Exhibit 10.1
MUNICIPAL EFFLUENT PURCHASE AND SALE AGREEMENT
This MUNICIPAL EFFLUENT PURCHASE AND SALE AGREEMENT (this “Agreement”) is
entered by and between City of Phoenix (“Phoenix”), City of Mesa, City of Tempe,
City of Scottsdale, and City of Glendale, Arizona municipal corporations
(collectively the “Subregional Operating Group” and hereinafter referred to as
the “SROG Cities” and individually as a “SROG City”); and Arizona Public Service
Company, an Arizona corporation (“APS”), and Salt River Project Agricultural
Improvement and Power District, an Arizona municipal corporation and
agricultural improvement district (“SRP”), acting on behalf of themselves and El
Paso Electric Company, a Texas corporation, Southern California Edison Company,
a California corporation, Public Service Company of New Mexico, a New Mexico
corporation, Southern California Public Power Authority, a California joint
powers authority, and the Los Angeles Department of Water & Power, a municipal
utility (hereinafter collectively referred to as the “Palo Verde Participants”
and individually as a “Palo Verde Participant”). The SROG Cities and APS and SRP
are sometimes individually referred to in this Agreement as a “Party” and
collectively as the “Parties.”
RECITALS

A.  
WHEREAS, on April 23, 1973, the SROG Cities, along with the Town of Youngtown,
and APS and SRP entered into that certain “Option and Purchase of Effluent
Agreement” referred to as “Agreement No. 13904” under which, among other things,
the municipalities agreed to sell and deliver treated wastewater discharged from
the 91st Avenue wastewater treatment plant (“Effluent”), a municipal wastewater
treatment plant jointly owned by the SROG Cities (the “91st Avenue WWTP”) and
operated and maintained by Phoenix in its own behalf and as administrative agent
for the other SROG Cities, for cooling use at the Palo Verde Nuclear Generating
Station (“PVNGS”) operated and maintained by APS in its own behalf and as
administrative agent for the other Palo Verde Participants;

B.  
WHEREAS, on April 17, 1989, in Arizona Public Service Co. v. Long, 160 Ariz. 429
(1989), the Supreme Court of Arizona held, among other things, that municipal
sewage effluent is neither surface water nor groundwater; it is water that loses
its original character as surface water or groundwater, does not reestablish its
legal character until it is returned to the ground as either surface water or
groundwater, and prior to such return of effluent to the ground as either
surface water or groundwater, the municipalities creating it are free to
contract for the disposition of said effluent;

C.  
WHEREAS, the Effluent purchased and sold in accordance with the terms and
conditions of this Agreement is intended by the Parties to meet the legal
standards set forth in Arizona Public Service Co. v. Long regarding the SROG
Cities’ disposition of effluent;

D.  
WHEREAS, pursuant to the terms of Agreement No. 13904, the SROG Cities are
committed to make available to the Palo Verde Participants up to 105,000
acre-feet of Effluent per year through June 1, 2025, 70,000 acre-feet of
Effluent per year through April 24, 2026, and 35,000 acre-feet of Effluent per
year through November 25, 2027, after which time Agreement No. 13904 would
terminate;

 

 

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E.  
WHEREAS, on December 11, 2008, APS, acting in its capacity as operating agent of
PVNGS, submitted to the United States Nuclear Regulatory Commission three
operating license renewal applications, which, if granted, will allow each of
the three units at PVNGS to operate for an additional 20 years beyond the
current license termination dates, thereby potentially extending the operating
life of PVNGS through 2047;

F.  
WHEREAS, as a result of these PVNGS operating license extensions, the Palo Verde
Participants desire to secure the right to continue purchasing and receiving
Effluent from the SROG Cities through 2050;

G.  
WHEREAS, the Palo Verde Participants have determined that less than the entire
105,000 acre-foot quantity of Effluent the SROG Cities are committed to provide
each year under Agreement No. 13904 is required to operate PVNGS at full
capacity and, therefore, desire to reduce this quantity by 25,000 acre-feet per
year;

H.  
WHEREAS, the SROG Cities desire to continue selling Effluent for beneficial use
at PVNGS and any other electric generating facilities located within 10 miles of
PVNGS pursuant to the terms and conditions contained in this Agreement;

I.  
WHEREAS, the extended sale and purchase of Effluent through 2050 will ensure the
continued beneficial use of a renewable water source for power generation
purposes while reducing the demand for non-renewable water supplies;

J.  
WHEREAS, this Agreement is intended to replace Agreement No. 13904, which will
be of no further force and effect upon the Effective Date (defined in Section 2,
below) of this Agreement; and

K.  
WHEREAS, APS and SRP are entering into this Agreement on their own behalf and on
behalf of the other Palo Verde Participants pursuant to authorizations conferred
on APS and SRP under that certain Arizona Nuclear Power Project Participation
Agreement effective September 4, 1973, as such agreement is amended from time to
time (the “ANPP Participation Agreement”).

AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, terms, and conditions
contained in this Agreement, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by the Parties, the
Parties agree as follows:

1.  
Ownership Changes.

  1.1.  
As to the Palo Verde Participants. Any person, partnership, corporation, or
governmental body or agency (each, a “Person”) engaged in the generation,
transmission, or distribution of energy that, after the Effective Date, becomes
a Participant in PVNGS pursuant to Section 15 of the ANPP Participation
Agreement shall be a Palo Verde Participant under this Agreement.

 

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  1.2.  
As to the SROG Cities. Any municipal corporation that, after the Effective Date,
becomes the holder of an ownership interest in the 91st Avenue WWTP shall be a
SROG City under this Agreement.

2.  
Term and Termination Date. This Agreement shall become effective on the date on
which this Agreement has been approved by the governing bodies of all of the
Parties and is signed by all of the Parties (the “Effective Date”), and shall
terminate on December 31, 2050, unless extended by mutual agreement of the
Parties pursuant to Section 14, below.

3.  
Effluent Deliveries; Quantity; Relinquishment.

  3.1.  
Delivery Points. Throughout the term of this Agreement and in accordance with
Section 3.2, below, Phoenix shall deliver up to 80,000 acre-feet of Effluent
annually (the “Committed Quantity”) to the delivery points (the “Delivery
Points”) interconnecting the 91st Avenue WWTP with the PVNGS water reclamation
supply system pipeline (the “WRSS Pipeline”) for transport to the PVNGS Water
Reclamation Facility (the “PVNGS WRF”), which Delivery Points are depicted on
Exhibit “A” attached to this Agreement. APS and Phoenix may from time to time,
by mutual written agreement, designate additional points of delivery for the
purpose of delivering Effluent to the WRSS Pipeline. Upon such designation, the
new point of delivery shall become a Delivery Point under this Agreement.
    3.2.  
Monthly Delivery Quantities.

  3.2.1.  
Subject to Section 3.3, below, throughout the term of this Agreement, in each of
the months from January through April and October through December, Phoenix
shall make available for delivery to PVNGS up to 7,000 acre-feet of Effluent.

  3.2.2.  
Subject to Section 3.3, below, throughout the term of this Agreement, in each of
the months from May through September, Phoenix shall make available for delivery
to PVNGS up to 8,000 acre-feet of Effluent.

  3.3.  
Annual Delivery Quantities. Subject to Sections 3.5 and 7.2, below, Phoenix
shall not be required to deliver more than the Committed Quantity of Effluent
each calendar year under this Agreement.
    3.4.  
Relinquishment of Portion of Committed Quantity.

  3.4.1.  
The Palo Verde Participants may, upon six months’ prior written notice to
Phoenix, which notice shall be given in accordance with the requirements of
Section 28.3, below (the “Relinquishment Notice”), permanently relinquish a
portion of the Committed Quantity. The Relinquishment Notice shall identify the
quantity of Effluent the Palo Verde Participants desire to relinquish (the
“Relinquished Quantity”) and the date on which the relinquishment shall become
effective (the “Relinquishment Date”).

 

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Unless otherwise agreed to in writing by the SROG Cities, as of the date of the
Relinquishment Notice, neither the Relinquished Quantity nor Relinquishment Date
may be subsequently modified by the Palo Verde Participants, nor may the Palo
Verde Participants rescind the relinquishment described in the Relinquishment
Notice. Upon the Relinquishment Date, the Relinquished Quantity shall be
deducted from the Committed Quantity in effect as of the date of the
Relinquishment Notice, and the difference shall become the new Committed
Quantity under this Agreement unless and until later modified pursuant to this
Section 3.4.1.

  3.4.2.  
Unless otherwise agreed to by the Parties, modifications to the Committed
Quantity pursuant to this Section 3.4 shall not affect the monthly delivery
requirements set forth in Section 3.2, above.

  3.4.3.  
As of the Relinquishment Date, the Relinquished Quantity of Effluent shall be
available for the SROG Cities’ use, sale, or other disposition.

