                                                                    Exhibit 99.1

                    BEFORE THE ARIZONA CORPORATION COMMISSION

WILLIAM A. MUNDELL
     CHAIRMAN
JIM IRVIN
     COMMISSIONER
MARC SPITZER
     COMMISSIONER

IN THE MATTER OF THE GENERIC                  DOCKET NO. E-00000A-02-0051
PROCEEDINGS CONCERNING ELECTRIC
RESTRUCTURING ISSUES.

IN THE MATTER OF ARIZONA PUBLIC               DOCKET NO. E-01345A-01-0822
SERVICE COMPANY'S REQUEST FOR
VARIANCE OF CERTAIN REQUIREMENTS OF
A.A.C. R14-2-1606.

IN THE MATTER OF THE GENERIC                  DOCKET NO. E-00000A-01-0630
PROCEEDING CONCERNING THE ARIZONA
INDEPENDENT SCHEDULING ADMINISTRATOR.

IN THE MATTER OF TUCSON ELECTRIC              DOCKET NO. E-01933A-02-0069
POWER COMPANY'S APPLICATION FOR A
VARIANCE OF CERTAIN ELECTRIC
COMPETITION RULES COMPLIANCE DATES.

IN THE MATTER OF THE APPLICATION OF           DOCKET NO. E-1933A-98-0471
TUCSON ELECTRIC POWER COMPANY FOR             DECISION NO. 65154
APPROVAL OF ITS STRANDED COST
RECOVERY.                                     OPINION AND ORDER


DATES OF HEARING:                  June 14, 2002 (pre-hearing); June 17, 18, 19,
                                   20, 21, 27, and 28, 2002

PLACE OF HEARING:                  Phoenix, Arizona

ADMINISTRATIVE LAW JUDGE:          Lyn Farmer

IN ATTENDANCE:                     William A. Mundell, Chairman
                                   Marc Spitzer, Commissioner

APPEARANCES:                       Mr. Jay L. Shapiro,  FENNEMORE  CRAIG and Mr.
                                   Michael  R.  Engleman,   DICKSTEIN,  SHAPIRO,
                                   MORIN &  OSHINSKY  on  behalf  of Panda  Gila
                                   River, L.P.;

                                   Mr. Lindy Funkhouser, Director, and Mr. Scott
                                   S. Wakefield, Chief Counsel, on behalf of the
                                   Residential Utility Consumer Office;

                                   Mr.   Thomas  L.  Mumaw,   Senior   Attorney,
                                   PINNACLE WEST  CORPORATION and Mr. Jeffrey B.

                                       1
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


                                   Guldner, SNELL & WILMER; on behalf of Arizona
                                   Public Service Company;

                                   Mr.  Raymond  S.  Heyman,  ROSHKA,  HEYMAN  &
                                   DeWULF;  on behalf of Tucson  Electric  Power
                                   Company;

                                   Mr.  Lawrence  V.   Robertson,   Jr.,  MUNGER
                                   CHADWICK,   on  behalf   of   Sempra   Energy
                                   Resources and Southwestern Power Group II;

                                   Mr. William P.  Sullivan,  and Mr. Michael A.
                                   Curtis, MARTINEZ & CURTIS, P.C., on behalf of
                                   Reliant Energy Resources;

                                   Mr.  Steven  Lynn  Wene,  MOYES,  STOREY;  on
                                   behalf of PPL Southwest  Generation Holdings,
                                   LLC;  PPL  EnergyPlus,  LLC; and PPL Sundance
                                   Energy, LLC;

                                   Mr.  Walter W. Meek on behalf of the  Arizona
                                   Utility Investors Association;

                                   Mr.  Randall  H.  Warner,  JONES,  SKELTON  &
                                   HOCHULI,  P.C.,  and Mr. Daniel W.  Douglass,
                                   LAW OFFICES OF DANIEL W. DOUGLASS,  on behalf
                                   of  AES  NewEnergy   and  Strategic   Energy,
                                   L.L.C.;

                                   Mr. Greg Patterson on behalf of the Alliance;

                                   Mr. Roger K. Ferland, QUARLES & BRADY STREIGH
                                   LANG,   L.L.P.,   on  behalf  of   Harquahala
                                   Generating Company;

                                   Mr.  Gary A.  Dodge,  HATCH,  JAMES &  DODGE,
                                   P.C.,  on behalf of  Arizona  for  Choice and
                                   Electric Competition;

                                   Mr.  Robert J. Metli,  CHEIFETZ & IANNITELLI,
                                   on behalf of Citizens Communications Company;
                                   and

                                   Mr. Christopher K. Kempley, Chief Counsel and
                                   Ms. Janet F. Wagner,  Staff  Attorney,  Legal
                                   Division, on behalf of the Utilities Division
                                   of the Arizona Corporation Commission.

BY THE COMMISSION:

     On October 18, 2001, Arizona Public Service Company ("APS") filed a Request
for a Partial  Variance to A.A.C.  R14-2-1606(B)  and for Approval of a Purchase
Power Agreement ("Variance/PPA") (Docket No. E-01345A-01-0822).

.. . .

                                       2                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     A Procedural Conference was held on December 5, 2001, to discuss procedural
issues and the appropriate  scope of the proceeding.  APS filed direct testimony
on December 12, 2001, and the parties filed briefs on December 19, 2001.

     By Procedural  Order issued January 22, 2002,  the  Commission  opened this
generic  docket on electric  restructuring  (Docket No.  E-00000A-02-0051).  The
Commissioners,  through a series of letters,  requested that the parties respond
to questions about electric competition.

     On January 28, 2002,  Tucson Electric Power Company ("TEP") filed a Request
for Variance (Docket No. E-01933A-02-0069).

     On January 30, 2002, the  Commission's  Utilities  Division Staff ("Staff")
filed a Response to the  Procedural  Order  establishing  the generic docket and
requested  consolidation of all related electric competition dockets,  including
the generic docket,  the APS variance  request,  the TEP variance  request,  the
Arizona  Independent  Scheduling  Administrator  ("AISA")  inquiry,  and the TEP
request to amend its market generation credit, Docket No. E-01933A-98-0471.

     A Procedural conference was held on January 31, 2002, to discuss procedural
issues and on February 8, 2002, a Procedural Order was issued  consolidating the
dockets,  ordering  Staff to file a Staff  Report  in the  Generic  Docket,  and
establishing a hearing date on APS' Variance/PPA application.

     Intervention was granted to the following: the Residential Utility Consumer
Office  ("RUCO");  Reliant  Resources,  Inc.  ("Reliant");  Panda Gila River, LP
(Panda");  Arizona  Competitive  Power  Alliance  ("Alliance");   Arizonans  for
Electric  Choice  and  Competition  ("AECC");  Harquahala  Generating  Co.,  LLC
("Harquahala");  Arizona Utility Investors Association  ("AUIA");  Sempra Energy
Resources ("Sempra"); Southwestern Power Group II, Inc. ("SWPG"); AES New Energy
Inc. ("AES NE"); Strategic Energy, LLC ("Strategic"); Toltec Power Station, LLC;
Bowie Power  Station,  LLC; PG&E National  Energy  Group;  Arizona  Transmission
Dependent Utility Group;  Duke Energy Arlington  Valley,  LLC; Duke Energy North
America,  LLC;  Kroger  & Co.;  Land  &  Water  Fund  of  the  Rockies;  Arizona
Cogeneration   Association;   Conoco,  Inc.;  APS  Energy  Services  Co.,  Inc.;
Department  of  Defense;  Stirling  Energy  System;  Arizona  Consumer  Council;
Southwest Energy Efficiency  Project;  and Arizona Community Action  Association
("ACAA").

     On March 19, 2002,  Panda Gila River,  L.P.  ("Panda")  filed a Request for
Order to Show Cause.

     On March 22, 2002,  Staff filed its Staff  Report in this  Generic  Docket,
summarizing  the parties'  answers to the  Commissioners'  questions  and making
recommendations about electric restructuring.

                                       3                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     On April 22, 2002, APS filed a Motion for Determination of Threshold Issue,
which  indicated that APS intended to submit its "30-day  letter"  regarding the
asset transfer on approximately August 1, 2002, irrespective of the Commission's
resolution  of the  Variance/PPA  request  or  the  proceedings  in the  generic
electric docket.(1)

     On April 25, 2002, the Commission  held a Special Open Meeting at which the
Commission  stayed the APS Variance/PPA  hearing,  denied Panda's Request for an
OSC, and directed that certain issues be addressed in the Generic Docket.

     By Procedural  Order issued on May 2, 2002, a hearing was set on the issues
identified by the Commission,  including:  the transfer of assets and associated
market  power  issues;   Code  of  Conduct;   Affiliated   Interest  Rules;  and
jurisdictional  issues raised by Chairman Mundell,  collectively  referred to as
"Track A" issues. Track B, Competitive  Procurement,  was also established.  The
Procedural  Order also put the parties and the general public on notice that the
Commission may initiate rulemaking(s),  or, pursuant to A.R.S. ss. 40-252, after
hearing,   enter  such  orders  as  may  be  appropriate  relating  to  electric
restructuring, including variances from Commission rules and/or Decisions.

     Notice of the hearing was published in newspapers of general circulation in
the APS and TEP service areas and statewide between May 26 and June 6, 2002.(2)

     The hearing  was held as  scheduled.  No members of the public  appeared to
make public  comment.  Witnesses  testified on behalf of APS, TEP,  AUIA,  AECC,
RUCO, Panda, Harquahala, Sempra/SWPG, Reliant, AES NE/Strategic, and Staff.

     By Procedural Order issued on July 10, 2002, TEP's application to amend its
market generation credit was removed from this consolidated proceeding.

     On July 10, 2002, the parties filed briefs.

                                   BACKGROUND

     On May  20,  1994,  the  Commission  opened  Docket  No.  U-0000-94-165  to
investigate the  introduction of retail  electric  competition.  On December 26,
1996, the Commission issued Decision No. 59943, which adopted A.A.C.  R14-2-1601
through  1616,  the Retail  Electric  Competition  Rules.  Hearings were held on
generic  stranded  cost issues,  and on June 28,  1998,  the  Commission  issued
Decision No. 60977 on Stranded Costs. On August 10, 1998, in Decision No. 61071,

----------
(1) See footnote 3 to the Motion.
(2) Arizona  Republic,  Bisbee Daily  Review,  Sierra Vista  Herald,  Tri-Valley
Dispatch,  Douglas  Daily  Dispatch,   Flagstaff  Arizona  Daily  Sun,  Holbrook
Tribune/Silver  Creek Herald,  Parker  Pioneer,  Payson Round Up, Prescott Daily
Courier,  Sedona Red Rock  News/Cottonwood  Journal  Extra/Camp  Verde  Journal/
Wickenburg Sun, Winslow Mail, Yuma Daily Sun, Arizona Daily Star, and the Tucson
Citizen.

                                       4                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


the Commission  adopted amended rules on an emergency basis, and on December 11,
1998, adopted the emergency rules on a permanent basis in Decision No. 61272. On
January 11, 1999, the  Commission  issued  Decision No. 61311,  which stayed the
Retail Electric Competition Rules and related decisions,  including Decision No.
60977.

     On April 27, 1999, the Commission issued Decision No. 61677,  which amended
Decision No. 60977, the Commission's prior Stranded Cost decision.  Decision No.
61677 ordered the Hearing  Division to issue a Procedural Order to set dates for
consideration of stranded costs and unbundled tariffs for each Affected Utility.
The revised Retail Electric Competition Rules were published on May 14, 1999 and
public comment  sessions were held. On May 18, 1999, APS filed for approval of a
settlement agreement and on June 9, 1999, TEP filed for approval of a settlement
agreement.  Hearings were held on both  applications,  and the Commission issued
Decision No. 61973  (October 6, 1999) in the APS docket,  and Decision No. 62103
(November  30, 1999) in the TEP docket.  On September 29, 1999,  the  Commission
issued   Decision  No.  61969,   which  approved  the  revised  Retail  Electric
Competition Rules ("Retail Electric  Competition  Rules"). In Decision No. 62924
(October 10, 2000) the  Commission  adopted  clarifying  revisions to the Retail
Electric Competition Rules.

     The  Settlement  Agreements  provided  and  Decision  Nos.  61973 and 62103
granted two-year extensions of time, until December 31, 2002, for APS and TEP to
separate  assets  (A.A.C.  1615(A)(3))  and also  granted  a  "similar  two-year
extension" for compliance  with A.A.C.  R14-2-1606(B)(4).  APS planned to divest
its competitive  generation assets to a yet-to-be formed  generation  affiliate.
The Addendum to APS'  Settlement  Agreement  also  provided  that:  "[a]fter the
extensions granted in Section 4.1 have expired, APS shall procure generation for
Standard  Offer  customers  from the  competitive  market as provided for in the
Electric Competition Rules. An affiliated  generation company formed pursuant to
this Section 4.1 may  competitively bid for APS' Standard Offer load, but enjoys
no automatic  privilege  outside of the market bid on account of its affiliation
with APS." (4.1(3)).

.. . .

