-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R63FQZr2YF9aiDkuMX1246W9ngyIIC2Uvt6o8NJMCmQIwsG95MJObuzAFtueoKuW 5a5fNoCmK4YxgyWyK5z0Og== 0000930661-99-001937.txt : 19990817 0000930661-99-001937.hdr.sgml : 19990817 ACCESSION NUMBER: 0000930661-99-001937 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EL PASO ELECTRIC CO /TX/ CENTRAL INDEX KEY: 0000031978 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 740607870 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00296 FILM NUMBER: 99690121 BUSINESS ADDRESS: STREET 1: 303 N OREGON ST CITY: EL PASO STATE: TX ZIP: 79901 BUSINESS PHONE: 9155435711 10-Q 1 FORM 10-Q =============================================================================== Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 0-296 El Paso Electric Company (Exact name of registrant as specified in its charter) Texas 74-0607870 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Kayser Center, 100 North Stanton, El Paso, Texas 79901 (Address of principal executive offices) (Zip Code) (915) 543-5711 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X NO --- --- As of August 10, 1999, there were 59,436,535 of the Company's no par value common stock outstanding. =============================================================================== EL PASO ELECTRIC COMPANY INDEX TO FORM 10-Q Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - June 30, 1999 and December 31, 1998............... 1 Statements of Operations - Three Months, Six Months and Twelve Months Ended June 30, 1999 and 1998......................... 3 Statements of Comprehensive Operations - Three Months, Six Months and Twelve Months Ended June 30, 1999 and 1998.............. 5 Statements of Cash Flows - Six Months Ended June 30, 1999 and 1998............................................. 6 Notes to Financial Statements...................................... 7 Independent Auditors' Review Report................................ 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 27 PART II. OTHER INFORMATION Item 1. Legal Proceedings.............................................. 28 Item 4. Submission of Matters to a Vote of Security Holders............ 28 Item 6. Exhibits and Reports on Form 8-K............................... 28 i PART I. FINANCIAL INFORMATION Item 1. Financial Statements EL PASO ELECTRIC COMPANY BALANCE SHEETS
ASSETS June 30, (In thousands) 1999 December 31, (Unaudited) 1998 ---------------- --------------- Utility plant: Electric plant in service.............................................. $1,618,760 $1,599,207 Less accumulated depreciation and amortization......................... 288,939 243,405 ---------- ---------- Net plant in service................................................. 1,329,821 1,355,802 Construction work in progress.......................................... 65,342 54,641 Nuclear fuel; includes fuel in process of $6,686 and $8,031, respectively................................................. 87,699 89,784 Less accumulated amortization.......................................... 45,524 45,691 ---------- ---------- Net nuclear fuel..................................................... 42,175 44,093 ---------- ---------- Net utility plant.................................................. 1,437,338 1,454,536 ---------- ---------- Current assets: Cash and temporary investments......................................... 49,106 229,150 Accounts receivable, principally trade, net of allowance for doubtful accounts of $1,464 and $1,738, respectively................. 56,209 64,735 Inventories, at cost................................................... 26,520 27,537 Prepayments and other.................................................. 7,050 16,896 ---------- ---------- Total current assets............................................... 138,885 338,318 ---------- ---------- Long-term contract receivable............................................ 20,241 23,139 ---------- ---------- Deferred charges and other assets: Accumulated deferred income taxes, net................................. 761 10,518 Decommissioning trust fund............................................. 52,385 46,725 Other.................................................................. 17,493 17,983 ---------- ---------- Total deferred charges and other assets............................ 70,639 75,226 ---------- ---------- Total assets....................................................... $1,667,103 $1,891,219 ========== ==========
See accompanying notes to financial statements. 1 EL PASO ELECTRIC COMPANY BALANCE SHEETS (Continued)
CAPITALIZATION AND LIABILITIES June 30, (In thousands except for share data) 1999 December 31, (Unaudited) 1998 ------------------ ------------------ Capitalization: Common stock, stated value $1 per share, 100,000,000 shares authorized, 60,200,921 and 60,122,377 shares issued, and 256,169 and 147,985 restricted shares, respectively................. $ 60,457 $ 60,270 Capital in excess of stated value........................................... 242,481 241,325 Unearned compensation - restricted stock awards............................. (1,457) (611) Retained earnings........................................................... 118,578 115,193 Accumulated other comprehensive income (unrealized gains on marketable securities)......................................... 3,007 1,101 ---------- ---------- 423,066 417,278 Reacquired common stock, 475,300 shares; at cost............................ (4,288) - ---------- ---------- Common stock equity................................................. 418,778 417,278 Preferred stock, redemption required, cumulative, no par value, 2,000,000 shares authorized, 1,357,444 shares issued and outstanding; at liquidation preference.................................. - 135,744 Long-term debt.............................................................. 827,810 872,213 Financing and capital lease obligations..................................... 22,189 24,849 ---------- ---------- Total capitalization............................................ 1,268,777 1,450,084 ---------- ---------- Current liabilities: Current maturities of long-term debt and financing and capital lease obligations............................................... 27,402 63,817 Accounts payable, principally trade......................................... 15,216 31,135 Taxes accrued other than federal income taxes............................... 17,201 20,316 Interest accrued............................................................ 18,109 20,412 Net overcollection of fuel revenues......................................... 3,210 2,632 Provision for Texas Settlement base revenue refund.......................... 4,156 - Other....................................................................... 25,703 19,359 ---------- ---------- Total current liabilities....................................... 110,997 157,671 ---------- ---------- Deferred credits and other liabilities: Decommissioning liability................................................... 133,143 129,750 Accrued postretirement benefit liability.................................... 83,139 80,477 Accrued pension liability................................................... 33,688 33,880 Other....................................................................... 37,359 39,357 ---------- ---------- Total deferred credits and other liabilities.................... 287,329 283,464 ---------- ---------- Commitments and contingencies Total capitalization and liabilities............................ $ 1,667,103 $ 1,891,219 =========== ===========
