Letter from
Salt River Project (SRP)

The following is a copy of a letter I received on Tuesday, February 3, 2004.

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SRP BEGINS PUBLIC PRICING PROCESS

SRP is beginning a public process to review a management pricing proposal. The public process reflects SRP's tradition of involving customers in decisions that will affect them. The process formally starts on January 30, 2004, and is proposed to conclude with an SRP Board of Directors' decision April 26, 2004, with changes, if any, proposed to be effective June 1, 2004.

Management proposes that the changes effective June 1, have no impact on the total price paid by customers during the upcoming summer season. However, to respond to a decade of inflation and customer growth, SRP management seeks an increase in prices effective November 1, 2004. The proposed increase would vary across customer classes, but represents an average annual increase to customer bills of 1.8%. If approved, the monthly bill for a typical residential customer using about 1,100 kilowatt-hours per month, effective November 1, will increase $2.65. SRP's last increase in standard electric price plans was over 10 years ago.

The proposed price change is a result of significant investments in new power plants, power lines, and distribution equipment to meet growing customer demand for electricity. Customer demand increased 50% during the past decade.

While management's proposal has no immediate impact on overall price levels, it does rearrange various components of existing prices. The amount of the "competitive transition charge," currently a component of the delivery portion of each bill, would be moved to the "shopping credit" portion of customer bills. The shopping credit is the energyportion of the bill and can be used in comparing SRP's prices with those of alternative energy suppliers. Further, all costs related to fuel and purchased power would be identified as a separate component of price.

As a result of this change, management is proposing changes to the fuel and purchased power adjustment mechanism. Management also has proposed certain changes to (i) the "rules and regulations of electric service" and (ii) the calculation methodology for late payment fees and interest charges, and has proposed a provision to recover the costs incurred if "Regional Transmission Organizations" become active in Arizona.

SRP REMAINS COMMITTED TO LOW PRICES

SRP decreased electric prices 11% after 1991. Recent fuel and purchased power adjustments offset some, but not all, of these decreases. Current SRP prices are 4.6% below 1991 price levels. That means that $1 of electricity 13 years ago can be bought for a little less than $1 today, despite the fact that the consumer price index has risen nearly 40% over the same time.

Even with the November increase, SRP electric prices would continue to be among the lowest in the Southwest.

ENVIRONMENTAL AND CONSERVATION
PRINCIPLES LINKED TO PRICING

SRP also is holding a public process this sprint to adop principles to govern SRP's future environmental and conservation initiatives. This process will expand upon SRP's commitment to provide environmentally friendly generation resources (for example, wind, solar, geothermal and biomass energy), and to continue and expand customer conservation measures. SRP's initiatives are funded through a component of price known as the "system benefits charge." The level of the system benefits charge will be considered and determined in the pricing process.

A public workshop to discuss the process for developing the environmental and conservation priciples will be conducted on Monday, February 23, at 9:30 a.m. at SRP's main administrative offices, 1521 N. Project Drive, Tempe. The meeting will be conducted by a consultant retained by SRP's Board.

YOU'RE INVITED TO PARTICIPATE

As a customer, you have esveral opportunities to learn more about SRP's proposal and to submit your comments. You can review the proposed price adjustment in our information room at SRP's main administrative offices, 1521 N. Project Drive, Tempe. You also can get information about current residental and business prices from our Web site at www.srpnet.com, or discuss the adjustment with SRP representatives during a series of informational meetings. Here are the dates, times and locations of these meetings.

February 26	Residential and Small Business Customer Meeting 6 p.m. to 9 p.m. Dobson Ranch Library 2425 S. Dobson Road, Mesa
March 4	Commercial Customer/Stakeholder Meeting 9:30 a.m. to 4 p.m. SRP Project Administration Building, Mohave Rooms 1521 N. Project Drive, Tempe
March 10	Residential and Small Business Customer Meeting 6 p.m. to 9 p.m. Desert Sage Library 7602 W. Encanto Boulevard, Phoenix
March 17	Residential and Small Business Customer Meeting 6 p.m. to 9 p.m. SRP Project Administration Building, Mohave Rooms 1521 N. Project Drive, Tempe

SRP's publicly elected Board then will conduct a special meeting on March 29, beginning at 9:30 a.m. at SRP's main offices, 1521 N. Project Drive, Tempe, to formally review the price proposals and allow interested persons an opportunity to questions to SRP Management and present comments and proposals to the Board.

It is anticipated that on April 26, after considering management's recommendations and any public input, SRP's Board will decide on the price proposal. For Further information about the public process, see the accompanying Legal Notice.

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LEGAL NOTICE

NOTICE OF MEETING OF BOARD OF DIRECTORS ON CHANGES TO STANDARD ELECTRIC RATE SCHEDULES ("PRICE PLANS") AND TERMA AND CONDITIONS OF COMPETITION PURSUANT TO A.R.S. SECTIONS 30-802 AND 48-2334, AND CERTAIN PROPOSED CHANGES TO THE RULES AND REGULATIONS REGARDING LIABILITY IN THE EVENT OF INTERRUPTION, VARIATION OR CURTAILMENT OF SERVICE.

SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT

The Board of Directors of the Salt River Project Agricultrual Improvement and Power District ("SRP") is considering: (i) adjustments to its standard electric rate schedules ("price plans"), including riders, (ii) establishing additional escalation provisions and changing the method of calculating the existing escalation provisions of the price plans, and (iii) modifications to ccertain of its terms and conditions for competition in the retail sale of electric service (collectively, the "Price Proposal"), as determined in the reasonable discretion of the SRP Board of Directors.

In addition, the Board of Directors will consider certain proposed changes to the SRP Rules and Regulations regarding liability in the event of interruption, variation or curtailment of service. The proposed changes will modify the current limitation of liability provisions in the Rules and Regulations.

From 8:30 a.m. on January 30, 2004, to 5:00 p.m. on June 1, 2004, weekdays, SRP will make available for inspection at its main administration offices, 1521 North Project Drive, Tempe, Arizona, 85281, information pertinents to the Price Proposal and proposed Rules and Regulations changes including:

1. Management's recommended Price Proposal;
   
   
2. Relevant financial and other information as may be pertinent and upon which the management proposal is based, including data from budgets and long-range plans; SRP will timely supplement such information as my be reasonably requested by any interested person and will answer reasonable questions posed by any interested person;
   
   
3. Management's proposed changes to the SRP Rules and Regulations regarding liability in the event of inteerruption, variation or curtailment of service;
   
   
4. Current prices, terma and conditions, including the terms and conditions for competition adopted by the SRP Board of Directors at its November 26, 2001, meeting, as amended to date;
   
   
5. Reports by consultants to the Board, if any; and
   
   
6. Proposals and comments submitted by interested persons.

Interested persons may:

1. File written comments and proposals: Written comments and proposals may be submitted at any time during the process. It is recommended, however, that written comments and proposals be submitted by April 8, 2004.
   
   
2. Submit written questions to SRP management: Written questions may be submitted at any time through April 8, 2004. Management will make a reasonable effort to timely respond to each question.
   
   
3. Submit written requests for documents to SRP management: Written requests for documents may be submitted at any time through April 8, 2004. Management will make a reasonable effort to timely accommodate each request.
   
   
4. Request interviews with SRP management or with the Board's consultants: At 9:30 a.m. on March 4, 2004, management will present an overview of the Price Proposal and the proposed changes to the Rules and Regulations at the SRP Project Administration Building, 1521 North Project Drive, Tempe, Arizona, 85281. Following the presentation, SRP will make available for questioning representatives of its Pricing Department or other appropriate representatives until 4:00 p.m. In addition, any person may request an interview with a specific management representative or Board consultant. Such requests should be in writing and should be addressed to [email protected], mailed to SRP Corporate Secretary, PAB 215, P.O. Box 52025, Phoenix, Arizona 85072-2025, faxed to (602) 236-2188 or hand-delivered to SRP Corporate Secretary, 1521 North Project Drive, Tempe, Arizona 85281 no later than February 26, 2004.

All comments, proposals, questions and document requests should be in writing and should be addressed to [email protected], mailed to SRP Corporate Secretary, PAB 215, P.O. Box 52025, Phoenix, Arizona 85072-2025, faxed to (602) 236-2188 or hand-delivered to SRP Corporate Secretary, 1521 North Project Drive, Tempe, Arizona 85281.

Persons wishing to participate in these proceddings may provide their names, addresses, telephone numbers, facsimile numbers (optional) and e-mail addresses (optional) to the SRP Corporate Secretary. This will insure that the participant will be given timely notice of additional meetings and copies of additional materials. Persons providing their names and addresses to the SRP Corporate Secretary will be considered "parties" within the meaning of A.R.S. Sections 30-810 through 812 for the purpose of these proceedings.

A meeting of the Board of Directors of SRP will convene at 9:30 a.m. on March 29, 2004, in the Project Administration Building, 1521 North Project Drive, Tempe, Arizona 85281, to:

1. Afford SRP management an opportunity to explain the Price Proposal and the criteria for such prices, terms and conditions and to answer questions;
   
   
2. Afford SRP management an opportunity to explain management's proposed changes to the SRP Rules and Regulations regarding liability in the event of interruption, variation or curtailment of service;
   
   
3. Afford the Board's consultant(s) an opportunity to comment upon the Price Proposal and the proposed changes to the Rules and Regulations; and
   
   
4. Afford interested persons a reasonable opportunity to orally present their views, questions and comments and to pose questions to management and consultants.

The March 29, 2004, meeting is the board meeting described in A.R.S. Sections 48-2334(D) and 30-802(B)(3).

The Board of Directors will make its decision on the Price Proposal and the proposed changes to the SRP Rules and Regulations following review of information and comments gathered pursuant to the procedures set forth in this Notice. The Board anticipates conducting a meeting for this purpose at 9:30 a.m. on April 26, 2004, in the Project Administration Building, 1521 North Project Drive, Tempe, Arizona 85281.

BY ORDER OF THE PRESIDENT OF SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT.

January 30, 2004

Terrill Lonon
Corporate Secretary