determining the most advantageous proposal if a competing offeror
located outside this state is not subject to a transaction privilege
or use tax of a political subdivision of this state. The contract file
shall contain the basis on which the award is made.
Section ___. Section 41-2537, Arizona Revised Statutes is amended to read:
41-2537 Emergency procurements
Notwithstanding any other provision of this chapter, the director may make
or authorize others to make emergency procurements if there exists a
threat to public health, welfare, or safety or if a situation exists
which makes compliance with section 41-2533 or 41-2534 impracticable,
unnecessary or contrary to the public interest as defined in
regulations promulgated by the director, except that such emergency
procurements shall be made with such competition as is practicable
under the circumstances. AN IMMINENT LOSS OR SHORTAGE OF ELECTRIC
POWER SHALL CONSTITUTE AN EMERGENCY PERMITTING PURCHASES OUTSIDE OF
THE REQUEST FOR PROPOSALS PROCESS. PREFERENCE SHALL BE GIVEN TO THE
CURRENT ELECTRIC POWER SUPPLIER TO PROVIDE SUCH ELECTRIC POWER AS
SHALL BE
Page 25
NECESSARY TO SATISFY THE EMERGENCY NEED. A written determination of
the basis for the emergency and for the selection of the particular
contractor shall be included in the contract file.
Section ___. Section 41-2541, Arizona Revised Statutes is amended to read:
41-2541 Prequalification of contractors
Prospective contractors may be prequalified for particular types of
materials, services and construction. Prospective contractors of
essential goods and services shall be prequalified and must be so in
order to participate in requests for proposals for electric service.
In the case of electric service, prequalification shall include, at a
minimum, a demonstration of the contractor's resources that support
its commitment to serve electricity, including plant and
transmission/distribution rights and proof that it holds all licenses
and authorizations to serve the state or the agency concerned.
Prospective contractors have a continuing duty to provide the director
with information on any material change affecting the basis of
prequalification. Solicitation mailing lists of potential contractors
shall include the prequalified contractors. Only those prospective
contractors of essential goods and services who are prequalified will
be included on the solicitation mailing list for essential goods and
services.
Section ___. Section 41-2546, Arizona Revised Statutes is amended to read:
41-2546 Multi-term contracts
A. Unless otherwise provided by law, a contract for materials or services
may be entered into for a period of time up to five years, as deemed
to be in the best interest of this state, if the term of the contract
and conditions of renewal or extension, if any, are included in the
solicitation and monies are available for the first fiscal period at
the time of contracting. A contract may be entered into for a period
of time exceeding five years if, under regulations promulgated
pursuant to this chapter, the director determines in writing that such
a contract would be advantageous to this state. IN THE CASE OF
ESSENTIAL GOODS AND SERVICES, IT IS PRESUMPTIVELY ADVANTAGEOUS TO THE
STATE TO ENTER INTO CONTRACTS EXCEEDING FIVE YEARS IN ORDER TO TAKE
ADVANTAGE OF ECONOMIES OFFERED UNDER SUCH LONG-TERM CONTRACTS AND TO
ENSURE UNINTERRUPTED AVAILABILITY OF ESSENTIAL GOODS AND SERVICES.
Payment and performance obligations for succeeding fiscal periods are
subject to the availability and appropriation of monies, EXCEPT AS
OTHERWISE AGREED IN CONTRACTS FOR ESSENTIAL GOODS AND SERVICES.
B. Before the use of a multi-term contract, it shall be determined in
writing that: 1. Estimated requirements cover the period of the
contract and are reasonable and continuing. 2. Such a contract will
serve the best interests of this state by encouraging effective
competition or otherwise promoting economies in state procurement.
C. If monies are not appropriated or otherwise made available to support
continuation of performance in a subsequent fiscal period, the
contract shall be canceled and the contractor may only be reimbursed
for the reasonable value of any nonrecurring
Page 26
costs incurred but not amortized in the price of the materials or
services delivered under the contract or which are otherwise not
recoverable. The cost of cancellation may be paid from any
appropriations available for such purposes.
Reference: Senate Commerce and Economic Development Committee Amendment
Page 15
Strike lines 27 through 28
Line 15 strike "JUNE 30", replace with "DECEMBER 31"
Page 16
Strike lines 5 and 6
Page 17
Line 27 strike "JUNE 30", replace with "DECEMBER 31"
Strike line 29
Strike line 33
Page 27
Exhibit Four
Stranded costs would be measured during concurrent applicable periods, in no
event ending later than December 31, 2006, for the respective utilities
("Transition Period") by comparing the respective utilities' actual and
reasonable generation and generation-related costs including purchased power,
cost of capital, and all mitigation costs during this period, and actual market
prices for the preceding year using a four-step process.
STEP 1
------
Market prices will be determined by reference to the California PX
market (or some comparable market index). If the California PX price is
used it will be adjusted for transmission wheeling, administrative and
other applicable charges, and transmission losses in an attempt to
determine the hourly market price at Palo Verde. The respective
utilities will apply the same market index in determining any
applicable stranded cost charges.
STEP 2
------
Actual hourly system loads will be multiplied by hourly market prices
from Step 1 to determine hourly revenues which could have been produced
if the utilities were to sell their power supply in the competitive
market. Summation of these hourly dollar values will produce annual
revenues.
STEP 3
------
The utilities will determine their actual and reasonable generation and
generation-related costs including purchased power, cost of capital and
all mitigation costs, from relevant financial and accounting data.
STEP 4
------
If the amount of the utilities' costs (Step 3) is greater than the
utilities' calculated retail market revenues (Step 2), the difference
will then be allocated among the respective utilities' rate classes,
using traditional cost allocation and rate design principles, and will
be charged to all customers on a demand and/or energy basis, depending
upon the customer's class. Such recovery will occur over a concurrent
period for the respective utilities, in no event to end later than
2006.
For purposes of this calculation, "stranded costs" will include only those
prudent, verifiable and unmitigated costs as defined by each party.
SRP will propose and support before its Board of Directors the stranded cost
methodology as set forth in this Exhibit.
Page 28
APS will propose and support before the Arizona Corporation Commission the
stranded cost methodology as set forth in this Exhibit, except that APS will not
count regulatory assets recovered under existing ACC orders.
Page 29
