<PAGE>
===============================================================================
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-296
El Paso Electric Company
(Exact name of registrant as specified in its charter)
Texas 74-0607870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Kayser Center, 100 North Stanton, El Paso, Texas 79901
(Address of principal executive offices) (Zip Code)
(915) 543-5711
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO
--- ---
As of August 10, 1999, there were 59,436,535 of the Company's no par value
common stock outstanding.
===============================================================================
<PAGE>
EL PASO ELECTRIC COMPANY
INDEX TO FORM 10-Q
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1999 and December 31, 1998............... 1
Statements of Operations - Three Months, Six Months and
Twelve Months Ended June 30, 1999 and 1998......................... 3
Statements of Comprehensive Operations - Three Months, Six
Months and Twelve Months Ended June 30, 1999 and 1998.............. 5
Statements of Cash Flows - Six Months Ended
June 30, 1999 and 1998............................................. 6
Notes to Financial Statements...................................... 7
Independent Auditors' Review Report................................ 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 28
Item 4. Submission of Matters to a Vote of Security Holders............ 28
Item 6. Exhibits and Reports on Form 8-K............................... 28
i
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EL PASO ELECTRIC COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30,
(In thousands) 1999 December 31,
(Unaudited) 1998
---------------- ---------------
<S> <C> <C>
Utility plant:
Electric plant in service.............................................. $1,618,760 $1,599,207
Less accumulated depreciation and amortization......................... 288,939 243,405
---------- ----------
Net plant in service................................................. 1,329,821 1,355,802
Construction work in progress.......................................... 65,342 54,641
Nuclear fuel; includes fuel in process of $6,686 and
$8,031, respectively................................................. 87,699 89,784
Less accumulated amortization.......................................... 45,524 45,691
---------- ----------
Net nuclear fuel..................................................... 42,175 44,093
---------- ----------
Net utility plant.................................................. 1,437,338 1,454,536
---------- ----------
Current assets:
Cash and temporary investments......................................... 49,106 229,150
Accounts receivable, principally trade, net of allowance for
doubtful accounts of $1,464 and $1,738, respectively................. 56,209 64,735
Inventories, at cost................................................... 26,520 27,537
Prepayments and other.................................................. 7,050 16,896
---------- ----------
Total current assets............................................... 138,885 338,318
---------- ----------
Long-term contract receivable............................................ 20,241 23,139
---------- ----------
Deferred charges and other assets:
Accumulated deferred income taxes, net................................. 761 10,518
Decommissioning trust fund............................................. 52,385 46,725
Other.................................................................. 17,493 17,983
---------- ----------
Total deferred charges and other assets............................ 70,639 75,226
---------- ----------
Total assets....................................................... $1,667,103 $1,891,219
========== ==========
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
EL PASO ELECTRIC COMPANY
BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
CAPITALIZATION AND LIABILITIES June 30,
(In thousands except for share data) 1999 December 31,
(Unaudited) 1998
------------------ ------------------
<S> <C> <C>
Capitalization:
Common stock, stated value $1 per share, 100,000,000 shares
authorized, 60,200,921 and 60,122,377 shares issued,
and 256,169 and 147,985 restricted shares, respectively................. $ 60,457 $ 60,270
Capital in excess of stated value........................................... 242,481 241,325
Unearned compensation - restricted stock awards............................. (1,457) (611)
Retained earnings........................................................... 118,578 115,193
Accumulated other comprehensive income (unrealized
gains on marketable securities)......................................... 3,007 1,101
---------- ----------
423,066 417,278
Reacquired common stock, 475,300 shares; at cost............................ (4,288) -
---------- ----------
Common stock equity................................................. 418,778 417,278
Preferred stock, redemption required, cumulative, no par value,
2,000,000 shares authorized, 1,357,444 shares issued and
outstanding; at liquidation preference.................................. - 135,744
Long-term debt.............................................................. 827,810 872,213
Financing and capital lease obligations..................................... 22,189 24,849
---------- ----------
Total capitalization............................................ 1,268,777 1,450,084
---------- ----------
Current liabilities:
Current maturities of long-term debt and financing and
capital lease obligations............................................... 27,402 63,817
Accounts payable, principally trade......................................... 15,216 31,135
Taxes accrued other than federal income taxes............................... 17,201 20,316
Interest accrued............................................................ 18,109 20,412
Net overcollection of fuel revenues......................................... 3,210 2,632
Provision for Texas Settlement base revenue refund.......................... 4,156 -
Other....................................................................... 25,703 19,359
---------- ----------
Total current liabilities....................................... 110,997 157,671
---------- ----------
Deferred credits and other liabilities:
Decommissioning liability................................................... 133,143 129,750
Accrued postretirement benefit liability.................................... 83,139 80,477
Accrued pension liability................................................... 33,688 33,880
Other....................................................................... 37,359 39,357
---------- ----------
Total deferred credits and other liabilities.................... 287,329 283,464
---------- ----------
Commitments and contingencies
Total capitalization and liabilities............................ $ 1,667,103 $ 1,891,219
=========== ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
EL PASO ELECTRIC COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except for share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ----------------------------
1999 1998 1999 1998
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues............................................. $ 132,722 $ 146,403 $ 262,591 $ 283,348
------------ ------------ ----------- ------------
Energy expenses:
Fuel......................................................... 22,272 27,630 44,334 53,112
Purchased and interchanged power............................. 3,968 4,644 4,720 7,808
------------ ------------ ----------- ------------
26,240 32,274 49,054 60,920
------------ ------------ ----------- ------------
Operating revenues net of energy expenses...................... 106,482 114,129 213,537 222,428
------------ ------------ ----------- ------------
Other operating expenses:
Other operations............................................. 31,879 31,623 62,511 64,193
Maintenance.................................................. 11,874 8,320 20,788 16,522
Depreciation and amortization................................ 22,931 22,312 45,736 44,539
Taxes other than income taxes................................ 10,889 11,156 22,169 22,516
------------ ------------ ----------- ------------
77,573 73,411 151,204 147,770
------------ ------------ ----------- ------------
Operating income............................................... 28,909 40,718 62,333 74,658
------------ ------------ ----------- ------------
Other income (deductions):
Investment income............................................ 1,041 2,357 3,720 4,992
Settlement of bankruptcy professional fees................... - 228 - 604
Other, net................................................... 430 (808) (483) (834)
------------ ------------ ----------- ------------
1,471 1,777 3,237 4,762
------------ ------------ ----------- ------------
Income before interest charges................................. 30,380 42,495 65,570 79,420
------------ ------------ ----------- ------------
Interest charges (credits):
Interest on long-term debt................................... 18,565 20,359 37,720 40,695
Other interest............................................... 2,038 1,788 4,075 3,553
Interest capitalized and deferred............................ (1,635) (1,625) (3,339) (3,246)
------------ ------------ ----------- ------------
18,968 20,522 38,456 41,002
------------ ------------ ----------- ------------
Income before income taxes..................................... 11,412 21,973 27,114 38,418
Income tax expense............................................. 4,364 8,278 10,604 14,208
------------ ------------ ----------- ------------
Income before extraordinary loss on
repurchases of debt.......................................... 7,048 13,695 16,510 24,210
Extraordinary loss on repurchases of debt,
net of income tax benefit.................................... (1,183) - (1,183) -
------------ ------------ ----------- ------------
Net income..................................................... 5,865 13,695 15,327 24,210
Preferred stock:
Dividend requirements........................................ - 3,624 2,616 7,147
Redemption costs............................................. 10 - 9,581 -
------------ ------------ ----------- ------------
Net income applicable to common stock.......................... $ 5,855 $ 10,071 $ 3,130 $ 17,063
============ ============ =========== ============
Basic earnings per common share:
Income before extraordinary loss on repurchases of debt...... $ 0.117 $ 0.167 $ 0.072 $ 0.284
Extraordinary loss on repurchases of debt, net of
income tax benefit........................................ (0.020) - (0.020) -
------------ ------------ ----------- ------------
Net income................................................ $ 0.097 $ 0.167 $ 0.052 $ 0.284
============ ============ =========== ============
Diluted earnings per common share:
Income before extraordinary loss on repurchases of debt...... $ 0.116 $ 0.166 $ 0.071 $ 0.282
Extraordinary loss on repurchases of debt, net of
income tax benefit........................................ (0.019) - (0.019) -
------------ ------------ ----------- ------------
Net income................................................ $ 0.097 $ 0.166 $ 0.052 $ 0.282
============ ============ =========== ============
Weighted average number of common shares outstanding........... 60,206,105 60,169,436 60,208,059 60,167,618
============ ============ =========== ============
Weighted average number of common shares and
dilutive potential common shares outstanding................. 60,620,696 60,740,262 60,415,355 60,591,778
============ ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
EL PASO ELECTRIC COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except for share data)
<TABLE>
<CAPTION>
Twelve Months Ended
June 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Operating revenues.............................................................. $ 581,464 $ 597,254
----------- -----------
Energy expenses:
Fuel.......................................................................... 100,672 112,660
Purchased and interchanged power.............................................. 17,522 19,938
----------- -----------
118,194 132,598
----------- -----------
Operating revenues net of energy expenses....................................... 463,270 464,656
----------- -----------
Other operating expenses:
Other operations.............................................................. 132,568 133,956
Maintenance................................................................... 39,221 32,465
New Mexico Settlement charge.................................................. 6,272 -
Depreciation and amortization................................................. 91,010 89,271
Taxes other than income taxes................................................. 43,985 43,917
----------- -----------
313,056 299,609
----------- -----------
Operating income................................................................ 150,214 165,047
----------- -----------
Other income (deductions):
Investment income............................................................. 10,234 8,965
Settlement of bankruptcy professional fees.................................... 657 654
Other, net.................................................................... (1,379) 28
----------- -----------
9,512 9,647
----------- -----------
Income before interest charges.................................................. 159,726 174,694
----------- -----------
Interest charges (credits):
Interest on long-term debt.................................................... 77,992 83,005
Other interest................................................................ 7,720 6,367
Interest capitalized and deferred............................................. (6,493) (6,232)
----------- -----------
79,219 83,140
----------- -----------
Income before income taxes...................................................... 80,507 91,554
Income tax expense.............................................................. 31,134 34,717
----------- -----------
Income before extraordinary items............................................... 49,373 56,837
----------- -----------
Extraordinary items:
Extraordinary gain on discharge of debt, net of income tax expense............ 3,343 -
Extraordinary loss on repurchases of debt, net of income tax benefit.......... (1,183) -
----------- -----------
2,160 -
----------- -----------
Net income...................................................................... 51,533 56,837
Preferred stock:
Dividend requirements......................................................... 10,176 13,904
Redemption costs.............................................................. 9,581 -
----------- -----------
Net income applicable to common stock........................................... $ 31,776 $ 42,933
=========== ===========
Basic earnings per common share:
Income before extraordinary items............................................. $ 0.492 $ 0.714
Extraordinary gain on discharge of debt, net of income tax expense............ 0.056 -
Extraordinary loss on repurchases of debt, net of income tax benefit.......... (0.020) -
----------- -----------
Net income................................................................. $ 0.528 $ 0.714
=========== ===========
Diluted earnings per common share:
Income before extraordinary items............................................. $ 0.489 $ 0.710
Extraordinary gain on discharge of debt, net of income tax expense............ 0.055 -
Extraordinary loss on repurchases of debt, net of income tax benefit.......... (0.019) -
----------- -----------
Net income................................................................. $ 0.525 $ 0.710
=========== ===========
Weighted average number of common shares outstanding............................ 60,188,290 60,151,260
=========== ===========
Weighted average number of common shares and
dilutive potential common shares outstanding.................................. 60,544,922 60,500,662
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
EL PASO ELECTRIC COMPANY
STATEMENTS OF COMPREHENSIVE OPERATIONS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income...................................... $ 5,865 $ 13,695 $ 15,327 $ 24,210 $ 51,533 $ 56,837
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable
securities, less applicable income tax
(expense) benefit of $(683), $6, $(1,027),
$(207), $(1,511) and $(35), respectively..... 1,268 (11) 1,906 386 2,805 64
-------- -------- -------- -------- -------- --------
Comprehensive income............................ 7,133 13,684 17,233 24,596 54,338 56,901
Preferred stock:
Dividend requirements.......................... - 3,624 2,616 7,147 10,176 13,904
Redemption costs............................... 10 - 9,581 - 9,581 -
-------- -------- -------- -------- -------- --------
Comprehensive income applicable
to common stock................................ $ 7,123 $ 10,060 $ 5,036 $ 17,449 $ 34,581 $ 42,997
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
EL PASO ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income........................................................ $ 15,327 $ 24,210
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 45,736 44,539
Amortization of nuclear fuel.................................... 10,351 10,974
Deferred income taxes, net...................................... 9,486 12,850
Provision for Texas Settlement base revenue refund.............. 4,156 -
Extraordinary loss on repurchases of debt, net of
income tax benefit........................................... 1,183 -
Other operating activities...................................... 2,697 2,970
Change in:
Accounts receivable............................................. 8,526 (2,419)
Inventories..................................................... 1,017 (293)
Prepayments and other........................................... 9,846 (2,377)
Long-term contract receivable................................... 2,898 2,219
Accounts payable................................................ (15,919) (5,416)
Taxes accrued other than federal income taxes................... (3,115) (2,280)
Interest accrued................................................ (2,303) (862)
Net over/undercollection of fuel revenues....................... 578 3,433
Other current liabilities....................................... 8,923 1,524
Deferred charges and credits.................................... 2,944 4,154
------------ ------------
Net cash provided by operating activities..................... 102,331 93,226
------------ ------------
Cash Flows From Investing Activities:
Cash additions to utility property, plant and equipment........... (29,501) (20,479)
Cash additions to nuclear fuel.................................... (6,741) (7,841)
Interest capitalized:
Nuclear fuel.................................................... (1,691) (2,027)
Utility property, plant and equipment........................... (1,648) (1,219)
Investment in decommissioning trust fund.......................... (2,728) (3,122)
Other investing activities........................................ (136) (42)
------------ ------------
Net cash used for investing activities........................ (42,445) (34,730)
------------ ------------
Cash Flows From Financing Activities:
Reacquired common stock........................................... (4,288) -
Repurchases of and payments on long-term debt..................... (82,196) (30,582)
Nuclear fuel financing obligations:
Proceeds........................................................ 8,433 9,877
Payments........................................................ (10,725) (11,081)
Redemption of preferred stock..................................... (148,937) -
Preferred stock dividend payment.................................. (1,328) -
Payments on capital lease obligations............................. (751) (683)
Other financing activities........................................ (138) (69)
------------ ------------
Net cash used for financing activities........................ (239,930) (32,538)
------------ ------------
Net (decrease) increase in cash and temporary investments........... (180,044) 25,958
Cash and temporary investments at beginning of period............... 229,150 111,227
------------ ------------
Cash and temporary investments at end of period..................... $ 49,106 $ 137,185
============ ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
A. Principles of Preparation
Pursuant to the rules and regulations of the Securities and Exchange
Commission, certain financial information has been condensed and certain
footnote disclosures have been omitted. Such information and disclosures are
normally included in financial statements prepared in accordance with generally
accepted accounting principles.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto in the Annual Report of El Paso Electric
Company (the "Company") on Form 10-K for the year ended December 31, 1998 (the
"1998 Form 10-K"). Capitalized terms used in this report and not defined herein
have the meaning ascribed for such terms in the 1998 Form 10-K. In the opinion
of management of the Company, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position of the Company at
June 30, 1999 and December 31, 1998; the results of operations for the three,
six and twelve months ended June 30, 1999 and 1998; and cash flows for the six
months ended June 30, 1999 and 1998. The results of operations for the three,
six and twelve months ended June 30, 1999 are not necessarily indicative of the
results to be expected for the full calendar year.
Supplemental Cash Flow Disclosures (In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Cash paid for:
Interest on long-term debt....................... $36,706 $37,905
Income taxes, net................................ 1,200 1,300
Reorganization items - professional
fees and other............................... - 2,715
Non-cash investing and financing activities:
Issuance of preferred stock for
pay-in-kind dividend......................... 3,867 7,010
Issuance of restricted shares of
common stock................................. 1,480 195
</TABLE>
7
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Reconciliation of Basic and Diluted Earnings Per Common Share
The reconciliation of basic and diluted earnings per common share before
extraordinary items is presented below:
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------------------------
1999 1998
----------------------------------- -----------------------------------
Per Per
Common Common
Income Shares Share Income Shares Share
-------------- ---------- ------- -------------- ---------- -------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary item..... $ 7,048 $ 13,695
Less:
Preferred stock:
Dividend requirements............ - 3,624
Redemption costs................. 10 -
------------- -------------
Basic earnings per common share:
Net income applicable to
common stock....................... 7,038 60,206,105 $ 0.117 10,071 60,169,436 $ 0.167
======= =======
Effect of dilutive securities:
Unvested restricted stock........... - 29,186 - 31,840
Stock options....................... - 385,405 - 538,986
------------- ---------- ------------- ----------
Diluted earnings per common share:
Net income applicable to
common stock....................... $ 7,038 60,620,696 $ 0.116 $ 10,071 60,740,262 $ 0.166
============= ========== ======= ============= ========== =======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------------------
1999 1998
----------------------------------- -----------------------------------
Per Per
Common Common
Income Shares Share Income Shares Share
-------------- ---------- ------- -------------- ---------- -------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary item..... $ 16,510 $ 24,210
Less:
Preferred stock:
Dividend requirements............ 2,616 7,147
Redemption costs................. 9,581 -
------------- -------------
Basic earnings per common share:
Net income applicable to
common stock....................... 4,313 60,208,059 $ 0.072 17,063 60,167,618 $ 0.284
======= =======
Effect of dilutive securities:
Unvested restricted stock........... - 14,593 - 23,168
Stock options....................... - 192,703 - 400,992
------------- ---------- ------------- ----------
Diluted earnings per common share:
Net income applicable to
common stock....................... $ 4,313 60,415,355 $ 0.071 $ 17,063 60,591,778 $ 0.282
============= ========== ======= ============= ========== =======
</TABLE>
8
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Twelve Months Ended June 30,
-----------------------------------------------------------------------
1999 1998
--------------------------------- ----------------------------------
Per Per
Common Common
Income Shares Share Income Shares Share
------------ ---------- ------- ---------- ---------- -------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary items.... $ 49,373 $ 56,837
Less:
Preferred stock:
Dividend requirements............ 10,176 13,904
Redemption costs................. 9,581 -
------------ ----------
Basic earnings per common share:
Net income applicable to
common stock....................... 29,616 60,188,290 $ 0.492 42,933 60,151,260 $ 0.714
======= =======
Effect of dilutive securities:
Unvested restricted stock........... - 26,022 - 18,867
Stock options....................... - 330,610 - 330,535
------------ ---------- ---------- ----------
Diluted earnings per common share:
Net income applicable to
common stock....................... $ 29,616 60,544,922 $ 0.489 $ 42,933 60,500,662 $ 0.710
============ ========== ======= ========== ========== =======
</TABLE>
B. Rate Matters
For a full discussion of the Company's rate matters, see Note B of Notes to
Financial Statements in the 1998 Form 10-K.
Texas Rate Matters
A comprehensive electric industry restructuring bill was signed into law by
the Governor of Texas on June 18, 1999, and becomes effective September 1, 1999.
Under this law, retail customer choice will begin in the service territories of
most investor-owned utilities on January 1, 2002. Municipal and cooperative
utilities will have the option of electing to offer customer choice in their
service areas. The Company is exempt from the competitive provisions of this
law until August 2005, the expiration of the Freeze Period. After July 2005,
the Company will not have a claim for stranded costs or transition costs
incurred or otherwise provided for pursuant to the law. The Company will be
subject to the provisions of the new law after July 2005. The competitive
provisions of the new law include the following: (i) a 6% rate reduction,
coincident with the start of retail choice, for residential and small commercial
customers; (ii) a limitation that no power generation company may own and
control more than 20% of the generation capacity in a power region; (iii) an
obligation to auction entitlements to at least 15% of a utility's Texas
jurisdictional installed generation capacity, continuing until the earlier of 60
months after the date customer choice is introduced or the date the Texas
Commission determines that 40% of the power consumed by residential and small
commercial customers is served by non-affiliated retail electric providers; (iv)
a reduction in emissions for grandfathered plants by May 2003; (v) an additional
2,000 MW of statewide renewable energy capacity by 2009; (vi) the establishment
of a System Benefit
9
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Fund ($0.50/MWh) for customer education and low-income assistance; and (vii) a
detailed affiliate code of conduct to govern relationships between the regulated
utility and its affiliates.
New Mexico Rate Matters
A comprehensive electric utility industry restructuring bill was signed
into law by the Governor of New Mexico and became effective on April 8, 1999.
Under this law, retail customer choice begins January 1, 2001 for public post-
secondary educational institutions, public schools, and residential and small
business customers. Retail customer choice begins January 1, 2002 for all other
customers. The New Mexico Commission may delay implementation of retail customer
choice or other deadlines established by the new law for up to one year. The new
law allows utilities to recover no less than 50% of their stranded costs with up
to 100% recovery allowed if the New Mexico Commission determines that additional
recovery is in the public interest, is necessary to maintain a utility's
financial integrity, is necessary to continue adequate and reliable service, and
will not cause an increase in rates to residential and small business customers.
Utilities are required to file transition plans addressing the various
restructuring issues, including the recovery of stranded costs, by March 1,
2000. The new law also allows the New Mexico Commission to review and approve
any rate settlement previously approved by the New Mexico Commission as a means
of transition to competition.
On June 30, 1999, the New Mexico Commission ordered the review of the
Company's New Mexico Settlement. Under the new law, the New Mexico Commission
may review certain transition plans previously approved by the New Mexico
Commission and confirm, reject or modify such plans by the end of November 1999,
unless the New Mexico Commission extends this deadline under certain provisions
of the new law. If the New Mexico Commission approves the New Mexico
Settlement, it will supersede the new law to the extent the new law is
inconsistent. On August 3, 1999, the Company filed with the New Mexico
Commission testimony and exhibits in support of the New Mexico Settlement.
Although the Company believes that the recovery of costs provided for in the New
Mexico Settlement is consistent with the intent of the new law, it cannot
predict whether the New Mexico Commission's review will impact the Company's
revenues and recovery of costs contemplated under the New Mexico Settlement, or
whether the Company will be able to maintain its New Mexico rates at the new
levels.
Federal Rate Matters
In July 1996, Las Cruces exercised its right under FERC Order No. 888 to
request that the Company calculate Las Cruces' stranded cost obligation should
it leave the Company's system and operate its own municipal utility while
receiving certain transmission services from the Company. Las Cruces
subsequently filed a request at the FERC for a summary determination that Las
Cruces would have no stranded cost obligation to the Company or, in the
alternative, that the FERC convene a hearing to establish the amount of any
stranded costs. On May 26, 1999, the FERC issued its opinion and ruled that
based on the FERC's method for calculating stranded costs, Las Cruces' stranded
cost obligation was $52.9 million, assuming a departure date of July 1, 1999.
Although this amount is approximately $30 million higher than an earlier
administrative law judge's recommendation, the Company believes the FERC's
decision is inconsistent with the intent and policy of FERC Order
10
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
No. 888, which establishes the right to full recovery of a utility's stranded
generation cost. The Company continues to believe it is entitled to full
compensation for the costs it incurred with the expectation of continuing to
serve Las Cruces. The Company filed a motion for rehearing of the FERC's
decision. The FERC has extended its time limit for ruling on this motion. The
Company cannot predict when the FERC will rule on this motion. See Note B of
Notes to Financial Statements in the 1998 Form 10-K for a full discussion of
stranded costs.
Pursuant to FERC Order No. 888, the Company filed its non-discriminatory
open access transmission tariffs with the FERC in July 1996. The Company reached
a settlement with the various parties regarding rates for transmission and
ancillary services under these tariffs. However, the settlement, which was filed
with the FERC in March 1997 and approved by the FERC in June 1998, did not
resolve the issues concerning the manner in which the Company will determine the
amount of transmission capacity that is available for use by third parties
desiring to use its transmission system and whether the Company must provide
back-up generation services to third parties using its transmission system.
On May 26, 1999, the FERC issued its opinion in a proceeding brought by
Southwestern Public Service Company ("SPS") regarding the use of the Company's
transmission system to serve Las Cruces, holding that the Company was not
obligated under FERC Order No. 888 to provide back-up generation services to
third parties using its transmission system. However, the FERC stated that, for
purposes of this calculation, the Company should assume that it would not be
providing generation service to Las Cruces or Comision Federal de Electricidad
("CFE"), and the loads of those customers should be omitted from its calculation
of available transmission capacity. The FERC also concluded that once the
Company's calculation was adjusted to reflect the assumed discontinuation of
service to Las Cruces and CFE, the Company would have sufficient transmission
capacity over the Eddy County tie to meet SPS' request for firm transmission
service. Although the Company has filed a compliance filing as required by the
order, the filing reflects that the Company does not have sufficient
transmission capacity over the Eddy County tie to meet SPS' request for firm
transmission service. The Company filed a motion for rehearing of the FERC's
decision. The FERC has extended its time limit for ruling on this motion. The
Company does not expect a material financial impact from this FERC ruling.
However, the Company is concerned that the result of this FERC ruling will be to
impair the reliability of service to the Company's other retail customers while
increasing costs.
In order to procure a firm supply of electric power to serve its proposed
municipal electric system, during the pendency on the transmission litigation,
Las Cruces filed a request with the FERC in November 1998 for an order requiring
the Company to sell wholesale power to Las Cruces on a temporary basis pursuant
to Section 202(b) of the Federal Power Act from July 1999 until such time as Las
Cruces is able to secure firm transmission service and back-up generation
service required to enable it to obtain reliable service from SPS. In January
1999, the FERC ordered the Company to sell electric energy to Las Cruces at a
cost-based wholesale rate from July 1, 1999 until the earlier of the time Las
Cruces begins receiving its power from a different supplier or one year. The
Company submitted a proposed cost-based rate for the sale of electricity at
wholesale to Las Cruces in compliance with the FERC's order in February 1999.
On May 27, 1999, the FERC issued an order denying requests for
11
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
rehearing of its January order. The Company has appealed this order to the
United States Court of Appeals for the Fifth Circuit and the court granted the
Company's motion for expedited review. In a separate order on May 27, 1999, the
FERC ordered an evidentiary hearing with respect to the Company's compliance
filing and ruled that the administrative law judge must issue an initial
decision no later than January 31, 2000.