  3.5.  
Substantial Change in Conditions. Section 3.4, above, notwithstanding, and
subject to availability as reasonably in good faith determined and authorized by
the SROG Cities, the Palo Verde Participants shall have the right to the
delivery of additional quantities of Effluent for use consistent with the terms
of this Agreement if certain conditions substantially change at PVNGS resulting
in the need for additional Effluent. The additional quantities of Effluent
resulting from substantially changed conditions pursuant to this Section 3.5
shall not be greater than 8,000 acre-feet per year during the term of this
Agreement. The Per Acre-Foot Price (defined in Section 4.2, below) of any
additional Effluent purchased by the Palo Verde Participants pursuant to this
Section 3.5 shall be:

  3.5.1.  
For calendar years 2010 through 2025, the Per Acre-Foot Price determined in
accordance with Section 4.2.1, below;

  3.5.2.  
For calendar years 2026 through 2050, the fourth tier Per Acre-Foot Price
determined in accordance with Section 4.2.2, below.

4.  
Price. In consideration of the sale and delivery of Effluent from the SROG
Cities throughout the term of this Agreement and the other services provided by
the SROG Cities pursuant to this Agreement, the Palo Verde Participants shall
make payments to Phoenix, on behalf of the SROG Cities, in the manner and as
determined pursuant to this Section 4.

  4.1.  
Water Supply Payments. The Palo Verde Participants shall pay Phoenix, on behalf
of the SROG Cities, four lump-sum payments of 7.5 million dollars each (“Water
Supply Payments”), which Water Supply Payments shall total 30 million dollars.
The Palo Verde Participants shall pay the Water Supply Payments in accordance
with the following schedule:

 

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  4.1.1.  
Within 30 days after the Effective Date, 7.5 million dollars;

  4.1.2.  
7.5 million dollars by January 31 of each of the years 2011 through 2013;

  4.1.3.  
Upon the Palo Verde Participants’ full payment of 30 million dollars to the SROG
Cities pursuant to this Section 4.1, no further Water Supply Payments shall be
payable to the SROG Cities throughout the term of this Agreement.

  4.2.  
Per Acre-Foot Payments. In addition to the Water Supply Payments described in
Section 4.1, above, subject to Section 7.2, below, the Palo Verde Participants
shall pay Phoenix, on behalf of the SROG Cities, for each acre-foot of Effluent
actually delivered to the Delivery Points pursuant to this Agreement (“Delivered
Effluent Quantity”), as measured by the Metering Devices (defined in Section 6,
below). Beginning on the Effective Date, throughout the term of this Agreement,
the Palo Verde Participants shall pay Phoenix, on behalf of the SROG Cities, for
the previous month’s Delivered Effluent Quantity by multiplying the previous
month’s Delivered Effluent Quantity by the applicable per acre-foot price (the
product being the “Monthly Payment Amount”), as determined in accordance with
Sections 4.2.1 and 4.2.2, below (the “Per Acre-Foot Price”).

  4.2.1.  
Per Acre-Foot Price: 2010 through 2025. For calendar years 2010 through 2025,
the Palo Verde Participants shall pay Phoenix, on behalf of the SROG Cities, the
Per Acre-Foot Prices contained in the following schedule:

              Per Acre-Foot   Contract Year   Price  
 
       
2010
  $ 58.57  
2011
  $ 64.71  
2012
  $ 71.51  
2013
  $ 79.02  
2014
  $ 87.31  
2015
  $ 96.48  
2016
  $ 106.61  
2017
  $ 117.81  
2018
  $ 130.18  
2019
  $ 143.85  
2020
  $ 158.95  
2021
  $ 175.64  
2022
  $ 194.08  
2023
  $ 214.46  
2024
  $ 236.98  
2025
  $ 261.86  

 

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  4.2.2.  
Per Acre-Foot Price: 2026 through 2050.

  4.2.2.1.  
In calendar years 2026 through 2050, the Palo Verde Participants shall pay
Phoenix, on behalf of the SROG Cities, a Per Acre-Foot Price based on the
following escalating tiered rate structure, which is composed of four price
tiers based on the monthly Delivered Effluent Quantity:

          Delivered Effluent Tier   Quantity
 
   
1
  0 – 2,000 acre-feet
2
  2,001 – 4,000 acre-feet
3
  4,001 – 6,000 acre-feet
4
  6,001 – 8,000 acre-feet

  4.2.2.2.  
For each of the years 2026 through 2028, the Per Acre-Foot Prices applicable to
Tiers 1 through 4 shall remain fixed at $198.00, $293.00, $349.00, and $474.00,
respectively.

  4.2.2.3.  
Starting in 2029 and every year thereafter through 2050, subject to an annual
cap of three percent, the preceding year’s Per Acre-Foot Price applicable to
each tier shall be adjusted based on the simple average of the following three
price indices as determined for that preceding calendar year: (i) Consumer Price
Index — All Urban Consumers, U. S. City Average, Water and Sewerage Maintenance
(not seasonally adjusted) [CUUR0000SEHG01)]; (ii) Consumer Price Index — All
Urban Consumers, U.S. City Average, West Urban (not seasonally adjusted)
[CUUR0400SA0, CUUS0400SA0]; and (iii) Consumer Price Index - All Urban
Consumers, U.S. City Average, Electricity (not seasonally adjusted)
[CUUR0000SEHF01, CUUS0000SEHF01] (the “Indices Basket”). Should any of the price
indices in the Indices Basket be discontinued, the Parties shall substitute
another such index generally recognized to be authoritative with respect to the
subject matter of the discontinued index and this Agreement.

  4.2.3.  
Monthly Billings and Payments. By the fifth business day of each month, APS
shall provide to Phoenix the flow information necessary to calculate the Monthly
Payment Amount, which flow information shall be sent by facsimile or electronic
mail and regular United States Mail. Using the flow information provided by APS
pursuant to this Section 4.2.3, Phoenix shall invoice APS for the Monthly
Payment Amount by the fifteenth day of the same month in which the flow
information was received from APS; and APS shall pay Phoenix, on behalf of the
SROG Cities, the Monthly Payment Amount by the last day of that same month.
Provided Phoenix

 

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has properly invoiced APS pursuant to this Section 4.2.3, if APS fails to pay
the Monthly Payment Amount by the due date thereof, Phoenix shall notify APS of
such delinquent payment (the “Monthly Payment Delinquency Notice”), and APS
shall pay the entire amount owed to Phoenix within 15 days after receipt of the
Monthly Payment Delinquency Notice. If APS fails to pay the entire amount owed
to Phoenix within 15 days of receipt of the Monthly Payment Delinquency Notice,
beginning on the date on which the Monthly Payment Amount was originally due,
interest shall accrue on the delinquent amount at a rate of one percent per
month until paid.

5.  
Non-Usage Fees.

  5.1.  
Calculation of Non-Usage Fee. Subject to Section 5.3, below, throughout the term
of this Agreement, if APS does not take delivery of the entire Committed
Quantity in a calendar year, in addition to any other payments owed to the SROG
Cities pursuant to Section 4, above, the Palo Verde Participants shall pay a fee
to Phoenix, on behalf of the SROG Cities, based on the difference between the
Committed Quantity and Delivered Effluent Quantity in such year (the “Non-Usage
Fee”). The Non-Usage Fee shall be calculated in accordance with the following
schedule (see attached Appendix for illustrative examples of Non-Usage Fee
calculations):

  5.1.1.  
2010 through 2025. For calendar years 2010 through 2025, the Non-Usage Fee shall
be calculated by subtracting the Delivered Effluent Quantity in the calendar
year (DQ) from the Committed Quantity in that same year (CQ) and multiplying the
difference by 20 percent of the Per Acre-Foot Price (PP) applicable in that year
(as determined in accordance with Section 4.2.1, above); or [(CQ – DQ) x PP x
.20].

  5.1.2.  
2026 through 2050: Non-Extended Outage Periods. Subject to Section 5.1.3, below,
for calendar years 2026 through 2050, the Non-Usage Fee shall be calculated by
subtracting the Delivered Effluent Quantity in the calendar year (DQ) from the
Committed Quantity in that same year (CQ) and multiplying the difference by
30 percent of the simple average per acre-foot price applicable in that year,
which average per acre-foot price shall be determined by adding the Per
Acre-Foot Price applicable to each of the four tiers in the relevant year, (as
determined in accordance with Section 4.2.2, above) and dividing the total by
four (“Average Per Acre-Foot Price” or (AP)); or [(CQ – DQ) x AP x .30].

For example, because, in 2026, the Per Acre-Foot Prices for tiers 1 through 4
are set at $198, $293, $349, and $474, respectively, the Average Per Acre-Foot
Price for these four tiers is $328.50. If 75,000 acre-feet (AF) of water was
delivered to PVNGS in 2026 and the Committed Quantity was 80,000 acre-feet in
that year, assuming there were no Extended Outage Periods (defined in
Section 5.1.3.1, below), the Non-

 

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Usage Fee payable to the SROG Cities by January 31, 2027 would be $492,750
((80,000 AF – 75,000 AF) x $328.50 x .30).

