Parker-Davis Project FES Contract Amendment January 16, 2004

Purpose & Expectations Purpose: To discuss customer comments in response to the December 22, 2003 prototype contract revision. Expectation: To finalize contract language for the Parker-Davis Project Firm Electric Service contract extension amendment.

Comments Received to Date Colorado River Commission (CRC) Fredonia Mohave Electric Cooperative Salt River Project Town of Thatcher Arizona Electric Power Cooperative

Comments & Responses Check the Power Marketing Website at for: Customer comment letters Response to comments Prototype contract For those who do not have internet access, Western will fax comments and responses upon request.

General Principles The FES Contract does not amend or modify the Generation AOF Contract and visa versa Important to FES Contractors that the FES Contract Extension Amendment not be construed as modifying the Generation AOF Important to Western that the Generation AOF Contract not be construed as superseding or modifying the FES Contract Western has agreed to the provisions of the Generation AOF Contract by becoming a party thereto Western will not make repeated references to the Generation AOF Contract in the FES Contract

General Principles As a Federal Power Marketing Administration, Western conducts business in accordance with Federal resource power marketing laws, rules, regulations and principles It is not necessary to repeat this language in the FES Contract

Exhibits Deleted the phrase or Exhibit A-1, as the case may be Inserted a universal provision at section 15 to make clear that On and after October 1, 2008, all references to Exhibit A shall be deemed to refer to Exhibit A-1

General Power Contract Provisions Deleted the phrase as they may apply Begs the question and does not add clarity Inserted language to make facilities provisions inapplicable Articles 20 through 30 shall not apply…

Replacement Advances Reconciliation Surcharge The FES contract cites the Generation AOF Contract as the source for the Surcharge requirement As signified by Westerns signature on the Generation AOF Contract, the surcharge will be calculated as set forth in the Generation AOF Contract. In the FES Contract, the surcharge is implemented by Western only, not the new or existing FES Contractor Thus the language As determined by Western

Transfer of Interest in Contract – Customer Concerns Language is too broad …if the Contractors status as a customer changes in some manner,… Term Adjust viewed as putting allocation at risk Prefer CRSP Contract language …the Contractors obligation to supply electricity to preference entity loads changes as a result… Ensure ability to adapt to contractual changes in organization membership status

Transfer of Interest in Contract – Western Concerns Preserve preference principles Retain ability to make changes as reasonably necessary and appropriate

Transfer of Interest in Contract Deleted reference to …status as a customer… Inserted …obligation to supply electricity to preference entity loads… Inserted reasonably Replaced Adjust with conform Inserted reference to contractual changes in membership based organizations

Transfer of Interest in Contract - Language Notwithstanding any other provision of the contract to the contrary, Westerns Administrator reserves the right to conform Westerns firm electric service obligations under this contract as he or she deems reasonably appropriate if the Contractors obligation to supply electricity to preference entity loads changes in some manner as a result of the following, including but not limited to: (1) merger with another organization, (2) acquisition of or being acquired by another organization, (3) creating a new organizational entity from an existing one, (4) joining or withdrawing from, or contractually restructuring its membership in, a member-based power supply organization, or (5) if the Contractor is a member-based power supply entity (such as a generation and transmission cooperative), losing or altering its contractual relationship with one or more members from its membership organization.

Contingent upon Authorization Deleted GPCP language referring to Congressional Appropriations is sufficient in the context of this electric service contract

Excess Energy Comments agreed with deleting excess energy language from FES Contract Western will continue to provide excess energy, as we do today, in accordance with existing contract provisions

Integrated Resource Exchange Program No Change Will continue to operate In accordance with existing contract provisions

Term of Contract; Effective Dates Section 14.1 Section 6 of this Amendment shall become effective October 1, 2004, except that subsection 6.2 shall operate as of September 1, 2004, for purposes of billing referenced therein.

Other Comments Concern over cost increases Western is sensitive to cost increase concerns & welcomes customer input and suggestions GPCP Revisions July 10, 1998 version will be attached to the P-DP Contract Amendment Contract provisions control in the event of conflict

Timeline Review October 1, 2003 – Customer Meeting November 4, 2003 – Customer Meeting December 22, 2003 – 2 nd Prototype January 16, 2004 – Customer Meeting

Next Steps Comments, if any, due to Western by close of business January 23, 2004 Western will send out individual contract offer on January 28, 2004 Contractors sign and return Contract Amendment by March 31, 2004

Comments & Responses Posted on the Power Marketing Website at for: Customer comment letters Responses to comments Prototype contract For those who do not have internet access, Western will fax comments and responses upon request.