Salt River Project 2009 Annual Report

1. Salt River Project 2009 Annual Report Dan Casiraro January 25, 2011

4. FY09 Operating Stats and Sustainable Portfolio FY09 Operating Statistics • Electric Customers, year-end 933,771 • Electric Service Area (sq. mi.) 2,900 • Peak – Power System (MW) 6,410 • Resources Available to Serve Peak (MW) 7,860 • Total Electric Sales (GWh) 33,064 • Water Service Area (sq. mi.) 375 • Watershed (sq. mi.) 13,000 • Water Deliveries (af) 854,093 • Water Storage Capacity (af) 2,328,021 • Water in Storage, year-end (af) 1,388,759 FY09 Sustainable Portfolio • Energy Efficiency 18.8% • Fuel Cell 0.1% • Hydropower 58.3% • Solar 0.4% • Wind 3.3% • Biomass 3.5% • Landfill Gas 1% • Miscellaneous 6.6% • Geothermal 7.9%

5. Organizational Environmental PoliciesSRP Environmental Policy SRP, the nation's oldest multipurpose reclamation project, was founded on the principles of resource stewardship. We strive to preserve the balance between serving growing customer needs and protecting natural resources. We do this by incorporating the following principles into our business practices: • Environmental stewardship As an historical and integral part of central Arizona, SRP recognizes its responsibility to respond to environmental challenges associated with supplying water and power services to a growing customer base. SRP will pursue opportunities to preserve the quality of the natural environment while maintaining the community's quality of life. • Compliance SRP is committed to complying with environmental laws and regulations. We do this through comprehensive compliance programs and self-evaluation of our facilities and operations. SRP provides employee training and communications to promote awareness of employees' individual roles and accountability for operational effects on the environment

6. Environmental Policy – cont. • Good business practices SRP recognizes that environmental protection, resource conservation and pollution prevention are sound business practices and add value to the services we provide. The efficient use of energy and water resources is encouraged by promoting customer awareness and supporting research in alternative energies, environmental controls and water management techniques. • Public partnerships SRP is committed to working in partnership with the public, elected officials, federal, tribal and state agencies and other concerned parties on issues related to the Project's operations and protection of the environment. SRP advocates a balanced integration of sound science, customer values and resource preservation as a foundation for addressing emerging issues and creating environmental policy and strategies. • Recognition SRP has been honored for its innovative programs. M-Power, the largest electricity pre-payment program in the country, won the first-place award for energy efficiency from the National Energy Resources Organization (NERO) in June 2008.

7. Organizational Environmental PoliciesSRP Sustainable Principles • SRP continually evaluates ways to expand our use of environmentally sensitive supply and demand-side options, explore additional ways to displace the use of fossil fuels, and provide opportunities for the introduction of new technologies and ideas. SRP does this by implementing eight key sustainable portfolio principles: Principle 1 – Sustainable Resources: SRP will evaluate and implement supply- and demand-side measures that reduce the use of traditional fossil fuels. Principle 2 – Complementary Goals: SRP’s sustainability portfolio goals will produce the maximum sustainable energy benefit for the lowest reasonable cost to SRP’s customers.

8. Sustainable Principles - continued Principle 3 – Resource Planning: During the annual resource planning process, SRP seeks to achieve a balance between owned resources, purchased resources, and conservation/energy-efficiency measures, with preference given to the most cost-effective option. Principle 4 – Outreach: SRP collaborates with customers, as well as public and private entities, to develop and expand the use of sustainable energy technologies. Principle 5 – Encourage Innovation: SRP actively encourages and recognizes the development and use of sustainable energy technologies. Principle 6 – Annual Report: SRP publishes an annual report that documents the current actual and future potential performance of our sustainability portfolio.

9. Sustainable Principles - continued Principle 7 – Compliance: All sustainable resource options adopted will comply with SRP’s current purchasing policies, pricing policies and competitive procurement principles. Principle 8 – Flexibility: SRP may revise these principles as necessary to ensure the principles remain in the best interests of SRP and our customers.

10. Conservation & Pollution PreventionWater Banking • SRP in partnership with Valley cities, operates and maintains two water recharge projects that store water underground for drought protection and groundwater (GW) replenishment and two GW savings facilities that store surface water instead of pumping GW. • Underground projects: - Granite Reef - approx. 1 million acre feet of water stored - New River/Agua Fria – approx. 43,000 acre feet stored • Groundwater savings: - SRP – 500,00 acre feet of water - Pinal County – 20,000 acre feet of water

11. Conservation and Pollution PreventionReclamation/Recycling • SRP is committed to recycling and reclaiming as many materials and potential assets as possible and highly encourages its employees to do so as well. • SRP reclaimed: - 7,155 tons of copper, aluminum, and steel - 1,500 distribution transformers • SRP recycled: - 150 tons of electrical meters, streetlight poles & luminaries - 7,500 railroad ties - 116 tons of electrical line hardware - 480,812 tons of fly ash from coal combustion - 261,040 tons of paper

12. Education & MentoringPowering our Future • SRP’s renewable energy curriculum offers educational materials modules designed for grade levels 4-12. All modules address state academic standards in science, social studies, math, and language arts. - Provided educational materials to 500 teachers - Trained 140 teachers - Awarded 51 mini-grants to teachers using curriculum to purchase hands-on materials.

13. Education & MentoringArizona Rinse Smart • SRP distributed low-water use, high-pressure pre-rinse spray nozzles free to customers for use in their commercial kitchens. The spray nozzles reduce hot water consumption, saving water and energy. - 116 nozzles distributed in 2009 - 2,100 total nozzles distributed since 2006 - 19 million gallons – annual estimated water savings - 1,100 MWh – annual estimated energy savings

14. Partnerships & Affiliations • • Alliance to Save Energy • • American Council on Renewable Energy • • American Public Power Association • • American Water Works Association • • Arizona Businesses Advancing Sustainability • • Arizona Environmental Strategic Alliance • • Association of Energy Services Professionals • • Audubon Arizona • • Colorado River Water Users Association • • Consortium for Energy Efficiency • • Electric Power Research Institute • • EPA WaterSense • • E Source • • Generators for Clean Air • • Green-e • • Large Public Power Council • • National Water Resources Association • • The Climate Registry • • The Nature Conservancy • • Valley Forward • • WEST Associates • • Western Climate Initiative • • Western Energy Institute

15. Adverse Environmental ItemsNotices of Violation (NOVs) • Kyrene Generating Station – NOV issued for NOx startup emission limitation exceedance (entered into Order of Abatement on Consent (OAC) with Maricopa County and paid a $3,838 penalty). • Construction site 1- two NOVs issued for failing to adequately stabilize unpaved parking area and failure to implement control measures on unpaved areas at the site (entered into OAC with Maricopa County and paid a $1,170 penalty). • Construction Site 2 – NOV issued for failure to adequately stabilize a haul/access road (entered into OAC with Maricopa County and paid a $1,866 penalty).