See accompanying notes to financial statements. 2 EL PASO ELECTRIC COMPANY STATEMENTS OF OPERATIONS (Unaudited) (In thousands except for share data)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ---------------------------- 1999 1998 1999 1998 ------------ ------------ ----------- ------------ Operating revenues............................................. $ 132,722 $ 146,403 $ 262,591 $ 283,348 ------------ ------------ ----------- ------------ Energy expenses: Fuel......................................................... 22,272 27,630 44,334 53,112 Purchased and interchanged power............................. 3,968 4,644 4,720 7,808 ------------ ------------ ----------- ------------ 26,240 32,274 49,054 60,920 ------------ ------------ ----------- ------------ Operating revenues net of energy expenses...................... 106,482 114,129 213,537 222,428 ------------ ------------ ----------- ------------ Other operating expenses: Other operations............................................. 31,879 31,623 62,511 64,193 Maintenance.................................................. 11,874 8,320 20,788 16,522 Depreciation and amortization................................ 22,931 22,312 45,736 44,539 Taxes other than income taxes................................ 10,889 11,156 22,169 22,516 ------------ ------------ ----------- ------------ 77,573 73,411 151,204 147,770 ------------ ------------ ----------- ------------ Operating income............................................... 28,909 40,718 62,333 74,658 ------------ ------------ ----------- ------------ Other income (deductions): Investment income............................................ 1,041 2,357 3,720 4,992 Settlement of bankruptcy professional fees................... - 228 - 604 Other, net................................................... 430 (808) (483) (834) ------------ ------------ ----------- ------------ 1,471 1,777 3,237 4,762 ------------ ------------ ----------- ------------ Income before interest charges................................. 30,380 42,495 65,570 79,420 ------------ ------------ ----------- ------------ Interest charges (credits): Interest on long-term debt................................... 18,565 20,359 37,720 40,695 Other interest............................................... 2,038 1,788 4,075 3,553 Interest capitalized and deferred............................ (1,635) (1,625) (3,339) (3,246) ------------ ------------ ----------- ------------ 18,968 20,522 38,456 41,002 ------------ ------------ ----------- ------------ Income before income taxes..................................... 11,412 21,973 27,114 38,418 Income tax expense............................................. 4,364 8,278 10,604 14,208 ------------ ------------ ----------- ------------ Income before extraordinary loss on repurchases of debt.......................................... 7,048 13,695 16,510 24,210 Extraordinary loss on repurchases of debt, net of income tax benefit.................................... (1,183) - (1,183) - ------------ ------------ ----------- ------------ Net income..................................................... 5,865 13,695 15,327 24,210 Preferred stock: Dividend requirements........................................ - 3,624 2,616 7,147 Redemption costs............................................. 10 - 9,581 - ------------ ------------ ----------- ------------ Net income applicable to common stock.......................... $ 5,855 $ 10,071 $ 3,130 $ 17,063 ============ ============ =========== ============ Basic earnings per common share: Income before extraordinary loss on repurchases of debt...... $ 0.117 $ 0.167 $ 0.072 $ 0.284 Extraordinary loss on repurchases of debt, net of income tax benefit........................................ (0.020) - (0.020) - ------------ ------------ ----------- ------------ Net income................................................ $ 0.097 $ 0.167 $ 0.052 $ 0.284 ============ ============ =========== ============ Diluted earnings per common share: Income before extraordinary loss on repurchases of debt...... $ 0.116 $ 0.166 $ 0.071 $ 0.282 Extraordinary loss on repurchases of debt, net of income tax benefit........................................ (0.019) - (0.019) - ------------ ------------ ----------- ------------ Net income................................................ $ 0.097 $ 0.166 $ 0.052 $ 0.282 ============ ============ =========== ============ Weighted average number of common shares outstanding........... 60,206,105 60,169,436 60,208,059 60,167,618 ============ ============ =========== ============ Weighted average number of common shares and dilutive potential common shares outstanding................. 60,620,696 60,740,262 60,415,355 60,591,778 ============ ============ =========== ============
See accompanying notes to financial statements. 3 EL PASO ELECTRIC COMPANY STATEMENTS OF OPERATIONS (Unaudited) (In thousands except for share data)
Twelve Months Ended June 30, ---------------------------- 1999 1998 ----------- ----------- Operating revenues.............................................................. $ 581,464 $ 597,254 ----------- ----------- Energy expenses: Fuel.......................................................................... 100,672 112,660 Purchased and interchanged power.............................................. 17,522 19,938 ----------- ----------- 118,194 132,598 ----------- ----------- Operating revenues net of energy expenses....................................... 463,270 464,656 ----------- ----------- Other operating expenses: Other operations.............................................................. 132,568 133,956 Maintenance................................................................... 39,221 32,465 New Mexico Settlement charge.................................................. 6,272 - Depreciation and amortization................................................. 91,010 89,271 Taxes other than income taxes................................................. 43,985 43,917 ----------- ----------- 313,056 299,609 ----------- ----------- Operating income................................................................ 150,214 165,047 ----------- ----------- Other income (deductions): Investment income............................................................. 10,234 8,965 Settlement of bankruptcy professional fees.................................... 657 654 Other, net.................................................................... (1,379) 28 ----------- ----------- 9,512 9,647 ----------- ----------- Income before interest charges.................................................. 159,726 174,694 ----------- ----------- Interest charges (credits): Interest on long-term debt.................................................... 77,992 83,005 Other interest................................................................ 7,720 6,367 Interest capitalized and deferred............................................. (6,493) (6,232) ----------- ----------- 79,219 83,140 ----------- ----------- Income before income taxes...................................................... 80,507 91,554 Income tax expense.............................................................. 31,134 34,717 ----------- ----------- Income before extraordinary items............................................... 49,373 56,837 ----------- ----------- Extraordinary items: Extraordinary gain on discharge of debt, net of income tax expense............ 3,343 - Extraordinary loss on repurchases of debt, net of income tax benefit.......... (1,183) - ----------- ----------- 2,160 - ----------- ----------- Net income...................................................................... 51,533 56,837 Preferred stock: Dividend requirements......................................................... 10,176 13,904 Redemption costs.............................................................. 9,581 - ----------- ----------- Net income applicable to common stock........................................... $ 31,776 $ 42,933 =========== =========== Basic earnings per common share: Income before extraordinary items............................................. $ 0.492 $ 0.714 Extraordinary gain on discharge of debt, net of income tax expense............ 0.056 - Extraordinary loss on repurchases of debt, net of income tax benefit.......... (0.020) - ----------- ----------- Net income................................................................. $ 0.528 $ 0.714 =========== =========== Diluted earnings per common share: Income before extraordinary items............................................. $ 0.489 $ 0.710 Extraordinary gain on discharge of debt, net of income tax expense............ 0.055 - Extraordinary loss on repurchases of debt, net of income tax benefit.......... (0.019) - ----------- ----------- Net income................................................................. $ 0.525 $ 0.710 =========== =========== Weighted average number of common shares outstanding............................ 60,188,290 60,151,260 =========== =========== Weighted average number of common shares and dilutive potential common shares outstanding.................................. 60,544,922 60,500,662 =========== ===========