On April 7, 1999, the Company filed an application with the FERC for
authorization to engage in the sale of electricity in wholesale electric markets
outside of the southern New Mexico region at market-based rates. The Company's
application included a market-dominance study showing that it lacked market
power outside of that region and it otherwise met the FERC's criteria for being
authorized to sell electricity at market-based prices. The FERC approved the
Company's application on May 27, 1999.
C. 1999 Long-Term Incentive Plan
On May 27, 1999, the Company's shareholders approved the adoption of a
stock-based long-term incentive plan (the "1999 Plan"). Under the 1999 Plan,
directors, officers, managers, other employees and consultants are eligible to
receive non-statutory stock options, incentive stock options, stock appreciation
rights, restricted stock, bonus stock and performance shares covering up to two
million shares of common stock. On July 1, 1999, the Company filed its
Registration Statement on Form S-8 registering the two million shares of common
stock reserved for issuance under the 1999 Plan. On July 30, 1999, the Company
filed its application with the FERC to approve the issuance of shares under the
1999 Plan.
D. Common Stock Repurchase Program
On May 27, 1999, the Company's Board of Directors approved a stock
repurchase program allowing the Company to purchase outstanding shares of its
common stock from time to time, up to a total of six million shares. The Company
will make purchases primarily in the open market at prevailing prices and will
also engage in private transactions, if appropriate. The shares that the Company
acquires will be available for issuance under employee benefit and stock option
plans or may be retired. As of June 30, 1999, the Company had reacquired 475,300
shares of common stock at a cost of approximately $4.3 million, including
commissions.
E. Preferred Stock Redemption
On March 1, 1999, after obtaining required consents of holders of certain
of the Company's outstanding debt securities, the Company redeemed the Series A
Preferred Stock. The Company paid the redemption price of approximately $139.6
million, accrued cash dividends of $1.3 million, and premium, fees and costs of
securing the consents aggregating $9.6 million. The preferred stock had an
annual dividend rate of 11.40%.
12
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
F. Commitments and Contingencies
For a full discussion of commitments and contingencies, including
environmental matters related to the Company, see Note H of Notes to Financial
Statements in the 1998 Form 10-K. In addition, see Note C of Notes to Financial
Statements in the 1998 Form 10-K regarding matters related to Palo Verde,
including decommissioning, spent fuel storage, disposal of low-level radioactive
waste and liability and insurance matters.
Coal Mine Reclamation
The Four Corners participants are currently reviewing a 1999 study
conducted by an outside engineering firm of the estimated final reclamation and
coal mine closure costs. Based on a preliminary review of this report, the
Company believes that its ultimate liability for reclamation and closure costs
may be less than the currently accrued amount of $14.8 million. The
participants' review of the study includes an analysis of the assumptions used
to estimate the liability for reclamation and closure costs. Once the review is
completed, the Company can determine what effect, if any, the study may have on
the Company. Participant review of the study is expected to be completed by the
end of 1999. Final review of the study may justify a material reduction in the
Company's liability for reclamation and closure costs. If the review is
completed by year end and the reduction is so justified, it will be recorded by
year end as a change in estimate.
G. Litigation
For a full discussion of litigation, see Note I of Notes to Financial
Statements in the 1998 Form 10-K.
Litigation with Las Cruces
Las Cruces is attempting to replace the Company as the electric service
provider in Las Cruces by acquiring, through condemnation or a negotiated
purchase, the distribution assets and other facilities used to provide electric
service to customers in Las Cruces. Sales to customers in Las Cruces represent
approximately 8% of the Company's operating revenues.
On February 26, 1999, Las Cruces filed its Petition for Condemnation and
Application for Immediate Possession with the New Mexico State District Court.
On March 9, 1999, the Company removed the Las Cruces petition and application to
the United States District Court for the District of New Mexico. On May 17,
1999, the federal court issued a final decision finding that the removal to
federal court was proper. On June 3, 1999, the federal court consolidated this
matter with the declaratory action previously filed by the Company challenging
the constitutionality of the legislation giving Las Cruces the authority to
condemn. At this time no hearing on the immediate possession matter has been
set. The Company is unable to predict the outcome of this litigation.
13
<PAGE>
EL PASO ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
If Las Cruces succeeds in its efforts to condemn the Company's distribution
system, the Company could lose its Las Cruces customer base, although the
Company would be entitled to receive "just compensation" as established by New
Mexico law. "Just compensation" is generally defined as the amount of money
that would fairly compensate the party whose property is condemned. It is the
Company's opinion that this amount would be the difference between the value of
the Company's distribution system prior to the taking, as compared to the value
of the distribution system after the taking. Compensation for any stranded
costs related to the Company's generation assets will be determined by the FERC.
See Note B, "Rate Matters - Federal Rate Matters."
Las Cruces has taken several actions to position itself to acquire portions
of the Company's distribution system and certain related facilities. In August
1994, SPS and Las Cruces entered into an agreement granting SPS the right to
provide all of the electric power and energy required by Las Cruces if Las
Cruces succeeds in its efforts to obtain the Company's distribution system. In
addition, Las Cruces sold approximately $73 million in revenue bonds in October
1995 to provide funding to finance the acquisition by condemnation or negotiated
purchase of the Company's electrical distribution assets within and adjacent to
the Las Cruces city limits.
In July 1996, Las Cruces exercised its right under FERC Order No. 888 to
request that the Company calculate Las Cruces' stranded cost obligation should
it leave the Company's system and operate its own municipal utility. See Note
B, "Rate Matters - Federal Rate Matters" for a discussion of this proceeding.
The Company continues to believe that it can provide lower cost electric
service to customers in Las Cruces than can be achieved through a municipal
takeover. Accordingly, the Company has stated its strong preference for a
resolution of its differences with Las Cruces through negotiation rather than
litigation and condemnation.
The Company is unable to predict the outcome of Las Cruces' efforts to
replace the Company as its electric service provider or the effects it may have
on the Company's financial position, results of operations and cash flows. The
Company does not believe it is probable that a loss has been incurred and,
therefore, has made no provision in the accompanying financial statements
related to these matters.
14
<PAGE>
Independent Auditors' Review Report
-----------------------------------
The Shareholders and the Board of Directors
El Paso Electric Company:
We have reviewed the accompanying condensed balance sheet of El Paso Electric
Company (the Company) as of June 30, 1999, the related condensed statements of
operations and comprehensive operations for the three months, six months, and
twelve months ended June 30, 1999 and 1998, and the related condensed statements
of cash flows for the six months ended June 30, 1999 and 1998. These condensed
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of El Paso Electric Company as of December 31,
1998, and the related statements of operations, comprehensive operations,
changes in common stock equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 5, 1999, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 1998, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
KPMG LLP
El Paso, Texas
July 26, 1999
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information contained in this Item 2 updates, and should be read in
conjunction with, the information set forth in Part II, Item 7 of the Company's
1998 Form 10-K.
Statements in this document, other than statements of historical information,
are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements, as well as other oral and written forward-looking
statements made by or on behalf of the Company from time to time, including
statements contained in the Company's filings with the Securities and Exchange
Commission and its reports to stockholders, involve known and unknown risks and
other factors which may cause the Company's actual results in future periods to
differ materially from those expressed in any forward-looking statements. Any
such statement is qualified by reference to the risks and factors discussed
below under the headings "Operational Prospects and Challenges," "Liquidity and
Capital Resources" and "Year 2000 Preparedness," as well as in the Company's
filings with the Securities and Exchange Commission, which are available from
the Securities and Exchange Commission or which may be obtained upon request
from the Company. The Company cautions that the risks and factors discussed
below and in such filings are not exclusive. The Company does not undertake to
update any forward-looking statement that may be made from time to time by or on
behalf of the Company.
Operational Prospects and Challenges
The Texas Settlement Agreement provides the Company with a stable base of
retail revenues in Texas during a period in which the Company has substantially
reduced its fixed obligations. The New Mexico Settlement provides a similar
level of certainty in the Company's New Mexico rates, although of shorter
duration. As discussed below, the Texas Settlement Agreement provides for an
annual base revenue reduction in Texas of approximately $15.4 million and
approval of all Company fuel expenses for the 42-month period subject to
reconciliation. The Texas Rate Stipulation is preserved under the Texas
Settlement Agreement and the Texas electric industry restructuring law. The New
Mexico Settlement includes an annual base revenue reduction of $4.6 million,
exclusive of the Company's annual $0.4 million contribution for low-income
assistance in New Mexico.
In return for these rate reductions, the Company believes it will achieve in
both Texas and New Mexico a new period of revenue stability at levels that will
permit it to further reduce its debt while continuing to address issues raised
by industry restructuring and competition. During this period, the Company's
strategic goals include (i) serving the growing need for electricity within its
retail service territory; (ii) continuing to focus on its strategic location on
the border with Mexico; (iii) enhancing long-term relationships with its largest
retail customers; (iv) continuing to reduce operating costs; and (v) developing
an energy-related services business.
The New Mexico Settlement provides for (i) a total annual jurisdictional base
revenue reduction of $4.6 million; (ii) a 30-month moratorium on rate increases
or decreases in New Mexico; (iii) the elimination of the need for future fuel
reconciliations in New Mexico by incorporating the existing fixed fuel factor
into rates; (iv) an increased degree of ratemaking certainty for the future
achieved by an agreement among the signatories reducing the net value of certain
assets by approximately $40 million
16
<PAGE>
on a New Mexico jurisdictional basis for ratemaking purposes (but with no effect
on book values), while establishing the signatories' agreement that the Company
is entitled to 100% recovery of such revalued assets; and (v) the ability to
enter into long-term rate contracts with commercial and industrial customers in
New Mexico. The New Mexico Settlement became effective on October 26, 1998.
Additionally, as a result of the New Mexico Settlement, the Company will
contribute $0.4 million annually ($1.0 million over the term of the moratorium
period) to a social services agency in Dona Ana County providing assistance to
low-income individuals. The Company negotiated the New Mexico Settlement so as
to substantially reduce the likelihood of additional rate reductions during the
moratorium period.
A comprehensive electric utility industry restructuring bill was signed into
law by the Governor of New Mexico and became effective on April 8, 1999. Under
this law, retail customer choice begins January 1, 2001 for public post-
secondary educational institutions, public schools, and residential and small
business customers. Retail customer choice begins January 1, 2002 for all other
customers. The New Mexico Commission may delay implementation of retail
customer choice or other deadlines established by the new law for up to one
year. The new law allows utilities to recover no less than 50% of their
stranded costs with up to 100% recovery allowed if the New Mexico Commission
determines that additional recovery is in the public interest, is necessary to
maintain a utility's financial integrity, is necessary to continue adequate and
reliable service, and will not cause an increase in rates to residential and
small business customers. Utilities are required to file transition plans
addressing the various restructuring issues, including the recovery of stranded
costs, by March 1, 2000. The new law also allows the New Mexico Commission to
review and approve any rate settlement previously approved by the New Mexico
Commission as a means of transition to competition.
On June 30, 1999, the New Mexico Commission ordered the review of the
Company's New Mexico Settlement. Under the new law, the New Mexico Commission
may review certain transition plans previously approved by the New Mexico
Commission and confirm, reject or modify such plans by the end of November 1999,
unless the New Mexico Commission extends this deadline under certain provisions
of the new law. If the New Mexico Commission approves the New Mexico
Settlement, it will supersede the new law to the extent the new law is
inconsistent. On August 3, 1999, the Company filed with the New Mexico
Commission testimony and exhibits in support of the New Mexico Settlement.
Although the Company believes that the recovery of costs provided for in the New
Mexico Settlement is consistent with the intent of the new law, it cannot
predict whether the New Mexico Commission's review will impact the Company's
revenues and recovery of costs contemplated under the New Mexico Settlement, or
whether the Company will be able to maintain its New Mexico rates at the new
levels.
Following the New Mexico Settlement, the Company offered to enter into a
comparable agreement in Texas. Based upon that offer, the Company entered into
the Texas Settlement Agreement providing for: (i) a total annual jurisdictional
base revenue reduction of approximately $15.4 million retroactive to November 1,
1998; (ii) reconciliation of the Company's fuel expenses through December 31,
1998, with no disallowance; and (iii) an agreement to use 50% of all Palo Verde
performance rewards related to evaluation periods after 1997, when collected,
for low-income assistance and for Demand-Side Management ("DSM") programs,
primarily focused on small business customers, through the end of the Freeze
Period. The new rates under the Texas Settlement Agreement were implemented in
April 1999, pursuant to an interim order of the Texas Commission. On June 8,
1999, the Texas Commission issued a final order approving the Texas Settlement
Agreement.
17
<PAGE>
A comprehensive electric industry restructuring bill was signed into law by
the Governor of Texas on June 18, 1999, and becomes effective September 1, 1999.
Under this law, retail customer choice will begin in the service territories of
most investor-owned utilities on January 1, 2002. Municipal and cooperative
utilities will have the option of electing to offer customer choice in their
service areas. The Company is exempt from the competitive provisions of this law
until August 2005, the expiration of the Freeze Period. After July 2005, the
Company will not have a claim for stranded costs or transition costs incurred or
otherwise provided for pursuant to the law. The Company will be subject to the
provisions of the new law after July 2005. The competitive provisions of the
new law include the following: (i) a 6% rate reduction, coincident with the
start of retail choice, for residential and small commercial customers; (ii) a
limitation that no power generation company may own and control more than 20% of
the generation capacity in a power region; (iii) an obligation to auction
entitlements to at least 15% of a utility's Texas jurisdictional installed
generation capacity, continuing until the earlier of 60 months after the date
customer choice is introduced or the date the Texas Commission determines that
40% of the power consumed by residential and small commercial customers is
served by non-affiliated retail electric providers; (iv) a reduction in
emissions for grandfathered plants by May 2003; (v) an additional 2,000 MW of
statewide renewable energy capacity by 2009; (vi) the establishment of a System
Benefit Fund ($0.50/MWh) for customer education and low-income assistance; and
(vii) a detailed affiliate code of conduct to govern relationships between the
regulated utility and its affiliates.
The Company faces a number of challenges which could negatively impact its
operations and financial results. The primary challenge is the risk of
increased costs, including the risk of additional or unanticipated costs at Palo
Verde resulting from (i) increases in operation and maintenance expenses; (ii)
the possible replacement of steam generators; (iii) an extended outage of any of
the Palo Verde units; (iv) increases in estimates of decommissioning costs; (v)
the storage of radioactive materials; and (vi) compliance with the various
requirements and regulations governing commercial nuclear generating stations.
At the same time, the Company's revenues, which have been reduced from previous
levels as a result of the New Mexico Settlement and the Texas Settlement
Agreement, are effectively capped. There can be no assurance that the Company's
revenues will be sufficient to recover any increased costs, including any such
increased costs in connection with Palo Verde or increases in other costs of
operation, whether as a result of higher than anticipated levels of inflation,
changes in tax laws or regulatory requirements, or other causes.
Another risk to the Company's operations is the potential loss of customers.
The Company's wholesale and large retail customers have, in varying degrees,
additional alternate sources of economical power, including co-generation of
electric power. For example, a 504 MW combined-cycle generating plant located
in Samalayuca, Chihuahua, Mexico, which became fully operational at the end of
1998, gave CFE the current capacity to supply electricity to portions of
northern Chihuahua, including the geographic area previously served by the
Company. In addition, the New Mexico State Legislature has passed legislation
which purportedly gives Las Cruces the authority to condemn the Company's
distribution system and related assets located within its city limits. On
February 26, 1999, Las Cruces filed its eminent domain proceeding. If Las
Cruces succeeds in its efforts, the Company could lose its Las Cruces customer
base, which currently represents approximately 8% of annual operating revenues,
although the Company would receive "just compensation" as established by the
court. If the Company loses a significant portion of its retail customer base
or wholesale sales, the Company may not be able to replace such revenues through
either the addition of new customers or an increase in rates to remaining
customers.
18
<PAGE>
In recent years, the United States has closed a large number of military
bases. The Company's sales to military bases represent approximately 3% of
annual operating revenues. While there can be no assurance that Holloman Air
Force Base ("Holloman"), White Sands Missile Range ("White Sands") or the United
States Army Air Defense Center at Fort Bliss ("Ft. Bliss") will not be closed in
the future or that the Company will not lose all or some of its military base
sales, the Company currently has long-term contracts with all three military
bases that it serves. The Company signed a contract with Ft. Bliss in December
1998, under which Ft. Bliss will take service from the Company through December
2008. The Company has a contract to provide retail electric service to Holloman
for a ten-year term which began in December 1995. In May 1999, the Army and the
Company entered into a new ten-year contract to provide retail electric service
to White Sands.
The electric utility industry in general is facing significant challenges and
increased competition as a result of changes in federal provisions relating to
third-party transmission services and independent power production, as well as
changes in state laws and regulatory provisions relating to wholesale and retail
service. The potential effects of deregulation are particularly important to
the Company because its rates are significantly higher than the national and
regional averages. In the face of increased competition, there can be no
assurance that this competition will not adversely affect the future operations,
cash flow, and financial condition of the Company.
Liquidity and Capital Resources
The Company's principal liquidity requirements for the next several years are
expected to consist of interest and principal payments on the Company's
indebtedness and capital expenditures related to the Company's generating
facilities and transmission and distribution systems. The Company expects that
cash flows from operations will be sufficient for such purposes.
Long-term capital requirements of the Company will consist primarily of
construction of electric utility plant and payment of interest on and retirement
of debt. The Company has no current plans to construct any new generating
capacity to serve retail load through at least 2004. Utility construction
expenditures will consist primarily of expanding and updating the transmission
and distribution systems and the cost of capital improvements and replacements
at Palo Verde and other generating facilities.
The Company anticipates that internally generated funds will be sufficient to
meet its construction requirements, provide for the retirement of debt, and
enable the Company to meet other contingencies that may exist, such as
compliance with environmental regulation, pending litigation, any claims for
indemnification, and Year 2000 remediation. At June 30, 1999, the Company had
approximately $49.1 million in cash and cash equivalents. In February 1999, the
Company renewed its $100 million revolving credit facility, which now provides
up to $70 million for nuclear fuel purchases and up to $50 million (depending on
the amount of borrowings outstanding for nuclear fuel purchases) for working
capital needs. At June 30, 1999, approximately $47.0 million had been drawn for
nuclear fuel purchases. No amounts have been drawn on this facility for working
capital needs.
The Company has a high debt to capitalization ratio and significant debt
service obligations. Due to the Texas Rate Stipulation, the Texas Settlement
Agreement, the New Mexico Settlement, and competitive pressures, the Company
does not expect to be able to raise its base rates in the event of increases in
non-fuel costs, increases in fuel costs in New Mexico or loss of revenues.
Accordingly, as described below, the reduction of fixed obligations is a high
priority for the Company in order to gain additional financial flexibility to
address the evolving competitive market. On March 1, 1999, the
19
<PAGE>
Company used cash on hand to pay for the early redemption of its Series A
Preferred Stock, which resulted in the avoidance of additional cash dividends of
approximately $2.7 million that would have occurred through May 1, 1999, and
$4.0 million quarterly thereafter until mandatory redemption in 2008.
The Company has significantly reduced its long-term debt following its
emergence from bankruptcy in 1996. From June 1, 1996 through August 6, 1999,
the Company has repurchased approximately $290.5 million of first mortgage bonds
as part of an aggressive deleveraging program and repaid the remaining $36.0
million of Series A First Mortgage Bonds at their maturity on February 1, 1999.
The foregoing, together with the early redemption of the Series A Preferred
Stock, reduced the Company's annual interest expense and annual cash dividend
requirements by approximately $25.6 million and $15.9 million, respectively.
Common stock equity as a percentage of capitalization has increased from 19% at
June 30, 1996 to 33% at June 30, 1999.
On May 27, 1999, the Company's Board of Directors approved a stock repurchase
program allowing the Company to purchase outstanding shares of its common stock
from time to time, up to a total of six million shares. The Company will make
purchases primarily in the open market at prevailing prices and will also engage
in private transactions, if appropriate. The shares that the Company acquires
will be available for issuance under employee benefit and stock option plans or
may be retired. As of August 10, 1999, the Company had reacquired 1,022,400
shares of common stock at a cost of approximately $9.2 million, including
commissions.
The Company continues to believe that the orderly reduction of fixed
obligations with a goal of achieving a capital structure that is more typical in
the electric utility industry and, ultimately, an investment grade rating, is a
significant component of long-term shareholder value creation. Future
repurchases of first mortgage bonds and common stock will be evaluated based on
market conditions, the availability of cash to meet bond maturities, and the
comparative economic value of alternative uses of cash.
The degree to which the Company is leveraged could have important
consequences on the Company's liquidity, including (i) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate or other purposes could be limited in the
future, and (ii) the Company's substantial leverage may place the Company at a
competitive disadvantage by limiting its financial flexibility to respond to the
demands of the competitive market and make it more vulnerable to adverse
economic or business changes.
20
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
Net Income Applicable Diluted Earnings Per
to Common Stock Before Common Share Before
Extraordinary Items Extraordinary Items
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
(In thousands)
Three Months Ended June 30.................... $ 7,038 $10,071 $0.116 $0.166
Six Months Ended June 30...................... 4,313 17,063 0.071 0.282
Twelve Months Ended June 30................... 29,616 42,933 0.489 0.710
</TABLE>
Results of operations for the six and twelve months ended June 30, 1999 were
affected by unusual or infrequent items, including the recognition of certain
items arising from the Texas Settlement Agreement, a change in estimated fuel
cost reserves, and the early redemption of the Company's 11.40% Series A
Preferred Stock.
Operating revenues net of energy expenses decreased $7.6 million for the
three months ended June 30, 1999 compared to the same period last year primarily
due to the rate reductions in Texas and New Mexico, the loss of sales to CFE,
and decreased retail kWh sales due to mild weather. Operating revenues net of
energy expenses decreased $8.9 million and $1.4 million for the six and twelve
months ended June 30, 1999, respectively, compared to the same periods last
year, as follows (In thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30: 1999 1998 Increase/(Decrease)
- ------------------------- ---- ---- -------------------
<S> <C> <C> <C>
Texas Settlement Agreement:
Palo Verde performance reward.......... $ 3,453 $ - $ 3,453
Retroactive base rate decrease......... (2,343) - (2,343)
Change in estimated fuel cost reserves... 3,754 - 3,754
Other.................................... 208,673 222,428 (13,755)
-------- -------- ---------
Total operating revenues net
of energy expenses............... $213,537 $222,428 $ (8,891)
======== ======== =========
<CAPTION>
Twelve Months Ended June 30: 1999 1998 Increase/(Decrease)
- ----------------------------- ---- ---- -------------------
<S> <C> <C> <C>
Texas Settlement Agreement:
Palo Verde performance reward.......... $ 3,453 $ - $ 3,453
Change in estimated fuel cost reserves... 3,754 - 3,754
Other.................................... 456,063 464,656 (8,593)
-------- -------- ---------
Total operating revenues net
of energy expenses............... $463,270 $464,656 $ (1,386)
======== ======== =========
</TABLE>
Excluding the effects of the recognition of the Palo Verde performance
reward, the retroactive base rate decrease, and the change in estimated fuel
cost reserves, the six month decrease of $13.8 million was primarily due to the
rate reductions in Texas and New Mexico, the loss of sales to CFE, and decreased
retail kWh sales due to mild weather. These decreases were partially offset by
increased economy sales at higher margins. Excluding the recognition of the
Palo Verde performance reward and the change in estimated fuel cost reserves,
the twelve month decrease of $8.6 million was primarily due to the rate
reductions in Texas and New Mexico and the loss of sales to CFE. These decreases
were partially offset by increased retail kWh sales and increased economy sales
at higher margins.
21
<PAGE>
Operating revenues from retail customers shown below include the recognition
of the Palo Verde performance reward and the effects of the change in estimated
fuel cost reserves for the six and twelve month periods ended June 30, 1999.
Also included in the six month period is the effect of the retroactive base rate
decrease. Comparisons of kWh sales and operating revenues are shown below (In
thousands):
<TABLE>
<CAPTION>
Increase/(Decrease)
-------------------
Three Months Ended June 30: 1999 1998 Amount Percent
- --------------------------- ---- ---- ------ -------
<S> <C> <C> <C> <C>
Electric kWh Sales:
Retail Customers........................ 1,417,621 1,439,329 (21,708) (1.5)%
Other Utilities......................... 225,163 469,239 (244,076) (52.0) (1)
---------- ---------- ---------
Total.................................. 1,642,784 1,908,568 (265,784) (13.9)
========== ========== =========
Operating Revenues:
Retail Customers........................ $ 115,866 $ 121,396 $ (5,530) (4.6)%
Other Utilities......................... 16,856 25,007 (8,151) (32.6) (2)
---------- ---------- ---------
Total.................................. $ 132,722 $ 146,403 $ (13,681) (9.3)
========== ========== =========
<CAPTION>
Increase/(Decrease)
-------------------
Six Months Ended June 30: 1999 1998 Amount Percent
- ------------------------- ---- ---- ------ -------
<S> <C> <C> <C> <C>
Electric kWh Sales:
Retail Customers........................ 2,740,133 2,765,403 (25,270) (0.9)%
Other Utilities......................... 372,423 928,573 (556,150) (59.9) (1)
---------- ---------- ---------
Total.................................. 3,112,556 3,693,976 (581,420) (15.7)
========== ========== =========
Operating Revenues:
Retail Customers........................ $ 226,612 $ 232,135 $ (5,523) (2.4)%
Other Utilities......................... 35,979 51,213 (15,234) (29.7) (2)
---------- ---------- ---------
Total.................................. $ 262,591 $ 283,348 $ (20,757) (7.3)
========== ========== =========
<CAPTION>
Increase/(Decrease)
-------------------
Twelve Months Ended June 30: 1999 1998 Amount Percent
- ----------------------------- ---- ---- ------ -------
<S> <C> <C> <C> <C>
Electric kWh Sales:
Retail Customers........................ 5,922,951 5,869,776 53,175 0.9%
Other Utilities......................... 1,201,730 1,943,469 (741,739) (38.2) (1)
---------- ---------- ---------
Total.................................. 7,124,681 7,813,245 (688,564) (8.8)
========== ========== =========
Operating Revenues:
Retail Customers........................ $ 492,307 $ 496,688 $ (4,381) (0.9)%
Other Utilities......................... 89,157 100,566 (11,409) (11.3) (2)
---------- ---------- ---------
Total.................................. $ 581,464 $ 597,254 $ (15,790) (2.6)
========== ========== =========
</TABLE>
(1) Primarily due to the loss of sales to CFE.