  5.1.3.  
2026 through 2050: Extended Outage Periods. For calendar years 2026 through
2050, in lieu of the formula set forth in Section 5.1.2, above, if any PVNGS
electric generating unit is shut down (“Outage Unit”) for an Extended Outage
Period (defined in Section 5.1.3.1, below), the Non-Usage Fee applicable to each
Outage Unit during the Extended Outage Period only shall be determined by using
the “Representative Usage” (defined in Section 5.1.3.2, below) of such unit. The
Non-Usage Fee payable for each Outage Unit during the Extended Outage Period
shall be calculated by multiplying the Representative Usage (RU) by 20 percent
of the Average Per Acre-Foot Price (AP) applicable in that year; or [RU x AP x
.20].

  5.1.3.1.  
“Extended Outage Period” shall mean a period of 90 or more consecutive days over
which a PVNGS electric generating unit is shut down. The Extended Outage Period
shall commence on the day the electric generating unit is shut down and shall
terminate on the day the electric generating unit has resumed full power
generation. For purposes of this Section 5, “full power” means operation of a
PVNGS electric generating unit at or near maximum generation with consideration
for ambient temperature, regulatory requirements, and equipment conditions.

  5.1.3.2.  
“Representative Usage” is an estimate of the quantity of Effluent the Outage
Unit would have used had it not experienced an Extended Outage Period, and is
necessary to calculate the Non-Usage Fee for that Extended Outage Period. The
Representative Usage shall equal the average Effluent usage over the entirety of
the Extended Outage Period of the two remaining PVNGS electric generating units
that operated at full power during such period. If only one PVNGS electric
generating unit operated at full power during the entirety of the Extended
Outage Period, the Representative Usage shall equal the Effluent usage of that
unit over such period. If none of the PVNGS electric generating units operated
at full power over the entirety of the Extended Outage Period, the
Representative Usage shall be determined by considering the Effluent usage
during the most recent year in which at least one PVNGS electric generating unit
operated at full power over the same period of time as the Extended Outage
Period. If during the entirety of such prior time period more than one unit
operated at full power, the average Effluent usage of those units shall be used
to calculate the Representative Usage.

For example, on March 17, 2026, PVNGS Unit 3 shuts down and does not resume full
power generation until June 20, 2026. In

 

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addition, during this time frame, Units 2 and 3 experience short-term outages,
each lasting a few weeks. Because none of the three PVNGS electric generating
units operated continuously over the entire March 17 through June 20, 2026 time
frame, it is necessary to consider the average Effluent usage for the electric
generating units operating at full power during the entirety of the March 17,
2025 through June 20, 2025 period (or the Effluent usage of one unit if it was
the only unit that operated at full power over the entirety of that period) in
order to determine the Representative Usage. If such data is not available over
the March 17, 2025 through June 20, 2025 period because all three units
experienced an outage sometime during that period, the March 17, 2024 through
June 20, 2024 period will be considered. This process will continue until the
Representative Usage for at least one PVNGS unit operating at full power can be
determined.

  5.1.3.3.  
Flow Measurements during Extended Outage Period. For purposes of determining the
Representative Usage pursuant to Section 5.1.3.2, above, APS shall take a
totalizer reading off the Metering Devices of Effluent transferred from the
PVNGS reservoirs to the circulating water canals of the PVNGS electric
generating units when the Outage Unit ceases operating at full power, and a
second totalizer reading when the Outage Unit resumes operating at full power.
The totalizer readings taken during the year used to determine the
Representative Usage shall be used as the basis for calculating the Non-Usage
Fee pursuant to this Section 5.1.3.

  5.1.3.4.  
Calculation of Non-Usage Fees in Extended Outage Period Years. In any year in
which Non-Usage Fees are paid pursuant to this Section 5.1.3, the total quantity
of Effluent on which such payment or payments are based shall be subtracted from
the Committed Quantity in that year when determining the Non-Usage Fee payable
pursuant to Section 5.1.2, above. Thus, the Non-Usage Fee payable pursuant to
Section 5.2, below, shall be calculated by subtracting the Delivered Effluent
Quantity in the relevant calendar year (DQ) and the total Representative Usage
(RU) in that same year from the Committed Quantity in such year (CQ) and
multiplying the difference by 30 percent of the Average Per Acre-Foot Price
(AP) applicable in that year; or [(CQ – DQ – RU) x AP x .30].

For example, on March 17, 2026, PVNGS Unit 3 shuts down and does not resume full
power generation until June 20, 2026; the Representative Usage over the Extended
Outage Period for the Outage Unit was 6,500 acre-feet (AF). Assuming a Committed
Quantity of 80,000 acre-feet, a Delivered Effluent Quantity of

 

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68,500 acre-feet, and an Average Per Acre-Foot Price in 2026 of $328.50, the
total Non-Usage Fees payable to Phoenix by January 31, 2027 would be calculated
as follows:
Extended Outage Period: 6,500 AF x $328.50 x .20 = $427,050 (Section 5.1.3)
Non-Extended Outage Period: (80,000 AF – 68,500 AF – 6,500 AF) x $328.50 x .30 =
$492,750 (Section 5.1.3.4)
Total Non-Usage Fees (2026): $427,050 + $492,750 = $919,800

  5.1.3.5.  
Extended Outage Periods over Multiple Calendar Years: Existence Known as of
December 31. In the event an Extended Outage Period extends from the calendar
year for which a Non-Usage Fee is payable into the following calendar year, and
the existence of that Extended Outage Period is known as of December 31 of the
year for which the Non-Usage Fee is payable, the Representative Usage shall be
treated as follows: The Representative Usage based on that portion of the
Extended Outage Period extending from the date on which the Extended Outage
Period commenced through December 31 of that same year shall be used to
calculate the Non-Usage Fee payable for that year. Additionally, the
Representative Usage based on that portion of any Extended Outage Period
extending from January 1 of any subsequent year through the earlier of the date
on which the Extended Outage Period terminates, or December 31 of that year,
shall be included in the calculation of the Non-Usage Fee payable for such year.

  5.1.3.6.  
Extended Outage Periods over Multiple Calendar Years: Existence Unknown as of
December 31. In the event an Extended Outage Period extends from the calendar
year for which a Non-Usage Fee is payable into the following calendar year, but
the existence of that Extended Outage Period was not known as of December 31 of
the year for which the Non-Usage Fee is payable and did not become known until
the following year, 10 percent of that portion of the Non-Usage Fee paid for
such year, which is attributable to that part of the Extended Outage Period that
occurred between the date on which the Extended Outage Period commenced through
December 31 of that same year (which portion of the Non-Usage Fee would have
been paid pursuant to Section 5.1.2, above) shall be credited against the
Non-Usage Fee payable for the following year and, to the extent the credit is
not depleted, the remainder will be credited against the Non-Usage Fee payable
in any subsequent years until depleted. That portion of the Non-Usage Fee for
any

 

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part of the Extended Outage Period extending from January 1 of the year
immediately following the year in which the Extended Outage Period commenced
shall be determined in accordance with Section 5.1.3.5, above.

  5.1.3.7.  
Extended Outage Periods over Multiple Calendar Years: Applicable Per Acre-Foot
Price. In any year in which an Extended Outage Period extends over multiple
calendar years pursuant to Sections 5.1.3.5 and 5.1.3.6, above, the Average Per
Acre-Foot Price used to calculate the Non-Usage Fee in accordance with this
Section 5.1.3 shall be determined with reference to the Per Acre-Foot Price
applicable in the calendar year in which that portion of the Extended Outage
Period actually occurred.

  5.2.  
Payment of Non-Usage Fees. By the tenth day of each January, APS shall provide
to Phoenix the Representative Usage, along with the totalizer readings and
calculations used to determine the Representative Usage, which totalizer
readings and calculations shall be sent by facsimile or electronic mail and
regular United States Mail. By the twentieth day of each January, Phoenix shall
invoice APS for the Non-Usage Fee calculated pursuant to Section 5.1, above; and
APS shall pay Phoenix, on behalf of the SROG Cities, the entire Non-Usage Fee by
January 31 of that same year. Provided Phoenix has properly invoiced APS
pursuant to this Section 5.2, if APS fails to pay the Non-Usage Fee by the due
date thereof, Phoenix shall notify APS of such delinquent payment (the
“Non-Usage Fee Delinquency Notice”), and APS shall pay the entire amount owed to
Phoenix within 15 days after receipt of the Non-Usage Fee Delinquency Notice. If
APS fails to pay the entire amount owed to Phoenix within 15 days of receipt of
the Non-Usage Fee Delinquency Notice, beginning on the date on which the
Non-Usage Fee was originally due, interest shall accrue on the delinquent amount
at a rate of one percent per month until paid.