See accompanying notes to financial statements. 4 EL PASO ELECTRIC COMPANY STATEMENTS OF COMPREHENSIVE OPERATIONS (Unaudited) (In thousands)
Three Months Ended Six Months Ended Twelve Months Ended June 30, June 30, June 30, ------------------- ------------------- ------------------- 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- Net income...................................... $ 5,865 $ 13,695 $ 15,327 $ 24,210 $ 51,533 $ 56,837 Other comprehensive income (loss): Net unrealized gain (loss) on marketable securities, less applicable income tax (expense) benefit of $(683), $6, $(1,027), $(207), $(1,511) and $(35), respectively..... 1,268 (11) 1,906 386 2,805 64 -------- -------- -------- -------- -------- -------- Comprehensive income............................ 7,133 13,684 17,233 24,596 54,338 56,901 Preferred stock: Dividend requirements.......................... - 3,624 2,616 7,147 10,176 13,904 Redemption costs............................... 10 - 9,581 - 9,581 - -------- -------- -------- -------- -------- -------- Comprehensive income applicable to common stock................................ $ 7,123 $ 10,060 $ 5,036 $ 17,449 $ 34,581 $ 42,997 ======== ======== ======== ======== ======== ========
See accompanying notes to financial statements. 5 EL PASO ELECTRIC COMPANY STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Six Months Ended June 30, ------------------------------------ 1999 1998 ------------ ------------ Cash Flows From Operating Activities: Net income........................................................ $ 15,327 $ 24,210 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................... 45,736 44,539 Amortization of nuclear fuel.................................... 10,351 10,974 Deferred income taxes, net...................................... 9,486 12,850 Provision for Texas Settlement base revenue refund.............. 4,156 - Extraordinary loss on repurchases of debt, net of income tax benefit........................................... 1,183 - Other operating activities...................................... 2,697 2,970 Change in: Accounts receivable............................................. 8,526 (2,419) Inventories..................................................... 1,017 (293) Prepayments and other........................................... 9,846 (2,377) Long-term contract receivable................................... 2,898 2,219 Accounts payable................................................ (15,919) (5,416) Taxes accrued other than federal income taxes................... (3,115) (2,280) Interest accrued................................................ (2,303) (862) Net over/undercollection of fuel revenues....................... 578 3,433 Other current liabilities....................................... 8,923 1,524 Deferred charges and credits.................................... 2,944 4,154 ------------ ------------ Net cash provided by operating activities..................... 102,331 93,226 ------------ ------------ Cash Flows From Investing Activities: Cash additions to utility property, plant and equipment........... (29,501) (20,479) Cash additions to nuclear fuel.................................... (6,741) (7,841) Interest capitalized: Nuclear fuel.................................................... (1,691) (2,027) Utility property, plant and equipment........................... (1,648) (1,219) Investment in decommissioning trust fund.......................... (2,728) (3,122) Other investing activities........................................ (136) (42) ------------ ------------ Net cash used for investing activities........................ (42,445) (34,730) ------------ ------------ Cash Flows From Financing Activities: Reacquired common stock........................................... (4,288) - Repurchases of and payments on long-term debt..................... (82,196) (30,582) Nuclear fuel financing obligations: Proceeds........................................................ 8,433 9,877 Payments........................................................ (10,725) (11,081) Redemption of preferred stock..................................... (148,937) - Preferred stock dividend payment.................................. (1,328) - Payments on capital lease obligations............................. (751) (683) Other financing activities........................................ (138) (69) ------------ ------------ Net cash used for financing activities........................ (239,930) (32,538) ------------ ------------ Net (decrease) increase in cash and temporary investments........... (180,044) 25,958 Cash and temporary investments at beginning of period............... 229,150 111,227 ------------ ------------ Cash and temporary investments at end of period..................... $ 49,106 $ 137,185 ============ ============
See accompanying notes to financial statements. 6 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) A. Principles of Preparation Pursuant to the rules and regulations of the Securities and Exchange Commission, certain financial information has been condensed and certain footnote disclosures have been omitted. Such information and disclosures are normally included in financial statements prepared in accordance with generally accepted accounting principles. These condensed financial statements should be read in conjunction with the financial statements and notes thereto in the Annual Report of El Paso Electric Company (the "Company") on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K"). Capitalized terms used in this report and not defined herein have the meaning ascribed for such terms in the 1998 Form 10-K. In the opinion of management of the Company, the accompanying financial statements contain all adjustments necessary to present fairly the financial position of the Company at June 30, 1999 and December 31, 1998; the results of operations for the three, six and twelve months ended June 30, 1999 and 1998; and cash flows for the six months ended June 30, 1999 and 1998. The results of operations for the three, six and twelve months ended June 30, 1999 are not necessarily indicative of the results to be expected for the full calendar year. Supplemental Cash Flow Disclosures (In thousands)
Six Months Ended June 30, -------------------------------------- 1999 1998 ------------------ ------------------ Cash paid for: Interest on long-term debt....................... $36,706 $37,905 Income taxes, net................................ 1,200 1,300 Reorganization items - professional fees and other............................... - 2,715 Non-cash investing and financing activities: Issuance of preferred stock for pay-in-kind dividend......................... 3,867 7,010 Issuance of restricted shares of common stock................................. 1,480 195
7 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) Reconciliation of Basic and Diluted Earnings Per Common Share The reconciliation of basic and diluted earnings per common share before extraordinary items is presented below:
Three Months Ended June 30, ------------------------------------------------------------------------ 1999 1998 ----------------------------------- ----------------------------------- Per Per Common Common Income Shares Share Income Shares Share -------------- ---------- ------- -------------- ---------- ------- (In thousands) (In thousands) Income before extraordinary item..... $ 7,048 $ 13,695 Less: Preferred stock: Dividend requirements............ - 3,624 Redemption costs................. 10 - ------------- ------------- Basic earnings per common share: Net income applicable to common stock....................... 7,038 60,206,105 $ 0.117 10,071 60,169,436 $ 0.167 ======= ======= Effect of dilutive securities: Unvested restricted stock........... - 29,186 - 31,840 Stock options....................... - 385,405 - 538,986 ------------- ---------- ------------- ---------- Diluted earnings per common share: Net income applicable to common stock....................... $ 7,038 60,620,696 $ 0.116 $ 10,071 60,740,262 $ 0.166 ============= ========== ======= ============= ========== =======
Six Months Ended June 30, ------------------------------------------------------------------------ 1999 1998 ----------------------------------- ----------------------------------- Per Per Common Common Income Shares Share Income Shares Share -------------- ---------- ------- -------------- ---------- ------- (In thousands) (In thousands) Income before extraordinary item..... $ 16,510 $ 24,210 Less: Preferred stock: Dividend requirements............ 2,616 7,147 Redemption costs................. 9,581 - ------------- ------------- Basic earnings per common share: Net income applicable to common stock....................... 4,313 60,208,059 $ 0.072 17,063 60,167,618 $ 0.284 ======= ======= Effect of dilutive securities: Unvested restricted stock........... - 14,593 - 23,168 Stock options....................... - 192,703 - 400,992 ------------- ---------- ------------- ---------- Diluted earnings per common share: Net income applicable to common stock....................... $ 4,313 60,415,355 $ 0.071 $ 17,063 60,591,778 $ 0.282 ============= ========== ======= ============= ========== =======
8 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited)
Twelve Months Ended June 30, ----------------------------------------------------------------------- 1999 1998 --------------------------------- ---------------------------------- Per Per Common Common Income Shares Share Income Shares Share ------------ ---------- ------- ---------- ---------- ------- (In thousands) (In thousands) Income before extraordinary items.... $ 49,373 $ 56,837 Less: Preferred stock: Dividend requirements............ 10,176 13,904 Redemption costs................. 9,581 - ------------ ---------- Basic earnings per common share: Net income applicable to common stock....................... 29,616 60,188,290 $ 0.492 42,933 60,151,260 $ 0.714 ======= ======= Effect of dilutive securities: Unvested restricted stock........... - 26,022 - 18,867 Stock options....................... - 330,610 - 330,535 ------------ ---------- ---------- ---------- Diluted earnings per common share: Net income applicable to common stock....................... $ 29,616 60,544,922 $ 0.489 $ 42,933 60,500,662 $ 0.710 ============ ========== ======= ========== ========== =======
B. Rate Matters For a full discussion of the Company's rate matters, see Note B of Notes to Financial Statements in the 1998 Form 10-K. Texas Rate Matters A comprehensive electric industry restructuring bill was signed into law by the Governor of Texas on June 18, 1999, and becomes effective September 1, 1999. Under this law, retail customer choice will begin in the service territories of most investor-owned utilities on January 1, 2002. Municipal and cooperative utilities will have the option of electing to offer customer choice in their service areas. The Company is exempt from the competitive provisions of this law until August 2005, the expiration of the Freeze Period. After July 2005, the Company will not have a claim for stranded costs or transition costs incurred or otherwise provided for pursuant to the law. The Company will be subject to the provisions of the new law after July 2005. The competitive provisions of the new law include the following: (i) a 6% rate reduction, coincident with the start of retail choice, for residential and small commercial customers; (ii) a limitation that no power generation company may own and control more than 20% of the generation capacity in a power region; (iii) an obligation to auction entitlements to at least 15% of a utility's Texas jurisdictional installed generation capacity, continuing until the earlier of 60 months after the date customer choice is introduced or the date the Texas Commission determines that 40% of the power consumed by residential and small commercial customers is served by non-affiliated retail electric providers; (iv) a reduction in emissions for grandfathered plants by May 2003; (v) an additional 2,000 MW of statewide renewable energy capacity by 2009; (vi) the establishment of a System Benefit 9 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) Fund ($0.50/MWh) for customer education and low-income assistance; and (vii) a detailed affiliate code of conduct to govern relationships between the regulated utility and its affiliates. New Mexico Rate Matters A comprehensive electric utility industry restructuring bill was signed into law by the Governor of New Mexico and became effective on April 8, 1999. Under this law, retail customer choice begins January 1, 2001 for public post- secondary educational institutions, public schools, and residential and small business customers. Retail customer choice begins January 1, 2002 for all other customers. The New Mexico Commission may delay implementation of retail customer choice or other deadlines established by the new law for up to one year. The new law allows utilities to recover no less than 50% of their stranded costs with up to 100% recovery allowed if the New Mexico Commission determines that additional recovery is in the public interest, is necessary to maintain a utility's financial integrity, is necessary to continue adequate and reliable service, and will not cause an increase in rates to residential and small business customers. Utilities are required to file transition plans addressing the various restructuring issues, including the recovery of stranded costs, by March 1, 2000. The new law also allows the New Mexico Commission to review and approve any rate settlement previously approved by the New Mexico Commission as a means of transition to competition. On June 30, 1999, the New Mexico Commission ordered the review of the Company's New Mexico Settlement. Under the new law, the New Mexico Commission may review certain transition plans previously approved by the New Mexico Commission and confirm, reject or modify such plans by the end of November 1999, unless the New Mexico Commission extends this deadline under certain provisions of the new law. If the New Mexico Commission approves the New Mexico Settlement, it will supersede the new law to the extent the new law is inconsistent. On August 3, 1999, the Company filed with the New Mexico Commission testimony and exhibits in support of the New Mexico Settlement. Although the Company believes that the recovery of costs provided for in the New Mexico Settlement is consistent with the intent of the new law, it cannot predict whether the New Mexico Commission's review will impact the Company's revenues and recovery of costs contemplated under the New Mexico Settlement, or whether the Company will be able to maintain its New Mexico rates at the new levels. Federal Rate Matters In July 1996, Las Cruces exercised its right under FERC Order No. 888 to request that the Company calculate Las Cruces' stranded cost obligation should it leave the Company's system and operate its own municipal utility while receiving certain transmission services from the Company. Las Cruces subsequently filed a request at the FERC for a summary determination that Las Cruces would have no stranded cost obligation to the Company or, in the alternative, that the FERC convene a hearing to establish the amount of any stranded costs. On May 26, 1999, the FERC issued its opinion and ruled that based on the FERC's method for calculating stranded costs, Las Cruces' stranded cost obligation was $52.9 million, assuming a departure date of July 1, 1999. Although this amount is approximately $30 million higher than an earlier administrative law judge's recommendation, the Company believes the FERC's decision