(2) Primarily due to the loss of sales to CFE partially offset by increased
economy sales at higher margins.
22
<PAGE>
Other operations and maintenance expense increased $3.8 million for the three
months ended June 30, 1999 compared to the same period last year due to
increased maintenance expense of $3.6 million and increased operations expense
of $0.3 million, as follows (In thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30: 1999 1998 Increase/(Decrease)
- --------------------------- ---- ---- -------------------
<S> <C> <C> <C>
Generation and transmission operations
expense................................ $ 2,053 $ 1,073 $ 980
Regulatory expense....................... 551 1,601 (1,050)
Other.................................... 29,275 28,949 326
------- ------- -------
Total other operations expense........ 31,879 31,623 256
------- ------- -------
Maintenance at Company-owned
generating plants...................... 3,850 1,835 2,015 (3)
Maintenance at Palo Verde................ 5,108 3,929 1,179
Other.................................... 2,916 2,556 360
------- ------- -------
Total maintenance expense............. 11,874 8,320 3,554
------- ------- -------
Total other operations and
maintenance expense.............. $43,753 $39,943 $ 3,810
======= ======= =======
</TABLE>
Other operations and maintenance expense increased $2.6 million for the six
months ended June 30, 1999 compared to the same period last year due to
increased maintenance expense of $4.3 million partially offset by decreased
operations expense of $1.7 million, as follows (In thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30: 1999 1998 Increase/(Decrease)
- ------------------------- ---- ---- -------------------
<S> <C> <C> <C>
Regulatory expense........................ $ 372 $ 3,055 $(2,683)
Generation and transmission operations
expense................................. 3,858 2,348 1,510
Other..................................... 58,281 58,790 (509)
------- ------- -------
Total other operations expense......... 62,511 64,193 (1,682)
------- ------- -------
Maintenance at Company-owned
generating plants....................... 7,497 3,381 4,116 (3)
Other..................................... 13,291 13,141 150
------- ------- -------
Total maintenance expense.............. 20,788 16,522 4,266
------- ------- -------
Total other operations and
maintenance expense............... $83,299 $80,715 $ 2,584
======= ======= =======
</TABLE>
23
<PAGE>
Other operations and maintenance expense increased $5.4 million for the
twelve months ended June 30, 1999 compared to the same period last year due to
increased maintenance expense of $6.8 million partially offset by decreased
operations expense of $1.4 million, as follows (In thousands):
<TABLE>
<CAPTION>
Twelve Months Ended June 30: 1999 1998 Increase/(Decrease)
- ---------------------------- ---- ---- -------------------
<S> <C> <C> <C>
Outside services.......................... $ 7,567 $ 11,424 $(3,857)
Regulatory expense........................ 3,360 5,673 (2,313)
All employee bonus plan................... 5,606 2,200 3,406
Other..................................... 116,035 114,659 1,376
-------- -------- -------
Total other operations expense......... 132,568 133,956 (1,388)
-------- -------- -------
Maintenance at Company-owned
generating plants....................... 12,353 6,462 5,891 (3)
Insurance settlements..................... - (1,192) 1,192
Other..................................... 26,868 27,195 (327)
-------- -------- -------
Total maintenance expense.............. 39,221 32,465 6,756
-------- -------- -------
Total other operations and
maintenance expense............... $171,789 $166,421 $ 5,368
======== ======== =======
</TABLE>
(3) Primarily due to scheduled maintenance and overhauls at Company-owned
generating plants, including underestimated costs of overhauling a steam
generator turbine of $0.4 million, $1.8 million and $2.9 million for the
three, six and twelve months ended June 30, 1999, respectively.
The New Mexico Settlement charge of $6.3 million for the twelve months ended
June 30, 1999 represents the write-off of the book value of undercollected fuel
revenues in the Company's New Mexico jurisdiction.
Depreciation and amortization expense increased slightly for the three, six
and twelve months ended June 30, 1999 compared to the same periods last year due
to routine capital additions.
Taxes other than income taxes were essentially unchanged for the three, six
and twelve months ended June 30, 1999.
Other income decreased $0.3 million and $1.5 million for the three and six
months ended June 30, 1999, respectively, compared to the same periods last year
primarily due to a decrease in investment income of $1.3 million in each period
resulting from the investment of lower levels of cash. The three month decrease
was partially offset by a gain on disposition of non-utility property of $1.0
million in 1999, with no comparable amount in 1998. Other income decreased $0.1
million for the twelve months ended June 30, 1999 compared to the same period
last year primarily due to (i) a decrease in gains realized on disposition of
non-utility property of $0.6 million; (ii) increased donations of $0.4 million
in 1999 pursuant to the terms of the New Mexico Settlement; and (iii) an
increase in other miscellaneous deductions. These decreases were partially
offset by an increase in investment income of $1.3 million resulting from the
investment of higher levels of cash.
Interest charges decreased $1.6 million, $2.5 million and $3.9 million for
the three, six and twelve months ended June 30, 1999, respectively, compared to
the same periods last year, primarily due to a
24
<PAGE>
reduction in outstanding debt as a result of open market purchases and
redemptions of the Company's first mortgage bonds.
Income tax expense decreased $3.9 million, $3.6 million and $3.6 million for
the three, six and twelve months ended June 30, 1999 compared to the same
periods last year primarily due to changes in pretax income and certain
permanent differences.
Extraordinary gain on discharge of debt of $3.3 million for the twelve months
ended June 30, 1999, net of income tax expense of $2.1 million, represents
unclaimed and undistributed funds designated for the payment of preconfirmation
claims which reverted to the Company pursuant to the Company's Fourth Amended
Plan of Reorganization, with no comparable amount for the same period in 1998.
Extraordinary loss on repurchases of debt of $1.2 million for the three, six
and twelve months ended June 30, 1999, net of income tax benefit of $0.8
million, represents the payment of premiums on debt repurchased and the
recognition of unamortized issuance expenses on that debt with no comparable
amounts for the same periods in 1998.
The Company has an Energy Services Business Unit (the "ESBU") which began
developing energy efficient products and services in 1997. The ESBU offers
customers pricing options, as well as value-added products and services designed
to give them greater value for the kWh purchased from the Company. The revenues
and expenses related to the operations of the ESBU have not been material to
date.
Year 2000 Preparedness
The Company faces the same concerns regarding the transition to the Year 2000
("Y2K") as virtually all other companies. During the Y2K transition, computer
hardware and software, or equipment with embedded computer chips, may encounter
the year 2000 and interpret a two-digit year "00" as 1900, instead of 2000. As
a result, equipment and applications that are date sensitive may not properly
calculate information or otherwise may not function as intended. Because the
Y2K challenge, if not addressed, could directly affect the Company's service
reliability, the Company considers it to be of the highest priority. The
Company's Y2K mission statement is to "provide for the safe, continuous
operation of the Company's electric and business systems during the Y2K
transition period."
The Company has defined "mission critical" systems as those that could affect
service to its customers or could otherwise result in a permanent and
substantial loss to the Company, if they fail to function properly. Mission-
critical systems have received top priority. As of June 30, 1999, the Company
believes all of its mission-critical systems and applications are suitable for
continued use into the year 2000 ("Y2K ready" as that term is defined by the
North American Electric Reliability Council (the "NERC")) based on the "level 3"
rating received during the Department of Energy's (the "DOE") review. All other
systems and applications are scheduled to be Y2K ready by December 31, 1999.
In late June 1999, the Company conducted a live, integrated test of its
primary control and local generating facilities, including the Company's energy
management system computer and local power plant and key substation equipment.
Internal clocks for equipment included in the test were synchronously forwarded
to roll over into the year 2000 and typical, individual operations were then
performed to verify that the equipment will operate as expected in a year 2000
environment. All devices
25
<PAGE>
handled the rollover without incident and all commands sent from the control
computer to remote equipment were executed properly.
The integrated test was observed by an assessment team of engineers on behalf
of the DOE. Following the test, the DOE team issued the Company a "level 3"
rating regarding its state of readiness, asserting that the Company's mission-
critical systems and applications met the NERC's definition of Y2K ready. A
level 3 rating is the most favorable that could be issued, and was based not
only on the successful integrated test, but also on a review of the Company's
entire Y2K program. The DOE team reviewed pertinent documentation for the
project, queried Company personnel and observed a rerunning of embedded chip
tests for digitally-controlled relays. The DOE team has been randomly reviewing
30 small utilities in North America in order to better predict an overall state
of readiness.
The Company began addressing the Y2K issue during the last quarter of 1996
with a program consisting of four major phases: inventory, assessment,
remediation and testing for Y2K readiness. This readiness process was
recommended by the NERC. For its mission-critical equipment and applications,
the Company has completed each of these phases. For its non-critical equipment
and applications, the Company is 100% complete with inventory, 91% complete with
assessment and 73% complete with remediation/testing. Overall, the Company is
94% complete with the four-phase process.
The Company is actively participating in Y2K planning sessions with other
Western System Coordinating Council ("WSCC") members due to the interrelated
nature of the Company's electric system and those of other neighboring
utilities. WSCC utilities comprise the western United States electric "grid."
The Company is monitoring the Y2K readiness status of Palo Verde and Four
Corners power plants, for which the Company has joint ownership and which are
operated by Arizona Public Service Company ("APS"). APS has reported to the
NERC and the Nuclear Regulatory Commission that the mission-critical facilities
at each plant are now Y2K ready.
In addition, the Company is continuing to assess its financial institutions
and critical suppliers to determine their respective states of readiness for the
Y2K transition. The Company is scheduled to complete these assessments by
September 30, 1999. The Company has provided Y2K information to its customers
and community through a public outreach program, and has contacted large
industrial customers to ascertain their plans for the transition period.
Given the complex nature and uncertainties of the Y2K issue, the Company
cannot absolutely assure that it will not experience some outages or operational
failures during the Y2K transition period. Further, there are no guarantees that
all vendor representations obtained by the Company will prove to be entirely
accurate or that testing and remediation procedures employed by the Company will
identify and correct 100% of potential Y2K-related problems. There remains a
chance that on January 1, 2000 some equipment will not function properly.
Therefore, the Company is also preparing contingency and continuity plans. The
Company has always prepared for unexpected outages of its facilities (resulting
from storms and other natural disasters and failures). Consequently, the
Company's existing Emergency Procedure Manual forms the basis for the Company's
Y2K Operational Contingency Plan. Procedures to deal with an array of scenarios
resulting from the singular or simultaneous failure(s) of elements or systems
during the Y2K transition period have also been developed. The Company's Y2K
Operational Contingency Plan for its electric system was completed in June 1999.
The Company is also developing a Y2K Business Continuity Plan for its business
systems and processes that it expects to complete during the fourth quarter of
1999.
26
<PAGE>
Failure by the Company to meet the challenges of the Y2K issue could have
serious consequences. A malfunction in a system affecting the generation,
transmission or distribution of energy to the Company's customers, whether
caused by a problem with one of the Company's systems or a system operated by a
third party, could result in a disruption of service. The severity and cost of
the problem would depend on numerous factors, including the scope and duration
of any such disruption. If the disruption is severe enough, the Company's
operations and financial condition could be adversely affected, the extent of
which cannot be predicted. However, given the completion of all mission
critical readiness activities, the successful integrated test of the primary
control equipment on the Company's electric system, and the independent
verification by the DOE team regarding the Company's state of readiness, the
Company does not believe that significant adverse impacts as a result of the Y2K
issue are likely to occur.
The Company has expensed substantially all costs of its Y2K program. Through
June 30, 1999, the Company's expenditures on the Y2K program have been
predominantly related to internal labor, diagnostic tools, server upgrades and
consultation costs totaling approximately $2.1 million. Costs associated with
hardware and software replacements and other technology "refresh" programs that
may also remediate non-ready equipment and applications have not been included
in the Company's accounting of Y2K expenses. These activities are considered to
have been undertaken as part of the normal course of business. Future Y2K
expenses, to be incurred through the year 1999, are not expected to exceed an
additional $2.3 million and will likely include costs for remediation of non-
critical equipment and applications, consultation, independent verification,
participation in a September 1999 NERC-sponsored drill, documentation and
business continuity planning. Approximately half of all the Company's Y2K
program expenses are expected to be internal labor costs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk due to changes in interest rates,
equity prices and commodity prices. See the Company's 1998 Form 10-K, Item 7A,
"Quantitative and Qualitative Disclosures About Market Risk," for a complete
discussion of the market risks faced by the Company and the Company's market
risk sensitive assets and liabilities. As of June 30, 1999, there have been no
material changes in the market risks faced by the Company or the fair values of
assets and liabilities disclosed in Item 7A, "Quantitative and Qualitative
Disclosures About Market Risk," in the Company's 1998 Form 10-K.
27
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company hereby incorporates by reference the information set forth in
Part I of this report under Note G of Notes to Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held May 27, 1999.
The total number of common shares outstanding was 60,405,083, of which
55,862,447 were represented in person or by proxy. The following directors were
elected to hold office for a three-year term expiring at the annual meeting of
shareholders of the Company to be held in 2002:
Director Votes For Votes Withheld
-------- --------- --------------
James W. Harris 55,563,348 299,099
Kenneth R. Heitz 49,334,811 6,527,636
Michael K. Parks 55,561,001 301,446
Eric B. Siegel 55,553,037 309,410
James Haines 55,555,475 306,972
In addition to the individuals set forth above, the following individuals
continued as directors following the meeting: George W. Edwards, Jr., Ramiro
Guzman, Stephen Wertheimer, Charles A. Yamarone, Wilson K. Cadman, James A.
Cardwell, James W. Cicconi and Patricia Z. Holland-Branch.
The Board of Directors recommended and shareholders voted to approve the
Company's 1999 Long-Term Incentive Plan, which authorized the issuance of up to
two million shares of common stock for the benefit of directors, officers,
managers, other employees and consultants through the award or grant of non-
statutory stock options, incentive stock options, stock appreciation rights,
restricted stock, bonus stock and performance stock. Shares voted in favor of
approving the plan were 45,859,614 and shares voted against were 9,902,312.
There were 100,521 abstentions. See Part I, Item 1, "Financial Statements -
Note C of Notes to Financial Statements."
No other matters were voted on at the annual meeting of shareholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits incorporated herein by reference.
(b) Reports on Form 8-K:
None
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EL PASO ELECTRIC COMPANY
By: /s/ Gary R. Hedrick
------------------------------------------
Gary R. Hedrick
Vice President, Chief Financial Officer
and Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
Dated: August 13, 1999
29
<PAGE>
EL PASO ELECTRIC COMPANY
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------ -------
10.05 Stock Option Agreement, dated as of April 26, 1999, with James S.
Haines, Jr.
10.06 Stock Option Agreement, dated as of May 28, 1999, with Helen
Knopp.
+10.07 Form of Directors' Restricted Stock Award Agreement between the
Company and certain directors of the Company.
10.08 Stock Option Agreement, dated as of July 1, 1999, with Wilson K.
Cadman.
10.09 Amendment No. 6, dated June 17, 1999, to the Southwest New Mexico
Transmission Project Participation Agreement, dated April 11,
1977, between Public Service Company of New Mexico, Community
Public Service Company and the Company, and Amendments 1 through
5 thereto. (Exhibit 10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995)
11 Statement re Computation of Per Share Earnings
15 Letter re Unaudited Interim Financial Information
27 Financial Data Schedule (EDGAR filing only)
99.01 Final Order, entered June 8, 1999, by the Public Utility
Commission of Texas.
+ Agreements substantially identical in all material respects to
this Exhibit have been entered into with George W. Edwards, Jr.;
Ramiro Guzman; James W. Harris; Kenneth R. Heitz; James W.
Cicconi; Patricia Z. Holland-Branch; Michael K. Parks; Eric B.
Siegel; Stephen Wertheimer; Charles A. Yamarone; James A.
Cardwell; and Wilson K. Cadman, directors of the Company. In
addition, in lieu of non-employee director compensation,
agreements substantially identical in all material respects to
this Exhibit have been entered into with Patricia Z. Holland-
Branch; Stephen Wertheimer; and Charles Yamarone, directors of
the Company.
30
<PAGE>
EXHIBIT 10.05
EL PASO ELECTRIC COMPANY
STOCK OPTION AGREEMENT
FOR EMPLOYEES
(NON-QUALIFIED STOCK OPTIONS)
El Paso Electric Company, a Texas corporation (the "Company"), hereby
-------
grants to James S. Haines, Jr. (the "Optionee") as of March 18, 1999 (the
"Option Date"), pursuant to the provisions of the El Paso Electric Company 1996
- ------------
Long-Term Incentive Plan (the "Plan"), a non-qualified option to purchase from
----
the Company (the "Option") 50,000 shares of its Common Stock, no par value
("Stock"), at the price of $7.3750 per share upon and subject to the terms and
- -------
conditions set forth below.
1. Option Subject to Acceptance of Agreement. The Option shall be
-----------------------------------------
null and void unless the Optionee shall accept this Agreement by executing it in
the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
-------------------------------------
2.1. Maximum Term of Option. In no event may the Option be
----------------------
exercised, in whole or in part, after March 17, 2009 (the "Expiration Date").
---------------
2.2. Exercise of Option. (a) Except as otherwise provided by
------------------
Sections 2.2(b) and 2.2(c) hereof and by Section 6.8 of the Plan, the Option
shall become exercisable on March 18, 1999.
(b) If the Optionee's employment by the Company terminates by reason
of "Total Disability", the Option may thereafter be exercised by the Optionee or
the Optionee's Legal Representative until and including the earliest to occur of
(i) the date which is 120 days after the effective date of the Optionee's
termination of employment and (ii) the Expiration Date.
(c) If the Optionee's employment by the Company terminates by reason
of voluntary retirement, the Option may thereafter be exercised by the Optionee
or the Optionee's Legal Representative until and including the earliest to occur
of (i) the date which is 120 days after the effective date of the Optionee's
termination of employment and (ii) the Expiration Date.
(d) If the Optionee's employment by the Company terminates by reason
of death, the Option may thereafter be exercised by the Optionee or the
Optionee's Legal Representative or Permitted Transferees, as the case may be,
until and including the earliest to occur of (i) the date which is 120 days
after the date of death and (ii) the Expiration Date.
<PAGE>
(e) If the Optionee's employment by the Company terminates for any
reason other than "Total Disability", retirement or death, the Option may
thereafter be exercised by the Optionee or the Optionee's Legal Representative
until and including the earliest to occur of (i) the date which is 120 days
after the effective date of the Optionee's termination of employment and (ii)
the Expiration Date.
(f) If the Optionee dies during the period set forth in Section
2.2(b) following termination of employment by reason of "Total Disability", or
if the Optionee dies during the period set forth in Section 2.2(c) following
termination of employment, by reason of voluntary retirement, or if the Optionee
dies during the period set forth in Section 2.2(e) following termination of
employment for any reason other than "Total Disability" or retirement, the
Option may thereafter be exercised by the Optionee's Legal Representative or
Permitted Transferees, as the case may be, until and including the earliest to
occur of (i) the date which is 120 days after the date of death and (ii) the
Expiration Date.
2.3 Method of Exercise. Subject to the limitations set forth in this
------------------
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company specifying the number of whole shares of Stock to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and for which the Optionee has good title, free and
clear of all liens and encumbrances) having a Fair Market Value, determined as
of the date of exercise, equal to the aggregate purchase price payable pursuant
to the Option by reason of such exercise, (iii) in cash by a broker-dealer
acceptable to the Company to whom the Optionee has submitted an irrevocable
notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing
such documents as the Company may reasonably request. The Committee may
disapprove an election pursuant to any of clauses (ii) - (iv) if the Committee
determines, based on the opinion of recognized securities counsel, that the
method of exercise so elected would result in liability to the Optionee under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the regulations promulgated thereunder. Any fraction of a share of
Stock which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the Optionee. No
certificate representing a share of Stock shall be delivered until the full
purchase price therefor has been paid.
2.4 Termination of Option. (a) In no event may the Option be
---------------------
exercised after it terminates as set forth in this Section 2.4. The Option
shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of the
shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for
-2-
<PAGE>
full or partial cancellation, as the case may be. Such cancellation shall be
effective regardless of whether the Optionee returns this Agreement. If the
Optionee continues to have rights to purchase shares of Stock hereunder, the
Company shall, within 10 days of the Optionee's delivery of this Agreement to
the Company, either (i) mark this Agreement to indicate the extent to which the
Option has expired or been exercised, cancelled or forfeited or (ii) issue to
the Optionee a substitute option agreement applicable to such rights, which
agreement shall otherwise be substantially similar to this Agreement in form and
substance.
2.5 Dividend Equivalents. The Company hereby grants to Optionee
---------------------
50,000 dividend equivalents (the "Dividend Equivalents"). Each Dividend
Equivalent shall entitle Optionee to receive a cash payment on each dividend
payment date after March 18, 1999 equal to the product of (i) of the amount any
dividend declared with respect to a share of Stock and (ii) the number of shares
of Stock subject to unexercised Non-Qualified Options hereunder that have not
expired or terminated on the date of payment of such dividend.
3. Additional Terms and Conditions of Option.
-----------------------------------------
3.1. Nontransferability of Option. The Option may not be transferred
----------------------------
by the Optionee other than (i) by will or the laws of descent and distribution
or pursuant to beneficiary designation procedures approved by the Company or
(ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be
set forth in an amendment to this Agreement. Except to the extent permitted by
the foregoing sentence, during the Optionee's lifetime the Option is exercisable
only by the Optionee or the Optionee's Legal Representative. Except to the
extent permitted by the foregoing, the Option may not be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of the Option, the Option and all rights hereunder
shall immediately become null and void.
3.2. Investment Representation. The Optionee hereby represents and
-------------------------
covenants that (a) any share of Stock purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
----------
Act"), unless such purchase has been registered under the Securities Act and any
- ---
applicable state securities laws; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, the Optionee shall submit a written
statement, in form satisfactory to the Company, to the effect that such
representation (x) is true and correct as of the date of purchase of any shares
hereunder or (y) is true and correct as of the date of any sale of any such
shares, as applicable. As a further condition precedent to any exercise of the
Option, the Optionee shall comply with all regulations and requirements of any
regulatory
-3-
<PAGE>
authority having control of or supervision over the issuance or delivery of the
shares and, in connection therewith, shall execute any documents which the Board
or the Committee shall in its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
-----------------
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
---------------------
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and for which the Optionee has good title, free and
clear of all liens and encumbrances) having a Fair Market Value, determined as
of the date the obligation to withhold or pay taxes first arises in connection
with the Option (the "Tax Date"), equal to the Required Tax Payments, (3)
--------
authorizing the Company to withhold whole shares of Stock which would otherwise
be delivered to the Optionee upon exercise of the Option having a Fair Market
Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a
cash payment by a broker-dealer acceptable to the Company to whom the Optionee
has submitted an irrevocable notice of exercise or (5) any combination of (1),
(2) and (3). The Committee may disapprove an election pursuant to any of
clauses (2)-(5) if the Committee determines, based on the opinion of recognized
securities counsel, that the method so elected would result in liability to the
Optionee under Section 16(b) of the Exchange Act or the regulations promulgated
thereunder. Shares of Stock to be delivered or withheld may not have a Fair
Market Value in excess of the minimum amount of the Required Tax Payments. Any
fraction of a share of Stock which would be required to satisfy any such
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the Optionee. No certificate representing a share of Stock shall be
delivered until the Required Tax Payments have been satisfied in full.
3.4 Adjustment. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
-4-
<PAGE>
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is subject to the
------------------------------
condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.6. Delivery of Certificates. Upon the exercise of the Option, in
------------------------
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee shall not
---------------------------------------
be entitled to any privileges of ownership with respect to shares of Stock
subject to the Option unless and until purchased and delivered upon the exercise
of the Option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no event
------------------------------------------------
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company.
3.9. Decisions of Board or Committee. The Board or the Committee
-------------------------------
shall have the right to resolve all questions which may arise in connection with
the Option or its exercise. Any interpretation, determination or other action
made or taken by the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.
3.10. Company to Reserve Shares. The Company shall at all times
-------------------------
prior to the expiration or termination of the Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Stock,
the full number of shares subject to the Option from time to time.
-5-
<PAGE>
3.11. Agreement Subject to the Plan. This Agreement is subject to
-----------------------------
the provisions of the Plan and shall be interpreted in accordance therewith.
The Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
------------------------
4.1. Designation as Nonqualified Stock Option. The Option is hereby
----------------------------------------
designated as not constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. As used herein, the term "Legal
------------------------ -----
Representative" shall include an executor, administrator, legal representative,
- --------------
guardian or similar person and the term "Permitted Transferee" shall include any
--------------------
transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan
and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation
procedures approved by the Company.
4.3. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder
in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided
-------
for in this Agreement shall be made, if to the Company, to Kayser Building, 100
North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to
the Optionee, to 720 Wakefield, El Paso, TX 79922. All notices, requests or
other communications provided for in this Agreement shall be made in writing
either (a) by personal delivery to the party entitled thereto, (b) by facsimile
with confirmation of receipt, (c) by mailing in the United States mails to the
last known address of the party entitled thereto or (d) by express courier
service. The notice, request or other communication shall be deemed to be
received upon personal delivery, upon confirmation of receipt of facsimile
transmission or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
4.5. Governing Law. This Agreement, the Option and all
-------------
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Texas and construed in accordance therewith without giving effect
to principles of conflicts of laws.
-6-
<PAGE>
4.6. Counterparts. This Agreement may be executed in two
------------
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
EL PASO ELECTRIC COMPANY
By: /s/ Kenneth R. Heitz
-----------------------------
Name: Kenneth R. Heitz
Title: Director
Accepted this 26th day of April, 1999.
/s/ James S. Haines, Jr.
- --------------------------------------
James S. Haines, Jr.
-7-
<PAGE>
EXHIBIT 10.06
EL PASO ELECTRIC COMPANY
STOCK OPTION AGREEMENT
(INCENTIVE STOCK OPTIONS)
El Paso Electric Company, a Texas corporation (the "Company"), hereby
-------
grants to Helen Knopp (the "Optionee") as of April 30, 1999 (the "Option Date"),
-----------
pursuant to the provisions of the El Paso Electric Company 1996 Long-Term
Incentive Plan (the "Plan"), an option to purchase from the Company (the
----
"Option") 61,535 shares of its Common Stock, no par value ("Stock"), at the
-----
price of $8.125 per share upon and subject to the terms and conditions set forth
below.