----------
(3)  A.A.C.  R14-2-1615(A)  provides:  "All  competitive  generation  assets and
competitive  services  shall be  separated  from an  Affected  Utility  prior to
January 1, 2001. Such separation shall either be to an unaffiliated  party or to
a separate corporate affiliate or affiliates.  If an Affected Utility chooses to
transfer  its  competitive  generation  assets  or  competitive  services  to  a
competitive electric affiliate,  such transfer shall be at a value determined by
the Commission to be fair and reasonable." ("Rule 1615(A)")
(4) A.A.C. R14-2-1606(B) provides: "After January 1, 2001, power purchased by an
investor owned Utility  Distribution Company for Standard Offer Service shall be
acquired from the competitive market through prudent, arm's length transactions,
and with at least 50% through a competitive bid process." ("Rule 1606(B)")

                                       5                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     APS'  Variance/PPA  application  stated that  "adherence to the competitive
bidding  requirements  of the  Electric  Competition  Rules will not produce the
intended  result of reliable  electric  service for Standard Offer  customers at
reasonable  rates" and requested that the Commission grant a partial variance to
R14-2-1606(B) that would otherwise obligate APS to acquire all of its customers'
Standard Offer  generation  requirements  from the  competitive  market,  and to
approve a long-term  purchase power agreement with its affiliate,  Pinnacle West
Capital Corporation ("PWCC").

     TEP's Variance application requested that the Commission grant an extension
of the compliance  dates in Rule 1606(B) and Rule 1615(A) to either December 31,
2003,  or six  months  after the  Commission  has  issued a final  order in this
docket, whichever occurs later.

     By Procedural Order issued February 8, 2002, the Commission determined that
APS' Variance/PPA application required proceeding according to A.R.S. ss. 40-252
in addition to  proceeding  as a request for a rule  variance.  Our May 2, 2002,
Procedural Order in this proceeding also stated that the parties and the general
public are put on notice that the  Commission  may  initiate  rulemaking(s)  or,
pursuant  to A.R.S.  ss.  40-252,  after  hearing,  enter such  orders as may be
appropriate  relating  to  electric  restructuring,   including  variances  from
Commission  rules and/or Decisions and required notice to be given that provided
as full notice and  opportunity for  participation  on the part of the public as
possible.

     The Track A issues to be resolved in this portion of the docket are:  Issue
#1 Market  Power;  Issue # 2  Divestiture;  Issue # 3 Code of  Conduct/Affiliate
Transactions; and Issue # 4 Jurisdictional Issues.

                             ISSUE # 1 MARKET POWER

STAFF

On the  issue  of the  condition  of  the  wholesale  market,  Staff  finds  and
recommends:

     1.   The wholesale market is not currently workably competitive; therefore,
          reliance on that market will not result in just and reasonable rates.

     2.   APS has market power in its Phoenix Valley and Yuma load pockets.

     3.   TEP has market power in its Tucson load pocket.

     4.   The  Commission  should  require APS and TEP to produce  market  power
          studies accompanied by market mitigation plans before allowing them to
          divest.

     5.   The wholesale  market  applicable to Arizona is poorly  structured and
          susceptible to possible malfunction and manipulation.

                                       6                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


APS

     APS argues that the  evidence  presented at hearing  demonstrated  that its
generation affiliate,  Pinnacle West Electric Corporation ("PWEC") will not have
unmitigated  market  power  post-divestiture.  APS states that all parties  that
conducted the Supply Margin  Assessment  ("SMA") analysis as used by the Federal
Energy  Regulatory  Commission  ("FERC") "came to the conclusion that APS passes
the most recent and stringent  market power test proposed by FERC in determining
whether or not a wholesale  electric market is functionally  competitive."  (APS
Brief at pp 19-20).  APS  believes  that the market power of  generation  owners
within  transmission-constrained areas is not caused by divestiture and will not
be ameliorated by retention of load pocket generation,  but will be mitigated by
the "must-run"  provisions of the AISA and the WestConnect  protocols.  Further,
APS points out that A.A.C.  R14-2-1609(I) requires that contracts for "must-run"
generation  must be in place prior to  divestiture.  APS  believes  that Staff's
proposed new market power study is  "unnecessary  and assumes the existence of a
problem requiring a solution." (APS Brief at p. 21)

TEP

     TEP  believes  that there is not  sufficient  consensus  in the record upon
which the Commission can make a decision as to how to quantify  market power and
how to resolve market power issues as they arise.  Consequently,  TEP recommends
that the issue of market power should be subject to further evaluation.

PANDA

     Panda agrees with APS' witness, Dr. Hieronymus'  definition of market power
as  "the  ability  to  profitably  sustain  an  above-competitive  price  in the
marketplace."   Panda's  witness,  Dr.  Roach,   testified  that  APS  has  both
transmission  and generation  market power in both the APS Market as a whole and
in the APS Valley Market. Dr. Roach's load  pocket-specific SMA analysis for the
Phoenix load center  found that APS' market  power in the Valley  Market is even
more significant than its market power in the region at large.  (Roach direct at
p.15) Panda recommends that the Commission should find that APS has market power
today, and that its affiliate will have market power in the future.

     Although  Panda does not believe that  additional  market power studies are
necessary,  it advises that if the Commission decides that market power analysis
is essential,  the SMA test,  as adjusted by Dr. Roach,  is the best approach to
measuring  market power.  Dr. Roach  identified  three  assumptions that tend to
overstate  the  supply  margin,   which,   according  to  him,   results  in  an
understatement  of market power.  He recommends  modifying the SMA as applied by
FERC to adjust  for those  factors.  Dr.  Roach  criticized  APS'  witness,  Dr.

                                       7                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


Hieronymus'  SMA  analysis  for  not  accounting  for the  SMA  test's  inherent
overstatement  of  supply  margin;  for  not  accounting  for  capacity  that is
foreclosed  from  competing by APS;  and for  significantly  overstating  import
capacity into the APS region by including transmission  facilities that APS does
not own or control.

     Panda believes that APS' market power can be mitigated through  competitive
procurement. Panda believes that the market power problem in Arizona is not that
there is an insufficient number of competitors, but that APS is in a position to
foreclose the  opportunity  for those  competitors to compete,  such as with its
proposed PPA which would allow APS to use its  existing  market power to protect
two facilities  built and owned as merchant  plants by its  affiliates,  thereby
harming  ratepayers by forcing them to pay higher prices and bearing more market
risk than necessary.

     Panda  also  believes  that  APS'  position  on market  power is  "ironic".
According to Panda,  when APS discusses whether it has market power, APS says it
does not  because  of a "vast  wholesale  market  and over  11,000  MW of import
capacity",  but when  claiming  it cannot  competitively  bid,  it cites lack of
competitors and existing transmission constraints. (Panda Brief at pp. 6-7)

RELIANT

     Reliant  states that most parties  "recognize  that the transfer of all UDC
generation  assets to an  affiliate  will  result in a  concentration  of market
resources that provide the  opportunity  for the affiliate to exert market power
on the wholesale generation market." (Reliant Brief at p. 4).

     Reliant  proposed a "two-prong"  approach that it believes  alleviates both
the market power and transmission-constraint issues. Reliant proposes a capacity
auction that allows wholesale market  participants to acquire specific  portions
of the  output  of  capacity  transferred  by the  UDC  to an  affiliate,  and a
competitive  solicitation  process  structured  as "slice of  system"  auctions.
Bidders  would  compete  to  provide a  specific  percentage  of APS' daily load
requirement,  using  staggered  delivery  dates and  varying  contract  lengths.
Reliant  believes  that this is a  potential  market-based  solution to concerns
about  short-term  market  power.  It  would  avoid  unnecessary  delay  in  the
implementation  of competition  for Arizona  Standard  Offer load,  resulting in
consumers  receiving the benefits of competition  in a timely  manner.  Further,
Reliant  asserts,  it allows for the divestiture of generation  assets and makes
further market power studies unnecessary.

.. . .

.. . .

.. . .

.. . .

                                       8                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


AECC

     AECC  signed  and  supports  the  APS  and TEP  Settlement  Agreements  and
continues to believe they are in the public interest. However, the AECC does not
want the Commission to ignore critical policy issues such as "the potential that
market power could unfairly impact retail prices after divestiture and after the
termination  of existing  price caps".  (AECC Brief at p. 3) AECC notes that the
"concerns  expressed  by APS and others  about the  near-term  viability  of the
wholesale  market make it difficult for  divestiture  to proceed within the time
frame contemplated by the APS Settlement Agreement.  [footnote omitted] APS, for
example,  has  characterized  the western  wholesale  market as `not functioning
properly' because liquidity has `gone in the tank'" (AECC Brief at p. 5, quoting
Jack Davis).  Further, AECC notes that to "the extent that the Commission is not
enamored  with the proposed PPA, but  otherwise  shares APS' concerns  about the
wholesale market, the Commission will naturally be hesitant to allow divestiture
to move forward on the current schedule without sufficient  protections in place
to protect the public  interest."  (AECC Brief at pp. 5-6). AECC recommends that
the  parties,  including  the  Commission,  should seek a consensus  approach to
market power testing,  monitoring,  and mitigation,  and should proactively seek
adoption of that approach by FERC.

AUIA

     AUIA believes  that the threat of market power has been vastly  overstated,
and that the  solution  to the threat of market  power can  probably be found in
Track B.

RUCO

     RUCO believes that electric deregulation is "in trouble." (RUCO Brief at p.
1) As support, RUCO states that "[e]lectricity  wholesale markets in the western
United States are dysfunctional and remain under federal price-cap controls" and
that  competition  and its benefits have not  materialized  for Arizona's  small
retail customers, who will be charged for the costs of transition. RUCO supports
Staff's   recommendation   that  before  divestiture  is  allowed  to  occur,  a
comprehensive market power study for the Arizona regional wholesale power market
needs to be done.  RUCO  believes  that  the  study  should  be  performed  on a
cooperative basis with input from all parties through a technical advisory team,
using computer-based  modeling of strategic behavior.  The results would be used
to determine the future of electric restructuring in Arizona.

.. . .

.. . .

.. . .

.. . .

                                       9                    DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


             ISSUE # 2 DIVESTITURE OF COMPETITIVE GENERATION ASSETS

STAFF

     On the issue of asset transfer, Staff recommends:

     1.   The  Commission  should  immediately  issue an order  that  stays Rule
          1606.B, Rule 1615.A, and the transfer provisions of Decision No. 61973
          and 62103 until the Commission can conclude that the wholesale  market
          is workably competitive.

     2.   The Commission  should initiate a rulemaking  proceeding to amend Rule
          1615.A.

     3.   The  utilities  should  not  be  prohibited  from  transferring  their
          generation  assets.  However,  such transfers  should not be permitted
          unless the transfer will serve the public interest.

     4.   Asset transfers will promote competition, and thereby serve the public
          interest, as long as the wholesale market is workably competitive.

     5.   In order to transfer its assets,  a utility should file a market power
          study, a market  mitigation  plan, and a proposed code of conduct.  It
          may be  feasible  for the  Commission  to  consider  these  items in a
          consolidated proceeding.

     Staff points out that when the Commission approved the Electric Competition
Rules  and the  Settlement  Agreements,  all the  parties  thought  that  retail
competition was imminent - that the wholesale market would be competitive;  that
a significant  number of retail  competitors  would be entering the market;  and
that customers would leave the incumbent utility and purchase power from the new
competitors.  Instead, Staff argues, the "wholesale market has faltered, the new
competitors  have failed to materialize,  and incumbent  utilities have not lost
customers in any meaningful  number." (Staff Brief at p. 2). Staff believes that
the timing of the transfer is  problematic.  Staff states that "APS has admitted
that  implementation of the terms of the rules and the settlement  agreements as
they currently  stand will put the public at risk." (Staff Brief at p. 5, citing
testimony of APS witness Davis).

     In response to some  witnesses'  recommendations  to rely on FERC to police
the market,  Staff cites the General Accounting Offices' ("GAO") conclusion that
FERC has not yet defined or  implemented  an effective  regulatory and oversight
approach for competitive energy markets,  which means that FERC "lacks assurance
that today's energy markets are producing  interstate  wholesale natural gas and
electricity prices that are just and reasonable." (Mundell Ex. A at pp. 5-6) The
timing  problem  is  also  apparent  in  the  lack  of  a  functioning  Regional
Transmission  Organization  ("RTO").  According to Staff,  it is not possible to
comply with the  competitive  bidding  requirements of 1606(B) by the end of the
year, and even APS seems to agree.

                                       10                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     Because the circumstances  that the rules were designed to address have not
developed,  because asset transfer combined with an ineffective wholesale market
places the public at substantial  risk, and because it "appears that reliance on
FERC to police the wholesale  market may be ill advised",  Staff recommends that
the  Commission  should not allow asset  transfer until it is convinced that the
transfer is in the public  interest.  Staff advises that  "[w]ithout  conditions
designed to address market structure concerns, the transfer is NOT in the public
interest." (Staff Brief at p. 4, emphasis original).

     Staff  believes  that before the  Commission  decides  whether a particular
utility  should be allowed to divest,  the utility  should  indicate  whether it
wants to divest.(5)  If a Company  wants to divest,  it should file market power
studies and a proposed code of conduct, Track B should be concluded,  and in any
event, no reliability  must-run  generation ("RMR") should be divested.  Staff's
states that its  recommendations on divestiture may have implications for future
rate  setting,  because if a utility  chooses to retain  its  assets,  the Staff
believes  that the  Commission  should  apply  cost of service  principles  when
setting rates.

