Exhibit 10.1





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;





 


 









 






	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






 


22









 





	 	 	 	 	 
	 

	 	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.





 


23









 






	 	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]



 


24









 





	 	 	 	 	 
	CITY OF PHOENIX,

an Arizona municipal corporation

 	 	 
	By:  	/s/ David Cavazos
 	 	
	 	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

	 	





 


25









 





	 	 	 	 	 
	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








 


26









 





	 	 	 	 	 
	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







 


27









 





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:

	 	
	 
	 
	Nov. 28, 2013
	 





 


28









 





	 	 	 	 	 
	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:

	 	
	 
	 
	1/9/2011
	 





 


29









 





	 	 	 	 	 
	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








 


30









 





	 	 	 	 	 
	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.



	 	 	 	 	 
		/s/ Fay A. Wehofer
 
	 	Notary Public 




My Commission Expires:



11/27/2011



 


31









 





EXHIBIT “A”



Map
of Delivery Points





 


 









 





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.




 


 









 





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