is inconsistent with the intent and policy of FERC Order 10 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) No. 888, which establishes the right to full recovery of a utility's stranded generation cost. The Company continues to believe it is entitled to full compensation for the costs it incurred with the expectation of continuing to serve Las Cruces. The Company filed a motion for rehearing of the FERC's decision. The FERC has extended its time limit for ruling on this motion. The Company cannot predict when the FERC will rule on this motion. See Note B of Notes to Financial Statements in the 1998 Form 10-K for a full discussion of stranded costs. Pursuant to FERC Order No. 888, the Company filed its non-discriminatory open access transmission tariffs with the FERC in July 1996. The Company reached a settlement with the various parties regarding rates for transmission and ancillary services under these tariffs. However, the settlement, which was filed with the FERC in March 1997 and approved by the FERC in June 1998, did not resolve the issues concerning the manner in which the Company will determine the amount of transmission capacity that is available for use by third parties desiring to use its transmission system and whether the Company must provide back-up generation services to third parties using its transmission system. On May 26, 1999, the FERC issued its opinion in a proceeding brought by Southwestern Public Service Company ("SPS") regarding the use of the Company's transmission system to serve Las Cruces, holding that the Company was not obligated under FERC Order No. 888 to provide back-up generation services to third parties using its transmission system. However, the FERC stated that, for purposes of this calculation, the Company should assume that it would not be providing generation service to Las Cruces or Comision Federal de Electricidad ("CFE"), and the loads of those customers should be omitted from its calculation of available transmission capacity. The FERC also concluded that once the Company's calculation was adjusted to reflect the assumed discontinuation of service to Las Cruces and CFE, the Company would have sufficient transmission capacity over the Eddy County tie to meet SPS' request for firm transmission service. Although the Company has filed a compliance filing as required by the order, the filing reflects that the Company does not have sufficient transmission capacity over the Eddy County tie to meet SPS' request for firm transmission service. The Company filed a motion for rehearing of the FERC's decision. The FERC has extended its time limit for ruling on this motion. The Company does not expect a material financial impact from this FERC ruling. However, the Company is concerned that the result of this FERC ruling will be to impair the reliability of service to the Company's other retail customers while increasing costs. In order to procure a firm supply of electric power to serve its proposed municipal electric system, during the pendency on the transmission litigation, Las Cruces filed a request with the FERC in November 1998 for an order requiring the Company to sell wholesale power to Las Cruces on a temporary basis pursuant to Section 202(b) of the Federal Power Act from July 1999 until such time as Las Cruces is able to secure firm transmission service and back-up generation service required to enable it to obtain reliable service from SPS. In January 1999, the FERC ordered the Company to sell electric energy to Las Cruces at a cost-based wholesale rate from July 1, 1999 until the earlier of the time Las Cruces begins receiving its power from a different supplier or one year. The Company submitted a proposed cost-based rate for the sale of electricity at wholesale to Las Cruces in compliance with the FERC's order in February 1999. On May 27, 1999, the FERC issued an order denying requests for 11 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) rehearing of its January order. The Company has appealed this order to the United States Court of Appeals for the Fifth Circuit and the court granted the Company's motion for expedited review. In a separate order on May 27, 1999, the FERC ordered an evidentiary hearing with respect to the Company's compliance filing and ruled that the administrative law judge must issue an initial decision no later than January 31, 2000. On April 7, 1999, the Company filed an application with the FERC for authorization to engage in the sale of electricity in wholesale electric markets outside of the southern New Mexico region at market-based rates. The Company's application included a market-dominance study showing that it lacked market power outside of that region and it otherwise met the FERC's criteria for being authorized to sell electricity at market-based prices. The FERC approved the Company's application on May 27, 1999. C. 1999 Long-Term Incentive Plan On May 27, 1999, the Company's shareholders approved the adoption of a stock-based long-term incentive plan (the "1999 Plan"). Under the 1999 Plan, directors, officers, managers, other employees and consultants are eligible to receive non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, bonus stock and performance shares covering up to two million shares of common stock. On July 1, 1999, the Company filed its Registration Statement on Form S-8 registering the two million shares of common stock reserved for issuance under the 1999 Plan. On July 30, 1999, the Company filed its application with the FERC to approve the issuance of shares under the 1999 Plan. D. Common Stock Repurchase Program On May 27, 1999, the Company's Board of Directors approved a stock repurchase program allowing the Company to purchase outstanding shares of its common stock from time to time, up to a total of six million shares. The Company will make purchases primarily in the open market at prevailing prices and will also engage in private transactions, if appropriate. The shares that the Company acquires will be available for issuance under employee benefit and stock option plans or may be retired. As of June 30, 1999, the Company had reacquired 475,300 shares of common stock at a cost of approximately $4.3 million, including commissions. E. Preferred Stock Redemption On March 1, 1999, after obtaining required consents of holders of certain of the Company's outstanding debt securities, the Company redeemed the Series A Preferred Stock. The Company paid the redemption price of approximately $139.6 million, accrued cash dividends of $1.3 million, and premium, fees and costs of securing the consents aggregating $9.6 million. The preferred stock had an annual dividend rate of 11.40%. 12 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) F. Commitments and Contingencies For a full discussion of commitments and contingencies, including environmental matters related to the Company, see Note H of Notes to Financial Statements in the 1998 Form 10-K. In addition, see Note C of Notes to Financial Statements in the 1998 Form 10-K regarding matters related to Palo Verde, including decommissioning, spent fuel storage, disposal of low-level radioactive waste and liability and insurance matters. Coal Mine Reclamation The Four Corners participants are currently reviewing a 1999 study conducted by an outside engineering firm of the estimated final reclamation and coal mine closure costs. Based on a preliminary review of this report, the Company believes that its ultimate liability for reclamation and closure costs may be less than the currently accrued amount of $14.8 million. The participants' review of the study includes an analysis of the assumptions used to estimate the liability for reclamation and closure costs. Once the review is completed, the Company can determine what effect, if any, the study may have on the Company. Participant review of the study is expected to be completed by the end of 1999. Final review of the study may justify a material reduction in the Company's liability for reclamation and closure costs. If the review is completed by year end and the reduction is so justified, it will be recorded by year