     In response to APS' argument that the Commission is bound by the Settlement
Agreement,  Staff argues that the Commission is not contractually  bound.  Staff
states that if a regulatory agency finds a proposed settlement to be reasonable,
the terms of the  settlement  form the  substance  of a decision  that binds all
parties to the proceeding,  and the approved  agreement assumes the nature of an
agency decision enacted in the public interest,  losing its private  contractual
character.  (Citing CAJUN ELEC.  POWER COOP.,  INC. V. F.E.R.C.,  924 F.2d 1132,
1135 (D.C. Cir. 1991). Staff also argues that it is unlikely that a contract was
formed due to the Commission's amendments to the agreement. Staff further argues
that,  assuming  for  the  sake  of  argument  that  a  contract  exists,  it is
unenforceable  because the  "alleged  contract  was based on the  existence of a
workably competitive wholesale market, and because a workably competitive market
does not exist, the purpose of the alleged contract has been frustrated, thereby
excusing performance." (Staff Brief at p. 19)

APS

     APS believes  that  divestiture  will benefit APS customers in the long run
and will not harm them in the short run. It  acknowledges  that the  benefits of
divesture  are more  long-term  in nature,  while the "risks of the market  loom
today".  (APS  Brief  at p.  12) APS  points  out that  through  its  Settlement
Agreement,  its customers have protection  against the market through June 2004,
and that intermediate to long-term protection for consumers is available through
the proposed PPA.

----------
(5) Staff recommends that utilities should inform the Commission  within 30 days
of the conclusion of Track B.

                                       11                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     APS  argues  that no party has  presented  a  compelling  argument  against
divestiture.  APS cites other  jurisdictions  that have  authorized  divestiture
without  harm to  consumers  and in  furtherance  of industry  restructuring  as
support  for its own  divestiture.  APS argues  that  Staff's  preconditions  to
divestiture  are  so  ambiguous  and  onerous  as  to  make  timely  divestiture
impossible  from both a regulatory  and commercial  standpoint.  APS states that
claims of  horizontal  market power  concerns  were not raised in 1999; no party
suggested that another code of conduct was necessary to address other  affiliate
issues;  and that  competitive  bidding has always been tied to divestiture  and
divestiture must occur first. APS believes that the parties'  arguments on these
issues  are  attempts  to   indefinitely   delay  or   unnecessarily   condition
divestiture.

     APS states that divestiture has already been finally authorized by Decision
No. 61073 and Rule 1615(A), and cannot be delayed or stayed in these proceedings
without breaching the APS Settlement.  According to APS, the Commission  entered
into a binding contract,  and this interpretation has been upheld by the Arizona
Court of  Appeals.  APS states that  Staff's  claimed  change in  circumstances,
including the "failure of retail  competition to develop as apparently Staff had
envisioned back in 1999, the existence of market power during a few hours of the
year in transmission  constrained  areas of APS service  territory,  the alleged
`loss'  of  Commission   jurisdiction   over  electric   generation,   and  some
non-specific  concerns over the efficacy of the wholesale  market"  actually are
not a change in circumstances or "represent  changes  irrelevant to the issue of
divesture." (APS Brief at p. 9). APS believes that the "failure of the wholesale
competitive  market  to  develop  as  quickly  as was  once  envisioned  and the
apparently  inherent  volatility and  unpredictability of the wholesale electric
market is a legitimate concern." (APS Brief at p. 10) However,  APS' solution to
that "legitimate concern" is approval of its PPA, not to delay divestiture.  APS
also argues that another  "dramatic change of circumstances  since 1999" was the
creation of a new and separate generation affiliate.(6)

TEP

     TEP has requested, in its Variance, an "extension of the compliance date in
Rule  1615.A,  which  requires  that  all  competitive   generation  assets  and
competitive  services be separated  from TEP." TEP believes that the date should
be  extended to either  December  31,  2003 or six months  after the  Commission
issues a final order in this proceeding, whichever occurs later. In its Variance

----------
(6) Although APS claims that "APS has been REQUIRED by this Commission to create
a new and separate generation affiliate" (APS Brief at p.9, emphasis added), the
Electric  Competition  Rules  (1615(A))  contemplate  divestiture  to  either an
"unaffiliated  party or to a separate corporate  affiliate or affiliates" and in
Decision No. 61973 at page 10, we state that "[w]e also recognize the Company is
making a business  decision to transfer  the  generation  assets to an affiliate
instead of an  unrelated  third  party",  indicating  that it was APS' choice to
create a "new and separate generation affiliate".

                                       12                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


application,  TEP states that "given the recent history - and current state - of
the western power markets,  TEP believes that neither an immediate transition to
the 50% competitive bid requirement or the generation separation  requirement is
prudent at this time." (Variance Application at p. 4)

PANDA

     Generally,   Panda  supports  the  proposed  divestiture  of  APS  and  TEP
generation  assets  to an  affiliate  on the terms  that  were  agreed to in the
Settlement  Agreements  (i.e. that  divestiture  would be  contemporaneous  with
competitive  procurement).  Panda  believes that any  divestiture  of generation
assets to affiliates  should be conditioned on implementation of the competitive
procurement   framework  as   established   in  Track  B.  According  to  Panda,
"[c]ompetitive procurement will yield substantial benefits to Arizona ratepayers
because  there is an  emerging  oversupply  of  generation  capacity in the near
term." (7) (Panda Brief at p. 3) Panda  believes  that  competitive  procurement
will benefit Arizona ratepayers with or without  divestiture.  Panda argues that
"[e]ven leaving aside replacement of inefficient or environmentally  undesirable
generation owned by APS today, APS needs  significant  additional  generation to
meet its needs in the  future.  APS should  not be  allowed to meet these  needs
without a reasonable market test to determine whether its arrangements for doing
so are in the public  interest.  Specifically,  the new RedHawk and West Phoenix
plants built by APS' merchant generation  affiliate must be subject to challenge
through  competitive  procurement to assure  Arizona  ratepayers are getting the
best deal in terms of price, risk, and reliability.  Neither of these plants has
gone through prudence review and neither is in rate base." (Panda Brief at p. 4)

     Panda believes that the concerns about divestiture  raised by other parties
can be addressed  through a competitive  bidding  framework  and an  appropriate
prudence review, but if the  "above-market,  self-dealing PPA is the only way to
mitigate the market power of APS affiliates,  then the Commission  should reject
divestiture." (Panda Brief at p.8).

RELIANT

     Reliant believes that allowing divestiture without appropriate  competitive
solicitation  procedures in place and underway  will  "severely  jeopardize  the
long-term  viability of competition  among  wholesale  suppliers in Arizona" and
"places at risk the  long-term  viability  of the  existing  and new  generation
projects constructed to serve the region's electrical demand." (Reliant Brief at

----------
(7) According to Panda,  APS' projected summer 2003 load is approximately  6,000
MW and by that time or soon thereafter,  6,500 MW of new competitive supply will
be on-line in the APS  service  territory,  for a total of 12,500 MW of capacity
potentially competing to serve 6,000 MW of load. (Panda Brief at p. 3)

                                       13                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


pp. 7 & 9) Reliant  believes  that by  requesting  a variance  to  1606(B),  APS
effectively  "stagnates the wholesale  market in Arizona."  (Reliant Brief at p.
10)

AECC

     AECC recommends  that the Commission  should "direct the parties to the APS
and TEP settlement  agreements (and other parties of interest) to make a prompt,
good faith effort to address the  following  issues  within the framework of the
settlement agreements:

     (a)  timing of divestiture - the parties should consider the need to modify
          the timing of divestiture,  as necessary,  to comport with the Track B
          findings,  (e.g.,  in the event that  competitive  bidding is delayed,
          then  divestiture  may  be  delayed);  alternatively,  APS  can  bring
          forward,   for  the   consideration  of  the  other  parties  and  the
          Commission,  a power  purchase  agreement  that  provides a short-term
          `bridge'  through  2003,  to the  extent  such a product  is needed to
          supplement  APS'  standard  offer  requirements  in  light  of Track B
          findings;

     (b)  longer-term power purchase agreement - APS can bring forward,  for the
          consideration  of the  other  parties  and  the  Commission,  a  power
          purchase  agreement that provides  long-term  resources  using today's
          rate-based  generation  as part of a  portfolio  that  is  limited  to
          meeting  demand  BEYOND  the  standard  offer  requirements  that  are
          competitively  bid (as  determined  in Track B)."  (AECC  Brief at pp.
          3-4).

AUIA

     AUIA  believes  that the  Commission  can safely  allow APS to transfer its
assets to PWEC and conduct a competitive  solicitation within the limits imposed
by the marketplace,  or in the  alternative,  the Commission can examine the PPA
concept  proposed  by  APS.  AUIA  states  that if none  of  these  options  are
acceptable,  the Commission  should suspend the electric  competition  rules and
continue  cost-of-service  regulation until it has completed a re-examination of
electric competition in Arizona.

AUIA believes that the "Commission has a legal and moral  obligation to abide by
the terms of the 1999  Settlement  Agreement it entered into with APS,  absent a
demonstration  that  extraordinary  circumstances  have intervened  since then."
(AUIA Brief at p. 6) AUIA  believes  that there has been no such showing in this
proceeding.

SEMPRA/SWPG

     Sempra and SWPG argue that because Rule 1606(B) and 1615 are "intrinsically
interwoven",  and  because  of market  power  concerns,  the  Commission  should
"establish as a fundamental  principle that generation  asset transfers will not
be allowed to occur under Rule 1615 until the  competitive  procurement  process

                                       14                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


contemplated  by and  provided  for under Rule  1606(B)  has been  implemented."
(Sempra/SWPG Brief at p. 4). Sempra/SWPG define  "implemented" to include:  "(i)
contracts for the provision of electric power have been awarded by UDCs pursuant
to a Commission - approved competitive  procurement process, (ii) the results of
that  process  have  been  publicly  announced  and (iii)  the  resulting  power
procurement  contracts  have been  reviewed  and  approved  by the  Commission."
(Sempra/SWPG Brief at p. 4)

     Sempra/SWPG  believes  that it is premature to alter the  deadlines for the
asset transfers and competitive  power  procurement  because they believe that a
viable competitive  procurement  process may still be put in place by January 1,
2003;  that APS and TEP could  both  still  complete  asset  transfers  prior to
January 1, 2003; and that market power studies could be completed, evaluated and
used constructively  before the end of the year.  Sempra/SWPG believe that asset
transfer and  implementation  of competitive  procurement could be phased in, to
the extent, and when market power problems do not exist.

HARQUAHALA

     Harquahala  believes that  contracting for competitive  procurement  should
occur  prior to  divestiture  and that it should not  include  existing  network
transmission service rights.

RUCO

     RUCO recommends:

     1.   Until the  Commission  is assured that FERC is  adequately  overseeing
          Arizona's wholesale electric market, the Commission should suspend the
          divestiture requirement.

     2.   Once the Commission is confident that the wholesale market is workable
          and free of market power pricing, divestiture should be accompanied by
          purchase power  agreements  that assure  Standard Offer customers have
          access to electricity at cost-based prices.

     3.   If the Commission decides to allow divestiture without a PPA in place,
          it should  delay  divestiture  for at least a year to conduct  further
          study,  including  strategic behavior  modeling,  to accurately assess
          market conditions.

     4.   The Commission must balance the need for further study with the costs.

                ISSUE # 3 CODE OF CONDUCT/AFFILIATE TRANSACTIONS

STAFF

     On the  issues  of Code  of  Conduct  and  Affiliate  Relationships,  Staff
recommends:

                                       15                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     1.   Any  investor-owned  utility  that  wants to  purchase  power  from an
          affiliate within twelve months of a Commission decision in this docket
          must file a Code of Conduct for Commission approval within ninety days
          of a Commission decision in this docket.

     2.   Any  investor-owned  utility that has already  purchased power from an
          affiliate must file a Code of Conduct for Commission  approval  within
          ninety days of a Commission decision in this docket.

     3.   Any  investor-owned  utility that has not made a filing in response to
          #s 1 & 2 above  but in the  future  plans to  purchase  power  from an
          affiliate must obtain Commission  approval of a Code of Conduct before
          executing any affiliate transactions.

     4.   Prior  to  a  transfer  of  generation  assets  to  an  affiliate,  an
          investor-owned  utility  must file a code of  conduct  for  Commission
          approval  unless  such  Code of  Conduct  has  already  been  filed in
          response to recommendations #s 1, 2, or 3 above.

     5.   The  Commission  should adopt a Code of Conduct to fill the gaps among
          existing Codes of Conduct.

APS

     On the issue of Code of Conduct/Affiliate  Transactions, APS argues that it
already  has  both a  Commission-approved  Code  of  Conduct  and  Policies  and
Procedures to effectuate the Code,  and  FERC-imposed  Standards of Conduct,  in
addition to the affiliated  interest rules,  and that nothing is "broken" and in
need of  "fixing".  However,  APS states that if  divestiture  is  permitted  in
accordance  with the  Settlement  Agreement,  APS would be  willing  to submit a
revised Code of Conduct  covering  PWEC,  PWM&T,  and APS Energy  Services.  APS
believes that divestiture should not be held up pending Commission consideration
and approval of any amended Code of Conduct.