  5.3.  
No Non-Usage Fee Payable upon Occurrence of Certain Events. To the extent an
event that may significantly impair Phoenix’s ability to comply with the SROG
Cities’ obligations under this Agreement (as described in Section 9.2, below)
results in a decrease in the quantity of Effluent the Palo Verde Participants
would have otherwise taken under this Agreement, no Non-Usage Fee shall apply to
such quantity.

6.  
Metering Devices. Metering devices installed by APS (“Metering Devices”) shall
be used to measure the quantity of Effluent delivered to the Delivery Points and
to measure Effluent flows for purposes of calculating the Representative Usage.
Title to the Metering Devices shall be vested in the Palo Verde Participants.
The Metering Devices shall be the basis for determining the Delivered Effluent
Quantity. The Metering Devices shall be of a design and type acceptable to
Phoenix and APS. The Palo Verde Participants shall bear the cost of the Metering
Devices and the cost to install, operate, maintain, repair, replace, and
calibrate the Metering Devices. APS shall calibrate the

 

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Metering Devices no less frequently than once every six months. The SROG Cities
may request in writing additional calibrations of the Metering Devices by an
independent third party; provided that the cost incurred by the Palo Verde
Participants for each additional calibration shall be reimbursed by the SROG
Cities unless any such additional calibration reveals that the inaccuracy of the
Metering Devices is greater than plus or minus two percent, in which case the
cost of such additional calibration shall be borne by the Palo Verde
Participants.

7.  
Effluent Quality.

  7.1.  
Minimum Quality Standards. At all times throughout the term of this Agreement,
the quality of Effluent delivered by Phoenix to the Delivery Points shall (i) be
of equal or better quality as the Effluent discharged from the 91st Avenue WWTP
to the Tres Rios constructed wetlands project; and (ii) meet or exceed the 91st
Avenue WWTP’s applicable federal and state discharge permit limits, including
any amendments or replacements thereof as may be made from time to time.

  7.2.  
Additional Effluent for Failure to Meet Minimum Quality Standards. Throughout
the term of this Agreement, if, in any calendar year, the quality of Effluent
delivered by Phoenix does not meet the minimum quality standards set forth in
Section 7.1, above, and, as a result of such failure, cooling water usage at
PVNGS is increased above 75,000 acre-feet per year based on an analysis of past
blowdown rates to the PVNGS evaporation ponds, upon request by APS, Phoenix
shall provide any additional Effluent required at no charge to the Palo Verde
Participants up to, but not exceeding, 10 percent of the Committed Quantity for
that calendar year. The additional quantity of Effluent required by this
Section 7.2 shall be independent of and in addition to any additional quantities
of Effluent delivered to PVNGS pursuant to Section 3.5, above. Any additional
Effluent provided pursuant to this Section 7.2 shall not be a part of the
Committed Quantity.

  7.3.  
Discharge of TDS Concentrate Prohibited. The SROG Cities shall not discharge any
total-dissolved-solids concentrate at any point downstream of the 91st Avenue
WWTP headworks, including, without limitation, the Delivery Points. By way of
example, but not limitation, the SROG Cities shall not discharge reverse osmosis
concentrate streams at such points.

8.  
Operation and Maintenance.

  8.1.  
SROG Cities. Phoenix shall operate, maintain, repair, and replace, at the SROG
Cities’ expense, the 91st Avenue WWTP as is necessary to enable the SROG Cities
to carry out their obligations pursuant to Sections 3 and 7, above.

  8.2.  
Palo Verde Participants. APS shall operate, maintain, repair, and replace, at
the Palo Verde Participants’ expense, all facilities, structures, and equipment
owned, leased, or operated by the Palo Verde Participants, wherever located,
used or useful for the receipt, treatment, storage, transportation, and use of
Effluent,

 

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including, without limitation, all such facilities, structures, and equipment
that may be located on property owned by the SROG Cities or any of them
(“Participants’ Facilities”). Phoenix and APS may agree by separate agreement
that Phoenix shall operate and maintain certain of Participants’ Facilities or
engage in other activities for the Palo Verde Participants and shall be
compensated therefor.

9.  
Practices and Procedures.

  9.1.  
APS.

  9.1.1.  
Throughout the term of this Agreement, by June 30 of each year, APS shall
provide Phoenix with a schedule setting forth the quantities of Effluent
anticipated to be needed during each month of the following year.

  9.1.2.  
Except in the event of an unplanned, unscheduled outage, APS shall give Phoenix
30 days’ written notice in advance of any outage event. This notice shall
include the date of the shutdown and the estimated duration of the outage.

  9.1.3.  
If an unplanned, unscheduled outage or any other event results in a “Substantial
Decrease” (defined below) in the quantity of Effluent required by PVNGS, APS
shall notify Phoenix of the decreased Effluent quantity requirements as soon as
reasonably practicable. “Substantial Decrease” shall mean a decrease in flow
requirements of greater than 2,000 gallons per minute over a six-hour period. By
way of example, but not limitation, “an unplanned, unscheduled outage or any
other event” resulting in a Substantial Decrease in the quantity of Effluent
required by PVNGS might include a short-notice outage of an electric generating
unit, a power failure at the Hassayampa pump station, or equipment failure at
the PVNGS WRF. APS shall use its best efforts to minimize the duration of any
unplanned, unscheduled outage or any other events that result in a Substantial
Decrease in the quantity of Effluent required by PVNGS under this Agreement. The
notice required by this Section 9.1.3 shall include information detailing the
reason for the decreased flow requirement and when the event giving rise to the
decreased flow requirement first occurred, the expected duration of the
decreased flow requirement, and on what date a return to full operating capacity
is expected.

  9.2.  
Phoenix. As soon as reasonably practicable, Phoenix shall notify APS of any
event that may significantly impair Phoenix’s ability to comply with the SROG
Cities’ obligations under this Agreement, including, without limitation, the
requirements of Section 3, above, regarding quantity and the requirements of
Section 7, above, regarding quality. By way of example, but not limitation, an
“event that may significantly impair Phoenix’s ability to comply with the SROG
Cities’ obligations under this Agreement” might include the loss or impairment
of portions of the 91st Avenue WWTP’s wastewater collection system, including,

 

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without limitation, interceptors, or operational anomalies at the 91st Avenue
WWTP that have the potential to significantly change the quantity or quality of
the Effluent delivered to the Palo Verde Participants. Phoenix shall use its
best efforts to minimize the duration of any events that may significantly
impair Phoenix’s ability to comply with the SROG Cities’ obligations under this
Agreement. The notice required by this Section 9.2 shall include information
detailing the cause of the event that significantly impairs Phoenix’s ability to
comply with the SROG Cities’ obligations under this Agreement and when the event
first occurred, the expected duration of such event, and by what date a return
to normal operations is expected.

  9.3.  
Contact by Third Parties. The SROG Cities shall not command, authorize, direct,
or instruct their agents, consultants, or contractors to contact PVNGS,
including the PVNGS WRF, without the prior consent of APS.

10.  
New Treatment Plants. The SROG Cities shall install, operate, and maintain any
new wastewater treatment plants and water reclamation plants constructed at any
location other than the site of the 91st Avenue WWTP in such manner that the
installation, operation, and maintenance of such new plant will not impair the
ability of the SROG Cities to deliver Effluent pursuant to this Agreement.

11.  
PVNGS Priority. The Palo Verde Participants’ right to the delivery of Effluent
from the SROG Cities pursuant to this Agreement shall have priority over any
other use or sale of Effluent from the 91st Avenue WWTP (“PVNGS Priority”),
other than preexisting commitments to Buckeye Irrigation Company (30,000
acre-feet), the Arizona Game & Fish Department (7,300 acre-feet), the United
States Water Conservation Lab (1,200 acre-feet), and each of their
successors-in-interest (collectively, “Preexisting Users”), and only up to the
respective quantities provided herein. Any use of the Committed Quantity by the
SROG Cities or any of them and by others claiming by, through, or under the SROG
Cities or any of them (other than the Preexisting Users) shall be subordinated
to the rights of the Palo Verde Participants pursuant to this Agreement.

12.  
Location of Use. Delivered Effluent may be used by the Palo Verde Participants
at PVNGS and any other electric generating facilities located within 10 miles of
PVNGS. In addition, Effluent discharged from the WRSS Pipeline for purposes of
maintaining and repairing the WRSS Pipeline may be used on agricultural lands
adjacent to the WRSS Pipeline and/or within the service area of an irrigation or
water conservation district formed pursuant to A.R.S. § 48-2901 et seq., as
amended.

13.  
Use of Effluent. Except as required for maintenance and repair activities on the
WRSS Pipeline, Effluent made available to the Palo Verde Participants pursuant
to this Agreement shall not be directly or indirectly utilized other than for
the purposes stated in this Agreement without prior written consent of the SROG
Cities.