end as a change in estimate. G. Litigation For a full discussion of litigation, see Note I of Notes to Financial Statements in the 1998 Form 10-K. Litigation with Las Cruces Las Cruces is attempting to replace the Company as the electric service provider in Las Cruces by acquiring, through condemnation or a negotiated purchase, the distribution assets and other facilities used to provide electric service to customers in Las Cruces. Sales to customers in Las Cruces represent approximately 8% of the Company's operating revenues. On February 26, 1999, Las Cruces filed its Petition for Condemnation and Application for Immediate Possession with the New Mexico State District Court. On March 9, 1999, the Company removed the Las Cruces petition and application to the United States District Court for the District of New Mexico. On May 17, 1999, the federal court issued a final decision finding that the removal to federal court was proper. On June 3, 1999, the federal court consolidated this matter with the declaratory action previously filed by the Company challenging the constitutionality of the legislation giving Las Cruces the authority to condemn. At this time no hearing on the immediate possession matter has been set. The Company is unable to predict the outcome of this litigation. 13 EL PASO ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) If Las Cruces succeeds in its efforts to condemn the Company's distribution system, the Company could lose its Las Cruces customer base, although the Company would be entitled to receive "just compensation" as established by New Mexico law. "Just compensation" is generally defined as the amount of money that would fairly compensate the party whose property is condemned. It is the Company's opinion that this amount would be the difference between the value of the Company's distribution system prior to the taking, as compared to the value of the distribution system after the taking. Compensation for any stranded costs related to the Company's generation assets will be determined by the FERC. See Note B, "Rate Matters - Federal Rate Matters." Las Cruces has taken several actions to position itself to acquire portions of the Company's distribution system and certain related facilities. In August 1994, SPS and Las Cruces entered into an agreement granting SPS the right to provide all of the electric power and energy required by Las Cruces if Las Cruces succeeds in its efforts to obtain the Company's distribution system. In addition, Las Cruces sold approximately $73 million in revenue bonds in October 1995 to provide funding to finance the acquisition by condemnation or negotiated purchase of the Company's electrical distribution assets within and adjacent to the Las Cruces city limits. In July 1996, Las Cruces exercised its right under FERC Order No. 888 to request that the Company calculate Las Cruces' stranded cost obligation should it leave the Company's system and operate its own municipal utility. See Note B, "Rate Matters - Federal Rate Matters" for a discussion of this proceeding. The Company continues to believe that it can provide lower cost electric service to customers in Las Cruces than can be achieved through a municipal takeover. Accordingly, the Company has stated its strong preference for a resolution of its differences with Las Cruces through negotiation rather than litigation and condemnation. The Company is unable to predict the outcome of Las Cruces' efforts to replace the Company as its electric service provider or the effects it may have on the Company's financial position, results of operations and cash flows. The Company does not believe it is probable that a loss has been incurred and, therefore, has made no provision in the accompanying financial statements related to these matters. 14 Independent Auditors' Review Report ----------------------------------- The Shareholders and the Board of Directors El Paso Electric Company: We have reviewed the accompanying condensed balance sheet of El Paso Electric Company (the Company) as of June 30, 1999, the related condensed statements of operations and comprehensive operations for the three months, six months, and twelve months ended June 30, 1999 and 1998, and the related condensed statements of cash flows for the six months ended June 30, 1999 and 1998. These condensed financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of El Paso Electric Company as of December 31, 1998, and the related statements of operations, comprehensive operations, changes in common stock equity, and cash flows for the year then ended (not presented herein); and in our report dated February 5, 1999, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1998, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. KPMG LLP El Paso, Texas July 26, 1999 15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The information contained in this Item 2 updates, and should be read in conjunction with, the information set forth in Part II, Item 7 of the Company's 1998 Form 10-K. Statements in this document, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, as well as other oral and written forward-looking statements made by or on behalf of the Company from time to time, including statements contained in the Company's filings with the Securities and Exchange Commission and its reports to stockholders, involve known and unknown risks and other factors which may cause the Company's actual results in future periods to differ materially from those expressed in any forward-looking statements. Any such statement is qualified by reference to the risks and factors discussed below under the headings "Operational Prospects and Challenges," "Liquidity and Capital Resources" and "Year 2000 Preparedness," as well as in the Company's filings with the Securities and Exchange Commission, which are available from the Securities and Exchange Commission or which may be obtained upon request from the Company. The Company cautions that the risks and factors discussed below and in such filings are not exclusive. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company. Operational Prospects and Challenges The Texas Settlement Agreement provides the Company with a stable base of retail revenues in Texas during a period in which the Company has substantially reduced its fixed obligations. The New Mexico Settlement provides a similar level of certainty in the Company's New Mexico rates, although of shorter duration. As discussed below, the Texas Settlement Agreement provides for an annual base revenue reduction in Texas of approximately $15.4 million and approval of all Company fuel expenses for the 42-month period subject to reconciliation. The Texas Rate Stipulation is preserved under the Texas Settlement Agreement and the Texas electric industry restructuring law. The New Mexico Settlement includes an annual base revenue reduction of $4.6 million, exclusive of the Company's annual $0.4 million contribution for low-income assistance in New Mexico. In return for these rate reductions, the Company believes it will achieve in both Texas and New Mexico a new period of revenue stability at levels that will permit it to further reduce its debt while continuing to address issues raised by industry restructuring and competition. During this period, the Company's strategic goals include (i) serving the growing need for electricity within its retail service territory; (ii) continuing to focus on its strategic location on the border with Mexico; (iii) enhancing long-term relationships with its largest retail customers; (iv) continuing to reduce operating costs; and (v) developing an energy-related services business. The New Mexico Settlement provides for (i) a total annual jurisdictional base revenue reduction of $4.6 million; (ii) a 30-month moratorium on rate increases or decreases in New Mexico; (iii) the elimination of the need for future fuel reconciliations in New Mexico by incorporating the existing fixed fuel factor into rates; (iv) an increased degree of ratemaking certainty for the future achieved by an agreement among the signatories reducing the net value of certain assets