PANDA

     Panda  believes that the "existing  Code of Conduct and Affiliate  Interest
Rules do not adequately address problems of self-dealing, preferential treatment
of affiliates and  cross-subsidization of competitive services." (Panda Brief at
p. 32) Panda agrees with Staff that "before divesting  generation or transacting
with an  affiliate  in any  way,  a UDC  should  be  required  to file  with the
Commission a proposed Code of Conduct that mitigates any potential for conflicts
of interest,  affiliate abuse,  self-dealing or  cross-subsidization,  and which
strictly limits access to commercially  sensitive or confidential  information."
(Id. at 32) Further, Panda believes that notice should be provided to interested
parties  and an  opportunity  to  comment  on such a Code of  Conduct  should be

                                       16                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


provided,  with a complaint process before the Commission if a UDC or any of its
affiliates violates the Code of Conduct.

RELIANT

     Reliant agrees with Staff that further consideration of Codes of Conduct is
appropriate to ensure that ratepayers do not subsidize non-regulated competitive
operations,  but that it should  not cause a material  delay in the  competitive
procurement of Standard Offer load.

SEMPRA/SWPG

     Sempra/SWPG  support Staff's  recommendation on adopting additional Code of
Conduct  requirements,  but suggest  that the  Commission  hold public  hearings
and/or an oral and written  comment  procedure on the Codes of Conduct  filed in
response to Staff's recommendations,  and that such Codes of Conduct be in place
by January 1, 2003.

                         ISSUE #4 JURISDICTIONAL ISSUES

STAFF

     On   the   Jurisdictional/Legal    issues,   Staff   made   the   following
recommendations:

     1.   If an asset transfer  occurs,  the Commission will lose its ratemaking
          jurisdiction  over those assets and will have no jurisdiction over any
          power purchase agreement that occurs after the transfer of assets.

     2.   Once an asset  transfer  occurs,  APS'  acquisition  of power would be
          wholesale transactions under the jurisdiction of the FERC.

     3.   The FERC has jurisdiction over both profit and not-for-profit RTOs.

     4.   The  Commission  is not  contractually  bound  by the  APS  Settlement
          Agreement

APS

     On the  issue of  jurisdiction  of the  Commission,  APS  asserts  that the
Commission will not lose any meaningful  jurisdiction over the setting of retail
rates as a result of generation divestiture. APS states that "[s]tate regulators
have never had jurisdiction over most wholesale  transactions." (APS Brief at p.
28) APS states that just as the  Commission  could not "deny rate  recovery to a
prudently  acquired and operated  resource  that is used and useful in providing
service" to a vertically  integrated  electric utility,  the "Commission  cannot
deny rate  recovery of a prudently  acquired  and  administered  purchase  power
expense  that  is  used  and  useful  in  providing  service  to  the  Company's
customers." (APS Brief at p. 29) APS states that the  Commission's  jurisdiction
is not affected by the formation of or participation in a "for profit" RTO.

.. . .

                                       17                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


TEP

     On  the  jurisdictional  issue,  TEP  states  that  it is  unaware  of  any
jurisdictional impact attributable to the "for-profit" status of WestConnect.

PANDA

     Panda  argues  that  with   divestiture,   the  Commission  will  not  lose
jurisdiction over "the most important aspect of its mandate:  what APS' Standard
Offer  Service  customers  pay for APS  purchases  from its  affiliate and other
merchant  generators  for  the  capacity  necessary  to  supply  Standard  Offer
customers." (Panda Brief at p. 31) Panda recommends that the "Commission can and
should  condition  any  divestiture  . . . on APS'  agreeing  to a  market  test
prudency  standard."  (Id.) Panda  further  believes  that the  Commission  will
maintain substantial  jurisdiction by its control of the competitive procurement
process.  Panda believes that the issue of for-profit or not-for profit RTO form
does not affect the Commission's jurisdiction.

                              MISCELLANEOUS ISSUES

TRANSMISSION

     On the issue of Transmission, Staff recommends:

     1.   The  Commission   should  encourage  an  industry-wide   collaborative
          planning process to resolve  transmission  constraints  (Smith Direct,
          Ex. S-13 at 25)

     2.   Staff   recommends   that  the  Commission   initiate  an  appropriate
          proceeding to consider the adoption of the following standards:

          a.   There should be  sufficient  transmission  import  capability  to
               reliably  serve all loads in a  utility's  service  area  without
               limiting  consumer  access or benefit to more  economical or less
               polluting generation located external to the service area.

          b.   A power plant must have  sufficient  interconnected  transmission
               capacity  to  reliably  deliver  its full  output  without use of
               remedial action schemes for single  contingency  (N-1) outages or
               displacing  a  priori  generation   interconnected  at  the  same
               switchyard or on the same transmission lines.

     3.   The Commission  should order  jurisdictional  utilities to resolve RMR
          generation concerns. Specifically, the utilities should be ordered to:

          a.   perform a study within  thirty days of a  Commission  decision in
               Track A  analyzing  the  merits  of  existing  dependence  on RMR
               generation  instead of  building  transmission  to resolve  local
               transmission import reliability constraints;

          b.   perform a study  analyzing the merits of any future  contemplated
               utilization of RMR to defer transmission projects; and

          c.   file such RMR study reports with the Commission for review within
               thirty days of their completion and prior to implementing any new
               RMR generation strategies.

                                       18                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     4.   Staff  recommends  that the  Commission  should  consider  appropriate
          avenues to establish the following criteria:

          a.   Future  power  plant  applications  for CECs should be denied for
               sufficiency  purposes if they have not  fulfilled  the  statutory
               technical  study  requirements  demonstrating  the  impact of the
               project on the existing Arizona transmission system; and

          b.   Power  plants  that fail to  demonstrate  the ability to reliably
               deliver  to a  market  without  displacing  a  priori  generation
               interconnected  at  the  same  location  or  utilizing  the  same
               interconnected transmission system should not be granted a CEC.

     5.   Both transmission providers and merchant power plants should share the
          burden and obligation to resolve Arizona's transmission constraints.

     In  response  to Staff's  recommendation,  APS states  that the  Commission
should  continue to monitor  transmission  issues and complete the next Biennial
Transmission  Assessment.  APS and  Staff  agree  that  successful  transmission
planning will require collaboration with all affected parties, including parties
not subject to the Commission's regulatory jurisdiction. APS believes that there
are no "must run" or  transmission  market power  issues that should  affect the
timing of divestiture.

PWEC'S GENERATION

     APS added an additional issue: termed the "West Phoenix and Redhawk" issue.
APS states that  although the West  Phoenix  Power Plant  Expansion  and Redhawk
Power Units 1 and 2 are being  constructed  by PWEC and are therefore  "merchant
plants",  they are being built to meet the  reliability  needs of APS'  Standard
Offer customers.

     APS also wants the  Commission  to address  what it calls the  "bifurcation
issue" and states that the  Commission  should allow APS and its  affiliates  to
recover all costs incurred in reliance on the provisions of the APS  Settlement.
Specifically,  APS believes that the  Commission  should:  "indicate that APS is
entitled to recover all reasonable  incurred and increased  costs  occasioned by
the Commission's change in position" (including costs of its affiliates);  allow
"APS to acquire  and  finance  the  Dedicated  Units  presently  owned by PWEC";
reconsider  other aspects of the APS  Settlement  during the Company's next rate
proceeding  or in a  separate  proceeding  held  prior  to the next  rate  case,
including  how to restore the "$234  million  write-off"  and "the  one-third of
divestiture-related  costs the Company was forced to absorb  under  Decision No.
61973." (APS Brief at pp. 42-43.)

     Panda believes that APS introduced  significant testimony going well beyond
the identified  Track A issues,  mainly that the "PWEC merchant  facilities were
constructed 'for the benefit of APS customers.' Tr. At 130". Panda believes that

                                       19                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


whether PWEC's merchant facilities (RedHawk 1 & 2 and West Phoenix 4 & 5) should
be transferred to APS is not before the Commission at this time.

     Panda notes that while APS presented evidence of steps it took to divest in
reliance  on the  Settlement  Agreement,  there is  nothing in the record of any
reasonable,  timely  efforts to comply  with the  requirement  to  competitively
procure power for its Standard Offer customers.  Specifically, Panda states that
there  is "no  evidence  that  APS  ever  issued  an  RFP,  made  a  competitive
solicitation on any significant  scale for any period following entry of the APS
Settlement  Agreement,  circulated its long-term energy or capacity requirements
to any  party,  other  than its  merchant  affiliate,  to allow the market to be
responsive to those needs, or otherwise sought a competitive  alternative to its
affiliate's construction projects. .. .In fact, the testimony in this proceeding
demonstrated  that APS is relying on affiliate  transactions  to supply needs in
2002,  again  without  any  apparent  effort to  solicit  those  needs  from the
competitive market." (Panda Brief at p. 6)

     In a footnote in its brief, Reliant states that PWEC must not be allowed to
transfer RedHawk and West Phoenix to APS if divestiture does not occur, as these
were built as competitive assets.  According to Reliant,  "[a]ny non-competitive
transfer to APS will effectively  eliminate the possibility of creating a robust
competitive  wholesale  market,  and the  benefits to retail  customers . . . ."
(Reliant brief at p. 10)

RETAIL COMPETITION

     TEP  proposed  that if retail  electric  competition  is to proceed at this
time,  the  Commission  should allow only  customers with a load of 3 MW or more
direct access for now.

     AES NE/Strategic discussed only one issue in their brief: TEP's proposal to
deny retail  customer  choice to all of Arizona's  residential  customers and to
commercial and industrial customers with load requirements of less than 3 MW.

     AES NE/Strategic believe that TEP's proposal is a fundamental breach of its
Settlement  Agreement.  According  to  AES  NE/Strategic,  retail  choice  was a
fundamental and significant element of the settlement; TEP seeks to preserve its
own benefits  gained under the  Settlement  while denying a fundamental  benefit
achieved by other parties to the  Settlement;  and TEP has failed to comply with
its obligations to defend the Amended Settlement Agreement and has taken actions
that are inconsistent with its provisions.

     AES  NE/Strategic  notes that TEP did not make any  effort to  discuss  the
issue or consult  with other  parties to the  Settlement  Agreement,  but made a
unilateral  proposal in its testimony in this proceeding.  AES NE/Strategic also
argues that TEP's efforts to declare  competition dead ignores TEP's own role in

                                       20                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


forestalling  competition,  citing  as the  primary  reason  why  direct  access
customers  returned to bundled  service  with TEP, the failure of TEP to pay the
required  competitive  transition  charge to direct access customers when market
prices spiked in the west.

     AES  NE/Strategic  believes  that if the  Commission  were to "accept TEP's
anti-competitive  proposal,  the end result for  retail  competition  in Arizona
would be the same as if the  Commission  acted to  repeal  the  Retail  Electric
Competition  Rules  adopted in  September  1999 - it would be the death knell to
retail competition in Arizona." (AES NE/Strategic Brief at p. 11)

     AECC  criticized  TEP and RUCO for  introducing  into the  record  proposed
changes to Arizona's  retail direct access program,  which are outside the scope
of this Track A proceeding.  AECC strongly objects to the proposed changes,  and
views  TEP's  proposal  as a "bad faith  attempt to advance  its  pre-settlement
agreement objectives." (AECC Brief at p. 2) Accordingly,  AECC did not brief the
issue,  but reserved its right to argue  against the  positions  advanced in the
appropriate forum.

     RUCO's witness testified that TEP's recommendation that only customers with
loads of 3 MW or greater be allowed to  participate  in retail  competition is a
reasonable  option to consider,  if traditional  cost-of-service  bundled retail
rates are maintained for all other customers, and if divestiture does not occur.

                                    ANALYSIS

MARKET POWER

     All the  parties to the  proceeding,  with the  exception  of APS and AUIA,
agree that market power/market abuse issues are real and should be addressed. We
find that APS and TEP have market power today in their Phoenix Valley,  Yuma and
Tucson  load  pockets,  respectively.  Moreover,  we note  that  there is no RTO
currently  in existence in Arizona and believe that it is desirable to establish
a  process  that  builds  upon,  but goes  beyond,  the  Arizona  ISA  "must-run
generation"  protocol to evaluate the long-term  infrastructure needs of service
to load  pockets.  We  disagree  that market  power in the load  pockets is best
addressed  through sole  reliance on the "must-run  generation"  protocol of the
Arizona ISA. We believe that it is  appropriate  to conduct market power studies
that focus not only on regional  market  power,  but on how market  power can be
exercised in Arizona specific areas, and how it can best be mitigated.  Although
Reliant posed an interesting  concept to mitigate  market power through a supply
auction,  we are not convinced that such a process is workable or appropriate in
Arizona at this time.  Accordingly,  we adopt Staff's  recommendations  and will
require  APS and TEP to  produce  market  power  studies  accompanied  by market
mitigation plans before allowing them to divest. Further, we agree with AECC and

                                       21                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


RUCO that the parties should seek a consensus  approach to market power testing,
monitoring, and mitigation.