1. Option Subject to Acceptance of Agreement. The Option shall be
-----------------------------------------
null and void unless the Optionee shall accept this Agreement by executing it in
the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
-------------------------------------
2.1. Maximum Term of Option. In no event may the Option be
----------------------
exercised, in whole or in part, after January 2, 2009 (the "Expiration Date").
---------------
"Any vested Option which has not bee exercised by Optionee or Optionee's Legal
Representative by the Expiration Date shall be forfeited."
2.2. Exercise of Option. (a) Except as otherwise provided by
------------------
Sections 2.2(b) through (g) hereof and by Section 6.8 of the Plan, the Option
shall vest and become exercisable ratably over a period of five (5) years from
the date hereof as follows:
<TABLE>
<CAPTION>
Date Exercisable No. of Shares Exercisable
-------------------- ---------------------------------
<S> <C>
January 2, 2000 12,307
January 2, 2001 12,307
January 2, 2002 12,307
January 2, 2003 12,307
January 2, 2004 12,307
</TABLE>
(b) Notwithstanding anything in this Agreement to the contrary, if a
Triggering Event (as such term is defined in that certain Employment Agreement
dated April 30, 1999, by and between the Company and Optionee, the "Employment
Agreement") shall occur, then all unvested Options shall immediately vest and
become exercisable in full and may be exercised by Optionee at any time prior to
the Expiration Date.
(c) If the Optionee's employment by the Company terminates by reason
of Total Disability (as such term is defined in that certain Employment
Agreement), the Option shall be exercisable only to the extent it is vested and
exercisable on the effective date of the Optionee's termination of employment
and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until and including the earliest to occur of (i) the date which
is 90 days after the effective date of the
<PAGE>
Optionee's termination of employment and (ii) the Expiration Date. "Any Option
which has not vested as of the effective date of Optionee's termination of
employment shall be forfeited."
(d) If the Optionee's employment by the Company terminates by reason
of retirement, (as such term is defined in the Employment Agreement) the Option
shall be exercisable only to the extent it is vested and exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until and
including the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date. "Any Option which has not vested as of the effective date of
Optionee's termination of employment shall be forfeited."
(e) If the Optionee's employment by the Company terminates by reason
of death, the Option shall be exercisable only to the extent it is vested and
exercisable on the date of death and may thereafter be exercised by the Optionee
or the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until and including the earliest to occur of (i) the date which is 90 days
after the date of death and (ii) the Expiration Date. "Any Option which has not
vested as of the effective date of Optionee's termination of employment shall be
forfeited."
(f) If the Optionee's employment by the Company terminates for any
reason other than Total Disability, retirement or death, the Option shall be
vested and exercisable only to the extent it is vested and exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until and
including the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date. "Any Option which has not vested as of the effective date of
Optionee's termination of employment shall be forfeited."
(g) If the Optionee dies during the period set forth in Section
2.2(b) following termination of employment by reason of Total Disability, or if
the Optionee dies during the period set forth in Section 2.2(c) following
termination of employment, or if the Optionee dies during the period set forth
in Section 2.2(e) following termination of employment for any reason other than
Total Disability or retirement, the Option shall be exercisable only to the
extent it is vested and exercisable on the date of death and may thereafter be
exercised by the Optionee's Legal Representative or Permitted Transferees, as
the case may be, until and including the earliest to occur of (i) the date which
is 90 days after the date of death and (ii) the Expiration Date. "Any Option
which has not vested as of the effective date of Optionee's termination of
employment shall be forfeited."
2.3 Method of Exercise. Subject to the limitations set forth in this
------------------
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company specifying the number of whole shares of Stock to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery
-2-
<PAGE>
of such shares or which the Optionee purchased on the open market and for which
the Optionee has good title, free and clear of all liens and encumbrances)
having a fair market value ("Fair Market Value",) determined as of the date of
-------------------
exercise, equal to the aggregate purchase price payable pursuant to the Option
by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the
Company to whom the Optionee has submitted an irrevocable notice of exercise or
(iv) a combination of (i) and (ii), and (2) by executing such documents as the
Company may reasonably request. The Compensation Committee of the Board of
Directors of the Company (the "Committee") may disapprove an election pursuant
to any of clauses (ii) - (iv) if the Committee determines, based on the opinion
of recognized securities counsel, that the method of exercise so elected would
result in liability to the Optionee under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the regulations
--------------
promulgated thereunder. Any fraction of a share of Stock which would be required
to pay such purchase price shall be disregarded and the remaining amount due
shall be paid in cash by the Optionee. No certificate representing a share of
Stock shall be delivered until the full purchase price therefor has been paid.
2.4 Termination of Option. (a) In no event may the Option be
---------------------
exercised after it terminates as set forth in this Section 2.4. The Option
shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of the
shares of Stock subject to the Option expire or are exercised, canceled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of
this Agreement to the Company, either (i) mark this Agreement to indicate the
extent to which the Option has expired or been exercised, canceled or forfeited
or (ii) issue to the Optionee a substitute option agreement applicable to such
rights, which agreement shall otherwise be substantially similar to this
Agreement in form and substance.
3. Additional Terms and Conditions of Option.
-----------------------------------------
3.1. Nontransferability of Option. The Option may not be transferred
----------------------------
by the Optionee other than (i) by will or the laws of descent and distribution
or pursuant to beneficiary designation procedures approved by the Company or
(ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be
set forth in an amendment to this Agreement. Except to the extent permitted by
the foregoing sentence, during the Optionee's lifetime the Option is exercisable
only by the Optionee or the Optionee's Legal Representative. Except to the
extent permitted by the foregoing, the Option may not be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of the Option, the Option and all rights hereunder
shall immediately become null and void.
-3-
<PAGE>
3.2. Investment Representation. The Optionee hereby represents and
-------------------------
covenants that (a) any share of Stock purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
----------
Act"), unless such purchase has been registered under the Securities Act and any
- ---
applicable state securities laws; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, the Optionee shall submit a written
statement, in form satisfactory to the Company, to the effect that such
representation (x) is true and correct as of the date of purchase of any shares
hereunder or (y) is true and correct as of the date of any sale of any such
shares, as applicable. As a further condition precedent to any exercise of the
Option, the Optionee shall comply with all regulations and requirements of any
regulatory authority having control of or supervision over the issuance or
delivery of the shares and, in connection therewith, shall execute any documents
which the Board or the Committee shall in its sole discretion deem necessary or
advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
-----------------
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
---------------------
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and for which the Optionee has good title, free and
clear of all liens and encumbrances) having a Fair Market Value, determined as
of the date the obligation to withhold or pay taxes first arises in connection
with the Option (the "Tax Date"), equal to the Required Tax Payments, (3)
--------
authorizing the Company to withhold whole shares of Stock which would otherwise
be delivered to the Optionee upon exercise of the Option having a Fair Market
Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a
cash payment by a broker-dealer acceptable to the Company to whom the Optionee
has submitted an irrevocable notice of exercise or (5) any combination of (1),
(2) and (3). The Committee may disapprove an election pursuant to any of
clauses (2)-(5) if the Committee determines, based on the opinion of recognized
securities counsel, that the method so elected would result in liability to the
Optionee under Section 16(b) of the Exchange Act or the regulations promulgated
thereunder. Shares of Stock to be delivered or withheld may not have a Fair
Market Value in excess of the minimum amount of the Required Tax Payments. Any
fraction of a share of Stock
-4-
<PAGE>
which would be required to satisfy any such obligation shall be disregarded and
the remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the Required Tax Payments
have been satisfied in full.
3.4 Adjustment. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is subject to the
------------------------------
condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.6. Delivery of Certificates. Upon the exercise of the Option, in
------------------------
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee shall not
---------------------------------------
be entitled to any privileges of ownership with respect to shares of Stock
subject to the Option unless and until purchased and delivered upon the exercise
of the Option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no event
------------------------------------------------
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company.
3.9. Decisions of Board or Committee. The Board or the Committee
-------------------------------
shall have the right to resolve all questions which may arise in connection with
the
-5-
<PAGE>
Option or its exercise. Any interpretation, determination or other action made
or taken by the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.
3.10. Company to Reserve Shares. The Company shall at all times
-------------------------
prior to the expiration or termination of the Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Stock,
the full number of shares subject to the Option from time to time.
3.11. Agreement Subject to the Plan. This Agreement is subject to
-----------------------------
the provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
------------------------
4.1. Designation as an Incentive Stock Option. The Option is hereby
----------------------------------------
designated as constituting an "incentive stock option" within meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. As used herein, the term "Legal
------------------------ -----
Representative" shall include an executor, administrator, legal representative,
- --------------
guardian or similar person and the term "Permitted Transferee" shall include any
--------------------
transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan
and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation
procedures approved by the Company.
4.3. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder
in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided
-------
for in this Agreement shall be made, if to the Company, to Kayser Building, 100
North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to
the Optionee, to Helen Knopp, 5756 Box Elder, El Paso, Texas 79932. All
notices, requests or other communications provided for in this Agreement shall
be made in writing either (a) by personal delivery to the party entitled
thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the
United States mails to the last known address of the party entitled thereto or
(d) by express courier service. The notice, request or other communication
shall be deemed to be received upon personal delivery, upon confirmation of
receipt of facsimile transmission or upon receipt by the party entitled thereto
if by United States mail or express courier service; provided, however, that if
a notice, request or other communication is not received during regular business
hours, it shall be deemed to be received on the next succeeding business day of
the Company.
4.5. Governing Law. This Agreement, the Option and all
-------------
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the
-6-
<PAGE>
laws of the United States, shall be governed by the laws of the State of Texas
and construed in accordance therewith without giving effect to principles of
conflicts of laws.
4.6. Counterparts. This Agreement may be executed in two
------------
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
EL PASO ELECTRIC COMPANY
By: /s/ James Haines
------------------------------------
Name: James Haines
Title: Chief Executive Officer and
President
Accepted this 28th day of May, 1999
/s/ Helen Knopp
- ----------------------------------
Helen Knopp
-7-
<PAGE>
EL PASO ELECTRIC COMPANY
STOCK OPTION AGREEMENT
FOR EMPLOYEES
(NON-QUALIFIED STOCK OPTIONS)
El Paso Electric Company, a Texas corporation (the "Company"), hereby
-------
grants to Helen Knopp (the "Optionee") as of April 30, 1999 (the "Option Date"),
-------- -----------
pursuant to the provisions of the El Paso Electric Company 1996 Long-Term
Incentive Plan (the "Plan"), a non-qualified option to purchase from the Company
----
(the "Option") 38,465 shares of its Common Stock, no par value ("Stock"), at the
-----
price of $8.125 per share upon and subject to the terms and conditions set forth
below.
1. Option Subject to Acceptance of Agreement. The Option shall be
-----------------------------------------
null and void unless the Optionee shall accept this Agreement by executing it in
the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
-------------------------------------
2.1. Maximum Term of Option. In no event may the Option be
----------------------
exercised, in whole or in part, after January 2, 2009 (the "Expiration Date").
---------------
"Any vested Option which has not been exercised by Optionee or Optionee's Legal
Representative by the Expiration Date shall be forfeited."
2.2. Exercise of Option. (a) Except as otherwise provided by
------------------
Sections 2.2(b) through (g) hereof and by Section 6.8 of the Plan, the Option
shall vest and become exercisable ratably over a period of five (5) years from
the date hereof as follows:
<TABLE>
<CAPTION>
Date Exercisable No. of Shares Exercisable
-------------------- ---------------------------------
<S> <C>
January 2, 2000 7,693
January 2, 2001 7,693
January 2, 2002 7,693
January 2, 2003 7,693
January 2, 2004 7,693
</TABLE>
(b) Notwithstanding anything in this Agreement to the contrary, if a
Triggering Event (as such term is defined in that certain Employment Agreement
dated April 30, 1999 by and between the Company and Optionee, the "Employment
Agreement") shall occur, then all unvested Options shall immediately vest and
become exercisable in full and may be exercised by Optionee at any time prior to
the Expiration Date.
(c) If the Optionee's employment by the Company terminates by reason of
Total Disability (as such term is defined in the Employment Agreement), the
Option shall be exercisable only to the extent it is vested and exercisable on
the effective date of the Optionee's termination of employment and may
thereafter be exercised by the Optionee or the Optionee's Legal Representative
until and including
<PAGE>
the earliest to occur of (i) the date which is 120 days after the effective date
of the Optionee's termination of employment and (ii) the Expiration Date. "Any
Option which has not vested as of the effective date of Optionee's termination
of employment shall be forfeited."
(d) If the Optionee's employment by the Company terminates by reason
of retirement, the Option shall be exercisable only to the extent it is vested
and exercisable on the effective date of the Optionee's termination of
employment and may thereafter be exercised by the Optionee or the Optionee's
Legal Representative until and including the earliest to occur of (i) the date
which is 120 days after the effective date of the Optionee's termination of
employment and (ii) the Expiration Date. "Any Option which has not vested as of
the effective date of Optionee's termination of employment shall be forfeited."
(e) If the Optionee's employment by the Company terminates by reason
of death, the Option shall be exercisable only to the extent it is vested and
exercisable on the date of death and may thereafter be exercised by the Optionee
or the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until and including the earliest to occur of (i) the date which is 120 days
after the date of death and (ii) the Expiration Date. "Any Option which has not
vested as of the effective date of Optionee's termination of employment shall be
forfeited."
(f) If the Optionee's employment by the Company terminates for any
reason other than Total Disability, retirement or death, the Option shall be
exercisable only to the extent it is vested and exercisable on the effective
date of the Optionee's termination of employment and may thereafter be exercised
by the Optionee or the Optionee's Legal Representative until and including the
earliest to occur of (i) the date which is 120 days after the effective date of
the Optionee's termination of employment and (ii) the Expiration Date. "Any
Option which has not vested as of the effective date of Optionee's termination
of employment shall be forfeited."
(g) If the Optionee dies during the period set forth in Section 2.2(b)
following termination of employment by reason of Total Disability, or if the
Optionee dies during the period set forth in Section 2.2(c) following
termination of employment, or if the Optionee dies during the period set forth
in Section 2.2(e) following termination of employment for any reason other than
Total Disability or retirement, the Option shall be exercisable only to the
extent it is vested and exercisable on the date of death and may thereafter be
exercised by the Optionee's Legal Representative or Permitted Transferees, as
the case may be, until and including the earliest to occur of (i) the date which
is 90 days after the date of death and (ii) the Expiration Date. "Any Option
which has not vested as of the effective date of Optionee's termination of
employment shall be forfeited."
2.3 Method of Exercise. Subject to the limitations set forth in this
------------------
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company specifying the number of whole shares of Stock to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery
of previously owned whole
-2-
<PAGE>
shares of Stock (which the Optionee has held for at least six months prior to
the delivery of such shares or which the Optionee purchased on the open market
and for which the Optionee has good title, free and clear of all liens and
encumbrances) having a fair market value ("Fair Market Value"), determined as of
-----------------
the date of exercise, equal to the aggregate purchase price payable pursuant to
the Option by reason of such exercise, (iii) in cash by a broker-dealer
acceptable to the Company to whom the Optionee has submitted an irrevocable
notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing
such documents as the Company may reasonably request. The Compensation Committee
of the Board of Directors of the Company (the "Committee") may disapprove an
election pursuant to any of clauses (ii) - (iv) if the Committee determines,
based on the opinion of recognized securities counsel, that the method of
exercise so elected would result in liability to the Optionee under Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
--------------
or the regulations promulgated thereunder. Any fraction of a share of Stock
which would be required to pay such purchase price shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the full purchase price
therefor has been paid.
2.4 Termination of Option. (a) In no event may the Option be
---------------------
exercised after it terminates as set forth in this Section 2.4. The Option
shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of the
shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of
this Agreement to the Company, either (i) mark this Agreement to indicate the
extent to which the Option has expired or been exercised, cancelled or forfeited
or (ii) issue to the Optionee a substitute option agreement applicable to such
rights, which agreement shall otherwise be substantially similar to this
Agreement in form and substance.
3. Additional Terms and Conditions of Option.
-----------------------------------------
3.1. Nontransferability of Option. The Option may not be transferred
----------------------------
by the Optionee other than (i) by will or the laws of descent and distribution
or pursuant to beneficiary designation procedures approved by the Company or
(ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be
set forth in an amendment to this Agreement. Except to the extent permitted by
the foregoing sentence, during the Optionee's lifetime the Option is exercisable
only by the Optionee or the Optionee's Legal Representative. Except to the
extent permitted by the foregoing, the Option may not be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell,
-3-
<PAGE>
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the
Option, the Option and all rights hereunder shall immediately become null and
void.
3.2. Investment Representation. The Optionee hereby represents and
-------------------------
covenants that (a) any share of Stock purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
----------
Act"), unless such purchase has been registered under the Securities Act and any
- ---
applicable state securities laws; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, the Optionee shall submit a written
statement, in form satisfactory to the Company, to the effect that such
representation (x) is true and correct as of the date of purchase of any shares
hereunder or (y) is true and correct as of the date of any sale of any such
shares, as applicable. As a further condition precedent to any exercise of the
Option, the Optionee shall comply with all regulations and requirements of any
regulatory authority having control of or supervision over the issuance or
delivery of the shares and, in connection therewith, shall execute any documents
which the Board or the Committee shall in its sole discretion deem necessary or
advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
-----------------
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
---------------------
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and for which the Optionee has good title, free and
clear of all liens and encumbrances) having a Fair Market Value, determined as
of the date the obligation to withhold or pay taxes first arises in connection
with the Option (the "Tax Date"), equal to the Required Tax Payments, (3)
--------
authorizing the Company to withhold whole shares of Stock which would otherwise
be delivered to the Optionee upon exercise of the Option having a Fair Market
Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a
cash payment by a broker-dealer acceptable to the Company to whom the Optionee
has submitted an irrevocable notice of exercise or (5) any combination of (1),
(2) and (3). The Committee may disapprove an election pursuant to any of
clauses (2)-(5) if the Committee determines, based on the opinion of recognized
securities counsel, that the method so elected would result in liability to the
Optionee under Section 16(b) of the Exchange Act or the regulations promulgated
thereunder. Shares of Stock to be
-4-
<PAGE>
delivered or withheld may not have a Fair Market Value in excess of the minimum
amount of the Required Tax Payments. Any fraction of a share of Stock which
would be required to satisfy any such obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the Required Tax Payments
have been satisfied in full.
3.4 Adjustment. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is subject to the
------------------------------
condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.6. Delivery of Certificates. Upon the exercise of the Option, in
------------------------
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee shall not
---------------------------------------
be entitled to any privileges of ownership with respect to shares of Stock
subject to the Option unless and until purchased and delivered upon the exercise
of the Option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no event
------------------------------------------------
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company.
-5-
<PAGE>
3.9. Decisions of Board or Committee. The Board or the Committee
-------------------------------
shall have the right to resolve all questions which may arise in connection with
the Option or its exercise. Any interpretation, determination or other action
made or taken by the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.
3.10. Company to Reserve Shares. The Company shall at all times
-------------------------
prior to the expiration or termination of the Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Stock,
the full number of shares subject to the Option from time to time.
3.11. Agreement Subject to the Plan. This Agreement is subject to
-----------------------------
the provisions of the Plan and shall be interpreted in accordance therewith.
The Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
------------------------
4.1. Designation as Nonqualified Stock Option. The Option is hereby
----------------------------------------
designated as not constituting an "incentive stock option" within meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
----
Agreement shall be interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. As used herein, the term "Legal
------------------------ -----
Representative" shall include an executor, administrator, legal representative,
- --------------
guardian or similar person and the term "Permitted Transferee" shall include any
--------------------
transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan
and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation
procedures approved by the Company.
4.3. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder
in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided
-------
for in this Agreement shall be made, if to the Company, to Kayser Building, 100
North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to
the Optionee, to Helen Knopp, 5756 Box Elder, El Paso, Texas 79932. All
notices, requests or other communications provided for in this Agreement shall
be made in writing either (a) by personal delivery to the party entitled
thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the
United States mails to the last known address of the party entitled thereto or
(d) by express courier service. The notice, request or other communication
shall be deemed to be received upon personal delivery, upon confirmation of
receipt of facsimile transmission or upon receipt by the party entitled thereto
if by United States mail or express courier service; provided, however, that if
a notice, request or other communication is not received during regular business
hours, it shall be deemed to be received on the next succeeding business day of
the Company.
-6-
<PAGE>
4.5. Governing Law. This Agreement, the Option and all
-------------
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Texas and construed in accordance therewith without giving effect
to principles of conflicts of laws.
4.6. Counterparts. This Agreement may be executed in two
------------
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
EL PASO ELECTRIC COMPANY
By: /s/ James Haines
------------------------------------
Name: James Haines
Title: Chief Executive Officer and
President
Accepted this 28th day of May, 1999
/s/ Helen Knopp
- --------------------------------
Helen Knopp
-7-
<PAGE>
EXHIBIT 10.07
EL PASO ELECTRIC COMPANY
DIRECTORS' RESTRICTED STOCK AWARD AGREEMENT
El Paso Electric Company, a Texas corporation (the "Company"), hereby
grants to ________ (the "Holder"), in accordance with the adopted resolution by
the Board of Directors on May 27, 1999, a restricted stock award (the "Award")
of _____ shares of the Company's Common Stock, no par value ("Stock"), upon and
subject to the restrictions, terms and conditions set forth below. Capitalized
terms not defined herein shall have the meanings specified in the Plan.
1. Award Subject to Acceptance of Agreement. The Award shall be null
----------------------------------------
and void unless the Holder shall (a) accept this Agreement by executing it in
the space provided below and returning it to the Company and (b) execute and
return one or more irrevocable stock powers. As soon as practicable after the
Holder has executed this Agreement and such stock power or powers and returned
the same to the Company, the Company shall cause to be issued in the Holder's
name a stock certificate or certificates representing the total number of shares
of Stock subject to the Award.
2. Rights as a Stockholder. The Holder shall have the right to vote
-----------------------
the shares of Stock subject to the Award and to receive dividends and other
distributions thereon; provided, however, that a dividend or other distribution
with respect to shares of Stock (including, without limitation, a stock dividend
or stock split), other than a regular cash dividend, shall be delivered to the
Company (and the Holder shall, if requested by the Company, execute and return
one or more irrevocable stock powers related thereto) and shall be subject to
the same restrictions as the shares of Stock with respect to which such dividend
or other distribution was made.
3. Custody and Delivery of Certificates Representing Shares. The
--------------------------------------------------------
Company shall hold the certificate or certificates representing the shares of
Stock subject to the Award until the restrictions on such Award shall have
lapsed, in whole or in part, pursuant to Paragraph 4 hereof, and the Company
shall as soon thereafter as practicable, subject to Section 5.3, deliver the
certificate or certificates for such shares to the Holder and destroy the stock
power or powers relating to such shares. If such stock power or powers also
relates to shares as to which restrictions remain in effect, the Company may
require, as a condition precedent to delivery of any certificate pursuant to
this Section 3, the execution and delivery to the Company of one or more stock
powers relating to such shares.
4. Restriction Period and Vesting. The restrictions on the Award
------------------------------
shall lapse (i) with respect to all of the shares of Stock subject to the Award
at the earlier of May 31, 2000 and the conclusion of the 2000 Annual Meeting of
Shareholders of the Company, or (ii) earlier in accordance with Section 6.8 of
the Plan (the "Restriction Period").
<PAGE>
5. Additional Terms and Conditions of Award.
----------------------------------------
5.1. Nontransferability of Award. During the Restriction Period, the
---------------------------
shares of Stock subject to the Award as to which restrictions remain in effect
may not be transferred by the Holder other than by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. Except to the extent permitted by the foregoing, during the
Restriction Period, the shares of Stock subject to the Award as to which
restrictions remain in effect may not be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate or encumber, or
otherwise dispose of such shares, the Award shall immediately become null and
void.
5.2. Investment Representation. The Holder hereby represents and
-------------------------
covenants that (a) any share of Stock acquired upon the lapse of restrictions
will be acquired for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such acquisition has been registered under the Securities Act and
any applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, the Holder shall submit a written
statement, in form satisfactory to the Company, to the effect that such
representation (x) is true and correct as of the date of acquisition of any
shares hereunder or (y) is true and correct as of the date of any sale of any
such shares, as applicable. As a further condition precedent to the delivery to
the Holder of any shares subject to the Award, the Holder shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board or any committee authorized by the Board
shall in its sole discretion deem necessary or advisable.
5.3. Withholding Taxes not applicable.
5.4. Adjustment. In the event of any stock split, stock
----------
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Stock other than a
regular cash dividend, the number and class of securities subject to the Award
shall be appropriately adjusted by the Committee. If any adjustment would
result in a fractional security being subject to the Award, the Company shall
pay the Holder in connection with the vesting, if any, of such fractional
security, an amount in cash determined by multiplying (i) such fraction (rounded
to the nearest hundredth) by (ii) the Fair Market Value on the vesting date.
The decision of the Committee regarding any such adjustment shall be final,
binding and conclusive.
-2-
<PAGE>
5.5. Compliance with Applicable Law. The Award is subject to the
------------------------------
condition that if the listing, registration or qualification of the shares
subject to the Award upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the vesting
or delivery of shares hereunder, the shares of Stock subject to the Award may
not be delivered, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company agrees to use
reasonable efforts to effect or obtain any such listing, registration,
qualification, consent or approval.
5.6. Decisions of Board or Committee. The Board or the Committee
-------------------------------
shall have the right to resolve all questions which may arise in connection with
the Award. Any interpretation, determination or other action made or taken by
the Board or the Committee regarding the Plan or this Agreement shall be final,
binding and conclusive.
5.7. Agreement Subject to the Plan. This Agreement is subject to the
-----------------------------
provisions of the Plan and shall be interpreted in accordance therewith. The
Holder hereby acknowledges receipt of a copy of the Plan.
6. Miscellaneous Provisions.
------------------------
6.1. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Holder, acquire any rights hereunder in
accordance with this Agreement or the Plan.