by approximately $40 million 16 on a New Mexico jurisdictional basis for ratemaking purposes (but with no effect on book values), while establishing the signatories' agreement that the Company is entitled to 100% recovery of such revalued assets; and (v) the ability to enter into long-term rate contracts with commercial and industrial customers in New Mexico. The New Mexico Settlement became effective on October 26, 1998. Additionally, as a result of the New Mexico Settlement, the Company will contribute $0.4 million annually ($1.0 million over the term of the moratorium period) to a social services agency in Dona Ana County providing assistance to low-income individuals. The Company negotiated the New Mexico Settlement so as to substantially reduce the likelihood of additional rate reductions during the moratorium period. A comprehensive electric utility industry restructuring bill was signed into law by the Governor of New Mexico and became effective on April 8, 1999. Under this law, retail customer choice begins January 1, 2001 for public post- secondary educational institutions, public schools, and residential and small business customers. Retail customer choice begins January 1, 2002 for all other customers. The New Mexico Commission may delay implementation of retail customer choice or other deadlines established by the new law for up to one year. The new law allows utilities to recover no less than 50% of their stranded costs with up to 100% recovery allowed if the New Mexico Commission determines that additional recovery is in the public interest, is necessary to maintain a utility's financial integrity, is necessary to continue adequate and reliable service, and will not cause an increase in rates to residential and small business customers. Utilities are required to file transition plans addressing the various restructuring issues, including the recovery of stranded costs, by March 1, 2000. The new law also allows the New Mexico Commission to review and approve any rate settlement previously approved by the New Mexico Commission as a means of transition to competition. On June 30, 1999, the New Mexico Commission ordered the review of the Company's New Mexico Settlement. Under the new law, the New Mexico Commission may review certain transition plans previously approved by the New Mexico Commission and confirm, reject or modify such plans by the end of November 1999, unless the New Mexico Commission extends this deadline under certain provisions of the new law. If the New Mexico Commission approves the New Mexico Settlement, it will supersede the new law to the extent the new law is inconsistent. On August 3, 1999, the Company filed with the New Mexico Commission testimony and exhibits in support of the New Mexico Settlement. Although the Company believes that the recovery of costs provided for in the New Mexico Settlement is consistent with the intent of the new law, it cannot predict whether the New Mexico Commission's review will impact the Company's revenues and recovery of costs contemplated under the New Mexico Settlement, or whether the Company will be able to maintain its New Mexico rates at the new levels. Following the New Mexico Settlement, the Company offered to enter into a comparable agreement in Texas. Based upon that offer, the Company entered into the Texas Settlement Agreement providing for: (i) a total annual jurisdictional base revenue reduction of approximately $15.4 million retroactive to November 1, 1998; (ii) reconciliation of the Company's fuel expenses through December 31, 1998, with no disallowance; and (iii) an agreement to use 50% of all Palo Verde performance rewards related to evaluation periods after 1997, when collected, for low-income assistance and for Demand-Side Management ("DSM") programs, primarily focused on small business customers, through the end of the Freeze Period. The new rates under the Texas Settlement Agreement were implemented in April 1999, pursuant to an interim order of the Texas Commission. On June 8, 1999, the Texas Commission issued a final order approving the Texas Settlement Agreement. 17 A comprehensive electric industry restructuring bill was signed into law by the Governor of Texas on June 18, 1999, and becomes effective September 1, 1999. Under this law, retail customer choice will begin in the service territories of most investor-owned utilities on January 1, 2002. Municipal and cooperative utilities will have the option of electing to offer customer choice in their service areas. The Company is exempt from the competitive provisions of this law until August 2005, the expiration of the Freeze Period. After July 2005, the Company will not have a claim for stranded costs or transition costs incurred or otherwise provided for pursuant to the law. The Company will be subject to the provisions of the new law after July 2005. The competitive provisions of the new law include the following: (i) a 6% rate reduction, coincident with the start of retail choice, for residential and small commercial customers; (ii) a limitation that no power generation company may own and control more than 20% of the generation capacity in a power region; (iii) an obligation to auction entitlements to at least 15% of a utility's Texas jurisdictional installed generation capacity, continuing until the earlier of 60 months after the date customer choice is introduced or the date the Texas Commission determines that 40% of the power consumed by residential and small commercial customers is served by non-affiliated retail electric providers; (iv) a reduction in emissions for grandfathered plants by May 2003; (v) an additional 2,000 MW of statewide renewable energy capacity by 2009; (vi) the establishment of a System Benefit Fund ($0.50/MWh) for customer education and low-income assistance; and (vii) a detailed affiliate code of conduct to govern relationships between the regulated utility and its affiliates. The Company faces a number of challenges which could negatively impact its operations and financial results. The primary challenge is the risk of increased costs, including the risk of additional or unanticipated costs at Palo Verde resulting from (i) increases in operation and maintenance expenses; (ii) the possible replacement of steam generators; (iii) an extended outage of any of the Palo Verde units; (iv) increases in estimates of decommissioning costs; (v) the storage of radioactive materials; and (vi) compliance with the various requirements and regulations governing commercial nuclear generating stations. At the same time, the Company's revenues, which have been reduced from previous levels as a result of the New Mexico Settlement and the Texas Settlement Agreement, are effectively capped. There can be no assurance that the Company's revenues will be sufficient to recover any increased costs, including any such increased costs in connection with Palo Verde or increases in other costs of operation, whether as a result of higher than anticipated levels of inflation, changes in tax laws or regulatory requirements, or other causes. Another risk to the Company's operations is the potential loss of customers. The Company's wholesale and large retail customers have, in varying degrees, additional alternate sources of economical power, including co-generation of electric power. For example, a 504 MW combined-cycle generating plant located in Samalayuca, Chihuahua, Mexico, which became fully operational at the end of 1998, gave CFE the current capacity to supply electricity to portions of northern Chihuahua, including the geographic area previously served by the Company. In addition, the New Mexico State Legislature has passed legislation which purportedly gives Las Cruces the authority to condemn the Company's distribution system and related assets located within its city limits. On February 26, 1999, Las Cruces filed its eminent domain proceeding. If Las Cruces succeeds in its efforts, the Company could lose its Las Cruces customer base, which currently represents approximately 8% of annual operating revenues, although the Company would receive "just compensation" as established by the court. If the Company loses a significant portion of its retail customer base or wholesale sales, the Company may not be able to replace such revenues through either the addition of new customers or an increase in rates to remaining customers. 