     Our  findings  about  market  power are intended to be used for purposes of
this  proceeding only as they relate to the issue of asset  divestiture.  We are
not making any finding regarding any FERC determination of market power, and our
findings  about market power are not intended to be used in any FERC  proceeding
or in another forum.

DIVESTITURE

     In  retrospect,  it was a good idea to delay  divestiture  and  competitive
procurement in the APS and TEP Settlement Agreements, given what has happened in
the last two or so years,  including the  experience in  California;  the market
volatility and illiquidity;  and the lack of public confidence in the transition
to electric  deregulation  and ability of  regulators  to prevent  price spikes,
ensure reliable  service,  and prevent  bankruptcies.  Even today,  there is not
agreement amongst economists,  much less regulators, as to why and what happened
in California, happened, and how to prevent a similar or related occurrence.

     It is clear that the  Commission  and all parties  expected  benefits  from
retail  competition,  yet  there is no  active  retail  competition,  so  actual
benefits  are  still  unknown.  It is said  that  consumers  will  benefit  from
wholesale  competition,   but  not  without  the  proper  market  structure  and
regulatory  framework that will support it. It was anticipated  that at the time
that APS and TEP  divested,  ESPs  would be  providing  direct  access to retail
customers.  In actuality,  no retail competition exists; market power is held by
the incumbent  utilities;  no RTO is in effect;  transmission  constraints exist
that potentially  exacerbate  market abuse; the GAO has issued a negative report
on FERC's ability to manage  competitive  markets;  both TEP and APS recognize a
problem - one wants to postpone its  divestiture  while the other is affected by
its parent's and  affiliates'  adverse  financial  considerations;  proposed new
generation may be cancelled if it is not able to find a market; more protections
are needed against self-dealing and inappropriate  affiliate  transactions;  and
investigations are ongoing into market manipulations and improprieties. Contrary
to what APS  argues,  these  changes  relate  to the  question  of  divestiture,
especially  to our  willingness  to transfer our  ratemaking  jurisdiction  over
generation  assets to FERC,  given its recent  history  regulating the wholesale
market and the conclusions contained in the recent GAO report.

     We find that due to circumstances outside our control or the control of any
party, and in order to protect the public interest,  we must take further action
to regulate the  transition to  competition.  We want to take action in a manner
that is fair to all parties and that protects ratepayers. Neither the Commission

                                       22                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


nor any party to this  proceeding  anticipated  the  current  state of  electric
competition nor caused the problems that have been  identified.  Therefore,  the
wise course of action is to try to minimize  the effects and figure out a way to
move forward that will  ultimately  result in a market  structure  that performs
efficiently  and  rationally,  and that will  result in the  benefits  that were
promoted in the move to competition. As a constitutionally created state agency,
our  overriding  concern is the public  interest.  This  means  maintaining  the
ability,  through our jurisdiction,  to insure that Arizona  ratepayers  receive
reliable, safe, economic, and efficient electric power.

     Therefore,  we find that the public interest  requires that the divestiture
requirement found in A.A.C. R14-2-1615(A) and our extensions of that requirement
until January 1, 2003, found in Decision Nos. 61973 and 62103,  must be modified
in the following manner: TEP is granted a waiver of A.A.C. R14-2-1615(A); APS is
granted a waiver of A.A.C. R14-2-1615(A); and both companies are hereby directed
to cancel any plans to divest interests in any generating assets.  Should either
company wish to pursue the divestiture  outlined in R14-2-1615(A) in the future,
they should file applications to that effect for Commission consideration.  This
determination is consistent with our planned transition to competition and as we
said in Decision  No.  61973,  ". . . the  Commission  must be able to make rule
changes/other  future  modifications that become necessary over time." (Decision
No.  61973  at p. 9) As we also  said in  Decision  No.  61973,  it is "not  the
Commission's  intent to undermine the benefits that parties have bargained for."
(Id.)  Recognizing  this,  it is incumbent  upon all parties to work together in
such a manner that will allow  competition and its expected  benefits to develop
in whatever  timeframe is needed to make it successful,  while ensuring that the
citizens  of Arizona  have safe,  reliable  and fairly  priced  electric  power.
Accordingly,  we will  modify  Decision  Nos.  61973 and 62103 to stay the asset
transfer provisions as outlined above.

     Further,  we will modify  R14-2-1606(B) and Decision Nos. 61973 and 62103's
requirement that 100 percent of power purchased for Standard Offer Service shall
be acquired  from the  competitive  market,  with at least 50 percent  through a
competitive  bid process;  but effective upon  implementation  of the outcome of
Track B, we will require APS and TEP to acquire,  at a minimum(8),  any required
power  that  cannot  be  produced  from its own  existing  assets,  through  the
competitive  procurement  process as developed in the Track B proceeding.(9) The
amount of power, the timing,  and the form of procurement shall be determined in
the Track B proceeding.  We believe that in this way we can encourage a phase-in
to  competition,  encourage the  development  of a robust  wholesale  market for

----------
(8) APS and TEP may  decide  to  retire  or  displace  inefficient,  uneconomic,
environmentally undesirable plants.
(9) The Commission  will closely  monitor APS' and TEP's power  procurement  for
potential  affiliate concerns until the Track B competitive  procurement process
is implemented.

                                       23                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


generation,  and  obtain  some of the  benefits  of the new  Arizona  generation
resources, while at the same time protecting ratepayers.

     The waivers and actions  ordered herein should allow the market power issue
and  any   necessary   future   market  power   studies  to  be  performed   and
recommendations  made; allow FERC to gain experience and expertise in regulating
competitive wholesale markets; increase the supply of new generation;  allow for
necessary revisions to the Electric  Competition Rules; allow the development of
an effective RTO or other such entity;  allow for some transmission  constraints
to be resolved;  allow the Commission,  APS, TEP, and the parties to develop and
implement  a  phased-in   competitive   procurement   process;   and  allow  all
participants  to analyze and learn from the events that have occurred during the
past two years. We agree with TEP that the overriding  concern of the Commission
must continue to be "ensuring  that the citizens of Arizona have safe,  reliable
and fairly priced electric power".

     APS' request for a change to the  competitive  procurement  requirement  of
1606(B)  is no  different  than a  request  for a change to the  requirement  of
divestiture  in 1615(A).(10) Although APS tries to argue that the Commission can
modify one provision  (1606(B)) but not the other provision  (1615(A)),  the two
provisions  have  always  been  paired  together.  Even APS  witness  Jack Davis
testified to their  linkage.  When asked  whether  divestiture  and  competitive
bidding  under Rule 1606(B) are linked,  he responds:  "Absolutely,  both in the
historical context of the Electric  Competition Rules and in the practical sense
.. . . Even during the approval process of the 1999 APS Settlement Agreement, the
variance  granted to Rule  1606(B) was referred to as a  'corresponding  delay,'
that is,  'corresponding'  to the delay in  implementation of Rule 1615." (Davis
Direct at pp. 9-10)

     Both were  treated  the same in  Decision  No.  61973 -  granted  "two-year
extensions",  therefore, if granting a "variance" from 1606(B) would not violate
the Settlement Agreement,  then granting a "stay" or "variance" of 1615(A) would
similarly  not violate the  Settlement  Agreement.  To the extent that any party
believes  that such a  variance  to  1615(A) is a  violation  of the  Settlement
Agreement,  the Commission  once again(11) urges the parties to meet and work to
resolve the issue.  Even if we were to believe that  granting a stay or variance

----------
(10) Although upon redirect  examination,  Mr. Davis  testified that neither the
decision  approving the settlement nor the addendum filed on December 1, 1999 in
accordance with the  Commission's  order  mentioned  1606(B),  the  Variance/PPA
application  at page 5  states  "Decision  No.  61973  provided  : '[A]  similar
two-year   extension   shall  be   authorized   for   compliance   with   A.A.C.
R14-2-1606(B).' ID. at 9.", which quote is also found in the addendum at page 3,
in paragraph 5, as set forth in 4.1(1).
(11) See February 8, 2002 Procedural Order at page 8, lines 22-23.

                                       24                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


of the divestiture requirement would necessitate  modification of the Settlement
Agreement, the public interest requires such action.

CODE OF CONDUCT/AFFILIATED INTEREST

     We agree with Staff that the Codes of Conduct we have already approved need
additional  provisions  and  should  cover an  investor-owned  electric  utility
regulated  by the  Commission  and  all  affiliates  in  energy-related  fields,
including  affiliates  who sell  power.  The  Commission  has an interest in and
jurisdiction  over  affiliate  wholesale  purchases used to serve Arizona retail
customers. At a minimum, the Code of Conduct should address the items identified
by  Staff,  including:   arm's  length  transactions;   access  to  confidential
information;  cross-subsidization;  preferential treatment to affiliates;  joint
employment and employee transfer issues; sharing of office space, equipment, and
services;   proprietary  customer  information;   financing   arrangements  with
affiliates; and conflicts of interest.  Accordingly, we will require APS and TEP
to submit  modifications  as  suggested  by Staff to their  Codes of  Conduct as
adopted in Decision No. 62416 (April 3, 2000) and Decision No. 62767  (August 2,
2000).  Such proposed  revisions shall be filed with the Commission and provided
to any  requesting  party,  with a hearing to be held as provided in R14-2-1616.
Regarding  Panda's  request for a complaint  procedure,  we note that 1616(B)(9)
currently provides for a complaint process.

JURISDICTIONAL ISSUES

     The parties  are in  agreement  that once an asset  transfer  occurs,  APS'
acquisition of power would be wholesale  transactions  under the jurisdiction of
the FERC and that FERC has  jurisdiction  over both  profit  and  not-for-profit
RTOs. The parties agree that the Commission's  jurisdiction  over public service
corporations  is  unaffected  whether an RTO approved by FERC is  for-profit  or
not-for-profit.

MISCELLANEOUS ISSUES

     We  agree  with  Staff's  recommendation  to form an  Electric  Competition
Advisory Group. This will facilitate communication and information sharing among
Staff,  stakeholders,  and market  participants.  Additionally,  we believe that
Staff should prepare and file quarterly  reports detailing the activities of the
Advisory Group.

     We are in general agreement with the Staff  recommendations on transmission
issues,   and  we  encourage  an  industry-wide   planning  process  to  resolve
transmission  constraints.  We  believe  that both  transmission  providers  and
merchant  power  plants  should  share the  burden  and  obligation  to  resolve
Arizona's transmission  constraints.  Further, we will order APS and TEP to work
with Staff to develop a 2002 study process to resolve RMR  generation  concerns,
such  study  plan  results  to be  included  in the 2004  Biennial  Transmission
Assessment.  This would  include  studying and  analyzing the merits of existing

                                       25                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


dependence  on RMR  generation  instead  of  building  transmission  to  resolve
transmission  import  reliability  constraints  and  the  merits  of any  future
contemplated  utilization of RMR to defer transmission projects.  Until the 2004
Biennial Transmission Assessment is issued with RMR study plan results resolved,
APS and TEP shall file annual RMR study  reports with the  Commission in concert
with their January 31 annual ten year plan for review prior to implementing  any
new RMR generation strategies.

     We recognize  that APS has  asserted  that the  generation  units owned and
built by its affiliate,  PWEC,  should be acquired by APS. This issue is not the
subject of this Track A proceeding,  and there is not sufficient evidence on the
record to make a finding thereon, nor have parties had an opportunity to present
evidence on the issue.  If APS wishes to pursue  this issue,  it should file the
appropriate  application(s) by September 15, 2002. The results of the proceeding
on such  application  shall not affect  the  amount,  timing,  and manner of the
competitive   procurement  process.  This  proceeding  should  not  address  the
ratemaking treatment of these assets. In authorizing this proceeding, we are not
predetermining  the  relative  merits  of the  issues to be  addressed.  Once an
Application  is filed,  the Hearing  Division  shall promptly issue a Procedural
Order scheduling a procedural conference to discuss the scope of the proceeding.

     Although TEP made a recommendation  concerning changing the availability of
Retail Competition, this was not an issue the Commissioners agreed to be decided
in  Track  A,  and  there  is  insufficient  evidence  in the  record  to make a
determination on this issue.  Accordingly,  we will not modify the direct access
provisions of the Retail Electric Competition Rules at this time.

     Staff  recommends that the following Rules and/or  Decisions may need to be
stayed/amended:    A.A.C.   R14-2-1606(B);    A.A.C.    R14-2-1611(A);    A.A.C.
R14-2-1615(A);  Decision No. 61973 (APS Settlement); and Decision No. 62103 (TEP
Settlement).

     APS essentially argues that it does not recommend any changes,  but that if
divestiture is not allowed, it recommends a comprehensive review of all Electric
Competition Rules to determine if other rules are also implicated, and also with
other Commission decisions,  such as Decision No. 62416 which approved APS' Code
of Conduct but also prohibited APS from providing competitive generation.