14.  
Option to Extend and True-Up Payment. In 2035, the Parties shall begin meeting
to discuss a potential new agreement for the purchase and sale of Effluent or an
extension of this Agreement for an additional 20 years through 2070 with no
changes in PVNGS

 

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Priority. The price terms of such new agreement or extended Agreement, which
extended Agreement would be applicable for the years 2051 through 2070 only,
will be negotiated at that time. If the Parties successfully negotiate a new
agreement or an extension of this Agreement, and upon full execution of such new
agreement or extended Agreement and approval by the governing bodies of all of
the Parties, the Palo Verde Participants shall pay Phoenix, on behalf of the
SROG Cities, a lump-sum true-up payment (“True-Up Payment”) if the annual price
adjustment cap of three percent is exceeded during the 2029 through 2035 period.
The True-Up Payment shall be based on the actual rate of inflation (based on the
Indices Basket) during each year that the three-percent cap was exceeded;
provided, however, the total overall price adjustment, including the True-Up
Payment, in each year of the 2029 through 2035 period shall not exceed four
percent. If the Parties are unable to mutually agree on the terms of a new
agreement or an extension of this Agreement, or if such new agreement or
extended Agreement is not approved by all of the Parties’ governing bodies, the
Palo Verde Participants shall not be obligated to pay a True-Up Payment.

15.  
Notice of Unit Shutdown. Subject to Section 27.2, below, in the event the Palo
Verde Participants intend to take out of service and permanently retire from use
as a source of electric generation a PVNGS electric generating unit, the Palo
Verde Participants shall provide Phoenix with at least 24 months’ written notice
of the date on which the unit will be shut down.

16.  
No Waiver of Water Rights. Nothing in this Agreement shall constitute a waiver,
relinquishment, abandonment, or forfeiture of any water rights of any of the
Parties.

17.  
Easements and Rights-of-Way. Phoenix, without cost to the Palo Verde
Participants, shall grant easements, rights-of-way, leases, and licenses to the
Palo Verde Participants for all Participants’ Facilities as may be located at
the site of the 9lst Avenue WWTP. It shall be the responsibility of Phoenix and
APS to agree upon the scope and description of such easements, rights-of-way,
leases, and licenses.

18.  
Pledge, Transfer, and Assignment of Palo Verde Participants Interest.

  18.1.  
The Palo Verde Participants shall have the right at any time and from time to
time to mortgage, create, or provide for a security interest in or convey in
trust all or part of their respective interests in this Agreement and in any
property installed or maintained subject to this Agreement, including, without
limitation, Participants’ Facilities, to a trustee or trustees under deeds,
mortgages, or indentures or to a secured party or parties under a security
agreement as security for present or future successors or assigns thereof,
without need for the prior written consent of any other Palo Verde Participant
or the SROG Cities and without such mortgagee, trustee, or secured party
assuming or becoming in any respect obligated to perform any obligations under
this Agreement.

  18.2.  
Upon 30 days’ advance written notice to the other Palo Verde Participants and
the SROG Cities, any mortgagee, trustee, or secured party under present or
future deeds of trust, mortgages, indentures, or security agreements of any Palo
Verde

 

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Participant and any successor or assign thereof, and any receiver, referee, or
trustee in bankruptcy or reorganization of any Palo Verde Participant, and any
successor by action of law or otherwise, and any purchaser, transferee, or
assignee of any thereof may, without need for the prior written consent of any
other Palo Verde Participant or the SROG Cities, succeed to and acquire all the
rights, titles, and interests of such Palo Verde Participant in this Agreement
and in any property installed or maintained subject to this Agreement and may
take over possession of or foreclose upon said rights, titles, and interests of
such Palo Verde Participant.

  18.3.  
Upon 30 days’ advance written notice to the SROG Cities and other Palo Verde
Participants, each Palo Verde Participant shall have the right to transfer and
assign all or part of its interest in this Agreement to any Person who is or
will become a Palo Verde Participant without the prior written consent of the
SROG Cities or any other Palo Verde Participant. Upon any such transfer, the
Palo Verde Participant acquiring such interest shall assume all the duties and
obligations related thereto and, with the written consent of the SROG Cities,
which shall not be unreasonably withheld, the Palo Verde Participant
transferring such interest shall be released and discharged therefrom.

  18.4.  
Except as otherwise provided in Sections 18.1, 18.2, and 18.3, above, any Person
succeeding to the rights, titles, and interests of a Palo Verde Participant or
SROG City shall assume and agree to fully perform and discharge all of the
obligations hereunder of such Palo Verde Participant or SROG City, and such
Person or successor shall notify each of the other Palo Verde Participants and
the SROG Cities in writing of such transfer, assignment, or merger and shall
furnish to each Palo Verde Participant and the SROG Cities evidence of such
transfer, assignment, or merger.

  18.5.  
Any Palo Verde Participant or SROG City transferring or assigning any of its
rights, titles, or interest in and to this Agreement shall provide 30 days’
advance written notice to each of the other Palo Verde Participants and SROG
Cities.

19.  
Improvements and Additions. The SROG Cities shall, at their sole expense, take
all reasonably practical actions necessary, including, without limitation,
making improvements, modifications, and additions to the 91st Avenue WWTP, to
ensure compliance with the delivery quantities established in Section 3 and
quality standards set forth in Section 7 hereof. If the SROG Cities fail,
refuse, or are unable to make required improvements, modifications, and
additions, the Palo Verde Participants shall have the right, with the
concurrence of the SROG Cities, which concurrence shall not unreasonably be
withheld, to install any facilities necessary to provide the treatment of
Effluent required to meet such quality specifications, and payments required to
be made by the Palo Verde Participants pursuant to Section 4, above, shall be
reduced by the amount of all costs reasonably incurred by the Palo Verde
Participants to install, operate, and maintain such facilities, including
reasonable fixed charges and operation and maintenance expenses.

 

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20.  
Permits and Authorizations.

  20.1.  
Palo Verde Participants. APS shall be solely responsible for securing and
maintaining in force and effect any and all permits and authorizations required
by law for the transportation of Effluent from the Delivery Points to PVNGS or
to any other points and for any uses of the Effluent set forth in this
Agreement. APS shall use the Effluent in accordance with all applicable laws and
regulations.

  20.2.  
SROG Cities. The SROG Cities shall be solely responsible for securing and
maintaining in force and effect any and all permits and authorizations required
by law for the delivery of Effluent to the Palo Verde Participants at the
Delivery Points and for the discharge into any watercourse or other disposal of
Effluent that is not delivered to and accepted by the Palo Verde Participants
pursuant to this Agreement. The SROG Cities shall deliver the Effluent to the
Palo Verde Participants in accordance with all applicable laws and regulations.

  20.3.  
Section 27.2, below, notwithstanding, if any laws or regulations governing the
delivery or use of Effluent as contemplated under this Agreement are promulgated
in the future so as to make it impossible or infeasible to deliver and use the
Effluent as specified hereunder, the Parties shall meet to discuss in good faith
how the purposes of this Agreement and intent of the Parties may be effectuated
in accordance with such newly promulgated laws or regulations.

21.  
Destruction, Damage, or Condemnation.

  21.1.  
If all, or any part, of the 91st Avenue WWTP is destroyed, damaged, or
condemned, the SROG Cities shall restore or reconstruct the 91st Avenue WWTP in
such a manner as to permit the SROG Cities to deliver Effluent to the Palo Verde
Participants pursuant to this Agreement; or in the event substitute wastewater
treatment facilities are constructed at a new location other than the site of
the 91st Avenue WWTP, in lieu of restoration or reconstruction of the 91st
Avenue WWTP, the SROG Cities shall sell and deliver the same rights to the
treated wastewater from such substitute facilities on the same terms and
conditions as apply to the sale and delivery of Effluent from the 91st Avenue
WWTP pursuant to this Agreement. If the SROG Cities make changes to the 91st
Avenue WWTP or construct substitute wastewater treatment facilities at a new
location pursuant to this Section 21.1, the SROG Cities shall, at their sole
expense, design, construct, and install all infrastructure necessary to deliver
the Effluent pursuant to this Agreement.

  21.2.  
If all or a portion of the Participants’ Facilities are destroyed or condemned,
the Palo Verde Participants shall repair, restore, or reconstruct the
Participants’ Facilities in a manner to permit the Palo Verde Participants to
receive and transport Effluent pursuant to this Agreement.

 

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22.  
Taxes.

  22.1.  
If any general and/or special city, county, state, or other real property taxes,
or any other typical taxes or imposts are properly assessed or levied against
the Participants’ Facilities, the Palo Verde Participants shall pay all such
taxes prior to delinquency.

  22.2.  
If any general and/or special county, state, or federal (but not city) taxes are
properly assessed or levied against the purchase or use of Effluent pursuant to
this Agreement, the Palo Verde Participants shall pay all such taxes prior to
delinquency.