6.2. Notices. All notices, requests or other communications provided
-------
for in this Agreement shall be made, if to the Company, to Kayser Building, 100
North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to
the Holder, to ___________________________________. All notices, requests or
other communications provided for in this Agreement shall be made in writing
either (a) by personal delivery to the party entitled thereto, (b) by facsimile
with confirmation of receipt, (c) by mailing in the United States mails to the
last known address of the party entitled thereto or (d) by express courier
service. The notice, request or other communication shall be deemed to be
received upon personal delivery, upon confirmation of receipt of facsimile
transmission, or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
-3-
<PAGE>
6.3. Governing Law. This Agreement, the Award and all determinations
-------------
made and actions taken pursuant hereto and thereto, to the extent not otherwise
governed by the laws of the United States, shall be governed by the laws of the
State of Texas and construed in accordance therewith without giving effect to
conflicts of laws principles.
6.4. Counterparts. This Agreement may be executed in two
------------
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
EL PASO ELECTRIC COMPANY
By: /s/ James Haines
-----------------------------------
Name: James Haines
Title: Chief Executive Officer and
President
Accepted this ____ day of
_________, 1999
- ---------------------------------
Holder
-4-
<PAGE>
EXHIBIT 10.08
EL PASO ELECTRIC COMPANY
STOCK OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
(Non-Qualified Stock Options)
El Paso Electric Company, a Texas corporation (the "Company"), hereby
-------
grants to Mr. Wilson K. Cadman (the "Optionee") as of July 1, 1999 (the "Option
------
Date"), in accordance with the adopted resolution by the Board of Directors on
- ----
May 27, 1999 pertaining to Non-Employee Directors compensation and by
designation made in election form completed by the Director, a non-qualified
option (the "Option") to purchase from the Company 2,703 shares of its Common
Stock, no par value ("Stock") at the price of $8.9375 per share, upon and
-----
subject to the terms and conditions set forth below.
1. Options Subject to Acceptance of Agreement. The Options shall be
------------------------------------------
null and void unless the Optionee shall accept this Agreement by executing it in
the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
-------------------------------------
2.1. Maximum Term of Option. In no event may the Options be
----------------------
exercised, in whole or in part, after May 29, 2008 (the "Expiration Date").
---------------
2.2. Exercise of Options. (a) The Options are fully exercisable
-------------------
from and after the date hereof.
(b) If the Optionee shall cease for any reason to serve as a
Director of the Company, the Options may thereafter be exercised by the Optionee
or the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until and including the earliest to occur of (i) the date which is 120 days
after the termination of such person's service on the Board and (ii) the
Expiration Date.
2.3 Method of Exercise. Subject to the limitations set forth in
------------------
this Agreement, the Options may be exercised by the Optionee (1) by giving
written notice to the Company specifying the Option or Options being exercised,
and the number of whole shares of Stock to be purchased and accompanied by
payment therefor in full (or arrangement made for such payment to the Company's
satisfaction) either (i) in cash, (ii) by delivery of previously owned whole
shares of Stock (which the Optionee has held for at least six months prior to
the delivery of such shares or which the Optionee purchased on the open market
and for which the Optionee has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date of exercise,
equal to the aggregate purchase price payable pursuant to the Option by reason
of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise, (iv) a
combination of (i) and (ii), and (2) by executing such documents as the Company
may reasonably request. The Committee may disapprove an election pursuant to
any of clauses (ii) - (iv) if the Committee determines, based on the opinion of
recognized securities
<PAGE>
counsel, that the method of exercise so elected would result in liability to the
Optionee under Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or the regulations promulgated thereunder. Any fraction of
a share of Stock which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the Optionee.
No certificate representing a share of Stock shall be delivered until the full
purchase price therefor has been paid.
2.4 Termination of Options. (a) In no event may an Option be
----------------------
exercised after it terminates as set forth in this Section 2.4. The Option
shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of
the shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of
this Agreement to the Company, either (i) mark this Agreement to indicate the
extent to which the Option has expired or been exercised, cancelled or forfeited
or (ii) issue to the Optionee a substitute option agreement applicable to such
rights, which agreement shall otherwise be substantially similar to this
Agreement in form and substance.
3. Additional Terms and Conditions of Option.
-----------------------------------------
3.1. Nontransferability of Options. The Options may not be
-----------------------------
transferred by the Optionee other than (i) by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act
as may be set forth in an amendment to this Agreement. Except to the extent
permitted by the foregoing sentence, during the Optionee's lifetime the Options
are exercisable only by the Optionee or the Optionee's Legal Representative.
Except to the extent permitted by the foregoing, the Options may not be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of an Option, the Option and
all rights hereunder shall immediately become null and void.
3.2. Investment Representation. The Optionee hereby represents
-------------------------
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
----------
Act"), unless such purchase has been registered under the Securities Act and any
- ---
applicable state securities laws; (b) any subsequent sale of any such shares
shall be made either
-2-
<PAGE>
pursuant to an effective registration statement under the Securities Act and any
applicable state securities laws, or pursuant to an exemption from registration
under the Securities Act and such state securities laws; and (c) if requested by
the Company, the Optionee shall submit a written statement, in form satisfactory
to the Company, to the effect that such representation (x) is true and correct
as of the date of purchase of any shares hereunder or (y) is true and correct as
of the date of any sale of any such shares, as applicable. As a further
condition precedent to any exercise of the Option, the Optionee shall comply
with all regulations and requirements of any regulatory authority having control
of or supervision over the issuance or delivery of the shares and, in connection
therewith, shall execute any documents which the Board or the Committee shall in
its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. Not applicable
-----------------
3.4 Adjustment. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Options and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Options, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Options is subject to the
------------------------------
condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Options may not be exercised, in whole or
in part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.6. Delivery of Certificates. Upon the exercise of the Option, in
------------------------
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.
-3-
<PAGE>
3.7. Options Confer No Rights as Stockholder. The Optionee shall not
---------------------------------------
be entitled to any privileges of ownership with respect to shares of Stock
subject to the Option unless and until purchased and delivered upon the exercise
of an Option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.8. Company to Reserve Shares. The Company shall at all times prior
-------------------------
to the expiration or termination of the Options reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Stock,
the full number of shares subject to the Options from time to time.
3.9. Agreement Subject to the Plan. This Agreement is subject to the
-----------------------------
provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
------------------------
4.1. Designation as Stock Option. The Option is hereby designated as
---------------------------
not constituting an "incentive stock option" within meaning of Section 422 of
the Internal Revenue Code of 1986, as amended. This Agreement shall be
interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. As used herein, the term "Legal
------------------------ -----
Representative" shall include an executor, administrator, legal representative,
- --------------
guardian or similar person and the term "Permitted Transferee" shall include any
--------------------
transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan
and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation
procedures approved by the Company.
4.3. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder
in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided
-------
for in this Agreement shall be made, if to the Company, to Kayser Building, 100
North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to
the Optionee, to 8905 East Douglas Avenue. All notices, requests or other
communications provided for in this Agreement shall be made in writing either
(a) by personal delivery to the party entitled thereto, (b) by facsimile with
confirmation of receipt, (c) by mailing in the United States mails to the last
known address of the party entitled thereto or (d) by express courier service.
The notice, request or other communication shall be deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transmission or
upon receipt by the party entitled thereto if by United States mail or express
courier service; provided, however, that if a
-4-
<PAGE>
notice, request or other communication is not received during regular business
hours, it shall be deemed to be received on the next succeeding business day of
the Company.
4.5. Governing Law. This Agreement, the Option and all
-------------
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Texas and construed in accordance therewith without giving effect
to principles of conflicts of laws.
4.6. Counterparts. This Agreement may be executed in two
------------
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
EL PASO ELECTRIC COMPANY
By: /s/ James Haines
--------------------------------------------
Name: James Haines
Title: Chief Executive Officer and
President
Accepted this 1st day of July, 1999
/s/ Wilson K. Cadman
- -------------------------------------
Mr. Wilson K. Cadman
-5-
<PAGE>
EXHIBIT 10.09
SWNMT Amendment #6
TEXAS-NEW MEXICO POWER COMPANY
Subject: SWNMT LETTER AGREEMENT - AMENDMENT #6
Public Service Company of New Mexico ("PNM"), Texas-New Mexico Power Company
("TNMP") and El Paso Electric Company ("EPE") (herein individually the "Party"
and collectively the "Parties") are parties to the Southwest New Mexico
Transmission Project Participation Agreement "SWNMT Agreement", dated April 11,
1977, and amended and supplemented at various times by the Parties. Section
10.0 of the SWNMT Agreement sets forth the terms and conditions under which the
Parties may interconnect facilities and/or equipment with the Southwest New
Mexico Transmission ("SWNMT") Project.
This SWNMT Letter Agreement - Amendment #6 sets forth the terms and conditions
under which the Parties agree to the interconnection of TNMP's Hidalgo 345-115
kV autotransformer and associated equipment and agree to supplement the SWNMT
Agreement.
Texas-New Mexico Power Company formally notified the Parties by letter dated
March 5, 1993, of its plans to install a second 345-115 kV 200 MVA
autotransformer at Hidalgo Substation. The facilities and particulars for the
installation were identified in that letter. The letter specifically stated,
"For the immediate future, this second autotransformer shall be considered a de-
energized spare for TNMP's existing Hidalgo 345-115 kV, 200 MVA
autotransformer". Additionally, the March 5, 1993 letter explained the location
and rationale behind the proposed installation plans. The letter also indicated
that in the future, the second autotransformer would be electrically
interconnected on a continuous basis to the 345 kV bus in accordance with the
original plans for expansion of the Hidalgo 345 kV Substation.
With the above being known, TNMP requests that the other Parties (PNM and EPE)
approve interconnection of the second 345-115 kV, 200 MVA autotransformer in its
final configuration (the "New Autotransformer") at the Hidalgo 345 kV
Substation. Such an interconnection will require the installation of one (1)
345 kV circuit breaker, two (2) 345 kV motor operated disconnects, and one (1)
345 kV circuit-switcher (collectively, the "Related Equipment").
I. In connection with such approval, the Parties agree:
a) TNMP will be responsible for all design, construction and equipment costs
for interconnecting the New Autotransformer, installing the Related
Equipment, moving of the phases of the existing strain bus, bus work,
protective relaying and other necessary items directly associated with this
project.
2
<PAGE>
SWNMT Amendment #6
TEXAS-NEW MEXICO POWER COMPANY
b) TNMP will interconnect the New Autotransformer and Related Equipment to the
SWNMT facilities in the manner displayed in the drawings attached to and
incorporated into this Letter Agreement (refer to drawing numbers: Hidalgo
1, 2 and 3). TNMP shall submit its interconnection design plans to the
SWNMT Project Coordinating Committee for review and approval prior to the
interconnection to SWNMT.
c) i) The New Autotransformer shall be wholly owned by TNMP, shall not be
part of the SWNMT, and shall be for the sole use of TNMP.
ii) TNMP shall be the sole owner of the Related Equipment and any other
equipment installed by TNMP for the interconnection of the New
Autotransformer, and such Related Equipment shall not be part of the SWNMT
facilities. Notwithstanding the foregoing, the 345 kV circuit breaker and
345 kV motor operated disconnect shall be controlled by EPE acting in its
role as Operating Agent of the SWNMT facilities. The 345 kV circuit-
switcher will remain under the control of TNMP.
iii) TNMP shall be responsible for the cost of operating and maintaining
the equipment associated with this interconnection.
iv) TNMP shall be responsible for the cost of installing sufficient
equipment such that the line flows (MW and MVAR) over the New
Autotransformer will be sent to EPE's Energy Management System (EMS) for
SCADA purposes. The above line flows will be made available to PNM at the
Luna Substation.
v) TNMP shall be responsible for the cost of installing sufficient
equipment such that operating status indications for the 345 kV circuit
breaker and 345 kV motor operated disconnect for SCADA purposes and
operating status indication for the 345 kV circuit-switcher for SCADA and
control purposes will be sent to EPE's EMS. The above operating status
indications will be made available to PNM at the Luna Substation.
II. In consideration of the Parties granting the interconnection of the New
Autotransformer to the SWNMT facilities as proposed, TNMP hereby agrees to the
following:
a) TNMP shall cooperate with EPE in performance of EPE's responsibilities as
Operating Agent and with EPE and PNM as SWNMT participants to minimize the
potential for unforeseen difficulties resulting from TNMP's planned
interconnection to the SWNMT facilities.
3
<PAGE>
SWNMT Amendment #6
TEXAS-NEW MEXICO POWER COMPANY
b) The installation of the New Autotransformer and Related Equipment will not
(i) increase TNMP's firm transmission rights into the Southern New Mexico
Transmission system above the firm transmission rights of 110 MW as
delineated in Amendment #5 of the SWNMT Agreement, or (ii) in any way limit
TNMP from pursuing additional transmission rights in the event such
transmission rights become available on the SWNMT Project at a future date
pursuant to the SWNMT Agreement.
c) Metering shall be at the 115 kV level and such metered amounts will be
adjusted as appropriate to account for losses in the New Autotransformer.
d) TNMP shall ensure that with the interconnection of the proposed facilities,
the two future positions planned for terminations of the Greenlee-Hidalgo-
Luna 345 kV #2 line as part of the SWNMT shall not be compromised.
e) TNMP will make available, at its cost, two communication channels for the
Greenlee-Hidalgo-Luna 345 kV #2 line when the line is constructed.
f) TNMP will provide first response activities regarding SWNMT facilities in
the Hidalgo Switchyard.
g) TNMP will perform the routine inspections and maintenance for the SWNMT
facilities at Hidalgo Substation, with the exception of the relaying and
communication facilities. Records of these activities shall be kept in
accordance with the requirements of EPE as Operating Agent.
III. In the event of a conflict between this Amendment #6 and the SWNMT
Agreement, as amended in Amendments #1 through #5, the provisions of this
Amendment #6 shall control. The remaining terms and conditions of the SWNMT
Agreement, as amended in Amendments #1 through #5, shall remain in full force
and effect, as if fully set forth in this letter.
If the forgoing terms and conditions are acceptable to the Parties, please so
indicate by signing this Letter Agreement and returning one original to TNMP.
/s/ Allan B. Davis
---------------------------------
Texas-New Mexico Power Company
4
<PAGE>
SWNMT Amendment #6
TEXAS-NEW MEXICO POWER COMPANY
Accepted and agreed to this 17th day of June, 1999.
/s/Roger Flynn
- -------------------------------------
Public Service Company of New Mexico
/s/John C. Horne
- -------------------------------------
El Paso Electric Company
5
<PAGE>
SWNMT Amendment #6
TEXAS-NEW MEXICO POWER COMPANY
Explanation of Diagrams to SWNMT Letter Agreement - Amendment #6
Exhibit 10.09 also includes three diagrams of the facilities at Hidalgo
Substation. The first diagram shows the existing 345 kV Ring Bus. The second
diagram is a 345 kV One Line Diagram showing the new autotransformer. The third
diagram is a 345 kV Partial One Line/Relay Diagram showing the relay detail.
6
<PAGE>
Exhibit 11
El Paso Electric Company
Computation of Earnings Per Share
(In Thousands Except for Share Data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income applicable to common stock:
Income before extraordinary item $ 7,038 $ 10,071 $ 4,313 $ 17,063
Extraordinary loss on repurchases of debt,
net of income tax benefit (1,183) - (1,183) -
------------- ------------- ------------- -------------
Net income applicable to common stock $ 5,855 $ 10,071 $ 3,130 $ 17,063
============= ============= ============= =============
Basic earnings per common share:
Weighted average number of common
shares outstanding 60,206,105 60,169,436 60,208,059 60,167,618
============= ============= ============= =============
Net income per common share:
Income before extraordinary item $ 0.117 $ 0.167 $ 0.072 $ 0.284
Extraordinary loss on repurchases of debt,
net of income tax benefit (0.020) - (0.020) -
------------- ------------- ------------- -------------
Net income $ 0.097 $ 0.167 $ 0.052 $ 0.284
============= ============= ============= =============
Diluted earnings per common share:
Weighted average number of common
shares outstanding 60,206,105 60,169,436 60,208,059 60,167,618
------------- ------------- ------------- -------------
Effect of dilutive potential common stock options
based on the treasury stock method using
average market price:
Quarter ended March 31 - - - 262,998
Quarter ended June 30 385,405 538,986 385,405 538,986
Quarter ended September 30 - - - -
Quarter ended December 31 - - - -
Effect of dilutive potential restricted common stock
based on the treasury stock method using
average market price:
Quarter ended March 31 - - - 14,496
Quarter ended June 30 29,186 31,840 29,186 31,840
Quarter ended September 30 - - - -
Quarter ended December 31 - - - -
------------- ------------- ------------- -------------
414,591 570,826 414,591 848,320
Divided by number of quarters 1 1 2 2
------------- ------------- ------------- -------------
Net effect of dilutive potential common stock 414,591 570,826 207,296 424,160
------------- ------------- ------------- -------------
Weighted average number of common shares and
dilutive potential common shares outstanding 60,620,696 60,740,262 60,415,355 60,591,778
============= ============= ============= =============
Net income per common share:
Income before extraordinary item $ 0.116 $ 0.166 $ 0.071 $ 0.282
Extraordinary loss on repurchases of debt,
net of income tax benefit (0.019) - (0.019) -
------------- ------------- ------------- -------------
Net income $ 0.097 $ 0.166 $ 0.052 $ 0.282
============= ============= ============= =============
</TABLE>
<PAGE>
Exhibit 11
El Paso Electric Company
Computation of Earnings Per Share
(In Thousands Except for Share Data)
<TABLE>
<CAPTION>
Twelve Months Ended June 30,
----------------------------------------------
1999 1998
--------------------- ---------------------
<S> <C> <C>
Net income applicable to common stock:
Income before extraordinary items $ 29,616 $ 42,933
Extraordinary gain on discharge of debt,
net of income tax expense 3,343 -
Extraordinary loss on repurchases of debt,
net of income tax benefit (1,183) -
===================== =====================
Net income applicable to common stock $ 31,776 $ 42,933
===================== =====================
Basic earnings per common share:
Weighted average number of common
shares outstanding 60,188,290 60,151,260
===================== =====================
Net income per common share:
Income before extraordinary items $ 0.492 $ 0.714
Extraordinary gain on discharge of debt,
net of income tax expense 0.056 -
Extraordinary loss on repurchases of debt,
net of income tax benefit (0.020) -
===================== =====================
Net income $ 0.528 $ 0.714
===================== =====================
Diluted earnings per common share:
Weighted average number of common
shares outstanding 60,188,290 60,151,260
--------------------- ---------------------
Effect of dilutive potential common stock options
based on the treasury stock method using
average market price:
Quarter ended March 31 - 262,998
Quarter ended June 30 385,405 538,986
Quarter ended September 30 457,905 220,412
Quarter ended December 31 479,130 299,744
Effect of dilutive potential restricted common stock
based on the treasury stock method using
average market price:
Quarter ended March 31 - 14,496
Quarter ended June 30 29,186 31,840
Quarter ended September 30 35,468 12,636
Quarter ended December 31 39,433 16,496
--------------------- ---------------------
1,426,527 1,397,608
Divided by number of quarters 4 4
--------------------- ---------------------
Net effect of dilutive potential common stock 356,632 349,402
--------------------- ---------------------
Weighted average number of common shares and
dilutive potential common shares outstanding 60,544,922 60,500,662
===================== =====================
Net income per common share:
Income before extraordinary items $ 0.489 $ 0.710
Extraordinary gain on discharge of debt,
net of income tax expense 0.055 -
Extraordinary loss on repurchases of debt,
net of income tax benefit (0.019) -
===================== =====================
Net income $ 0.525 $ 0.710
===================== =====================
</TABLE>
<PAGE>
Exhibit 15
El Paso Electric Company
El Paso, Texas
Ladies and Gentlemen:
Re: Registration Statement No's. 333-17971 and 333-82129
With respect to the subject registration statement, we acknowledge our awareness
of the use therein of our report dated July 26, 1999 related to our review of
interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such a report is not
considered part of the registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
KPMG LLP
El Paso, Texas
July 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF EL PASO ELECTRIC COMPANY AS OF JUNE 30, 1999 AND THE RELATED STATEMENTS
OF INCOME AND CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,437,338
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 138,885
<TOTAL-DEFERRED-CHARGES> 70,639
<OTHER-ASSETS> 20,241
<TOTAL-ASSETS> 1,667,103
<COMMON> 56,169
<CAPITAL-SURPLUS-PAID-IN> 241,024
<RETAINED-EARNINGS> 121,585
<TOTAL-COMMON-STOCKHOLDERS-EQ> 418,778
0
0
<LONG-TERM-DEBT-NET> 827,810
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 91
0
<CAPITAL-LEASE-OBLIGATIONS> 22,189
<LEASES-CURRENT> 27,311
<OTHER-ITEMS-CAPITAL-AND-LIAB> 370,924
<TOT-CAPITALIZATION-AND-LIAB> 1,667,103
<GROSS-OPERATING-REVENUE> 262,591
<INCOME-TAX-EXPENSE> 9,302
<OTHER-OPERATING-EXPENSES> 200,258
<TOTAL-OPERATING-EXPENSES> 209,560
<OPERATING-INCOME-LOSS> 53,031
<OTHER-INCOME-NET> 1,935
<INCOME-BEFORE-INTEREST-EXPEN> 54,966
<TOTAL-INTEREST-EXPENSE> 38,456
<NET-INCOME> 15,327<F1>
12,197<F2>
<EARNINGS-AVAILABLE-FOR-COMM> 3,130
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 66,238
<CASH-FLOW-OPERATIONS> 102,331
<EPS-BASIC> 0.052
<EPS-DILUTED> 0.052
<FN>
<F1>Net income is net of extraordinary loss on repurchases of debt (net of
income tax benefit) of ($1,183).
<F2>Includes $9,581 of redemption costs.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.01
(S) PUBLIC UTILITY COMMISSION
CONSOLIDATED ORDER (S)
(S) OF TEXAS
DOCKET NO. 20291 Petition of Northeast Texas Electric Cooperative, Inc.
to Reconcile Fuel Expense for the Period of July 1, 1995
through June 30, 1998
DOCKET NO. 20450 Application of El Paso Electric Company for Authority to
Reconcile Fuel Costs
DOCKET NO. 20583 Application of Texas Utilities Electric Company to Amend
Certificated Service Area Boundaries within Howard
County
DOCKET NO. 20591 Application of Pedernales Electric Cooperative, Inc. to
Amend Certificated Service Area Boundaries within
Williamson County and the City of Georgetown
DOCKET NO. 20632 Application of Nueces Electric Cooperative, Inc. to
Amend Certificated Service Area Boundaries (Service Area
Exception) within Nueces County and the City of Corpus
Christi
DOCKET NO. 20681 Application of Voice2, Inc. for a Service Provider
Certificate of Operating Authority
DOCKET NO. 20734 Application of Advanced TelCom Group, Inc. for a Service
Provider Certificate of Operating Authority
<PAGE>
CONSOLIDATED ORDER
PAGE 2
The Commission adopts the attached findings of fact and conclusions of law
and issues the orders set out therein.
SIGNED AT AUSTIN, TEXAS on the 8th day of June 1999.
PUBLIC UTILITY COMMISSION OF TEXAS
/s/ Pat Wood, III
--------------------------------------------------
PAT WOOD, III, CHAIRMAN
/s/ Judy Walsh
--------------------------------------------------
JUDY WALSH, COMMISSIONER
/s/ Brett A. Perlman
--------------------------------------------------
BRETT A. PERLMAN, COMMISSIONER
<PAGE>
DOCKET NO. 20450
APPLICATION OF EL PASO ELECTRIC (S) PUBLIC UTILITY COMMISSION
COMPANY FOR AUTHORITY TO (S)
RECONCILE FUEL COSTS (S) OF TEXAS
ORDER
This Order approves the application of El Paso Electric Company for
authority to reconcile fuel and fuel-related revenues and costs and implement
certain voluntary base rate reductions and refunds. The docket was processed in
accordance with applicable statutes and Commission rules. No requests for
hearing were filed. The parties filed a stipulation resolving all outstanding
issues. The application, consistent with the stipulation, is approved.
I. Findings of Fact
Procedural History
- ------------------
1. On March 22, 1999, El Paso Electric Company (EPE) filed with the Public
Utility Commission of Texas (Commission) an application to reconcile its fuel
and fuel-related revenues and costs for the period of July 1, 1995 through
December 31, 1998 and implement a voluntary base rate reduction and refund. In
its application, EPE requested the Commission: (a) find good cause to extend
the reconciliation period to include December 31, 1998; (b) find good cause to
waive the fuel reconciliation filing requirements of P.U.C. Subst. R.
23.23(b)(3); (c) grant EPE authority to roll the reconciliation period under-
recovery forward to EPE's next reconciliation period; and (d) grant EPE interim
approval of its voluntary base rate reductions, effective April 1, 1999. The
application was supported by a stipulation resolving all outstanding issues in
this proceeding. The stipulation was signed by EPE, Texas Industrial Energy
Consumers, Office of Public Utility Counsel, U.S. Department of Defense (DOD),
City of El Paso, Commission's General Counsel, Phelps Dodge Refining
Corporation, and Border Steel, Inc.
2. The DOD filed a motion to intervene in this proceeding. The motion was
subsequently granted.
3. At its open meeting of March 25, 1999, the Commission granted EPE interim
authority to implement the voluntary rate base reductions for bills rendered on
or after April 1, 1999.
<PAGE>
DOCKET NO. 20450 ORDER PAGE 2 of 8
4. On May 13, 1999, the parties filed joint proposed findings of fact and
conclusions of law (Supplemental Stipulation).
Notice
- ------
5. Notice of this application was provided by: (a) bill insert to EPE's Texas
customers; (b) mail to affected municipalities at least 35 days prior to the
proposed final effective date of the voluntary base rate reduction; (c) mail to
each signatory in Docket No. 12700;/1/ (d) mail to each of the parties in Docket
Nos. 18629/2/ and 20180;/3/ (e) mail to City of El Paso, Texas, Commission's
General Counsel, Office of Public Utility Counsel, ASARCO, Inc., Phelps Dodge
Refining Corporation, Texas State Agencies, U.S. Department of Defense, Border
Steel, Inc., and Texas Industrial Energy Consumers; (f) publication once a week
for two consecutive weeks in newspaper of general circulation in EPE's service
area; and (g) publication in the Texas Register.
Evidence of Record
- ------------------
6. The following items are admitted into evidence: (a) Application and
Stipulation including supplemental signature pages; (b) Affidavits of Notice,
filed on May 6, 1999; (c) Texas Register Submission Form; and (d) Revised
Proposed Findings of Fact and Conclusions of Law.