     As contained in the  discussions  above, we have granted a waiver of A.A.C.
R14-2-1615(A) and found that A.A.C.  R14-2-1606(B)  and A.A.C.  R14-2-1611(A) as
applied to TEP and APS' captive  customers,  should be stayed,  and Decision No.
61973 (APS Settlement);  Decision No. 62103 (TEP Settlement); Decision No. 62416
(APS Code of Conduct) and  Decision  No.  62767 (TEP Code of Conduct)  should be

                                       26                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


modified as discussed herein.  Further, we agree with APS that there should be a
comprehensive  review of all  Electric  Competition  Rules to determine if other
rules  or  Commission   decisions  are  also  implicated  as  a  result  of  our
determinations in Track A, and we also believe that such a review and rulemaking
may be  appropriate at the  conclusion of Track B.  Accordingly,  we will direct
Staff to open a rulemaking  docket to address any required changes to rules, and
will keep  this  docket  open for  parties  to file  comments  upon  what  other
decisions/issues may need to be revisited.

                     *   *   *   *   *   *   *   *   *   *

     Having  considered  the entire record herein and being fully advised in the
premises, the Commission finds, concludes, and orders that:

                                FINDINGS OF FACT

     1. On October 18, 2001,  Arizona Public Service Company filed a Request for
a Partial Variance to A.A.C.  R14-2-1606(B) and for Approval of a Purchase Power
Agreement.

     1. By Procedural Order issued January 22, 2002, the Commission  opened this
generic  docket on electric  restructuring  (Docket No.  E-00000A-02-0051).  The
Commissioners,  through a series of letters,  requested that the parties respond
to questions about electric competition.

     2. On January 28, 2002,  Tucson  Electric Power Company filed a Request for
Variance (Docket No. E-01933A-02-0069).

     3. Intervention was granted to numerous parties.

     4. On March 19, 2002,  Panda Gila River,  L.P. filed a Request for Order to
Show Cause.

     5. On March 22, 2002,  Staff filed its Staff Report in the generic  docket,
summarizing  the parties'  answers to the  Commissioners'  questions  and making
recommendations about electric restructuring.

     6. On April 22,  2002,  APS filed a Motion for  Determination  of Threshold
Issue, which indicated that APS intended to submit its "30-day letter" regarding
the  asset  transfer  on  approximately  August  1,  2002,  irrespective  of the
Commission's  resolution of the  Variance/PPA  request or the proceedings in the
generic electric docket.

     7. On April 25, 2002, the  Commission  held a Special Open Meeting at which
the Commission stayed the APS Variance/PPA  hearing,  denied Panda's Request for
an OSC, and directed that certain issues be addressed in the Generic Docket.

     8. By  Procedural  Order  issued on May 2, 2002,  a hearing  was set on the
issues  identified  by the  Commission,  including:  the  transfer of assets and
associated market power issues; Code of Conduct;  Affiliated Interest Rules; and
jurisdictional  issues raised by Chairman Mundell,  collectively  referred to as
"Track A" issues. Track B, Competitive Procurement, was also established.

                                       27                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     9. The May 2, 2002  Procedural  Order also put the  parties and the general
public on notice that the Commission may initiate rulemaking(s), or, pursuant to
A.R.S.  ss.  40-252,  after  hearing,  enter such  orders as may be  appropriate
relating to electric  restructuring,  including  variances from Commission rules
and/or Decisions.

     10.   Notice  of  the  hearing  was  published  in  newspapers  of  general
circulation  in the APS and TEP service areas and  statewide  between May 26 and
June 6, 2002.

     11. The hearing was held as scheduled. No members of the public appeared to
make public  comment.  Witnesses  testified on behalf of APS, TEP,  AUIA,  AECC,
RUCO, Panda, Harquahala, Sempra/SWPG, Reliant, AES NE/Strategic, and Staff.

     12. By Procedural Order issued on July 10, 2002, TEP's application to amend
its market generation credit was removed from this consolidated proceeding.

     13. On July 10, 2002, the parties filed briefs.

     14. The  Commission  has an interest  in and  jurisdiction  over  affiliate
wholesale purchases used to serve Arizona retail customers.

     15. Market power could unfairly impact retail prices after  divestiture and
after the termination of existing price caps.

     16. The wholesale  market  applicable to Arizona is poorly  structured  and
susceptible to possible malfunction and manipulation.

     17. APS has market power in its Phoenix Valley and Yuma load pockets.

     18. TEP has market power in its Tucson load pocket.

     19. APS and TEP have market power today in their Phoenix  Valley,  Yuma and
Tucson load pockets,  respectively.  Full divestiture of their generating assets
would limit the  jurisdictional  ability of this  Commission to ensure that such
market power does not and will not exist in the future.  Thus,  we find that the
provisions of A.A.C. R14-2-1615(A) requiring full divestiture are, at this time,
not in the public interest.

     20. APS and TEP's market power cannot be mitigated  solely through reliance
on competitive procurement at this time.

     21.  Our  findings  about  market  power  are  intended  to be used for the
purposes  of  this  proceeding  only  as  they  relate  to the  issue  of  asset
divestiture.  We are not making any finding regarding any FERC  determination of
market power, and our findings about market power are not intended to be used in
any FERC proceeding or in another forum.

                                       28                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     22. Asset transfers  should not be permitted unless the transfer will serve
the public interest.

     23. The waiver of the asset transfer  requirements of A.A.C.  R14-2-1615(A)
serves the public  interest and  recognizes  the current  state of the wholesale
market in Arizona.

     24.  Absent  conditions  in place to  address  market  structure  concerns,
generation  asset transfers as contemplated  in prior  Commission  Decisions and
A.A.C. R14-2-1616(A) are not in the public interest.

     25. The wholesale market is not currently workably competitive;  therefore,
reliance  on  that  market  without  recognizing  its  current  uncertainty  and
limitations will not result in just and reasonable rates for captive customers.

     26. The FERC has not yet defined or implemented an effective regulatory and
oversight approach for competitive energy markets,  so assurance is lacking that
wholesale electricity prices are just and reasonable.

     27. In order to  transfer  assets,  a utility  should  file a market  power
study, a market mitigation plan, and revisions to its Code of Conduct.

     28. At the time that the Commission approved the Electric Competition Rules
and the Settlement  Agreements,  the parties thought that retail competition was
imminent and that the wholesale market would be competitive;  that a significant
number of retail  competitors  would be entering the market;  and that customers
would leave the incumbent utility and purchase power from the new competitors.

     29. Contrary to the parties'  expectations and  assumptions,  the wholesale
market  has  faltered,  the new  competitors  have  failed to  materialize,  and
incumbent utilities have not lost customers in any meaningful number.

     30. The  competitive  conditions  that  formed the basis of the  Settlement
Agreement  and the adoption of the Retail  Electric  Competition  Rules have not
occurred as expected.

     31.  Competition and its benefits have not materialized for Arizona's small
retail customers.

     32. In its  Variance/PPA  application,  APS concluded that adherence to the
competitive  bidding  requirements  of the Electric  Competition  Rules will not
produce the intended  result of reliable  retail  electric  service for Standard
Offer customers at reasonable rates.

     33. The Codes of Conduct  that we have  already  approved  need  additional
provisions and should cover an investor-owned  electric utility regulated by the
Commission and all affiliates in energy-related fields, including affiliates who
sell power at wholesale.

                                       29                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     34. APS and TEP shall submit modifications as recommended by Staff to their
Codes of Conduct as adopted in Decision  No.  62416 (April 3, 2000) and Decision
No. 62767  (August 2, 2000).  Such  proposed  revisions  shall be filed with the
Commission  and provided to any requesting  party,  with a hearing to be held as
provided in A.A.C. R14-2-1616.

     35. A.A.C. R14-2-1615(A) should be waived and Decision Nos. 61973 and 62103
should be modified as directed herein.

     36. A.A.C. R14-2-1606(B) should be stayed and Decision Nos. 61973 and 62103
should be modified to stay the  requirement  that 100 percent of power purchased
for Standard Offer Service shall be acquired from the competitive  market,  with
at least 50 percent  through a  competitive  bid  process;  but  effective  upon
implementation  of the  outcome  of  Track  B,  we will  require  APS and TEP to
acquire,  at a minimum,  any required power that cannot be produced from its own
existing assets, through the competitive procurement process as developed in the
Track B proceeding. The amount of power, the timing, and the form of procurement
shall be determined in the Track B proceeding.

     37. We believe  that  requiring  some  power to be  purchased  through  the
competitive  procurement  process developed in Track B will encourage a phase-in
to  competition,  encourage the  development  of a robust  wholesale  market for
generation,  and  obtain  some of the  benefits  of the new  Arizona  generation
resources,  while at the same time protecting ratepayers.  We direct the parties
to continue their efforts in Track B of this proceeding to develop a competitive
solicitation  process  that can begin by March 1, 2003.  For the purposes of the
competitive procurement process, the pwec generating assets that APS may seek to
acquire from pwec shall not be counted as aps assets in determining  the amount,
timing, and manner of the competitive procurement.

     38. Staff's  recommendation to form an Electric  Competition Advisory Group
is adopted, and Staff should prepare and file quarterly reports during the first
two years  following  the  effective  date of this  decision,(12)  detailing the
activities  of the Advisory  Group,  with the first such report filed in January
2003 and detailing activities conducted during the third quarter of this year.

     39. Both transmission  providers and merchant power plants should share the
burden and obligation to resolve Arizona's transmission constraints.

     40. APS and TEP should  work with Staff to develop a 2002 study  process to
resolve RMR generation  concerns,  such study plan results to be included in the
2004 Biennial Transmission Assessment.  This includes studying and analyzing the
merits of existing dependence on RMR generation instead of building transmission

----------
(12) After two years, the reports should be filed on a semi-annual basis.

                                       30                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


to resolve  transmission  import  reliability  constraints and the merits of any
future contemplated utilization of RMR to defer transmission projects.

     41.  Until the 2004  Biennial  Transmission  Assessment  is issued with RMR
study plan  results  resolved,  APS and TEP shall file annual RMR study  reports
with the  Commission  in concert with their  January 31 annual ten year plan for
review prior to implementing any new RMR generation strategies.

     42.  Nothing in the Retail  Electric  Competition  Rules  abrogates APS and
TEP's  responsibility to provide reliable and reasonably priced service to their
customers.

     43. The issue of APS acquiring PWEC's  generation assets is not the subject
of this Track A proceeding,  and there is not sufficient  evidence on the record
to make a finding,  nor have parties had an opportunity  to present  evidence on
the issue.  If APS wishes to pursue this issue,  it should file the  appropriate
application(s)  by September  15, 2002.  The results of the  proceeding  on such
application shall not affect the amount,  timing,  and manner of the competitive
procurement process. This proceeding should not address the ratemaking treatment
of these assets. In authorizing this proceeding,  we are not  predetermining the
relative merits of the issues to be addressed. Once an Application is filed, the
Hearing Division shall promptly issue a Procedural Order scheduling a procedural
conference to discuss the scope of the proceeding.

     44. The continued  availability  of retail direct access is not an issue in
this  proceeding  and there is  insufficient  evidence  in the  record to make a
determination on this issue.

     45.  The  parties  agree that the  Commission's  jurisdiction  over  public
service corporations is unaffected whether an RTO approved by FERC is for-profit
or not-for profit.

     46. It is incumbent upon all parties to work together in such a manner that
will  allow  competition  and its  expected  benefits  to  develop  in  whatever
timeframe is needed to make it  successful,  while ensuring that the citizens of
Arizona have safe, reliable and fairly priced electric power.

                               CONCLUSIONS OF LAW

     1. The Commission has jurisdiction over these proceedings.

     2. Notice of these proceedings was given as required by law.

     3.  Pursuant  to  Article  15,  ss.  3 of  the  Arizona  Constitution,  the
Commission has full power to make and enforce reasonable rules, regulations, and
orders for convenience,  comfort,  and safety and the preservation of the health
of the employees and patrons of public service corporations.

     4. Pursuant to A.R.S. ss. 40-361,  every public service  corporation  shall
furnish and maintain such service,  equipment and facilities as will promote the

                                       31                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


safety,  health,  comfort and  convenience  of its  patrons,  employees  and the
public, and as will be in all respects adequate, efficient, and reasonable.

     5. Pursuant to  A.R.S.ss.ss.40-321  and 40-331,  the  Commission  has broad
authority to regulate the service and facilities of public service  corporations
in order to protect the public.

     6. The evidence  presented in this  proceeding  demonstrates  that, at this
time, pursuant to Article 15, ss.3 of the Arizona Constitution and A.R.S. ss.ss.
40-361,  -321, and -331, the public interest requires the suspension of the time
deadline requirements of A.A.C. R14-2-1606(B), as amended by Decision Nos. 61973
and 62103, pending a Decision in these dockets on the Track B issues.

     7. The evidence  presented in this  proceeding  demonstrates  that, at this
time,   pursuant   to  Article   15,ss.3  of  the   Arizona   Constitution   and
A.R.S.ss.ss.40-361,  -321, and -331, the public interest  requires the waiver of
A.A.C. R14-2-1615(A),  as amended by Decision Nos. 61973 and 62103, and further,
to prohibit the transfer of generation assets.

     8. The evidence  presented in this  proceeding  demonstrates  that, at this
time,   pursuant   to  Article   15,ss.3  of  the   Arizona   Constitution   and
A.R.S.ss.ss.40-361  the  public  interest  requires  the  suspension  of  A.A.C.
R14-2-1611(A)'s applicability to APS and TEP's captive customers.