  22.3.  
The SROG Cities or any of them shall not require the Palo Verde Participants to
pay a tax resulting from the sale of Effluent by the SROG Cities or impose any
assessment on the Participants’ Facilities. If, contrary to this Section 22.3,
the SROG Cities or any of them imposes an assessment or levies a tax on the
Participants’ Facilities that has the effect of raising the price of Effluent
under this Agreement, the price of Effluent shall be decreased by the amount of
such tax or assessment.

  22.4.  
If any general and/or special city, county, state, or other real property taxes,
or any other type of taxes or imposts are assessed or levied against the 91st
Ave WWTP, the SROG Cities shall pay all such taxes prior to delinquency.

  22.5.  
Nothing contained in this Section 22 shall be construed as a recognition or
admission by the SROG Cities or the Palo Verde Participants of the validity of
any particular tax or assessment.

23.  
Liability, Indemnification, and Insurance.

  23.1.  
Liability of SROG Cities. Except for the negligence or willful misconduct of the
Palo Verde Participants, their officers, directors, employees, and agents, the
SROG Cities shall be liable insofar as the Palo Verde Participants are concerned
for any physical damage to property and death of, and personal injury to, anyone
arising out of the ownership, use, occupancy, operation, maintenance, repair,
replacement, and reconstruction of the 9lst Avenue WWTP; and the SROG Cities
hereby indemnify and hold the Palo Verde Participants harmless for, from, and
against any cost, expense, claim, or loss from such damage or injury.

  23.2.  
Liability of Palo Verde Participants. Except for the negligence or willful
misconduct of the SROG Cities, their officers, councilmembers, managers,
employees, or agents, the Palo Verde Participants shall be liable insofar as the
SROG Cities are concerned for any physical damage to property and death of, and
personal injury to, anyone arising out of the Palo Verde Participants’
ownership, use, occupancy, operation, maintenance, repair, replacement, and
reconstruction of the Participants’ Facilities; and the Palo Verde Participants
hereby indemnify

 

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and hold the SROG Cities harmless for, from, and against any cost, expense,
claim, or loss from such damage or injury.

  23.3.  
Indemnification for Use of Delivered Effluent. The Palo Verde Participants shall
indemnify the SROG Cities for, from, and against any claim resulting from the
control, transmission, use, or disposal of Effluent by the Palo Verde
Participants after delivery thereof by the SROG Cities to the Delivery Points,
except to the extent such claim is the result of the SROG Cities’ failure to
comply with the quality standards set forth in Section 7.1, above.

  23.4.  
Insurance. The SROG Cities and the Palo Verde Participants shall procure and
maintain insurance against physical damage to property and death of, and
personal injury to, persons of the kind and with coverages normally carried by
entities operating properties similar to the 91st Avenue WWTP and the
Participants’ Facilities. Nothing contained in this Section 23.4 shall prohibit
the SROG Cities and the Palo Verde Participants from adopting a self-insurance
program of a type and kind being utilized by entities operating properties
similar to the 91st Avenue WWTP and the Participants’ Facilities. Upon request,
the SROG Cities and the Palo Verde Participants shall furnish the others with
certifications of insurance demonstrating compliance with this Section 23.4.

24.  
Cooperation of the Parties.

  24.1.  
Each of the SROG Cities and the Palo Verde Participants shall fully cooperate
with and assist one another in securing and maintaining in force any and all
licenses, permits, authorizations, approvals, and consents required in
accordance with this Agreement or by local, state, or federal laws and
regulations and shall render such assistance to the other Parties as it or they
may reasonably request.

  24.2.  
Each of the SROG Cities and the Palo Verde Participants shall fully cooperate
with and assist one another in any and all judicial and administrative
proceedings required in or related to the performance of this Agreement.

  24.3.  
Each of the SROG Cities and the Palo Verde Participants shall make, execute, and
deliver all documents and instruments necessary or useful to the implementation
and performance of this Agreement.

  24.4.  
In the event any proceeding at law or equity is instituted involving the
authority and power of any of the SROG Cities and/or the Palo Verde Participants
to make, execute, and deliver this Agreement and/or to perform its terms,
covenants, and conditions, or is relating to the rights, title, and interest of
any of the SROG Cities or the Palo Verde Participants in and to Effluent, then
the SROG Cities and the Palo Verde Participants shall jointly and cooperatively
defend the validity of this Agreement and the use of Effluent intended
hereunder.

 

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25.  
Interruption of Delivery of Effluent.

  25.1.  
Subject to Section 25.2 below, the SROG Cities shall have the right to refuse to
deliver Effluent under the terms of this Agreement when all of the following
have occurred: (i) there exists in the SROG Cities a critical need for water to
be used for domestic purposes; (ii) subject to Section 11, above, all other
reasonable sources of water in excess of the Committed Quantity have been
exhausted; (iii) reasonable steps have been taken by the SROG Cities to conserve
their municipal water supplies; and (iv) the SROG Cities have given the Palo
Verde Participants reasonable notice of the critical need in accordance with the
requirements of Section 28.3, below. When the critical need expires, or when
other reasonable sources of water become available, the SROG Cities may no
longer refuse to deliver Effluent pursuant to this Agreement. The SROG Cities
shall use their best efforts to resume deliveries of Effluent pursuant to this
Agreement at the earliest practicable time if such deliveries are interrupted
pursuant to this Section 25.

  25.2.  
Prior to designating the existence of a critical need and temporarily
discontinuing Effluent deliveries to the Palo Verde Participants pursuant to
Section 25.1, above, the SROG Cities shall consider the critical need for energy
to support the Parties’ respective customer bases by expressly acknowledging the
symbiotic relationship between water and energy in the desert state of Arizona
and the interdependency of these two vital resources by taking into account the
mutual critical need each Party has for the other’s product.

26.  
Dispute Resolution; Default and Termination.

  26.1.  
In the event of a dispute arising out of or relating to this Agreement, the
Parties shall attempt in good faith to resolve such dispute promptly by
negotiation between representatives having authority to settle the controversy.
All reasonable requests for information made by one Party to the other shall be
honored.

  26.2.  
The Parties shall pay all monies and carry out all other performances, duties,
and obligations agreed to be paid and/or performed by them pursuant to the terms
and conditions set forth and contained in this Agreement. A default by a Party
in its covenants and obligations shall be an act of default under this Agreement
(“Default”).

  26.3.  
In the event of a Default by a Party, within 30 days following the giving of
written notice of such Default by the non-defaulting Party, the defaulting Party
shall remedy such Default either by advancing the necessary funds and/or
rendering the necessary performance, as the context so requires. The notice
required by this Section 26.3 shall clearly identify the specific nature of the
Default and the steps required to cure the same.

  26.4.  
In the event that a Party disputes an asserted Default, such Party shall pay the
disputed payment or perform the disputed obligation, but may do so under
protest, which protest shall be in writing, shall accompany the disputed payment
or

 

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precede the performance of the disputed obligation, and shall specify the
reasons upon which the protest is based. Payments not made under protest shall
be deemed to be correct.

  26.5.  
In the event of a Default by a Party in the payment or performance of any
obligation under this Agreement, which continues for a period of 60 days or more
without having been cured by the defaulting Party, or without the defaulting
Party having commenced or continued action in good faith to cure such Default,
then, at any time thereafter and while said Default is continuing, the
non-defaulting Party at its option may, by written notice to the defaulting
Party, terminate this Agreement.

  26.6.  
If this Agreement is terminated for any reason, Phoenix shall have the immediate
right of re-entry of any easement or leasehold granted to the Palo Verde
Participants pursuant to Section 17, above. APS shall, as soon as reasonably
practicable or within such other time frame as the Parties may agree, remove all
facilities owned by the Palo Verde Participants located on property owned by the
SROG Cities or any of them. All facilities not removed from such property within
such time frame shall become the property of the owner of such real property.

27.  
Performance and Uncontrollable Circumstance.

  27.1.  
Performance. All terms, covenants, and conditions to be performed by the Parties
under this Agreement shall be performed at the sole expense of the Party so
obligated, and if another Party pays any sum of money or does any act that
requires the payment of money, by reason of the failure, neglect, or refusal of
the obligated Party to perform such term, covenant, or condition, the sum of
money so paid by the other Party shall immediately be payable to the
non-obligated Party by the Party obligated to perform.

