Parker-Davis ProjectFES 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 www.wapa.gov/dsw/pwrmkt 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 Western’s 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 Contractor’s status as a customer changes in some manner,…”

Term “Adjust” viewed as putting allocation at risk

Prefer CRSP Contract language “…the Contractor’s 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, Western’s Administrator reserves the right to conform Western’s firm electric service obligations under this contract as he or she deems reasonably appropriate if the Contractor’s 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 – 2nd 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 www.wapa.gov/dsw/pwrmkt 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.