     9. The Codes of Conduct as adopted in Decision  No.  62416  (April 3, 2000)
and Decision No. 62767  (August 2, 2000) must be revised in order to protect the
public interest.

     10. A rulemaking proceeding to review the Retail Electric Competition Rules
in light of our decisions  herein and to address issues resolved in Track B, and
to amend A.A.C. R14-2-1615(A),  A.A.C.  R14-2-1606(B),  and A.A.C. R14-2-1611(A)
should be initiated immediately.

     11. The  Commission's  jurisdiction  over public  service  corporations  is
unaffected  by  whether  such  public  service  corporations  participate  in  a
for-profit or not-for profit RTO.

     12. Our findings about market power are intended to be used for purposes of
this  proceeding only as they relate to the issue of asset  divestiture.  We are
not making any finding regarding any FERC determination of market power, and our
findings  about market power are not intended to be used in any FERC  proceeding
or in another forum.

                                      ORDER

     IT IS THEREFORE  ORDERED  that Tucson  Electric  Power  Company and Arizona
Public Service  Company are granted  waivers of A.A.C.  R14-2-1615(A),  Decision
Nos.  61973 and 62103 are modified as discussed  herein,  and both companies are
hereby ordered to cancel any plans to divest interests in any generating assets.

                                       32                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


     IT IS FURTHER ORDERED that A.A.C. R14-2-1606(B) is stayed and Decision Nos.
61973 and 62103 are modified to stay the  requirement  that 100 percent of power
purchased for Standard  Offer  Service  shall be acquired  from the  competitive
market, with at least 50 percent through a competitive bid process.

     IT IS FURTHER ORDERED that A.A.C. R14-2-1611(A)'s  applicability to APS and
TEP's captive customers is stayed.

     IT IS FURTHER ORDERED that upon  implementation  of the outcome of Track B,
APS shall acquire, at a minimum, any required power that cannot be produced from
its  own  existing  assets,  through  the  competitive  procurement  process  as
developed in the Track B proceeding.  The minimum  amount of power,  the timing,
and the form of procurement shall be determined in the Track B proceeding.

     IT IS FURTHER ORDERED that upon  implementation  of the outcome of Track B,
TEP shall acquire, at a minimum, any required power that cannot be produced from
its  own  existing  assets,  through  the  competitive  procurement  process  as
developed in the Track B proceeding.  The minimum  amount of power,  the timing,
and the form of procurement shall determined in the Track B proceeding.

     IT IS FURTHER  ORDERED  that the  parties are  directed  to continue  their
efforts  in Track B of this  proceeding  to develop a  competitive  solicitation
process  that can begin by March 1, 2003.  For the  purposes of the  competitive
solicitation  process,  the PWEC generating  assets that APS may seek to acquire
from PWEC, shall not be counted as APS assets in determining the amount,  timing
and manner of the competitive solicitation.

     IT IS FURTHER  ORDERED  that Staff  shall open a  rulemaking  to review the
Retail  Electric  Competition  Rules  in light of our  decisions  herein  and to
address issues  resolved in Track B, and to amend A.A.C.  R14-2-1615(A),  A.A.C.
R14-2-1606(B), and A.A.C. R14-2-1611(A).

     IT IS FURTHER  ORDERED  that APS and TEP shall work with Staff to develop a
plan as discussed herein to resolve reliability  must-run  generation  concerns.
Staff shall  include  results of such a plan in the 2004  Biennial  Transmission
Assessment.

     IT IS  FURTHER  ORDERED  that APS and TEP  shall  file  annual  reliability
must-run  generation  study  reports with the  Commission  in concert with their
January  31 ten  year  plan,  for  review  prior  to  implementing  any  new RMR
generation strategies until the 2004 Biennial Transmission Assessment is issued.

     IT IS FURTHER  ORDERED  that if APS wishes to pursue the issue of acquiring
PWEC's  generation  assets,  it shall  file the  appropriate  application(s)  by

                                       33                   DECISION NO. _______
<PAGE>
                                              DOCKET NO. E-00000A-02-0051 ET AL.


September 15, 2002. The results of the proceeding on such application  shall not
affect the amount,  timing, and manner of the competitive  procurement  process.
This proceeding should not address the ratemaking  treatment of these assets. In
authorizing this proceeding,  we are not  predetermining  the relative merits of
the issues to be addressed.  Once an Application is filed,  the Hearing Division
shall promptly issue a Procedural  Order  scheduling a procedural  conference to
discuss the scope of the proceeding.

     IT IS  FURTHER  ORDERED  that APS and TEP  shall  submit  modifications  as
recommended  by Staff to their Codes of Conduct as adopted in Decision No. 62416
(April 3, 2000) and Decision No. 62767 (August 2, 2000). Such proposed revisions
shall be filed with the Commission and provided to any requesting party,  within
60 days of the effective date of this Decision.

     IT IS FURTHER ORDERED that an Electric Competition Advisory Group is hereby
formed in order to facilitate communication and information sharing among Staff,
stakeholders, and market participants.

     IT IS FURTHER  ORDERED that Staff shall prepare and file reports  detailing
the activities of the Advisory Group, as directed herein.

     IT IS  FURTHER  ORDERED  that  APS and TEP  shall  comply  with  all of the
findings and orders discussed herein.

     IT  IS  FURTHER   ORDERED  that  this  Decision   shall  become   effective
immediately.

                 BY ORDER OF THE ARIZONA CORPORATION COMMISSION.


--------------------------------------------------------------------------------
CHAIRMAN                         COMMISSIONER                       COMMISSIONER


                                        IN WITNESS WHEREOF,  I, BRIAN C. McNEIL,
                                        Executive   Secretary   of  the  Arizona
                                        Corporation  Commission,  have  hereunto
                                        set my hand and caused the official seal
                                        of the  Commission  to be affixed at the
                                        Capitol,  in the City of  Phoenix,  this
                                        day of _________, 2002.



                                        --------------------------
                                        BRIAN C. McNEIL
                                        EXECUTIVE SECRETARY



DISSENT ____________
LAF

                                       34                   DECISION NO. _______
<PAGE>
SERVICE LIST FOR:                            GENERIC PROCEEDINGS, ARIZONA PUBLIC
                                             SERVICE COMPANY and TUCSON ELECTRIC
                                             POWER COMPANY

DOCKET NOS.:                                 E-00000A-02-0051, E-01345A-01-0822,
                                             E-00000A-01-0630, E-01933A-02-0069

<TABLE>
<S>                                                    <C>
Lindy Funkhouser                                       COLUMBUS ELECTRIC COOPERATIVE, INC.
Scott S. Wakefield                                     P.O. Box 631
RUCO                                                   Deming, New Mexico 88031
1110 W. Washington, Suite 220
Phoenix, Arizona 85007                                 CONTINENTAL DIVIDE ELECTRIC COOPERATIVE
                                                       P.O. Box 1087
Michael A. Curtis                                      Grants, New Mexico 87020
William P. Sullivan
Paul R. Michaud                                        DIXIE ESCALANTE RURAL ELECTRIC ASSOCIATION
MARTINEZ & CURTIS, P.C.                                CR Box 95
2712 North 7th Street                                  Beryl, Utah 84714
Phoenix, Arizona 85006
Attorneys for Arizona Municipal Power                  GARKANE POWER ASSOCIATION, INC.
Users' Association, Mohave Electric                    P.O. Box 790
Cooperative, Inc., Navopache Electric                  Richfield, Utah 84701
Cooperative, Inc., Reliant Resources,
Inc. & Primesouth, Inc.                                ARIZONA DEPT OF COMMERCE
                                                       ENERGY OFFICE
Walter W. Meek, President                              3800 North Central Avenue, 12th Floor
ARIZONA UTILITY INVESTORS ASSOCIATION                  Phoenix, Arizona 85012
2100 N. Central Avenue, Suite 210
Phoenix, Arizona 85004                                 ARIZONA COMMUNITY ACTION ASSOC.
                                                       2627 N. 3rd Street, Suite 2
Rick Gilliam                                           Phoenix, Arizona 85004
Eric C. Guidry
LAND AND WATER FUND OF THE ROCKIES                     TUCSON ELECTRIC POWER CO.
ENERGY PROJECT                                         Legal Dept - DB203
2260 Baseline Road, Suite 200                          220 W 6th Street
Boulder, Colorado 80302                                P.O. Box 711
                                                       Tucson, Arizona 85702-0711
Terry Frothun
ARIZONA STATE AFL-CIO                                  A.B. Baardson
5818 N. 7th Street, Suite 200                          NORDIC POWER
Phoenix, Arizona 85014-5811                            6464 N. Desert Breeze Ct.
                                                       Tucson, Arizona 85750-0846
Norman J. Furuta
DEPARTMENT OF THE NAVY                                 Jessica Youle
900 Commodore Drive, Building 107                      PAB300
San Bruno, California 94066-5006                       SALT RIVER PROJECT
                                                       P.O. Box 52025
Barbara S. Bush                                        Phoenix, Arizona 85072-2025
COALITION FOR RESPONSIBLE ENERGY EDUCATION
315 West Riviera Drive                                 Joe Eichelberger
Tempe, Arizona 85252                                   MAGMA COPPER COMPANY
                                                       P.O. Box 37
Sam Defraw (Attn. Code 00I)                            Superior, Arizona 85273
Rate Intervention Division
NAVAL FACILITIES ENGINEERING COMMAND                   Craig Marks
Building 212, 4th Floor                                CITIZENS UTILITIES COMPANY
901 M Street, SE                                       2901 N. Central Avenue, Suite 1660
Washington, DC  20374-5018                             Phoenix, Arizona 85012-2736

Rick Lavis                                             Barry Huddleston
ARIZONA COTTON GROWERS ASSOCIATION                     DESTEC ENERGY
4139 East Broadway Road                                P.O. Box 4411
Phoenix, Arizona 85040                                 Houston, Texas 77210-4411

Steve Brittle                                          Steve Montgomery
DON'T WASTE ARIZONA, INC.                              JOHNSON CONTROLS
6205 South 12th Street                                 2032 West 4th Street
Phoenix, Arizona 85040                                 Tempe, Arizona 85281
</TABLE>

                                       35                   DECISION NO. _______
<PAGE>
<TABLE>
<S>                                                    <C>
Terry Ross                                             Michael Grant
CENTER FOR ENERGY AND                                  GALLAGHER & KENNEDY
ECONOMIC DEVELOPMENT                                   2575 East Camelback Road
P.O. Box 288                                           Phoenix, Arizona 85016-9225
Franktown, Colorado 80116-0288                         Attorneys for AEPCO, Graham County Electric
                                                       Cooperative, and Duncan Valley Electric
Clara Peterson                                         Cooperative.
AARP
HC 31, Box 977                                         Vinnie Hunt
Happy Jack, Arizona 86024                              CITY OF TUCSON
                                                       Department of Operations
Larry McGraw                                           4004 S. Park Avenue, Building #2
USDA-RUS                                               Tucson, Arizona 85714
6266 Weeping Willow
Rio Rancho, New Mexico 87124                           Ryle J. Carl III
                                                       INTERNATION BROTHERHOOD OF
Jim Driscoll                                           ELECTRICAL WORKERS, L.U. #1116
ARIZONA CITIZEN ACTION                                 750 S. Tucson Blvd.
5160 E. Bellevue Street, Apt. 101                      Tucson, Arizona 85716-5698
Tucson, AZ  85712-4828
                                                       Carl Dabelstein
William Baker                                          CITIZENS COMMUNICATIONS
ELECTRICAL DISTRICT NO. 6                              2901 N. Central Ave., Suite 1660
7310 N. 16th Street, Suite 320                         Phoenix, Arizona 85012
Phoenix, Arizona 85020
                                                       William J. Murphy
Robert Julian                                          CITY OF PHOENIX
PPG                                                    2631 S. 22nd Avenue
1500 Merrell Lane                                      Phoenix, Arizona 85009
Belgrade, Montana 59714
                                                       Russell E. Jones
C. Webb Crockett                                       WATERFALL ECONOMIDIS CALDWELL HANSHAW &
Jay L. Shapiro                                         VILLAMANA, P.C.
FENNEMORE CRAIG, PC                                    5210 E. Williams Circle, Suite 800
3003 N. Central Avenue, Suite 2600                     Tucson, Arizona 85711
Phoenix, Arizona 85012-2913                            Attorneys for Trico Electric Cooperative, Inc.
Attorneys for Panda Gila River, L.P.
                                                       Christopher Hitchcock
Robert S. Lynch                                        HITCHCOCK & HICKS
340 E. Palm Lane, Suite 140                            P.O. Box 87
Phoenix, Arizona 85004-4529                            Bisbee, Arizona 85603-0087
Attorney for Arizona Transmission Dependent            Attorney for Sulphur Springs Valley
  Utility Group                                                 Electric Cooperative, Inc.