Fuel and Fuel-Related Revenues and Expenses
- -------------------------------------------
7. EPE is an investor-owned electric utility providing retail electric service
within the State of Texas.
8. EPE's Texas jurisdictional fuel under-recovery balance for the
reconciliation period is as follows:
- --------------------
/1/ Application of El Paso Electric Company for Authority to Change Rates,
Docket No. 12700 (Aug. 30, 1995)(not published).
/2/ Application of El Paso Electric Company for Authority to Implement a
Revised Composite Fixed Fuel Factor and to Implement an Interim Fuel Surcharge,
Docket No. 18629 (April 2, 1998).
/3/ Petition of El Paso Electric Company for Expedited Consideration and
Approval of Good Cause exception of Fuel Reconciliation Filing Deadline, Docket
No. 20180 (Feb. 5, 1999).
<PAGE>
DOCKET NO. 20450 ORDER PAGE 3 of 8
<TABLE>
<S> <C>
Fuel Factor Revenues $ 221,168,009
Fuel & Purchased Power Expense (adjusted) (235,639,248)
Interest on Net Over/(Under)-Recovery (1,882,729)
Net Interim Surcharge/(Refund) 845,041
CFE and IID-C Margins Credits and Interest 17,237,552
Docket No. 13966 Remaining Balance and Interest 331,480
Net Palo Verde Performance Rewards and Interest (3,644,843)
--------------
Cumulative Over/(Under)-Recovery Balance $ (1,584,738)
==============
</TABLE>
9. EPE properly accounted for the amount of fuel-related revenues collected
pursuant to the fuel factors in effect during the reconciliation period.
10. EPE's eligible fuel costs incurred during the reconciliation period were
reasonable and necessary to provide reliable electric service.
11. It is reasonable to reconcile EPE's fuel and fuel-related revenues and
expenses for the period of July 1995 through December 1998 consistent with the
terms of the stipulation.
Palo Verde Performance Rewards
- ------------------------------
12. During the reconciliation period, Palo Verde accrued net performance
rewards in the amount of $3,644,843, including $191,790 in interest, under the
performance standards established in Docket No. 8892,/4/ as continued in Docket
No. 12700.
13. The net Palo Verde performance rewards, including interest calculated
through December 31, 1998 have been debited to EPE's under-recovery balance for
the reconciliation period for use consistent with the agreed treatment in Docket
No. 19545./5/
14. As part of the overall settlement of this case, El Paso Electric agreed to
commit 50% of future Palo Verde Performance Standard Rewards (net of any Palo
Verde Performance Standard Penalties) accrued for the evaluation periods ending
December 31, 1998 through December 31, 2004, after approval in future fuel
reconciliation proceedings, to the initiatives listed below. All amounts deemed
collected and not subject to a surcharge will be paid upon issuance of a final
- ------------------------
/4/ Application of El Paso Electric Company to Establish Performance
Standards for the Palo Verde Nuclear Generation Station, Docket No. 8892
17P.U.C. Bull. 547 (March 27, 1991).
/5/ Application of El Paso Electric Company for Approval of Preliminary
Integrated Resource Plan, Docket No. 19545 (Jan. 21, 1999).
<PAGE>
DOCKET NO. 20450 ORDER PAGE 4 of 8
order, and any other amounts will be paid as collected over the applicable
recovery period. These amounts will be applied for the benefit of customers in
the following initiatives:
a. one-half to Project Care (or successor organization) to assist low
income customers of El Paso Electric Company in paying their utility
bills; and
b. one-half to demand side management programs such as weatherization
with a focus on programs to assist small business and commercial
customers.
Cumulative Under-Recovery Balance
- ---------------------------------
15. EPE's cumulative under-recovery balance at December 31, 1998, including
interest and the applicable Palo Verde performance rewards, $1,584,738. EPE has
correctly calculated the under-recovery balance.
16. EPE calculated interest on the ending cumulative over/under-recovery
balance in the manner and at the rate established by the Commission for
overbilling and underbilling./6/ EPE compounded interest annually.
17. EPE's cumulative under-recovery balance for the reconciliation period is
below the Company's materiality threshold of approximately $2.8 million, as
defined in P.U.C. Subst. R. 23.23(b)(2)(A)(iii)(II). Therefore, it is
reasonable for EPE, instead of surcharging customers the under-recovery balance
at this time, to carry that balance forward as the reconciled beginning balance
for the next reconciliation period beginning January 1, 1999.
18. The allocation factors used to allocate EPE's eligible fuel and fuel-
related revenues and expenses to the Texas jurisdiction are appropriate.
Certain Voluntary Base Rate Reductions and Refunds
- --------------------------------------------------
19. EPE agrees to implement voluntary base rate reductions of approximately
8.79% for customers receiving service under Rate Schedule No. 01--the
Residential Service Rate--and voluntary base rate reductions of approximately
3.18% for customer classes receiving reductions other than Rate Schedule No. 01.
- ------------------------
/6/ See P.U.C. Subst. R. 23.45(h)(repealed and recodified at P.U.C. Subst.
R. 25.28(c), effective May 6, 1999).
<PAGE>
DOCKET NO. 20450 ORDER PAGE 5 of 8
20. These voluntary base rate reductions equal approximately $15.4 million on
an annual basis.
21. EPE further agrees to implement voluntary base rate refunds over a period
of three months for the same customers receiving base rate reductions, as
detailed in Appendix III of the Supplemental Stipulation.
22. EPE's agreement to implement certain voluntary base rate reductions and
base rate refunds is just and reasonable and not unreasonably preferential,
prejudicial, or discriminatory.
Low-Income Assistance
- ---------------------
23. EPE's commitment to coordinate with local community service agencies and
the Texas Department of Human Services to foster customer education regarding
low-income assistance programs offered by the Company is reasonable.
Informal Disposition
- --------------------
24. More than 30 days have passed since completion of the notice provided in
this docket.
25. All parties are signatories to the stipulation; therefore, resolution of
this proceeding consistent with the stipulation is not adverse to any party.
The parties have waived their rights to a hearing on the merits in this docket,
subject to final approval of the stipulation.
26. No issues of fact or law are disputed by any party.
II. Conclusions of Law
1. EPE is a public utility, as defined in (S)(S) 11.004 and 31.002(1) of the
Public Utility Regulatory Act (PURA)./7/
2. The Commission has jurisdiction and authority over this application
pursuant to PURA (S)(S) 14.001, 32.001, 36.001, 36.003, 36.051, 36.109, and
36.203.
- --------------------------
/7/ Tex. Util. CODE ANN. (S)(S) 11.01--63.063 (Vernon 1998).
<PAGE>
DOCKET NO. 20450 ORDER PAGE 6 of 8
3. Notice of the application was provided in compliance with PURA (S)
36.103(b), P.U.C. SUBST. R. 23.23(b)(4), and P.U.C. PROC. R. 22.51(b) and 22.54.
4. Good cause exists to extend the reconciliation period addressed in this
docket through December 31, 1998.
5. Good cause exists to waive the fuel reconciliation filing package
requirements set forth in P.U.C. SUBST. R. 23.23(b)(3).
6. EPE's fuel reconciliation meets the requirements of P.U.C. SUBST. R.
23.23(b)(3).
7. The eligible fuel costs incurred by EPE during the reconciliation period
were reasonable and necessary expenses incurred to provide reliable electric
service to EPE's customers, as required by P.U.C. SUBST. R.
23.23(b)(3)(B)(i)(I).
8. Good cause exists to carry the cumulative under-recovery balance of
$1,584,738 forward as the reconciled beginning balance for EPE's next
reconciliation period beginning January 1, 1999.
9. EPE's voluntary base rate reductions and refunds are just and reasonable
and do not grant an unreasonable preference or advantage to any customer or
subject any customer to unreasonable prejudice or disadvantage, consistent with
PURA (S) 36.003.
10. Approval of the stipulation represents a reasonable resolution of the
issues in this proceeding and is in the public interest.
11. This application does not constitute a major rate proceeding as defined by
P.U.C. PROC. R. 22.2.
12. As no requests for hearing have been filed, the application may be approved
without a hearing pursuant to the Administrative Procedure Act, TEX. GOV'T CODE
ANN. (S) 2001.001 et seq. (Vernon 1999).
<PAGE>
DOCKET NO. 20450 ORDER PAGE 7 of 8
III. Ordering Paragraphs
In accordance with these findings of fact and conclusions of law, the
Commission issues the following Order:
1. EPE's proposed reconciliation of eligible fuel and fuel-related
revenues and expenses and implementation of certain voluntary base
rate reductions and refunds as set forth in the application and
supported by the stipulation are approved.
2. EPE shall carry its cumulative under-recovery balance forward as the
reconciled beginning balance for the reconciliation period beginning
January 1, 1999. The balances established for each customer class in
Appendix II of the Supplemental Stipulation are adopted and shall not
be subject to change.
3. The tariffs implementing EPE's voluntary base rate reductions
(Attachment 1) are approved, effective the date of this Order.
4. The tariff implementing EPE's base rate refunds (Attachment 2) is
approved, effective for a period of three months, beginning with EPE's
first billing cycle following the issuance of this Order.
5. EPE shall commit 50% of future Palo Verde Performance Standard Rewards
(net of any Palo Verde Performance Standard Penalties) accrued for the
evaluation periods ending December 31, 1998 through December 31, 2004,
after approval in future fuel reconciliation proceedings, to the
initiatives listed below. All amounts deemed collected and not
subject to a surcharge shall be paid upon issuance of a final order,
and any other amounts shall be paid as collected over the applicable
recovery period. These amounts shall be applied for the benefit of
customers in the following initiatives: (a) one-half to Project Care
(or successor organization) to assist low income customers of El Paso
Electric Company in paying their utility bills; and (b) one-half to
demand side management programs such as weatherization with a focus on
programs to assist small business and commercial customers.
<PAGE>
DOCKET NO. 20450 ORDER PAGE 8 of 8
6. Subject to the specific voluntary base rate reductions and base rate
refund approved in this docket, the terms of the Stipulation,
Settlement Agreement, and Agreed Order in Docket No. 12700 shall
remain in full force and effect and shall continue to apply as stated
therein.
7. The entry of an order consistent with the stipulation does not
indicate the Commission's endorsement or approval of any principle or
methodology that may underlie the stipulation. Neither should the
entry of an order consistent with the stipulation be regarded as
binding precedent as to the appropriateness of any principle
underlying the stipulation.
8. All other motions, requests for entry of specific findings of fact and
conclusions of law, and any other requests for general or specific
relief, if not expressly granted herein, are hereby denied for want of
merit.
<PAGE>
Attachment 1
<PAGE>
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
TABLE OF CONTENTS
-----------------
Rate
Schedule Sheet
Title Number Number
----- ------ ------
<S> <C> <C>
Section 1
- ---------
Table of Contents - 1
Description of Company Operations - 2
State of Texas Service Area - 3
Rate Schedules
- --------------
Residential Service Rate 01 4
Small Commercial Service Rate 02 5
Outdoor Recreational Lighting Service Rate 07 6
Governmental Street Lighting and Signal Service Rate 08 7
Municipal Pumping Service Rate 11 8
Municipal Pumping Service Rate 11-A 8.1
Electrolytic Refining Service Rate 15 9
Standby Service Rate 18 10
Irrigation Service Rate 22 11
General Service Rate 24 12
Large Power Service Rate 25 13
Petroleum Refinery Service Rate 26 14
Petroleum Refinery Service Rate 26-A 14.1
Interruptible Power Service Rate 27 15
Area Lighting Service Rate 28 16
Transmission Voltage Service Rate 29 17
Electric Furnace Rate 30 18
Military Reservation Service Rate 31 19
Economic Development Rate 33 21
Cotton Gin Service Rate 34 22
Interruptible Power Service for Large Power Rate 38 (LP) 23
City and County Service Rate 41 24
University Service Rate 43 25
Supplementary Power Service for Cogeneration and Small 45 26
Power Production Facilities
Maintenance Power Service for Cogeneration and Small 46 27
Power Production Facilities
Backup Power Service for Cogeneration and Small 47 28
Power Production Facilities
Non-Firm Purchased Power Service 48 29
State University Discount Rate Rider 49 29.1
</TABLE>
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 21
-------------------- ---------------------
Sheet Number 1 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 4 after
------------------------------ -------------------
<PAGE>
<TABLE>
<CAPTION>
EL PASO ELECTRIC COMPANY
TABLE OF CONTENTS
-----------------
Rate
Schedule Sheet
Title Number Number
----- ------ ------
<S> <C> <C>
Fixed Fuel Factor 98-FFF 30
Fixed Fuel Surcharge Factor 98-FS 31.2
Miscellaneous Service Charges 99 32
Rate Case Expense Surcharge 33
Base Rate Refund BRR 34
Section 2
- ---------
Table of Contents - 1
Company Rules and Regulations Regarding Electric - 2
Service
Agreement for Purchase of Electric Service from El Paso - 3
Electric Company
Residential Level Payment Plan Agreement - 4
Area Lighting Service Agreement - 5
Deferred Payment Plan Agreement - 6
Absolute Guaranty of Payment of Obligation for Electric - 7
Service
Application for Service - 8
Save Utilities Deposit System (SUDS) - 9
Easement - 10
Cutback Service Program - 11
Alternate Time-of-Use Service Agreement - 12
Verification from Army Community Service if Soldier is in - 13
Combat or War Zone
Section 3
- ---------
Line Extension Policy - -
Table of Contents - 1
Purpose - 3
Definitions - 4
Policies - 5
</TABLE>
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 21
-------------------- ---------------------
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---------------------- --------------------------
Page 2 of 4 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
DESCRIPTION OF COMPANY OPERATIONS
---------------------------------
The El Paso Electric Company serves the County of El Paso and portions of the
Counties of Culberson and Hudspeth in the State of Texas. The Company serves
portions of Dona Ana, Sierra, Otero and Luna Counties in the State of New
Mexico. The Company generates, transmits and distributes electric energy for
the entire Company service area. The Company has transmission line
interconnections in the states of Arizona, New Mexico and to the Republic of
Mexico and provides (FERC Jurisdictional) electrical energy to Rio Grande
Electric Cooperative, Inc., for Cooperative's Culberson and Hudspeth Counties
service areas and to Texas-New Mexico Power Company for its Lordsburg, New
Mexico, service area and to Imperial Irrigation District in California.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 6
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
STATE OF TEXAS SERVICE AREA
---------------------------
Incorporated Cities, Towns and Villages
---------------------------------------
City of El Paso
Town of Anthony
Town of Clint
Town of Horizon
City of Socorro
Town of Van Horn
Village of Vinton
Unincorporated Service Areas
----------------------------
County of El Paso
Portion of County of Culberson
Portion of County of Hudspeth
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 6
-------------------- ---------------------
Sheet Number 3 Effective with energy consumed on or
---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 01
---------------
RESIDENTIAL SERVICE RATE
------------------------
APPLICABILITY
- -------------
This rate is applicable for all domestic purposes in single family residences or
individually metered apartments. Service will be 120/240 volt, single phase,
except that three-phase service may be provided for motors over 5 horsepower
(HP) if economically feasible. Single or three-phase motors shall not exceed 10
HP individual capacity without the written approval of the Company.
TERRITORY
- ---------
Texas Service Area
MONTHLY RATE
- ------------
$4.50 Customer Charge plus
SUMMER BASE ENERGY RATE
- -----------------------
$0.08027 per kilowatt-hour for all kilowatt-hours during the (R)
billing months of June through September.
NON-SUMMER BASE ENERGY RATE
- ---------------------------
$0.07527 per kilowatt-hour for all kilowatt-hours during the (R)
billing months of October through May.
ALTERNATE TIME-OF-USE RATE
- --------------------------
This voluntary billing alternative will only be made available to residential
customers. The residential customer must contract for this provision for a
minimum of eighteen (18) months. The on-peak hours are 10:00 a.m. through 8:00
p.m., Mountain Standard Time, for weekdays of Monday through Friday. Off-peak
hours are all other hours of the week not covered in the on-peak period plus
weekends. This alternative is available only to the first 250 customers who sign
up to take service under this alternative.
MONTHLY RATE
- ------------
$6.00 Customer Charge plus
ON-PEAK BASE ENERGY RATE
- ------------------------
$0.12517 for all on-peak KWH. (R)
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 14
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 01
---------------
RESIDENTIAL SERVICE RATE
------------------------
OFF-PEAK BASE ENERGY RATE
- -------------------------
$0.04746 for all off-peak KWH. (R)
MONTHLY MINIMUM
- ---------------
Customer Charge
OFF-PEAK WATER HEATING RIDER
- ----------------------------
For domestic electric water heating service (swimming pool water heating and
water heating utilized for space heating excluded). The service shall be metered
on a circuit which shall include only water heating elements and excluded all
other service.
Periods of electric supply service may be scheduled to conform to off-peak
conditions of the Company's system, the Company reserving the right to change
the off-peak periods of supply to meet the changing off-peak conditions of its
system. The Company, at its option, will furnish and connect to the customer's
wiring and retain ownership of a time switch or suitable device to regulate the
hours of use.
Service under this schedule shall be limited to water heaters of thirty (30)
gallons or more capacity. All water heaters will be controlled by a thermostat
and if two or more heating elements are used, the water heater will be wired so
that only one element will operate at one time. The minimum wattage of all
heating elements shall total not less than 3,000 watts. Service may be limited
where customer has an abnormally large connected load, and is only available as
a secondary service in conjunction with a main service.
MONTHLY RATE FOR OFF-PEAK WATER HEATING
- ---------------------------------------
$1.00 Customer Charge plus
$0.04401 per kilowatt-hour for all kilowatt-hours. (R)
MONTHLY MINIMUM FOR OFF-PEAK WATER HEATING
- ------------------------------------------
Customer Charge
LOW INCOME RIDER
- ----------------
Upon qualification under the below defined criteria, the Customer Charge will
not be applicable. All other charges (credits) and/or provisions of Schedule No.
01 will remain unchanged.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 14
-------------------- ---------------------
Sheet Number 4 Effective with energy consumed on or
---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 01
---------------
RESIDENTIAL SERVICE RATE
------------------------
The Low Income Rider is available to qualified residential customers who apply
for the discount. The applicant must provide an approved referral form from the
Texas Department of Human Services. The applicant must be the EPEC customer of
record at his or her address. Once the customer has established qualification
for the Low Income Rider, the Rider will be in effect for the following twelve
(12) months. At the end of this twelve (12) month period, recertification will
be required. If no new referral is received by EPEC, the customer, without
notification, will be placed on the applicable Residential Service Rate.
A reminder notice will be printed on the customer's electric bill at least two
(2) months prior to the expiration date. No other notice will be provided.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule.
APPLICATION OF RESIDENTIAL SERVICE RATE
- ---------------------------------------
This rate is available only under the following conditions:
--
1. For a single household or single family for domestic purposes in individual
private residences or individually metered apartments.
2. For separately metered living quarters recognized as single-family living
quarters for domestic home use.
3. Service under this rate shall include home lighting and residential power
for operation of household appliances.
4. Single-phase motors for domestic use may not exceed 10 HP without the
written approval of the Company. The use of all single-phase motors over 5
HP must be approved by the Company concerning the motor's lock rotor
amperes.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 14
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 01
---------------
RESIDENTIAL SERVICE RATE
------------------------
5. If the three-phase service is supplied, sizes of motors and other loads will
be subject to Company approval. Three-phase service is only available if it
is existing at the location or economically feasible to bring to the
location.
6. Wiring may be extended from the residence circuit to private garages, barns
and similar structures and/or wells which are located on the same property
as the residence and used exclusively for domestic purposes in connection
with the residence.
7. For residences where rooms are rented or meals served to boarders if this is
incidental to the maintenance of a private residence.
This rate is not available under the following conditions:
------
1. If a separate meter and service are provided to garages, barns and similar
structures and/or wells even though their use may be in connection with the
residence.
2. When it is evident, both visually and/or electrically, that activity of a
business or professional character is being conducted in the residence.
Service to a combination residential and commercial establishment will be
supplied under the appropriate commercial service rate, but the portion used
as living quarters may be wired and metered separately and served on the
Residential Service Rate.
3. When service in the primary residence is resold or shared with one or more
other family residences, i.e., a garage apartment or a separate living
quarters connected to the main residence electric service, or a duplex with
one meter. The additional residence or separate living quarters may be
placed on the residential rate if local zoning ordinances permit such use
and the additional residence is served and metered separately.
4. When the customer operates devices which cause undue fluctuation of voltage.
Service may be limited where the customer has an abnormally large connected
load or kilowatt demand.
5. For a recognized or accepted boarding or rooming house.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 14
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 02
---------------
SMALL COMMERCIAL SERVICE RATE
-----------------------------
APPLICABILITY
- -------------
The Small Commercial Service Rate is available to all commercial customers for
lighting, power and heating service. All service will be taken at one point of
delivery designated by the Company and at one of the Company's standard types of
service. Service under this rate shall be limited to those small commercial
customers having usage levels that preclude them from proper classification
under the Company's other commercial service rates.
TERRITORY
- ---------
Texas Service Area
MONTHLY RATE
- ------------
$5.50 Customer Charge plus
Energy Charge
$0.11573 per kilowatt-hour for the first 1,500 kilowatt-hours (R)
$0.10288 per kilowatt-hour for all additional kilowatt-hours (R)
MONTHLY MINIMUM
- ---------------
Customer Charge
OFF-PEAK WATER HEATING RIDER
- ----------------------------
For domestic electric water heating service (swimming pool water heating,
commercial dishwasher water heating and water heating utilized for space heating
excluded). The service shall be metered on a circuit which shall include only
water heating elements and exclude all other service.
Periods of electric supply service may be scheduled to conform to off-peak
conditions of the Company's system, the Company reserving the right to change
the off-peak periods of supply to meet the changing off-peak conditions of its
system. The Company, at is option, will furnish and connect to the customer's
wiring and retain ownership of a time switch or suitable device to regulate the
hours of use.
Service under this schedule shall be limited to water heaters of thirty (30)
gallons or more capacity. All water heaters will be controlled by a thermostat
and if two or more heating elements are used, the water heater will be wired so
that only one element will operate at
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 02
---------------
SMALL COMMERCIAL SERVICE RATE
-----------------------------
one time. The minimum wattage of all heating elements shall total not less than
3,000 watts. Service may be limited where customer has an abnormally large
connected load, and is only available as a secondary service in conjunction with
a main service.
MONTHLY RATE - OFF-PEAK WATER HEATING
- -------------------------------------
$1.00 Customer Charge plus
$0.04401 per kilowatt-hour for all kilowatt-hours (R)
MONTHLY MINIMUM - OFF-PEAK WATER HEATING
- ----------------------------------------
Customer Charge
NON-METERED SERVICE
- -------------------
In instances when metering of energy would be impractical because of the low
monthly level of usage and when estimates of this usage can be accurately
calculated, the Company may at its option, provide non-metered service. Billing
for non-metered service shall be based on the customer charge and the monthly
energy usage calculated by the Company and applied to the energy charge of the
rate.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule.
The Company shall install metering equipment to measure the customers thirty
(30) minute average kilowatt load for purposes of determining the applicable
rate schedule. If a customer's highest measured thirty (30) minute average
kilowatt load exceeds 15 KW three (3) consecutive times during the months of May
through October, that customer shall be placed on the General Service Rate
Schedule No. 24 for a minimum of twelve (12) months, at which time a
determination will be made for the applicable rate schedule.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
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---------------------- --------------------------
Page 2 of 3 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 02
---------------
SMALL COMMERCIAL SERVICE RATE
-----------------------------
If the Company determines that a customer's bill under this schedule is unduly
burdensome and the Customer will benefit from a lower bill, the Company, at its
option, will bill said customer under Schedule No. 24, General Service Rate.
Specifically, this option will be applied to a customer who, for the preceding
twelve (12) months has an average monthly demand greater than 10 KW and operates
at greater than a thirty (30) percent load factor. Under this option, the
billing demand will be the highest measured demand.
Any new customer that has not established a prior service history with the
Company shall be classified under the appropriate rate schedule in accordance
with a demand estimate performed by the Company.
For the purpose of this rate schedule, commercial customers is defined as to
include all non-public schools and institutions of higher learning or facilities
not eligible under Schedule No. 41, municipal, county, State of Texas and
federal installations.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 07
---------------
OUTDOOR RECREATIONAL LIGHTING SERVICE RATE
------------------------------------------
APPLICABILITY
- -------------
This rate is available to all customers who desire outdoor recreational lighting
service under the conditions specified herein. All service will be taken at one
delivery point designated by the Company and will be separately metered from any
additional service that may be provided to the customer under other rates. This
rate is not available for any service other than for lighting of recreational
activities such as athletic fields, race tracks and other sport and recreational
facilities.
TERRITORY
- ---------
Texas Service Area
TYPE OF SERVICE
- ---------------
The type of service available will be determined by the Company and will
normally be single or three phase at the option of the Company and at a standard
Company approved voltage.
MONTHLY RATE
- ------------
$18.00 Customer Charge
Energy Charge
$0.06692 per kilowatt-hour (R)
MONTHLY MINIMUM
- ---------------
The Customer Charge.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of the Company's Tariff Schedule
No. 98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule. The
initial Term of Contract for service under this schedule shall be not less than
one(1) year. The Company reserves the right to remove all equipment furnished
under this schedule, after issuance of disconnect notice, and void the contract
if in the opinion of the Company, there is excessive breakage or vandalization
of its facilities.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 3
-------------------- ---------------------
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---------------------- --------------------------
Page 1 of 1 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
APPLICABILITY
- -------------
Cities of El Paso and Socorro, Towns of Anthony, Clint, Horizon and Van Horn,
Village of Vinton and Counties of Culberson, El Paso and Hudspeth, State of
Texas and Federal facilities for Mercury Vapor and High Pressure Sodium Vapor
street lights, freeway lighting and for traffic signal lights.
