Addendum to Memorandum of Agrement
This Addendum is to the Memorandum of Agreement effective, April 25,
1998 (hereafter "Memorandum"), between Arizona Public Service Company and Salt
River Project Agricultural Improvement and Power District (hereinafter "the
parties"). By signing this Addendum to Memorandum of Agreement (hereafter
"Addendum") the parties intend to change certain provisions in the Memorandum
and to bind themselves to certain additional obligations in the event their
respective governing boards approve the Memorandum.
By signing this Addendum the parties intend to clarify a number of
provisions in the original Memorandum for the express purpose of eliminating any
interpretation of the Memorandum that could be construed as permittimg
anticompetitive or unlawful conduct, or as being inconsistent with the policy of
the Arizona State Legislature and Arizona Corporation Commission, that there be
competition in certain aspects of the electric utility business as provided by
law.
RECITALS
These facts form the basis of this Addendum:
1. The parties entered into the Memorandum effective April 25, 1998;
2. At the time the Memorandum was executed the Arizona Corporation Commission,
within the scope of its jurisdiction, had declared that it is the policy of this
State that there be competition in certain aspects of the electric utility
business(1), and the Arizona State Legislature was considering a bill to declare
a similar statewide policy;
3. The Arizona Attorney General has raised certain issues involving potential
anticompetitive effects from possible interpretations of certain language in the
Memorandum;
4. The parties do not intend the Memorandum to limit competition in any aspect
of the electric utility business in which the parties are authorized by law to
compete, or in which they choose to compete;
5. The parties do not intend by the incorporation of any part of the 1955
Territorial Agreement, or the Power Coordination Agreement, to continue the
allocation of geographic territories or customer classes with respect to any
aspect of the electric utility business subject to competition;
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(1) The terms "electric utility business" and "electric services" are used
interchangeably in this Addendum, and are intended to mean all aspects of the
business of the parties.
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6. The parties do not intend by the words "operational opportunities" of mutual
benefit to mean the pursuit of any opportunity that would be anticompetitive or
unlawful in any aspect of the electric utility business that is subject to
competition, as of the date of the Memorandum and thereafter;
7. The parties understand that their electric utility business activities that
are not actively regulated are subject to state and federal antitrust law.
ADDENDUM AGREEMENT
Now, therefore, the parties agree as follows.
1. Amendment of Territorial Agreement(2).
The parties hereby repudiate any aspect, language or interpretation of
the 1955 Territorial Agreement that would permit any of the following:
a. The allocation or division of customers or geographic territories as
between the parties regarding non-distribution electric services that are
subject to competion;
b. Any collaborative decision to fix, maintain or stabilize the price
of electric services subject to competition;
2. Amendment of the Power Coordination Agreement
a. The parties agree that the Power Coordination Agreement shall not be
interpreted or performed by the parties in any manner inconsistent with
paragraph 1;
b. The parties agree that nothing in the Power Coordination Agreement
shall permit either to discriminate in access to transmission or distribution
systems against any competitive provider of electric services, in a manner
prohibited by applicable federal and state statute or regulatory requirements.
3. Identification of future savings.
a. The parties agree that paragraph 3 of the Memorandum shall not
permit them to jointly
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(2) Paragraph references in this Addendum refer to the same numbered paragraphs
in the Memorandum, except that the sub-parts of paragraph 1., 2. and 3. are
added by this Addendum.
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make any determination that would fix, maintain or stabilize any price of
electric services subject to competition;
b. The parties agree that paragraph 3 of the Memorandum shall not be
interpreted or performed by the parties in a manner inconsistent with paragraphs
1. and 2. of this Addendum;
c. The parties further agree that their senior executives shall not, in
any meetings to discuss joint business issues, enter into discussions concerning
the price or allocation of territories or customers of any electric service
subject to competition.
5. State Political Issues
a.- i. The parties agree that nothing contained in paragraphs a. - i.
will be construed by them to prevent each from advertising, marketing, and
promoting itself by comparison to the other in terms of price or efficiency in
connection with any aspect of the electric utility business subject to
competition;
d. The parties agree that nothing contained in paragraph 5.d. shall
require that APS disclose any stranded cost or regulatory asset numbers which
are not otherwise publicly available. The parties further agree that paragraph
5.d. shall not require any conformation of bills or billing format, other than
the general obligation that APS disclose the fact that regulatory assets are
recovered as part of its distribution bill;
f. The parties agree that each party will determine independently which
stranded cost calculation and recovery methodology to present to their
respective governing authorities. Such calculation and recovery methodology
shall be determined according to the procedures established by State law or
Arizona Corporation Commission Rule, whichever applies, and shall be in
accordance with federal and state antitrust law, notwithstanding any provision
in the Memorandum to the contrary.
6. Federal Political Issues
a.-g. The parties agree that nothing contained in paragraphs a.-g. will
be construed by them to prevent each from advertising, marketing and promoting
itself by comparison to the other in connection with any aspect of the electric
utility businesss that is subject to competition.
d. The parties agree that by paragraph 6.d. they do not intend to set
up any discriminatory auditing system, entity or mechanism to resolve
transmission system constraints that is not in compliance with applicable
federal and state regulatory or statutory requirements.
7. Transmission and Distribution Prices and Terms
The parties agree that paragraph 7 obligates them to allow access to
their respective
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electric power transmission and distribution facilities to all bona
fide competitors, including, but not limited to each other, under rates
and terms and conditions of service that are nondiscriminatory,
cost-based, just and reasonable and comparable to those charged by
themselves for their own use in accordance with applicable regulatory
or statutory "open access" rules.
10. Miscellaneous Provisions
d. No provision of the Memorandum, the 1955 Territorial Agreement or the 1955
Power Coordination Agreement, shall be binding on any party, successor, assign,
subsidiary or affiliate if a court of competent jurisdiction determines in a
preliminary order or final judgment that the provision violates any antitrust
law.
AGREED TO AS OF May 19, 1998
APS
ARIZONA PUBLIC SERVICE COMPANY
By William J. Post
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William J. Post
Chief Executive Officer
Date 5/19/98
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SRP
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
By Richard H. Silverman
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Richard H. Silverman
General Manager
Date 5/19/98
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