K.R. Saline                                            Andrew Bettwy
K.R. SALINE & ASSOCIATES                               Debra Jacobson
Consulting Engineers                                   SOUTHWEST GAS CORPORATION
160 N. Pasadena, Suite 101                             5241 Spring Mountain Road
Mesa, Arizona 85201-6764                               Las Vegas, Nevada 89150-0001

Carl Robert Aron                                       Barbara R. Goldberg
Executive Vice President and COO                       OFFICE OF THE CITY ATTORNEY
ITRON, INC.                                            3939 Civic Center Blvd.
2818 N. Sullivan Road                                  Scottsdale, Arizona 85251
Spokane, Washington 99216
                                                       Bradford A. Borman
Douglas Nelson                                         PACIFICORP
DOUGLAS C. NELSON PC                                   201 S. Main, Suite 2000
7000 N. 16th Street, Suite 120-307                     Salt Lake City, Utah 84140
Phoenix, Arizona 85020-5547
Attorney for Calpine Power Services                    Timothy M. Hogan
                                                       ARIZONA CENTER FOR LAW
Lawrence V. Robertson Jr.                                IN THE PUBLIC INTEREST
MUNGER CHADWICK, PLC                                   202 E. McDowell Rd., Suite 153
333 North Wilmot, Suite 300                            Phoenix, Arizona 85004
Tucson, Arizona 85711-2634
Attorney for PG&E Energy Services Corp                 Marcia Weeks
                                                       18970 N. 116th Lane
Albert Sterman                                         Surprise, Arizona 85374
ARIZONA CONSUMERS COUNCIL
2849 East 8th Street
Tucson, Arizona 85716
</TABLE>

                                       36                   DECISION NO. _______
<PAGE>
<TABLE>
<S>                                                    <C>
John T. Travers                                        Jay I. Moyes
William H. Nau                                         MOYES STOREY
272 Market Square, Suite 2724                          3003 N. Central Ave., Suite 1250
Lake Forest, Illinois 60045                            Phoenix, Arizona 85012
                                                       Attorneys for PPL Southwest Generation
Timothy Michael Toy                                    Holdings, LLC; PPL EnergyPlus, LLC and PPL
WINTHROP, STIMSON, PUTNAM & ROBERTS                    Sundance Energy, LLC
One Battery Park Plaza
New York, New York 10004-1490                          Stephen L. Teichler
                                                       Stephanie A. Conaghan
Raymond S. Heyman                                      DUANE MORRIS & HECKSCHER, LLP
Michael W. Patten                                      1667 K Street NW, Suite 700
ROSHKA HEYMAN & DEWULF, PLC                            Washington, DC  20006
400 E. Van Buren, Suite 800
Phoenix, Arizona 85004                                 Kathy T. Puckett
Attorneys for Tucson Electric Power Co.                SHELL OIL COMPANY
                                                       200 N. Dairy Ashford
Chuck Miessner                                         Houston, Texas  77079
NEV SOUTHWEST LLC
P.O. Box 711, Mailstop-DA308                           Andrew N. Chau
Tucson, Arizona 85702-0711                             SHELL ENERGY SERVICES CO., LLC
                                                       1221 Lamar, Suite 1000
Billie Dean                                            Houston, Texas 77010
AVIDD
P O Box 97                                             Peter Q. Nyce, Jr.
Marana, Arizona  85652-0987                            DEPARTMENT OF THE ARMY
                                                       JALS-RS Suite 713
Raymond B. Wuslich                                     901 N. Stuart Street
WINSTON & STRAWN                                       Arlington, Virginia 22203-1837
1400 L Street, NW
Washington, DC  20005                                  Michelle Ahlmer
                                                       ARIZONA RETAILERS ASSOCIATION
Steven C. Gross                                        224 W. 2nd Street
PORTER SIMON                                           Mesa, Arizona 85201-6504
40200 Truckee Airport Road
Truckee, California  96161-3307                        Dan Neidlinger
Attorneys for M-S-R Public Power Agency                NEIDLINGER & ASSOCIATES
                                                       3020 N. 17th Drive
Donald R. Allen                                        Phoenix, Arizona 85015
John P. Coyle
DUNCAN & ALLEN                                         Chuck Garcia
1575 Eye Street, N.W.,, Suite 300                      PNM, Law Department
Washington, DC  20005                                  Alvardo Square, MS 0806
                                                       Albuquerque, New Mexico  87158
Ward Camp
PHASER ADVANCED METERING SERVICES                      Sanford J. Asman
400 Gold SW, Suite 1200                                570 Vinington Court
Albuquerque, New Mexico  87102                         Dunwoody, Georgia  30350-5710

Theresa Drake                                          Patricia Cooper
IDAHO POWER COMPANY                                    AEPCO/SSWEPCO
P.O. Box 70                                            P.O. box 670
Boise, Idaho  83707                                    Benson, Arizona 85602

Libby Brydolf                                          Steve Segal
CALIFORNIA ENERGY MARKETS NEWSLETTER                   LEBOEUF, LAMB, GREENE, & MACRAE
2419 Bancroft Street                                   633 17th Street, Suite 2000
San Diego, California 92104                            Denver, Colorado  80202-3620

Paul W. Taylor                                         Holly E. Chastain
R W BECK                                               SCHLUMBERGER RESOURCE
14635 N. Kierland Blvd., Suite 130                       MANAGEMENT SERVICES, INC.
Scottsdale, Arizona 85254-2769                         5430 Metric Place
                                                       Norcross, Georgia  30092-2550
James P. Barlett
5333 N. 7th Street, Suite B-215                        Leslie Lawner
Phoenix, Arizona 85014                                 ENRON CORP
Attorney for Arizona Power Authority                   712 North Lea
                                                       Roswell, New Mexico  88201

                                                       Alan Watts
                                                       Southern California Public Power Agency
                                                       529 Hilda Court
                                                       Anaheim, California  92806
</TABLE>

                                       37                   DECISION NO. _______
<PAGE>
<TABLE>
<S>                                                    <C>
Frederick M. Bloom                                     Steven Lavigne
Commonwealth Energy Corporation                        DUKE ENERGY
15991 Red Hill Avenue, Suite 201                       4 Triad Center, Suite 1000
Tustin, California  92780                              Salt Lake City, Utah 84180
                                                       Dennis L. Delaney
Margaret McConnell                                     K.R. SALINE & ASSOC.
Maricopa Community Colleges                            160 N. Pasadena, Suite 101
2411 W. 14th Street                                    Mesa, Arizona 85201-6764
Tempe, Arizona 85281-6942
                                                       Kevin C. Higgins
Brian Soth                                             ENERGY STRATEGIES, LLC
FIRSTPOINT SERVICES, INC.                              30 Market Street, Suite 200
1001 S.W. 5th Ave, Suite 500                           Salt Lake City, Utah 84101
Portland, Oregon 92704
                                                       Michael L. Kurtz
Jay Kaprosy                                            BORHM KURTZ & LOWRY
PHOENIX CHAMBER OF COMMERCE                            36 E. Seventh Street, Suite 2110
201 N. Central Ave., 27th Floor                        Cincinnati, Ohio 45202
Phoenix, Arizona 85073
                                                       David Berry
Kevin McSpadden                                        P.O. Box 1064
MILBANK, TWEED, HADLEY AND                             Scottsdale, Arizona 85252
  MCCLOY, LLP
601 S. Figueroa, 30th Floor                            William P. Inman
Los Angeles, California 90017                          Dept. of Revenue
                                                       1600 W. Monroe, Room 911
M.C. Arendes, Jr.                                      Phoenix, Arizona 85007
C3 COMMUNICATIONS, INC.
2600 Via Fortuna, Suite 500                            Robert Baltes
Austin, Texas 78746                                    ARIZONA COGENERATION ASSOC.
                                                       7250 N. 16th Street, Suite 102
Patrick J. Sanderson                                   Phoenix, Arizona 85020-5270
ARIZONA INDEPENDENT SCHEDULING
  ADMINISTRATOR ASSOCIATION                            Jana Van Ness
P.O. Box 6277                                          APS
Phoenix, Arizona 85005-6277                            Mail Station 9905
                                                       P.O. Box 53999
Roger K. Ferland                                       Phoenix, Arizona 85072-3999
QUARLES & BRADY STREICH LANG, L.L.P.
Renaissance One                                        David Couture
Two North Central Avenue                               TEP
Phoenix, Arizona 85004-2391                            4350 E. Irvington Road
                                                       Tucson, Arizona 85714
Charles T. Stevens
Arizonans for Electric Choice & Competition            Kelly Barr
245 W. Roosevelt                                       Jana Brandt
Phoenix, Arizona 85003                                 SRP
                                                       Mail Station PAB211
Mark Sirois                                            P.O. Box 52025
Arizona Community Action Assoc.                        Phoenix, Arizona 85072-2025
2627 N. Third Street, Suite 2
Phoenix, Arizona 85004                                 Randall H. Warner
                                                       JONES SKELTON & HOCHULI PLC
Jeffrey Guldner                                        2901 N. Central Avenue, Suite 800
Thomas L. Mumaw                                        Phoenix, Arizona 85012
SNELL & WILMER
400 E. Van Buren,                                      John A. LaSota, Jr.
One Arizona Center                                     MILLER LASOTA & PETERS, PLC
Phoenix, Arizona 85004-0001                            5225 N. Central Ave., Suite 235
                                                       Phoenix, Arizona 85012
Steven J. Duffy
RIDGE & ISAACSON PC                                    Peter W. Frost
3101 N. Central Avenue, Suite 740                      Conoco Gas and Power Marketing
Phoenix, Arizona 85012                                 600 N. Dairy Ashford, CH-1068
                                                       Houston, Texas 77079
Greg Patterson
5432 E. Avalon                                         Joan Walker-Ratliff
Phoenix, Arizona 85018                                 Conoco Gas and Power Marketing
                                                       1000 S. Pine, 125-4 ST UPO
John Wallace                                           Ponca City, Oklahoma 74602
Grand Canyon State Electric Co-op
120 N. 44th Street, Suite 100
Phoenix, Arizona 85034-1822
</TABLE>

                                       38                   DECISION NO. _______
<PAGE>
<TABLE>
<S>                                                    <C>
Vicki G. Sandler                                       Larry F. Eisenstat
C/o Linda Spell                                        Frederick D. Ochsenhirt
APS Energy Services                                    Michael R. Engleman
P.O. Box 53901                                         DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
Mail Station 8103                                      2101 L Street, NW
Phoenix, Arizona 85072-3901                            Washington, DC 20037-1526

Lori Glover                                            David A. Crabtree
STIRLING ENERGY SYSTEMS                                Dierdre A. Brown
2920 E. Camelback Rd., Suite 150                       TECO POWER SERVICES CORP.
Phoenix, Arizona 85016                                 P.O. Box 111
                                                       Tampa, Florida 33602
Jeff Schlegel
SWEEP                                                  Michael A. Trentel
1167 Samalayuca Drive                                  Patrick W. Burnett
Tucson, Arizona 85704-3224                             PANDA ENERGY INTERNATIONAL INC
                                                       4100 Spring Valley, Suite 1010
Howard Geller                                          Dallas, Texas 75244
SWEEP
2260 Baseline Rd., Suite 200                           Theodore E. Roberts
Boulder, Colorado 80302                                SEMPRA ENERGY RESOURCES
                                                       101 Ash Street, HQ 12-B
Mary-Ellen Kane                                        San Diego, California 92101-3017
ACAA
2627 N. 3rd Street, Suite Two                          Jesse Dillon
Phoenix, Arizona 85004                                 PPL Services Corp.
                                                       2 N. Ninth Street
Aaron Thomas                                           Allentown, Pennsylvania 18101-1179
AES NewEnergy
350 S. Grand Avenue, Suite 2950                        Gary A. Dodge
Los Angeles, California 90071                          HATCH, JAMES & DODGE
                                                       10 W. Broadway, Suite 400
Theresa Mead                                           Salt Lake City, Utah 84101
AES NewEnergy
P.O. Box 65447                                         Christopher Kempley, Chief Counsel
Tucson, Arizona 85728                                  ARIZONA CORPORATION COMMISSION
                                                       1200 W. Washington Street
Peter Van Haren                                        Phoenix, Arizona 85007
CITY OF PHOENIX
Attn: Jesse W. Sears                                   Ernest G. Johnson, Utilities Division
200 W. Washington Street, Suite 1300                   ARIZONA CORPORATION COMMISSION
Phoenix, Arizona 85003-1611                            1200 West Washington Street
                                                       Phoenix, Arizona 85007
Robert Annan
ARIZONA CLEAN ENERGY INDUSTRIES ALLIANCE
6605 E. Evening Glow Drive
Scottsdale, Arizona 85262

Curtis L. Kebler
RELIANT RESOURCES, INC.
8996 Etiwanda Avenue
Rancho Cucamonga, California 91739

Philip Key
RENEWABLE ENERGY LEADERSHIP GROUP
10631 E. Autumn Sage Drive
Scottsdale, Arizona 85259

Paul Bullis
OFFICE OF THE ATTORNEY GENERAL
1275 W. Washington Street
Phoenix, Arizona 85007

Laurie Woodall
OFFICE OF THE ATTORNEY GENERAL
15 S. 15th Avenue
Phoenix, Arizona 85007

Donna M. Bronski
CITY OF SCOTTSDALE
3939 N. Drinkwater Blvd
Scottsdale, Arizona 85251
</TABLE>

                                       39                   DECISION NO. _______