TERRITORY
- ---------
Texas Towns, Counties and Cities
RATE
- ----
Street Lights
MERCURY VAPOR - OVERHEAD SYSTEM - COMPANY OWNED
-----------------------------------------------
30 FOOT MOUNTING HEIGHT - WOOD POLE
-----------------------------------
Lamp
----
Wattage Charge
------- ------
7,000 Lumen Single 195 $ 13.50 each per month (R)
11,000 Lumen Single 275 $ 16.11 each per month (R)
11,000 Lumen Double 550 $ 25.01 each per month (R)
20,000 Lumen Single 460 $ 19.22 each per month (R)
20,000 Lumen Double 920 $ 31.23 each per month (R)
MERCURY VAPOR - DOWNTOWN EL PASO AREA - COMPANY OWNED - 30 FOOT
---------------------------------------------------------------
MOUNTING HEIGHT - STEEL POLE - ORNAMENTAL LUMINAIRE
---------------------------------------------------
Lamp
----
Wattage Charge
------- ------
60,000 Lumen 1,120 $ 76.32 each per month (R)
Underground System
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
Sheet Number 7 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 8 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
HIGH PRESSURE SODIUM VAPOR - DOWNTOWN EL PASO AREA - COMPANY OWNED
------------------------------------------------------------------
30 FOOT MOUNTING HEIGHT - STEEL POLE - ORNAMENTAL LUMINAIRE
-----------------------------------------------------------
Lamp
----
Wattage Charge
------- ------
119,500 Lumen
Overhead System 1,102 $ 48.48 each per month (R)
119,500 Lumen
Underground System 1,102 $ 79.21 each per month (R)
HIGH PRESSURE SODIUM VAPOR - DOWNTOWN EL PASO AREA - COMPANY OWNED
------------------------------------------------------------------
30 FOOT MOUNTING HEIGHT - STEEL POLE
------------------------------------
Lamp
----
Wattage Charge
------- ------
45,000 Lumen
Overhead System 485 $ 47.87 each per month (R)
MERCURY VAPOR - OVERHEAD SYSTEM - COMPANY OWNED
-----------------------------------------------
30 FOOT MOUNTING HEIGHT - STEEL POLE
------------------------------------
Lamp
----
Wattage Charge
------- ------
20,000 Lumen Single 460 $ 29.69 each per month (R)
20,000 Lumen Double 920 $ 41.70 each per month (R)
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
MERCURY VAPOR - NON-COMPANY OWNED SYSTEMS
-----------------------------------------
Lamp
----
Wattage Charge
------- ------
11,000 Lumen -
Wall Mounted 292 $ 7.79 each per month (R)
20,000 Lumen -
40 Foot Maximum
Mounting Height 450 $ 10.72 each per month (R)
60,000 Lumen -
50 Foot Maximum
Mounting Height 1,102 $ 28.10 each per month (R)
MERCURY VAPOR - NON-COMPANY OWNED - WOOD POLE
---------------------------------------------
UNDERGROUND RESIDENTIAL SERVICE
-------------------------------
Lamp
----
Wattage Charge
------- ------
7,000 Lumen -
30 Foot Maximum
Mounting Height 195 $ 5.89 each per month (R)
11,000 Lumen -
30 Foot Maximum
Mounting Height 275 $ 7.49 each per month (R)
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
Sheet Number 7 Effective with energy consumed on or
---------------------- --------------------------
Page 3 of 8 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
HIGH PRESSURE SODIUM VAPOR - NON-COMPANY OWNED SYSTEMS
------------------------------------------------------
Lamp
----
Wattage Charge
------- ------
16,000 Lumen - Wall
Mounted 193 $ 6.21 each per month (R)
23,200 Lumen - Wall
Mounted 313 $ 8.36 each per month (R)
23,200 Lumen - 40 Foot
Maximum Mounting Height 313 $ 8.36 each per month (R)
45,000 Lumen - 50 Foot
Maximum Mounting Height 485 $ 11.49 each per month (R)
45,000 Lumen - Tower
Structure 150 Foot
Maximum Mounting Height
10 Luminaires per Tower 485 $ 12.13 each per month (R)
Rate per fixture
HIGH PRESSURE SODIUM VAPOR - NON-COMPANY OWNED
----------------------------------------------
OPERATED AND MAINTAINED
-----------------------
Lamp
----
Wattage Charge
------- ------
45,000 Lumen 485 $ 11.84 each per month (R)
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
HIGH PRESSURE SODIUM VAPOR - NON-COMPANY OWNED - RESIDENTIAL SERVICE
--------------------------------------------------------------------
STANDARD POLE - STANDARD FIXTURE
--------------------------------
Lamp
----
Wattage Charge
------- ------
8,500 Lumen - 30 Foot
Maximum Mounting Height 124 $ 4.91 each per month (R)
14,400 Lumen - 30 Foot
Maximum Mounting Height 193 $ 6.21 each per month (R)
23,200 Lumen - 30 Foot
Maximum Mounting Height 313 $ 8.36 each per month (R)
HIGH PRESSURE SODIUM VAPOR - OVERHEAD - NON-COMPANY OWNED
---------------------------------------------------------
STANDARD FIXTURE - COMPANY OWNED EXISTING WOOD POLE
---------------------------------------------------
Lamp
----
Wattage Charge
------- ------
8,500 Lumen - 30 Foot
Maximum Mounting Height 124 $ 6.58 each per month (R)
14,400 Lumen - 30 Foot
Maximum Mounting Height 193 $ 7.88 each per month (R)
23,200 Lumen - 30 Foot
Maximum Mounting Height 313 $ 10.03 each per month (R)
23,200 Lumen Double -
30 Foot Maximum
Mounting Height 626 $ 16.46 each per month (R)
45,000 Lumen - 50 Foot
Maximum Mounting Height 485 $ 13.16 each per month (R)
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
OVERHEAD SYSTEM - HIGH PRESSURE SODIUM VAPOR
--------------------------------------------
COMPANY OWNED - WOOD POLE
-------------------------
Lamp
----
Wattage Charge
------- ------
8,500 Lumen - 30 Foot
Mounting Height 124 $ 13.36 each per month (R)
14,400 Lumen - 30 Foot
Mounting Height 193 $ 14.48 each per month (R)
23,200 Lumen - 30 Foot
Mounting Height 313 $ 17.03 each per month (R)
45,000 Lumen - 50 Foot
Maximum Mounting Height 485 $ 23.98 each per month (R)
Obstruction Lights Incandescent
40 Foot Maximum
Mounting Height 116 $ 3.92 each per month (R)
150 Foot Tower 116 $ 4.72 each per month (R)
ORNAMENTAL HIGH PRESSURE SODIUM VAPOR -
---------------------------------------
NON-COMPANY OWNED, OPERATED AND MAINTAINED
------------------------------------------
Lamp
----
Wattage Charge
------- ------
14,400 Lumen 325 $ 5.87 each per month (R)
5,300 Lumen 82 $ 1.48 each per month (R)
14,400 Lumen 150 $ 2.70 each per month (R)
16,000 Lumen 193 $ 3.49 each per month (R)
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
STATE OF TEXAS LIGHTING
-----------------------
NON-COMPANY OWNED, OPERATED AND MAINTAINED
------------------------------------------
Lamp
----
Wattage Charge
------- ------
State of Texas Lighting 100 $ 1.81 each per month (R)
State of Texas Lighting 250 $ 4.51 each per month (R)
RATE
- ----
Traffic Signal Lights
MONTHLY RATE PER UNIT
- ---------------------
WATTAGE OF
TYPE AND HOURS INCANDESCENT MONTHLY
TYPE OF UNIT OF OPERATION LAMP RATE
- ------------ -------------- ------------ ----------
3 Lamp Head 24 Hours 61 $ 1.10 (R)
4 Lamp Head 24 Hours 61 $ 1.10 (R)
3 Lamp Head 24 Hours 103 $ 1.86 (R)
3 Lamp Head 18 Hours Normal, 103 $ 1.86 (R)
6 Hours Flashing
5 Lamp Head 24 Hours 133 $ 2.41 (R)
4 Lamp Head 18 Hours Normal,
6 Hours Flashing 103 $ 1.86 (R)
3 Lamp Head 24 Hours 133 $ 2.41 (R)
3 Lamp Head 18 Hours Normal,
6 Hours Flashing 133 $ 2.41 (R)
4 Lamp Head 24 Hours 133 $ 2.41 (R)
4 Lamp Head 18 Hours Normal,
6 Hours Flashing 133 $ 2.41 (R)
2 Unit Walk Light 24 Hours 61 $ 1.10 (R)
2 Unit Walk Light 24 Hours 103 $ 1.86 (R)
2 Unit Walk Light 18 Hours Normal,
6 Hours Flashing 103 $ 1.86 (R)
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
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---------------------- --------------------------
Page 7 of 8 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 08
---------------
GOVERNMENTAL STREET LIGHTING
----------------------------
AND SIGNAL SERVICE RATE
-----------------------
WATTAGE OF
TYPE AND HOURS INCANDESCENT MONTHLY
TYPE OF UNIT OF OPERATION LAMP RATE
- ------------ -------------- ------------ ----------
1 Unit Flashing 24 Hours 103 $ 1.86 (R)
1 Unit Flashing 24 Hours 133 $ 2.41 (R)
2 Unit Flashing 24 Hours 103 $ 1.86 (R)
2 Unit School Flashers 351 Annual
Burning Hours 103 $ 1.86 (R)
2 Unit School Flashers 790 Annual
Burning Hours 133 $ 2.41 (R)
30 Watt Controller 24 Hours 30 $ .54 (R)
MONTHLY RATE PER UNIT
- ---------------------
Street lights and traffic signal lights that do not operate under any of the
preceding conditions will be billed under the rate with the closest operating
conditions.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company Rules and Regulations apply to service under this schedule. Specific
terms are as covered in various written agreements.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 17
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 11
----------------
MUNICIPAL PUMPING SERVICE RATE
------------------------------
APPLICABILITY
- -------------
Service to towns, counties and municipalities in the Company's Texas service
area and other legal property taxing authorities for pumping of water, sewage,
storm water and sewage disposal. All service will be taken at one point of
delivery. As of November 1979, El Paso Electric Company will provide the
transformation necessary for all new accounts except those receiving service at
primary voltages (2,400 volts and higher).
TERRITORY
- ---------
Texas Service Area
SERVICE VOLTAGES
- ----------------
Service to locations existing as of December 1, 1974, to be maintained on
existing voltages. All new locations will have the following type of service: 10
HP or less connected - 120/240 volt, single phase; 11 HP to 49 HP connected -
120/240 volt, three phase; 50 HP to 1,000 HP connected - 277/480 volt, three
phase; and over 1,000 HP connected at the Company's specified standard primary
voltage.
MONTHLY RATE
- ------------
$23.25 Customer Charge plus
$0.05201 per kilowatt-hour for all kilowatt-hours (R)
MONTHLY MINIMUM
- ---------------
Customer Charge
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule. The
Term of Contract under this schedule shall be not less than one (1) year.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
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---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 22
---------------
IRRIGATION SERVICE RATE
-----------------------
APPLICABILITY
- -------------
This rate is available to irrigation water pumps dedicated solely for irrigation
water pumping. Only irrigation water pumps of seven and one-half (7-1/2)
horsepower or larger will be served under this schedule.
TERRITORY
- ---------
Texas Service Area
ALTERNATIVE BILLING PROVISION
- -----------------------------
An Alternative Billing Provision is available to any customer who has an
alternative supply of irrigation water. Customer can only select once on an
annual basis his choice of the billing provision.
MONTHLY RATE
- ------------
$12.50 Customer Charge Plus
Horsepower Charge
$1.50 per connected horsepower during the billing periods April through
September
Energy Charge
$0.08382 per kilowatt-hour for all kilowatt-hours (R)
ALTERNATE MONTHLY RATE
- ----------------------
Customer Charge
$12.50 Customer Charge plus
Energy Charge
$0.09280 per kilowatt-hour for all kilowatt-hours (R)
MONTHLY MINIMUM
- ---------------
Customer Charge plus Horsepower Charge when applicable.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 12
-------------------- ---------------------
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---------------------- --------------------------
Page 1 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 22
---------------
IRRIGATION SERVICE RATE
-----------------------
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than 16 days
after issuance. A bill becomes delinquent if not received at the Company by the
due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under the schedule. The
Term of Contract for service under this schedule shall be not less than one year
during which time the customer will maintain an active account and will pay the
monthly minimum regardless of whether or not service is consumed.
TYPE OF SERVICE SUPPLIED
- ------------------------
Service may be single or three phase at the option of the Company and at a
standard Company approved voltage.
CONDITIONS FOR SERVICE AVAILABILITY
- -----------------------------------
Service will be provided under the provisions of the Company's Line Extension
Policy.
DISCONTINUANCE OF USE BY CUSTOMER
- ---------------------------------
Where use of service is discontinued by customer or payments for any billing
year are not made in accordance with the rate, the Company may at such time,
after issuance of disconnect notice, remove the facilities installed by it to
provide the service with no further liability by the Company to the customer.
Such removal shall not relieve the customer of any payments due Company for
service.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 12
-------------------- ---------------------
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---------------------- --------------------------
Page 2 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 24
---------------
GENERAL SERVICE RATE
--------------------
APPLICABILITY
- -------------
The General Service Rate is available to all customers for lighting, power and
heating service with a highest measured demand as defined by the Determination
of Demand. All service will be taken at one point of delivery designated by the
Company and at one of the Company's standard types of service. Service under
this rate shall be limited to customers who otherwise do not qualify for service
under the Company's other commercial service rates and whose thirty (30) minute
average kilowatt demand is (i) greater than 15 kilowatts and (ii) does not
exceed 600 kilowatts for three (3) consecutive months during the months of May
through October. A new customer whose estimated monthly demand exceeds 600
kilowatts three (3) consecutive months during the aforementioned period will not
be eligible for this rate schedule and will be billed in accordance with the
billing provisions of Rate Schedule No. 25.
TERRITORY
- ---------
Texas Service Area
MONTHLY RATE
- ------------
$13.00 Customer Charge plus
Demand Charge
$12.75 per kilowatt for all kilowatts of Demand
Energy Charge
$0.04589 per kilowatt-hour for the first 200 hours times the maximum
measured demand. (R)
$0.03593 per kilowatt-hour for the next 150 hours times the maximum
measured demand. (R)
$0.02295 per kilowatt-hour for all additional kilowatt- hours. (R)
MONTHLY MINIMUM
- ---------------
Customer charge plus the greater of 15 kilowatts of demand or applicable minimum
demand charge.
DETERMINATION OF DEMAND
- -----------------------
Maximum demand will be defined as the highest measured thirty (30) minute
average kilowatt load determined by measurement.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
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---------------------- --------------------------
Page 1 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 24
---------------
GENERAL SERVICE RATE
--------------------
The billing demand will be the highest of:
A. 15 kilowatts of Demand, or
B. the maximum measured demand, or
C. 60% of the highest measured on-peak demand established during the
billing months of May through October in the 12-month period ending
with the current month. The exception to this will occur when the 1/2
on-peak - 1/2 off-peak provision is invoked. At that time, the measured
billing demand shall be used for the purposes of this paragraph.
For customers with demands in excess of 300 KW for 3 consecutive months, the
demand used for billing will be 1/2 the on-peak period demand plus 1/2 the off-
peak demand when the demand established during the daily off-peak exceeds the
demand established during the daily on-peak period.
On-peak period shall be from 10:00 A.M. to 8:00 P.M., Mountain Standard Time,
for weekdays Monday through Friday.
Off-peak period shall be all other hours of the week not covered in the on-peak
period.
The Company may refuse service to another customer at the same address when
service is terminated to avoid or evade payment of the minimum demand charges as
set forth in this rate.
PRIMARY VOLTAGE DISCOUNT
- ------------------------
If electric service is delivered at one of Company's standard primary voltages
and the Company is not providing a transformation solely to serve the customer
and if the customer owns, operates, and maintains all the facilities for
receiving such service at delivery voltage, the following primary voltage
discount (PVD) will be given:
PVD = $0.60 per kilowatt of measured demand.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
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---------------------- --------------------------
Page 2 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 24
---------------
GENERAL SERVICE RATE
--------------------
OFF-PEAK WATER HEATING RIDER
- ----------------------------
For domestic electric water heating service (swimming pool water heating,
commercial dishwasher water heating and water heating utilized for space heating
excluded). The service shall be metered on a circuit which shall include only
water heating elements and exclude all other service. Periods of electric supply
service may be scheduled to conform to off-peak conditions of the Company's
system, the Company reserving the right to change the off-peak periods of supply
to meet the changing off-peak conditions of its system. The Company, at its
option, will furnish and connect to the customer's wiring and retain ownership
of a time switch or suitable device to regulate the hours of use.
Service under this schedule shall be limited to water heaters of thirty (30)
gallons or more capacity. All water heaters will be controlled by a thermostat
and if two (2) or more heating elements are used, the water heater will be wired
so that only one element will operate at one time. The minimum wattage of all
heating elements shall total not less than 3,000 watts. Service may be limited
where customer has an abnormally large connected load, and is only available as
a secondary service in conjunction with a main service.
MONTHLY RATE - OFF-PEAK WATER HEATING
- -------------------------------------
$1.00 Customer Charge plus
$0.04401 per kilowatt-hour for all kilowatt-hours (R)
MONTHLY MINIMUM - OFF-PEAK WATER HEATING
- ----------------------------------------
Customer Charge
OFF-PEAK DEMAND RIDER
- ----------------------
When a customer who takes service under this rate establishes an average monthly
off-peak demand greater than or equal to three (3) times the average monthly on-
peak demand, then the maximum on-peak monthly demand shall be utilized for the
determination of billing demand.
MONTHLY RATE
- ------------
$13.00 Customer Charge plus
Demand Charge
$24.00 per kilowatt of demand
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
Sheet Number 12 Effective with energy consumed on or
---------------------- --------------------------
Page 3 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 24
---------------
GENERAL SERVICE RATE
--------------------
Energy Charge
$0.00729 per kilowatt-hour (R)
Determination of Demand (Off-Peak Demand Rider)
Maximum demand will be defined as the highest measured thirty (30) minute
average kilowatt load determined by measurement.
On-peak period shall be 8:00 A.M. to 10:00 P.M., Mountain Standard Time, for
weekdays of Monday through Friday.
Off-peak periods shall be all other hours of the week not covered in the on-peak
period.
Terms and Conditions
A customer requesting service under the Experimental Off-Peak Demand Rider must
sign an agreement for an initial one (1) year term after which the customer must
sign subsequent one (1) year agreements with the Company. The Company, however,
is under no obligation to renew any agreement for service under this rider. This
rider may not be taken in conjunction with any other rider offered under this
rate.
A customer taking service under this rider who fails to maintain an off-peak to
on-peak ratio of 3.0 or greater, for that month, shall be billed under the
applicable standard rate. In addition, the billing KW will be adjusted upward by
30% to account for noncompliance with the off-peak provisions of this rider.
Any customer who fails to maintain an off-peak to on-peak ratio of 3.0 or
greater for two (2) consecutive months shall be declared ineligible for this
rider for a period of one (1) year and will be billed under the standard rate.
The Company, at its option, may request payment for any special metering
installation costs required for the customer to take service under this rider.
THERMAL ENERGY STORAGE RIDER
- ----------------------------
Available to customers with separately metered Thermal Energy Storage (TES)
Systems whose maximum demand does not exceed the maximum demand of the building
after completion of the necessary contract arrangements and installation of
necessary metering equipment. The billing demand for this separately metered
load will be the highest measured thirty (30) minute average kilowatt load
established during the on-peak period.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
Sheet Number 12 Effective with energy consumed on or
---------------------- --------------------------
Page 4 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 24
---------------
GENERAL SERVICE RATE
--------------------
On-peak period shall be from 11:00 A.M. to 7:00 P.M., Mountain Standard Time for
weekdays of Monday through Friday. Off-peak period shall be all other hours not
covered in the on-peak period.
No other options or riders are applicable to consumption covered under this
rider. Both separately metered TES systems and total building loads must be
served under this rate schedule.
The Company reserves the right to close this rider to additional customers if,
in the Company's judgment, system load characteristics no longer warrant such a
rider.
CHURCH RIDER
- ------------
The kilowatt demand for billing for churches shall be the highest measured
thirty (30) minute average kilowatt load determined by measurement, which has
been established during the current billing month. This rider is not applicable
to meeting halls, schools or other ancillary buildings which may be associated
with the church. At its option, the Company may switch this service to the
Alternative Rate applicable to Schedule No. 02, Small Commercial Service Rate.
Refer to terms provided under the Terms and Conditions of this Schedule.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
Sheet Number 12 Effective with energy consumed on or
---------------------- --------------------------
Page 5 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 24
---------------
GENERAL SERVICE RATE
--------------------
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule.
If a customer's highest measured thirty (30) minute average kilowatt load
exceeds 600 KW three (3) consecutive times during the months of May through
October, that customer shall be placed on the Large Power Service Rate Schedule
No. 25 for a minimum of twelve (12) months, at which time a determination will
be made for the applicable rate schedule.
If a customer's highest measured thirty (30) minute average kilowatt load has
not exceeded 15 KW three (3) consecutive times during the months of May through
October, at the Company's option, that customer shall be placed on Schedule No.
02, Small Commercial Service Rate.
Any new customer that has not established a prior service history with the
Company shall be classified under the appropriate rate schedule in accordance
with a demand estimate performed by the Company.
If the Company determines that a customer's bill under this schedule is unduly
burdensome, the Company may, at its option, bill said customer under Schedule
No. 02, Small Commercial Service Rate. Specifically, a customer who operates at
less than a ten (10) percent load factor, based on the average of the preceding
twelve (12) month period and/or its unit rate is three (3) times greater than
the overall base unit rate of the Small Commercial class will qualify for this
billing alternative.
For the purpose of this rate schedule, customers is defined as to include all
non-public schools and institutions of higher learning or facilities not
eligible under Schedule No. 41, municipal, county, State of Texas and federal
installations.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
Sheet Number 12 Effective with energy consumed on or
---------------------- --------------------------
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------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 25
---------------
LARGE POWER SERVICE RATE
------------------------
APPLICABILITY
- -------------
This rate is applicable to all customers for lighting, power, and heating
service whose highest measured demand as defined by the Determination of Demand
exceeds 600 kilowatts for three (3) consecutive months during the months of May
through October or to new customers whose estimated monthly demand load exceeds
600 kilowatts for three (3) consecutive months during the months of May through
October. All service will be taken at the point of delivery designated by the
Company and at one of the Company's standard types of service.
TERRITORY
- ---------
Texas Service Area
MONTHLY RATE
- ------------
$100.00 Customer Charge plus
Demand Charge
$20.25 per kilowatt for all kilowatts of Demand
Energy Charge
$0.02074 per kilowatt-hour for the first 400 hours times the maximum
measured demand. (R)
$0.00550 per kilowatt-hour for all additional kilowatt-hours. (R)
MONTHLY MINIMUM
- ---------------
Customer charge plus the greater of the demand charge for 600 kilowatts or
applicable minimum demand charge.
DETERMINATION OF DEMAND
- -----------------------
Maximum demand will be defined as the highest measured thirty (30) minute
average kilowatt load determined by measurement.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 13 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 4 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 25
---------------
LARGE POWER SERVICE RATE
------------------------
The billing demand will be the highest of:
A. 600 kilowatts
B. the maximum demand or
C. 75% of the highest measured on-peak demand established during billing
months of May through October in the 12-month period ending with the
current month. The exception to this will occur when the 1/2 on-peak -
1/2 off-peak provision is invoked. At that time, the measured billing
demand shall be used for the purposes of this paragraph.
When the demand established during the daily off-peak period exceeds the demand
established during the daily on-peak period, the demand used for billing will be
1/2 the on-peak period demand plus 1/2 the off-peak demand.
On-peak period shall be from 10:00 A.M. to 8:00 P.M., Mountain Standard Time,
for weekdays of Monday through Friday.
Off-peak period shall be all other hours of the week not covered in the on-peak
period.
The Company may refuse service to another customer at the same address when
service is terminated to avoid or evade payment of the minimum demand charges as
set forth in this rate.
RATING PERIOD SELECTION OPTION
- ------------------------------
Upon written request by the customer and approval by the Company, a customer may
shift his 10-hour peak period for billing purposes by two (2) hours around the
normally defined on-peak period. The customer may exercise this option twice
during a twelve (12) month billing period.
FIXED RATE RIDER
- ----------------
This rider is available to new customers with a projected minimum demand of
1,000 KW or existing customers with increased load of at least 1,000 KW as
measured by the average of the three (3) highest peaks for the preceding twelve
(12) months. Upon the execution of a five (5) year service contract, EPEC will
guarantee fixed rates for a two (2) year period. Customers electing to take
service under this rider will not be eligible for the Economic Development Rate
Schedule No. 33. A new customer is defined-as one who has never taken electrical
service from EPEC within the Texas service area.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 13 Effective with energy consumed on or
---------------------- --------------------------
Page 2 of 4 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 25
---------------
LARGE POWER SERVICE RATE
------------------------
Existing businesses which change ownership, location or name do not qualify as
new customers, but would instead be treated as existing customers for purposes
of this rider. If a business ceases to exist and the premises are occupied by a
new owner and a new business is opened, it may qualify as a new customer. The
designation as a new customer shall be determined by the Company, subject to the
customer's right to seek PUCT review of such determination.
THERMAL ENERGY STORAGE RIDER
- ----------------------------
Available to customers with separately metered Thermal Energy Storage (TES)
Systems whose maximum demand does not exceed the maximum demand of the building
after completion of the necessary contract arrangements and installation of
necessary metering equipment. The billing demand for this separately metered
load will be the highest measured thirty (30) minute average kilowatt load
established during the on-peak period.
On-peak period shall be from 11:00 A.M. to 7:00 P.M., Mountain Standard Time for
weekdays of Monday through Friday. Off-peak period shall be all other hours not
covered in the on-peak period.
No other options or riders are applicable to consumption covered under this
rider. Both separately metered TES systems and total building loads must be
served under this rate schedule.
The Company reserves the right to close this rider to additional customers if,
in the Company's judgment, system load characteristics no longer warrant such a
rider.
POWER FACTOR ADJUSTMENT
- -----------------------
If the power factor at the time of the highest measured thirty (30) minute
interval kilowatt demand for the entire plant is below 90% lagging, a charge of
$0.0700 per KVAR will be made for each KVAR by which customer's computed KVAR
demand exceeds 48.432% of the measured kilowatt demand. If the power factor is
greater than or equal to 90%, then no power factor adjustment will be made.