  27.2.  
Uncontrollable Circumstance. A Party shall not be considered to be in Default in
the performance of any of the obligations under this Agreement (other than
obligations of a Party to pay costs and expenses) if failure of performance is
due to an Uncontrollable Circumstance. The term “Uncontrollable Circumstance”
means any act, event, or condition that is caused by or due to circumstances
beyond the reasonable control of the Party relying thereon as justification for
not performing an obligation or complying with any condition required of such
Party under this Agreement and that materially interferes with such Party’s
obligations under this Agreement (other than payment obligations) to the extent
that such act, event, or condition is not the result of the willful or negligent
act, error or omission, failure to exercise reasonable diligence, or breach of
this Agreement on the part of such Party. By way of example, but not limitation,
each of the following shall constitute an Uncontrollable Circumstance: failure
of facilities, flood, earthquake, tornado, storm, fire, lightning, epidemic,
war, riot, civil disturbance or disobedience, labor dispute, action or
non-action by or failure to obtain the necessary authorizations or approvals
from any governmental agency

 

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or authority or the electorate, labor or material shortage, sabotage, restraint
by court order, law, regulation, or public authority, and the forced shutdown of
PVNGS or the 91st Avenue WWTP by a governmental body, which by exercise of due
diligence and foresight such Party could not reasonably have been expected to
avoid and which, by exercise of due diligence it is unable to overcome. Nothing
contained in this Section 28.2 shall be construed so as to require a Party to
settle any strike or labor dispute in which it may be involved. A Party rendered
unable to fulfill any obligation by reason of an Uncontrollable Circumstance
shall, as soon as reasonably practicable, notify the others of the event giving
rise to such Uncontrollable Circumstance, and exercise due diligence to remove
such inability with all reasonable dispatch.

28.  
General Provisions.

  28.1.  
Incorporation of Recitals and Exhibit. The Recitals set forth in Paragraphs A
through K, above, and Exhibit “A” attached to this Agreement (but not the
attached Appendix) are incorporated here by this reference as if fully set forth
in this Agreement, and are acknowledged and agreed to by the Parties.

  28.2.  
Case; Section Headings. The use of the singular or plural number shall be deemed
to include the other uses whenever the context so requires. The section headings
used in this Agreement are for convenience and reference only and do not define,
limit, or describe the scope or intent of any provision of this Agreement.

  28.3.  
Notices. Notices shall be in writing and shall be given by: (a) personal
delivery; (b) national overnight delivery service; or (c) United States Mail,
certified mail, return receipt requested, postage prepaid. Notices shall be
delivered or addressed to the addresses set forth below or at such other address
as APS or Phoenix may designate in writing. The date a notice shall be deemed to
have been given, received, and become effective shall be: (i) the date on which
the notice is delivered or refused, if notice is given by personal delivery or
delivery by a national overnight delivery service; or (ii) three days following
the date of deposit in the mail, if the notice is sent by certified United
States Mail, return receipt requested and postage prepaid. No notice shall be
deemed effective unless sent in one of the manners described above.

         
 
  To Phoenix:   Director of Water Services
 
      City of Phoenix
 
      200 West Washington Street
 
      Phoenix, Arizona 85003
 
       
 
  To PVNGS:   Palo Verde Nuclear Generating Station
 
      Att’n: Water Reclamation Facility Manager
 
      5801 South Wintersburg Road, M.S. 6215
 
      Tonopah, Arizona 85354-7529

 

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  with a copy to APS:   Arizona Public Service Company
 
      Att’n: Water Resources Manager
 
      P.O. Box 52034, M.S. 9724
 
      Phoenix, Arizona 85072-2034

Any Party referenced in this Section 28.3 may change the address or addressee to
which notices are to be sent by giving notice of such change of address or
addressee in conformity with the provisions of this Section 28.3.

  28.4.  
Remedies Cumulative. The remedies provided for in this Agreement shall be
cumulative. All remedies available under this Agreement shall be in addition to
any and all remedies at law or in equity.

  28.5.  
Successors and Assigns. The terms, covenants, and conditions of this Agreement
shall be binding upon, and inure to the benefit of and shall apply to the
respective transferees, successors, and assigns of the transferring Party.

  28.6.  
Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Arizona.

  28.7.  
Entire Agreement. The Parties expressly acknowledge that they have read this
Agreement and understand all of its terms, covenants, and conditions, and that
this Agreement constitutes the entire agreement with respect to any matters
referred to in this Agreement. This Agreement supersedes any and all other
understandings, agreements, correspondence, or communications between the
Parties with respect to the matters embodied in this Agreement, including
Agreement No. 13904, which shall be of no further force and effect.

  28.8.  
Modification. No changes, alterations, or modifications to this Agreement shall
be effective unless in writing and signed by an authorized representative of
each of the Parties.

  28.9.  
Waiver. The failure of a Party to insist, in any one or more instances, on
performance of any of the terms, covenants, or conditions of this Agreement
shall not be construed as a waiver or relinquishment of any rights granted under
this Agreement or of the future performance of any such term, covenant, or
condition, and the obligations of the Parties with respect thereto shall
continue in full force and effect. No waiver of any provision or condition of
this Agreement by a Party shall be valid unless in writing signed by such Party.
A waiver by one Party of the performance of any covenant or condition of another
Party shall not invalidate this Agreement, nor shall such waiver be construed as
a waiver of any other covenant or condition.

  28.10.  
No Party the Drafter. This Agreement is the product of negotiation between the
Parties, and no Party is deemed the drafter of this Agreement.

 

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  28.11.  
Conflict of Interest. The provisions of A.R.S. § 38-511 are incorporated in this
Agreement to the extent of their applicability to contracts of the nature of
this Agreement under the laws of the State of Arizona.

  28.12.  
Counterpart Execution. This Agreement may be signed in counterparts, each of
which shall be an original and all of which shall constitute one and the same
instrument. All signatures need not be on the same counterpart.

  28.13.  
Authorizations. The signatories to this Agreement represent that they have been
appropriately authorized to enter into this Agreement on behalf of the Party for
which they sign and that no further action or approvals are necessary before
execution of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of
                     _____, 2010.
[Remainder of page intentionally left blank]

 

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          CITY OF PHOENIX,
an Arizona municipal corporation
      By:   /s/ David Cavazos     (SEAL) [c98580c9858001.gif]   Its: City
Manager      Attest:
    /s/ Mario Paniagua     City Clerk        Approved as to Form:
    /s/ Gary Verburg     Acting Phoenix City Attorney     

     
STATE OF ARIZONA
  ) 
 
  )ss. 
County of Maricopa
  ) 

On April, 14 2010, before me, Dawnell M. Navarro, a Notary Public in and for the
State of Arizona, personally appeared David Cavazos, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the City Manager and
                     of the CITY OF PHOENIX, an Arizona municipal corporation,
and that they being authorized to do so, executed the foregoing instrument for
the purposes therein contained by signing the name of the municipal corporation
by themselves and as such                      and                     .
WITNESS my hand and official seal.

            /s/ Dawnell M. Navarro       Notary Public   

My Commission Expires:

     
March 30, 2013
  (SEAL) [c98580c9858002.gif]

 

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          CITY OF MESA,
an Arizona municipal corporation
      By:   /s/ Christopher J. Brady         Its: City Manager             
Attest:
      /s/ Linda Crocker       City Clerk            Approved as to Form:
      /s/ Wilbert J. Taebel       Mesa City Attorney     

     
STATE OF ARIZONA
  ) 
 
  )ss. 
County of Maricopa
  ) 

On April, 29 2010, before me, Ann Webster, a Notary Public in and for the State
of Arizona, personally appeared Christopher J. Brady, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the City Manager and
                     of the CITY OF MESA, an Arizona municipal corporation, and
that they being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the municipal corporation by
themselves and as such City Manager and                     .
WITNESS my hand and official seal.

            /s/ Ann Webster       Notary Public   

My Commission Expires:
May 27, 2010
(SEAL) [c98580p9858001.gif]

 

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          CITY OF TEMPE,
an Arizona municipal corporation
      By:   /s/ Hugh Hallman         Its: Mayor              Attest:
      /s/ Jan Hort       City Clerk            Approved as to Form:
      /s/ Andrew B. Ching       Tempe City Attorney     

     
STATE OF ARIZONA
  ) 
 
  )ss. 
County of Maricopa
  ) 

On April 26, 2010, before me, Kay Savard, a Notary Public in and for the State
of Arizona, personally appeared Hugh Hallman & Jan Hort, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the Mayor and City
Clerk of the CITY OF TEMPE, an Arizona municipal corporation, and that they
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of the municipal corporation by themselves
and as such                      and                     .
WITNESS my hand and official seal.

            /s/ Kay E. Savard       Notary Public   

My Commission Expires:
Aug. 20, 2013
(SEAL) [c98580c9858003.gif]

 

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Contract No. 2010-042-COS

          CITY OF SCOTTSDALE,
an Arizona municipal corporation
      By:   /s/ W. J. Lane         Its: Mayor              Attest:
      /s/ Carolyn Jagger       City Clerk            Approved as to Form:
      /s/ Steven B. Bennett       Scottsdale City Attorney     

     
STATE OF ARIZONA
  ) 
 
  )ss. 
County of Maricopa
  ) 

On April, 19 2010, before me, K. Stevens, a Notary Public in and for the State
of Arizona, personally appeared Jim Lane and Carolyn Jagger, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the Mayor and
City Clerk of the CITY OF SCOTTSDALE, an Arizona municipal corporation, and that
they being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the municipal corporation by
themselves and as such Mayor and City Clerk.
WITNESS my hand and official seal.

