Letter from
Salt River Project (SRP)

The following is a copy of a letter I received on Thursday, April 28, 2005.

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April 2005

Dear Dennis Betz,

We are all very aware that fuel prices have gone up. The purpose of this letter is to let you know of certain changes in prices related to fuel used in our power plants that will affect your SRP bills this coming summer and winter. The average annual impact of these changes on customer bills is projected to be 1.6 percent.

SRP diversifies its fuel sorces in an effort to manage price swings. In addition, we have a very active program of "buying ahead", which helps us economize on, and stabilize, fuel costs. We believe these steps have been very effective, and helped us keep this increase to a relatively small size.

However, the price of our fuel sources in particular, natural gas, has gone up substantially. We only use it to produce about 12 percent of the electricity provided to you, mostly in the summer, but its price has increased nearly 120 percent in the last three years. Fuel costs appear on your bill as the "Fuel and Purchased Power Adjustment Factor" and are a straight pass through of actual costs. Very recently, SRP's Board of Directora approved an annual plan for these charges for the upcoming summer and winter.

The plan approved by the SRP Board on April 11 will increase the average cutomer's billing of the next year by 1.6 percent. The impact on summer bills, because of natrual gas costs, will be an increase of more electricity, and so more fuel, in the summer than the winter, this works out to be an annual effective increase of 1.6 percent.

Also included in your bill are charges for things other than fuel - for the most part reflecting the costs of the power plants and transmission lines necessary to produce your electricity and deliver it to you.

Last year, SRP increased prices because of increases in these costs for both summer and winter by about 2.3 percent. This was put into effect before the winter season, so this coming summer will be the first time your bills will also reflect this change. These changes are all added together, so the average customer's summer bills will rise 7 percent. Again, the winter bills will decrease by 4.3 percent, so this helps to offset the summer increase, but does not do so completely.

We would perfer to tell you our costs, and so your prices, were decreasing. However, prices for electricity are increasing nationwide. Please know that SRP is taking every step possible to keep increases in our fuel and other costs low, so that the increases in the prices you pay are as modest as possible. SRP prices remain among the lowest in the Southwest. We appreciate your understanding and will continue to provide you the best value for your energy dollar.

Sincerely,

Michael Lowe (signed)

Michael Lowe
Manager, Customer Services

P.S. SRP offers lower prices 75 percent of the week with its Time-of-Use Price Plan. Sign up today with a no-risk, money back guarantee. Visit www.srpnet.com/tou or call (602) 236-8888.