PRIMARY VOLTAGE DISCOUNT
- ------------------------
If electric service is delivered at one of the Company's standard primary
voltages and the Company is not providing a transformation solely to serve the
customer and if the customer owns, operates and maintains all the facilities for
receiving such service at delivery voltage, the following primary voltage
discount (PVD) will be given:
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 13 Effective with energy consumed on or
---------------------- --------------------------
Page 3 of 4 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 25
---------------
LARGE POWER SERVICE RATE
------------------------
PVD = $0.36 per kilowatt of measured Demand
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule.
For the purpose of this rate schedule, customers is defined as to include all
non-public schools and institutions of higher learning or facilities not
eligible under Schedule No. 41, municipal, county, State of Texas and federal
installations.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 13 Effective with energy consumed on or
---------------------- --------------------------
Page 4 of 4 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 28
---------------
AREA LIGHTING SERVICE RATE
--------------------------
APPLICABILITY
- -------------
All customers who desire overhead outdoor lighting service under the conditions
specified herein.
TERRITORY
- ---------
Texas Service Area
MONTHLY RATE
- ------------
<TABLE>
<S>
Single Fixture
Charge per Each
Standard Service: Wattage Per Month
- ----------------- ------- ---------------
<S> <C> <C> <C> <C>
7,000 Lumen Mercury Vapor Lamp - 195 $12.79 (R)
11,000 Lumen Mercury Vapor Lamp - 275 $14.29 (R)
20,000 Lumen Mercury Vapor Lamp - 460 $17.49 (R)
8,500 Lumen High Pressure Sodium Vapor - 124 $12.54 (R)
23,200 Lumen High Pressure Sodium Vapor - 313 $15.71 (R)
Floodlight Service:
- -------------------
Without Company Supplied 30' Wood Pole
9,500 Lumen High Pressure Sodium Vapor 137 $ 8.19 (R)
27,500 Lumen High Pressure Sodium Vapor 312 $11.31 (R)
50,000 Lumen High Pressure Sodium Vapor 485 $14.32 (R)
With Company Supplied 30' Wood Pole
9,500 Lumen High Pressure Sodium Vapor 137 $11.70 (R)
27,500 Lumen High Pressure Sodium Vapor 312 $14.82 (R)
50,000 Lumen High Pressure Sodium Vapor 485 $17.83 (R)
</TABLE>
TYPE OF SERVICE
- ---------------
Outdoor all night lighting service contracted for by customer for overhead
service, automatically controlled, standard mercury vapor and high pressure
sodium vapor luminarie units mounted on Company-owned wood poles.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
Sheet Number 16 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 28
---------------
AREA LIGHTING SERVICE RATE
--------------------------
FACILITIES PROVIDED
- -------------------
The Company will install a 30-foot wood pole, luminaire and necessary equipment
and extend overhead secondary wiring up to 125 feet where necessary. The Company
will own, operate and maintain the installation. Facilities necessary to provide
lighting in addition to above will be paid for by customer. All facilities
installed by the Company will remain the property of the Company. The Company
has the option to not install poles and/or luminaries in areas inaccessible to
the Company trucks.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule. The
initial Term of Contract for service under this schedule shall be not less than
two (2) years. The Company reserves the right to remove all equipment furnished
under this schedule, after issuance of disconnect notice, and void the contract
if in the opinion of the Company, there is excessive breakage or vandalization
of its facilities.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 15
-------------------- ---------------------
Sheet Number 16 Effective with energy consumed on or
---------------------- --------------------------
Page 2 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 34
---------------
COTTON GIN SERVICE RATE
-----------------------
APPLICABILITY
- -------------
This rate is available to cotton gins who purchase entire power requirements
from the Company and is applicable to electric service other than separately
metered light and miscellaneous office electric load furnished to the cotton
gin. Service will be furnished at one point of delivery.
The separately metered lighting and miscellaneous office electric load will be
billed under the applicable commercial rate schedule.
Customer's operating season will start September 1st of each year, or such later
date as customer first takes service. The above season shall not be for a period
of less than three (3) months, and season shall not last longer than eight (8)
months or April 30th of the following year, whichever comes first. Electrical
usage which occurs other than during the regular operating season will be billed
on the applicable commercial rate schedule.
TERRITORY
- ---------
Texas Service Area
RATE
- ----
Customer Charge - $277.75 Annually payable with the first month of
the operating season as defined above
Demand Charge - Monthly Billing
$13.75 per kilowatt for all kilowatts of Demand
Energy Charge - Monthly Billing
$0.01146 per kilowatt-hour (R)
DETERMINATION OF DEMAND
- -----------------------
Maximum demand will be defined as the highest measured thirty (30) minute
average kilowatt load determined by measurement.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 22 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 34
---------------
COTTON GIN SERVICE RATE
-----------------------
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule
No. 98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 22 Effective with energy consumed on or
---------------------- --------------------------
Page 2 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 41
---------------
CITY AND COUNTY SERVICE RATE
----------------------------
APPLICABILITY
- -------------
This schedule is limited to all public schools, Kindergarten through 12th grade,
and to those municipal and county customer service points currently taking
service under this schedule prior to the effective date of Rate Schedule 41 as
authorized in Docket No. 9945 and have continued to take service without
disconnection. Reconnections of existing service points, new customers or new
service points shall be classified under other appropriate schedules in
accordance with a demand estimate determined by the Company.
TERRITORY
- ---------
Texas Service Area
MONTHLY RATE
- ------------
$15.25 Customer Charge plus
Demand Charge
$16.25 per kilowatt in excess of 15 kilowatts (R)
Energy Charge
$0.11757 per kilowatt-hour for the first 3,000 kilowatt-hours (R)
$0.01245 per kilowatt-hour for all additional kilowatt-hours (R)
MONTHLY MINIMUM
- ---------------
Customer Charge
DETERMINATION OF DEMAND
- -----------------------
Maximum demand will be defined as the highest measured thirty (30) minute
average kilowatt load determined by measurement.
NON-METERED SERVICE
- -------------------
In instances when metering of energy would be impractical because of the low
monthly level of usage and where estimates of this usage can be accurately
calculated, the Company may, at its option, provide non-metered service.
Billings for non-metered service shall be based on the customer charge plus the
monthly energy usage calculated by the Company and applied to the energy charge
of this rate.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 24 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 41
---------------
CITY AND COUNTY SERVICE RATE
----------------------------
THERMAL ENERGY STORAGE RIDER
- ----------------------------
Available to public schools, Kindergarten through 12th grade, with separately
metered Thermal Energy Storage (TES) Systems whose maximum demand does not
exceed the maximum demand of the building after completion of the necessary
contract arrangements and installation of necessary metering equipment. The
billing demand for this separately metered load will be the highest measured
thirty (30) minute average kilowatt load established during the on-peak period.
On-peak period shall be from 11:00 A.M. to 7:00 P.M., Mountain Standard Time for
weekdays of Monday through Friday. Off-peak period shall be all other hours not
covered in the on-peak period.
No other options or riders are applicable to consumption covered under this
rider. Both separately metered TES systems and total building loads must be
served under this rate schedule.
The Company reserves the right to close this rider to additional customers if,
in the Company's judgment, system load characteristics no longer warrant such a
rider.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
The Company's Rules and Regulations apply to service under this schedule.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 13
-------------------- ---------------------
Sheet Number 24 Effective with energy consumed on or
---------------------- --------------------------
Page 2 of 2 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 46
---------------
MAINTENANCE POWER SERVICE FOR
-----------------------------
COGENERATION AND SMALL POWER PRODUCTION FACILITIES
--------------------------------------------------
APPLICABILITY
- -------------
This Rate Schedule is applicable to customers qualifying as small power
production and cogeneration facilities as defined in 18 CFR, Part 292, Subpart
B, of the final rules issued by the Federal Energy Regulatory Commission to
implement Sections 201 and 210 of the Public Utility Regulatory Policies Act of
1978.
Customer will furnish to the Company such data as required by the Company to
determine that customer meets the requirements for qualification.
The facility may be connected for (1) parallel operation with the Company's
service, or (2) isolated operation with Maintenance Power Service provided by
the Company by means of a double-throw switch.
This rate schedule is applicable to use of service for light, heat and power
supplied by the Company on a scheduled basis to a qualifying facility during an
outage scheduled for the purpose of performing maintenance to the qualifying
facility equipment, subject to the special provisions of this rate schedule.
TERRITORY
- ---------
Texas Service Area
TYPE OF SERVICE
- ---------------
Maintenance Power Service: Firm power service provided in pre-specified blocks
- -------------------------
of capacity on a scheduled basis to replace capacity and energy normally
generated by customer during periods when a customer's generation facility is
not available due to a maintenance outage, and Customer's total purchase demand
does not exceed the Supplementary Power Demand established during the billing
month.
Maintenance power shall be available to qualifying facilities for a maximum
period of sixty (60) days in aggregate per calendar year, scheduled outside of
the designated peak months (May through October) of the Company.
MONTHLY RATE
- ------------
Determination of a customer's Rate category for the purposes of this schedule
shall be based on the customer's contract capacity. Maintenance power for
residential customers with qualifying facilities shall be charged at the rates
currently in effect for the Company's
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 27 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 5 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 46
---------------
MAINTENANCE POWER SERVICE FOR
-----------------------------
COGENERATION AND SMALL POWER PRODUCTION FACILITIES
--------------------------------------------------
Residential Service Rate Schedule No. 01 and for non-residential customers with
qualifying facilities shall be as follows:
Rate I: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity is 15 kilowatts (KW) or less.
Rate II: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity is between 15 KW through 600 KW.
Rate III: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity is between 600 KW through 5,000 KW.
Rate IV: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity for Supplementary Power Service is
5,000 KW or more.
The monthly demand charge shall be the greater of the product of (i) the
capacity which had been scheduled in advance by the customer or (ii) the minimum
demand of the rate classification group and the demand charge stated below
adjusted by a monthly scheduled outage rate to reflect the duration of the
scheduled outage. The monthly scheduled outage rate shall be calculated by
dividing the number of days that Maintenance Power Service had been scheduled by
the total number of days within that billing month.
<TABLE>
<S> <C> <C> <C> <C>
I II III IV
- -- --- --
Customer Charge $ 6.50 $ 165.00 $ 255.00 $ 155.00
Demand Charge per KW $ 8.38 $ 10.13 $ 10.63
Energy Charge $0.10970 $0.02781 $0.01832 $0.00645 per KWH for (R)(R)(R)
all KWH
</TABLE>
COMMON PROVISIONS
- -----------------
Interconnection Charge:
Customers under this rate schedule shall be subject to a charge for
interconnection costs. Interconnection costs are the reasonable costs of
connection, switching, metering, transmission, distribution, safety provisions,
engineering and administrative costs incurred
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 27 Effective with energy consumed on or
---------------------- --------------------------
Page 2 of 5 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 46
---------------
MAINTENANCE POWER SERVICE FOR
-----------------------------
COGENERATION AND SMALL POWER PRODUCTION FACILITIES
--------------------------------------------------
by the Company directly related to the installation of the physical facilities
necessary to permit interconnected operations with a qualifying facility, to the
extent such costs are in excess of the corresponding costs that the Company
would have incurred if it had not engaged in interconnected operations, but
instead generated an equivalent amount of electric energy itself or purchased an
equivalent amount of electric energy or capacity from other sources.
The customer shall pay in full the actual reasonable costs of interconnection
prior to commencement of service under this rate schedule. In addition, the
customer shall pay an annual charge of 8% of the capital costs of
interconnection to cover property taxes and operation and maintenance expenses.
The annual charge of 8% is payable by the customer in monthly installments at
the rate of 2/3 of 1% per month.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
DETERMINATION OF CONTRACT CAPACITY
- ----------------------------------
The contract capacity for the purpose of classifying a customer into the
appropriate rate group of this rate schedule shall be the amount of capacity for
Maintenance Power Service that is requested by the customer and agreed to by the
Company. When a higher kilowatt demand for Maintenance Power Service is
established, the higher kilowatt demand based on a thirty (30) minute interval
shall become the new contract capacity for that month and for each month
hereafter, unless and until exceeded by a still higher kilowatt demand which in
turn shall be subject to the foregoing conditions.
POWER FACTOR ADJUSTMENT
- -----------------------
For those customers under Rate III and Rate IV:
If the power factor at the time of the highest measured thirty (30) minute
interval kilowatt demand for the entire plant is below 90% lagging, a charge of
$0.0700 per KVAR will be made for each KVAR by which customer's computed KVAR
demand exceeds 48.432% of the measure kilowatt demand. If the power factor is
greater than or equal to 90%, then no power factor adjustment will be made.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 27 Effective with energy consumed on or
---------------------- --------------------------
Page 3 of 5 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 46
---------------
MAINTENANCE POWER SERVICE FOR
-----------------------------
COGENERATION AND SMALL POWER PRODUCTION FACILITIES
--------------------------------------------------
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
This schedule shall be binding upon the Company and the customer for a period
conterminous with the interconnection agreement; provided, however, that the
customer may terminate this schedule at any time during such term by providing
the Company with written notice at least thirty (30) days prior to the effective
date of such termination and the Company may terminate in accordance with
regulatory regulations. Any change in this schedule approved by a regulatory
authority with the requisite jurisdiction, shall become effective upon such
approval and remain in force until the expiration of the term of this schedule
or the termination by customer in accordance with the requirements herein
contained, whichever event occurs first in time. The service supplied hereunder
is to be used exclusively within the premises of the customer, as described in
his application for service.
The Company's Rules and Regulations and the contract provisions shall apply
under this rate schedule.
INDEMNITY CLAUSE
- ----------------
The provisions of the Indemnity Clause in the customer's contract for service
under this schedule shall apply.
SPECIAL PROVISIONS
- ------------------
A. In the event a customer receives a combination of services providing for
separate customer charges, only the greater of the separate charges shall be
applied.
B. If the contracted capacity as determined above exceeds 15 KW, the Company
shall install a recording meter for purposes of measuring power taken under
this service schedule.
C. All maintenance power service supplied by the Company that has not been
scheduled with the Company and approved by the Company through prior written
notice shall be billed under the provisions of Backup Power Service. If this
situation occurs more than twice during any consecutive six (6) month
period, the customer
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 27 Effective with energy consumed on or
---------------------- --------------------------
Page 4 of 5 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 46
---------------
MAINTENANCE POWER SERVICE FOR
-----------------------------
COGENERATION AND SMALL POWER PRODUCTION FACILITIES
--------------------------------------------------
shall be required to contract for Backup Power Service in the event that
customer previously had not contracted for such service.
D. In the event maintenance occurs during the designated peak months (May
through October) of the Company or exceeds a maximum of 60 days in
aggregate, the total per calendar year, unless it is agreed to extend
Maintenance Power, by written request by the Customer and written consent of
the Company, such excess use of capacity will be billed as Supplementary
Power.
E. The following defines outage types for operational purposes:
1. A qualifying facility shall schedule its maintenance by giving the
Company advance notice on the length of the outage as follows:
Pre-Scheduled Required
Maintenance Outage Advanced Notice
------------------ ---------------
1 day or less 5 calendar days
2 to 5 days 30 calendar days
6 to 30 days 90 calendar days
F. Maintenance power requested during the designated peak months (May through
October), that is scheduled in advance and agreed to by the Company, shall
be billed according to the terms of Maintenance Power Service.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 27 Effective with energy consumed on or
---------------------- --------------------------
Page 5 of 5 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 47
---------------
BACKUP POWER SERVICE FOR COGENERATION
-------------------------------------
AND SMALL POWER PRODUCTION FACILITIES
-------------------------------------
APPLICABILITY
- -------------
This Rate Schedule is applicable to customers qualifying as small power
production and cogeneration facilities as defined in 1 8 CFR, Part 292, Subpart
B, of the final rules issued by the Federal Energy Regulatory Commission to
implement Sections 201 and 210 of the Public Utility Regulatory Policies Act of
1978.
Customer will furnish to the Company such data as required by the Company to
determine that customer meets the requirements for qualification.
The facility may be connected for (1) parallel operation with the Company's
service, or (2) isolated operation with Backup Power Service provided by the
Company by means of a double-throw switch.
This rate schedule is applicable to use of service for light, heat and power
supplied by the Company on an unscheduled outage at a qualifying facility
subject to the special provisions of this rate schedule.
TERRITORY
- ---------
Texas Service Area
TYPE OF SERVICE
- ---------------
Backup Power Service: Firm power service provided in contracted blocks of
- --------------------
capacity on an unscheduled basis to replace capacity and energy normally
generated by customer during periods when a Customer's generation facility
experiences an unscheduled forced outage, and Customer's total purchases demand
does not exceed the Supplementary Power Demand established during the billing
month.
MONTHLY RATE
- ------------
Determination of a customer's Rate category for purposes of this schedule shall
be based on the customer's contract capacity. Backup power for residential
customers with qualifying facilities shall be charged at the rates currently in
effect for the Company's Residential Service Rate Schedule No. 01 and for non-
residential customers with qualifying facilities shall be as follows:
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 28 Effective with energy consumed on or
---------------------- --------------------------
Page 1 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 47
---------------
BACKUP POWER SERVICE FOR COGENERATION
-------------------------------------
AND SMALL POWER PRODUCTION FACILITIES
-------------------------------------
Rate I: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity is 15 kilowatts (KW) or less.
Rate II: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity is between 15 KW through 600 KW.
Rate III: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity is between 600 KW through 5,000 KW.
Rate IV: Applicable to commercial or industrial customers with qualifying
facilities whose contract capacity for Supplementary Power Service is
5,000 KW or more.
The monthly demand charge shall be the product of the Backup Power Service
Demand, as defined in the following sections, and the demand charge stated below
adjusted by a monthly forced outage rate to reflect outage hours of the
customer's generation unit(s). The monthly forced outage rate is defined as the
Monthly Forced Outage Rate and is calculated as the total number of hours during
which Backup Power Service was provided during the billing month, divided by the
total number of operating hours in that month. In no event will the actual
monthly forced outage rate be less than zero.
<TABLE>
<S> <C> <C> <C> <C>
I II III IV
- -- --- --
Customer Charge $ 6.50 $ 165.00 $ 255.00 $ 155.00
Demand Charge per KW $ 16.75 $ 20.25 $ 21.25
Energy Charge $0.10970 $0.02781 $0.01832 $0.00645 per KWH for (R)(R)(R)
all KWH
</TABLE>
MONTHLY MINIMUM
- ---------------
Customer Charge plus the applicable Minimum Monthly Reservation Factor and
energy charges.
MONTHLY RESERVATION FACTOR
- --------------------------
For customers contracting for service under this schedule a minimum monthly
reservation factor per KW of contract capacity will be charged as follows:
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 28 Effective with energy consumed on or
---------------------- --------------------------
Page 2 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 47
---------------
BACKUP POWER SERVICE FOR COGENERATION
-------------------------------------
AND SMALL POWER PRODUCTION FACILITIES
-------------------------------------
Rate I: n/a
Rate II: .10
Rate III: .10
Rate IV: .10
This rate assumes a minimum monthly reservation factor (MRF) for backup power
service of 10% for the first three years. At the end of the first three years
billing, the actual three year average Forced Outage Rate (FOR) experienced by
the individual customer's cogeneration system shall replace the initial 10% MRF.
The determination of FOR will be calculated based on a weighted average of
actual backup demand during each forced outage period. The initial startup
period of 3 months will be excluded from the calculation of the three year
average Forced Outage Rate.
DETERMINATION OF DEMAND
- -----------------------
The Backup Power Service Demand to be used in billing shall be the highest
measured thirty (30) minute kilowatt average load for customers who take only-
Backup- Power Service. The Backup Power Service Demand, for those customers that
receive a combination of Maintenance Power Service and Backup Power Service,
shall be the greater of (i) the highest measured thirty (30) minute kilowatt
average load during periods of forced outages when Maintenance Power Service was
not scheduled or (ii) the highest thirty (30) minute kilowatt average load less
the scheduled Maintenance Power Service during periods of forced outages when
Maintenance Power Service was scheduled. The Backup Power Service Demand for
those customers that received Supplementary Power Service shall be based on
metered demand, less demand attributed to Supplementary Power and/or Maintenance
Power.
DETERMINATION OF CONTRACT CAPACITY
- ----------------------------------
The contract capacity for the purpose of this rate schedule shall be the amount
of capacity for Backup Power Service that is requested by the customer and
agreed to by the Company. In the event that the Backup Power Service Demand, as
determined above, exceeds the contract capacity, then that Backup Power Service
Demand shall establish a new contract capacity for purposes of this schedule for
the duration of the interconnection agreement or until a new contract capacity
has been negotiated according to the provisions of the interconnection
agreement. The contract capacity for Backup Power Service may be specified for
each individual unit for customers owning a multi-unit cogeneration facility.
- --------------------------------------------------------------------------------
Section Number 1 Revision Number 5
-------------------- ---------------------
Sheet Number 28 Effective with energy consumed on or
---------------------- --------------------------
Page 3 of 6 after
------------------------------ -------------------
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 47
---------------
BACKUP POWER SERVICE FOR COGENERATION
-------------------------------------
AND SMALL POWER PRODUCTION FACILITIES
-------------------------------------
COMMON PROVISIONS
- -----------------
Interconnection Charge:
Customers under this rate schedule shall be subject to a charge for
interconnection costs. Interconnection costs are the reasonable costs of
connection, switching, metering, transmission, distribution, safety provisions,
engineering and administrative costs incurred by the Company directly related to
the installation of the physical facilities necessary to permit interconnected
operations with a qualifying facility, to the extent such costs are in excess of
the corresponding costs that the Company would have incurred if it had not
engaged in interconnected operations, but instead generated an equivalent amount
of electric energy itself or purchased an equivalent amount of electric energy
or capacity from other sources.
The customer shall pay in full the actual reasonable costs of interconnection
prior to commencement of service under this rate schedule. In addition, the
customer shall pay an annual charge of 8% of the capital costs of
interconnection to cover property taxes and operation and maintenance expenses.
The annual charge of 8% is payable by the customer in monthly installments at
the rate of 2/3 of 1% per month.
FIXED FUEL FACTOR
- -----------------
The above rates are subject to the provisions of Company's Tariff Schedule No.
98 entitled Fixed Fuel Factor.
POWER FACTOR ADJUSTMENT
- -----------------------
For those customers under Rate III and Rate IV:
If the power factor at the time of the highest measured thirty (30) minute
interval kilowatt demand for the entire plant is below 90% lagging, a charge of
$0.0700 per KVAR will be made for each KVAR by which customer's computed KVAR
demand exceeds 48.432% of the measure kilowatt demand. If the power factor is
greater than or equal to 90%, then no power factor adjustment will be made.
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Section Number 1 Revision Number 5
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Sheet Number 28 Effective with energy consumed on or
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Page 4 of 6 after
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<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 47
---------------
BACKUP POWER SERVICE FOR COGENERATION
-------------------------------------
AND SMALL POWER PRODUCTION FACILITIES
-------------------------------------
TERMS OF PAYMENT
- ----------------
The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.
TERMS AND CONDITIONS
- --------------------
This schedule shall be binding upon the Company and the customer for a period
conterminous with the interconnection agreement; provided, however, that the
customer may terminate this schedule at any time during such term by providing
the Company with written notice at least thirty (30) days prior to the effective
date of such termination and the Company may terminate in accordance with
regulatory regulations. Any change in this schedule approved by a regulatory
authority with the requisite jurisdiction, shall become effective upon such
approval and remain in force until the expiration of the term of this schedule
or the termination by customer in accordance with the requirements herein
contained, whichever event occurs first in time. The service supplied hereunder
is to be used exclusively within the premises of the customer, as described in
his application for service.
The Company's Rules and Regulations and the contract provisions shall apply
under this rate schedule.
INDEMNITY CLAUSE
- ----------------
The provisions of the Indemnity Clause in the customer's contract for service
under this schedule shall apply.
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Section Number 1 Revision Number 5
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Sheet Number 28 Effective with energy consumed on or
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Page 5 of 6 after
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<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. 47
---------------
BACKUP POWER SERVICE FOR COGENERATION
-------------------------------------
AND SMALL POWER PRODUCTION FACILITIES
-------------------------------------
SPECIAL PROVISIONS
- ------------------
A. In the event a customer receives a combination of services providing for
separate customer charges only the greater of the separate charges shall be
applied.
B. If the contracted capacity as determined above exceeds 15 KW, the Company
shall install a recording meter for purposes of measuring power taken under
this service schedule.
C. On the date the meter is read the customer must provide the Company with the
date and times of all forced outage hours that occurred in that billing
month. If such information is not provided on the day the meter is read,
then the demand charge to be applied for Backup Power Service Demand shall
be the same as the demand charge under Supplementary Power Service.
D. The following defines outage type for operational purpose:
1. Forced Outage: An unplanned component failure or other condition that
requires the unit(s) be removed from service immediately.
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Section Number 1 Revision Number 5
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Sheet Number 28 Effective with energy consumed on or
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Page 6 of 6 after
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<PAGE>
Attachment 2
<PAGE>
EL PASO ELECTRIC COMPANY
SCHEDULE NO. BRR (N)
----------------
BASE RATE REFUND
----------------
APPLICABILITY
- -------------
This refund is applicable to the Rate Schedules listed below.
TERRITORY
- ---------
Texas Service Area
MONTHLY BILL
- ------------
A refund, calculated using the refund factor per KWH shown below will be added
as a separate line item to the base portion of the customer's Monthly Bill. The
line item will be titled "Base Rate Refund." The $/KWH refund will begin June
1999 and continue for three (3) months. A customer who leaves the system during
the refunding period will forfeit further refunds. A customer who enters the
system during the refunding period will receive a refund for only the remaining
refunding period.
Filed
Refund
to the Filed Refund
Rate Schedule Nos. Classes $/KWH Factor
------------------ ------- ------------
01 $3,657,419 $0.00981
02 $ 249,679 $0.00455
07 $ 3,998 $0.00378
08 $ 39,354 $0.00490
11 $ 61,171 $0.00166
11A $ 0
15 $ 0
W/H Rider $ 21,245 $0.00393
22 $ 1,853 $0.00165
24 $1,112,215 $0.00286
25 $ 455,387 $0.00305
26 $ 0
27 $ 0
28 $ 20,191 $0.00837
29 $ 0
30 $ 0
31 $ 0
33 $ 0
34 $ 5,008 $0.04317
38 $ 0
41 $ 226,318 $0.00346
43 $ 0
45 $ 1,297 $0.00811
----------
$5,855,135
==========
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Section Number 1 Original
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Sheet Number 34 Effective with bills rendered on or
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Page 1 of 1 after
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