            /s/ K. Stevens       Notary Public   

     
My Commission Expires:
  (SEAL) [c98580c9858004.gif]
 
 
Nov. 28, 2013
 

 

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          CITY OF GLENDALE,
an Arizona municipal corporation
      By:   /a/ Pamela J. Kavanaugh         Its: Assistant City Manager         
    Attest:
      /s/ Pamela Hanna       City Clerk            Approved as to Form:
      /s/ Craig D. Tindall       Glendale City Attorney     

     
STATE OF ARIZONA
  ) 
 
  )ss. 
County of Maricopa
  ) 

On April, 16 2010, before me, Summer Steinke, a Notary Public in and for the
State of Arizona, personally appeared Pam Kavanaugh, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the Assistant City
Manager of the CITY OF GLENDALE, an Arizona municipal corporation, and that they
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of the municipal corporation by themselves
and as such Assistant City Manager.
WITNESS my hand and official seal.

            /s/ Summer Steinke       Notary Public   

     
My Commission Expires:
  (SEAL) [c98580c9858005.gif]
 
 
1/9/2011
 

 

29

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          ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation
  By:   /s/ Randall K. Edington         Its: EVP & CNO              Attest:
      /s/ Diane Wood      

     
STATE OF ARIZONA
  ) 
 
  )ss. 
County of Maricopa
  ) 

On April, 23 2010, before me, Barbara J. Dubishar, a Notary Public in and for
the State of Arizona, personally appeared Randall K. Edington AND Diane Wood,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the EVP & CNO and Associate Secretary of ARIZONA PUBLIC SERVICE COMPANY,
an Arizona corporation, and that they being authorized to do so, executed the
foregoing instrument for the purposes therein contained by signing the name of
the municipal (BJD) corporation by themselves and as such EVP & CNO and
Associate Secretary.
WITNESS my hand and official seal.

            /s/ Barbara J. Dubishar       Notary Public   

My Commission Expires:
December 12, 2010
(SEAL) [c98580c9858006.gif]

 

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          SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an
Arizona municipal corporation
and agricultural improvement district
      By:   /s/ John M. Williams, Jr.         Its: President              Attest
and Countersign:
      /s/ Terrill A. Lonon             Approved as to Form:
      /s/ Frederic L. Beeson      

     
STATE OF ARIZONA
  ) 
 
  )ss. 
County of Maricopa
  ) 

         On March, 26, 2010, before me, Fay A. Wehofer, a Notary Public in and
for the State of Arizona, personally appeared John M. Williams Jr, and Terrill
A. Lonon, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the President and Secretary of the SALT RIVER PROJECT
AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an Arizona municipal corporation
and agricultural improvement district, and that they being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the municipal corporation by themselves and as such President and
Secretary.
WITNESS my hand and official seal.

          (SEAL) [c98580c9858007.gif] /s/ Fay A. Wehofer     Notary Public 

My Commission Expires:
11/27/2011

 

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EXHIBIT “A”
Map of Delivery Points
(MAP) [c98580c9858008.gif]

 

 

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APPENDIX†
Examples of Non-Usage Fee Calculations under
Municipal Effluent Purchase and Sale Agreement
For purposes of this Appendix, a Committed Quantity of 80,000 acre-feet (AF) is
assumed. In addition, this Appendix assumes the following for the years 2028 and
2029:
2028
Delivered Effluent Quantity: 65,000 AF
Per Acre-Foot Price:
Tier 1 — $198.00
Tier 2 — $293.00
Tier 3 — $349.00
Tier 4 — $474.00
Average Per-Acre-Foot Price: $328.50 [($198.00 + $293.00 + $349.00 + $474.00) ÷
4]
Outage Periods and Effluent Usage
Unit 1 outage: May 1 through August 31 = 123 days
Unit 2 Effluent usage from May 1 through August 31: 8,220 AF
Unit 3 Effluent usage from May 1 through August 31: 8,230 AF
Unit 3 outage: November 16 through December 31 = 45 days (outage ongoing into
2029)
Unit 1 Effluent usage from November 16 through December 31: 2,318 AF
Unit 2 Effluent usage from November 16 through December 31: 2,316 AF
2029
Delivered Effluent Quantity: 72,500 AF
Per Acre-Foot Price:
Tier 1 — $203.94
Tier 2 — $301.79
Tier 3 — $359.47
Tier 4 — $488.22
Average Per-Acre-Foot Price: $338.36 [(203.94 + 301.79 + 359.47 + 488.22) ÷ 4]
Outage Period and Effluent Usage
Unit 3 outage: January 1 through February 28 = 59 days (outage continuing from
2028)
Unit 1 Effluent usage from January 1 through February 28: 3,040 AF
Unit 2 Effluent usage from January 1 through February 28: 3,036 AF
 

      †  
This Appendix is for illustrative purposes only and is neither incorporated into
nor made a part of the Municipal Effluent Purchase and Sale Agreement.
Capitalized terms used in this Appendix shall have the meanings ascribed to them
in the Municipal Effluent Purchase and Sale Agreement.

 

 

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In 2028, the Unit 1 outage lasted for a total of 123 days. Therefore, pursuant
to Section 5.1.3.1, it is an Extended Outage Period. Based on the totalizer
readings taken pursuant to Section 5.1.3.3, pursuant to Section 5.1.3.2, the
Representative Usage for the Unit 1 Extended Outage Period would be calculated
by taking the average Effluent usage of the two remaining PVNGS electric
generating units operating at full power (i.e., Units 2 and 3) over that same
period, or 8,225 AF [(8,220 AF + 8,230 AF) ÷ 2]. In 2028, Unit 3 was also in an
outage that commenced on November 16 and continued through the end of that year.
However, because only 45 days had passed, the outage was not treated as an
Extended Outage Period and, as a result, the Palo Verde Participants paid the
higher 30 percent Non-Usage Fee on that portion of the outage extending from
November 16 through December 31.
Pursuant to Sections 5.1.3.4 and 5.2, by January 31, 2029, the Palo Verde
Participants would pay Phoenix, on behalf of the SROG Cities, a Non-Usage Fee of
$1,208,058.75 calculated as follows:
Portion of 2028 Non-Usage Fee Payable over Extended Outage Period
$540,382.50 [8,225 AF x $328.50 x .20]
Portion of 2028 Non-Usage Fee Payable over Non-Extended Outage Period
$667,676.25 [(80,000 AF – 65,000 AF – 8,225 AF) x $328.50 x .30]
Total 2028 Non-Usage Fee: $540,382.50 + $667,676.25 = $1,208,058.75
In 2029, there was only one outage—an outage to Unit 3, which was a continuation
of the outage that commenced on November 16, 2028. Because the outage lasted
104 days until Unit 3 resumed full power on February 28, 2029, it constituted an
Extended Outage Period. The Representative Usage for that portion of the Unit 3
Extended Outage Period occurring from January 1, 2029 through February 28, 2029
would be calculated by taking the average Effluent usage of the two remaining
PVNGS electric generating units operating at full power (i.e., Units 1 and 2)
over that same period, or 3,038 AF [(3,040 AF + 3,036 AF) ÷ 2].
Because that portion of the Unit 3 outage extending from November 16 through
December 31, 2028 was not treated as an Extended Outage Period (because the
existence of such Extended Outage Period was unknown as of December 31 of that
year), the Palo Verde Participants paid the higher 30 percent Non-Usage Fee for
that 45-day period. Therefore, pursuant to Section 5.1.3.6, 10 percent of that
portion of the Non-Usage Fee attributable to that part of the Extended Outage
Period extending from November 16 through December 31, 2028 must be credited
against the Non-Usage Fee payable in 2029. To determine the amount of the
credit, the Representative Usage for that portion of the Unit 3 Extended Outage
Period occurring from November 16, 2028 through December 31, 2028 must be
calculated by taking the average Effluent usage of the two remaining PVNGS
electric generating units operating at full power (i.e., Units 1 and 2) over
that same period, or 2,317 AF [(2,318 AF + 2,316 AF) ÷ 2].
By January 31, 2030, the Palo Verde Participants would pay Phoenix, on behalf of
the SROG Cities, a Non-Usage Fee of $582,402.79 calculated as follows:
Portion of 2029 Non-Usage Fee Payable over Extended Outage Period
$205,587.54 [3,038 AF x $338.36 x .20]
Portion of 2029 Non-Usage Fee Payable over Non-Extended Outage Period
$452,928.70 [(80,000 AF – 72,500 AF – 3,038 AF) x $338.36 x .30]
Credit for that Portion of Extended Outage Period Occurring in 2028
$76,113.45 [2,317 AF x $328.50 x .10]
Total 2029 Non-Usage Fee: $205,587.54 + $452,928.70 – $76,113.45 = $582,402.79