18 In recent years, the United States has closed a large number of military bases. The Company's sales to military bases represent approximately 3% of annual operating revenues. While there can be no assurance that Holloman Air Force Base ("Holloman"), White Sands Missile Range ("White Sands") or the United States Army Air Defense Center at Fort Bliss ("Ft. Bliss") will not be closed in the future or that the Company will not lose all or some of its military base sales, the Company currently has long-term contracts with all three military bases that it serves. The Company signed a contract with Ft. Bliss in December 1998, under which Ft. Bliss will take service from the Company through December 2008. The Company has a contract to provide retail electric service to Holloman for a ten-year term which began in December 1995. In May 1999, the Army and the Company entered into a new ten-year contract to provide retail electric service to White Sands. The electric utility industry in general is facing significant challenges and increased competition as a result of changes in federal provisions relating to third-party transmission services and independent power production, as well as changes in state laws and regulatory provisions relating to wholesale and retail service. The potential effects of deregulation are particularly important to the Company because its rates are significantly higher than the national and regional averages. In the face of increased competition, there can be no assurance that this competition will not adversely affect the future operations, cash flow, and financial condition of the Company. Liquidity and Capital Resources The Company's principal liquidity requirements for the next several years are expected to consist of interest and principal payments on the Company's indebtedness and capital expenditures related to the Company's generating facilities and transmission and distribution systems. The Company expects that cash flows from operations will be sufficient for such purposes. Long-term capital requirements of the Company will consist primarily of construction of electric utility plant and payment of interest on and retirement of debt. The Company has no current plans to construct any new generating capacity to serve retail load through at least 2004. Utility construction expenditures will consist primarily of expanding and updating the transmission and distribution systems and the cost of capital improvements and replacements at Palo Verde and other generating facilities. The Company anticipates that internally generated funds will be sufficient to meet its construction requirements, provide for the retirement of debt, and enable the Company to meet other contingencies that may exist, such as compliance with environmental regulation, pending litigation, any claims for indemnification, and Year 2000 remediation. At June 30, 1999, the Company had approximately $49.1 million in cash and cash equivalents. In February 1999, the Company renewed its $100 million revolving credit facility, which now provides up to $70 million for nuclear fuel purchases and up to $50 million (depending on the amount of borrowings outstanding for nuclear fuel purchases) for working capital needs. At June 30, 1999, approximately $47.0 million had been drawn for nuclear fuel purchases. No amounts have been drawn on this facility for working capital needs. The Company has a high debt to capitalization ratio and significant debt service obligations. Due to the Texas Rate Stipulation, the Texas Settlement Agreement, the New Mexico Settlement, and competitive pressures, the Company does not expect to be able to raise its base rates in the event of increases in non-fuel costs, increases in fuel costs in New Mexico or loss of revenues. Accordingly, as described below, the reduction of fixed obligations is a high priority for the Company in order to gain additional financial flexibility to address the evolving competitive market. On March 1, 1999, the 19 Company used cash on hand to pay for the early redemption of its Series A Preferred Stock, which resulted in the avoidance of additional cash dividends of approximately $2.7 million that would have occurred through May 1, 1999, and $4.0 million quarterly thereafter until mandatory redemption in 2008. The Company has significantly reduced its long-term debt following its emergence from bankruptcy in 1996. From June 1, 1996 through August 6, 1999, the Company has repurchased approximately $290.5 million of first mortgage bonds as part of an aggressive deleveraging program and repaid the remaining $36.0 million of Series A First Mortgage Bonds at their maturity on February 1, 1999. The foregoing, together with the early redemption of the Series A Preferred Stock, reduced the Company's annual interest expense and annual cash dividend requirements by approximately $25.6 million and $15.9 million, respectively. Common stock equity as a percentage of capitalization has increased from 19% at June 30, 1996 to 33% at June 30, 1999. On May 27, 1999, the Company's Board of Directors approved a stock repurchase program allowing the Company to purchase outstanding shares of its common stock from time to time, up to a total of six million shares. The Company will make purchases primarily in the open market at prevailing prices and will also engage in private transactions, if appropriate. The shares that the Company acquires will be available for issuance under employee benefit and stock option plans or may be retired. As of August 10, 1999, the Company had reacquired 1,022,400 shares of common stock at a cost of approximately $9.2 million, including commissions. The Company continues to believe that the orderly reduction of fixed obligations with a goal of achieving a capital structure that is more typical in the electric utility industry and, ultimately, an investment grade rating, is a significant component of long-term shareholder value creation. Future repurchases of first mortgage bonds and common stock will be evaluated based on market conditions, the availability of cash to meet bond maturities, and the comparative economic value of alternative uses of cash. The degree to which the Company is leveraged could have important consequences on the Company's liquidity, including (i) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate or other purposes could be limited in the future, and (ii) the Company's substantial leverage may place the Company at a competitive disadvantage by limiting its financial flexibility to respond to the demands of the competitive market and make it more vulnerable to adverse economic or business changes. 20 Results of Operations
Net Income Applicable Diluted Earnings Per to Common Stock Before Common Share Before Extraordinary Items Extraordinary Items ------------------------------ ------------------------------ 1999 1998 1999 1998 -------------- -------------- -------------- -------------- (In thousands) Three Months Ended June 30.................... $ 7,038 $10,071 $0.116 $0.166 Six Months Ended June 30...................... 4,313 17,063 0.071 0.282 Twelve Months Ended June 30................... 29,616 42,933 0.489 0.710
Results of operations for the six and twelve months ended June 30, 1999 were affected by unusual or infrequent items, including the recognition of certain items arising from the Texas Settlement Agreement, a change in estimated fuel cost reserves, and the early redemption of the Company's 11.40% Series A Preferred Stock. Operating revenues net of energy expenses decreased $7.6 million for the three months ended June 30, 1999 compared to the same period last year primarily due to the rate reductions in Texas and New Mexico, the loss of sales to CFE, and decreased retail kWh sales due to mild weather. Operating revenues net of energy expenses decreased $8.9 million and $1.4 million for the six and twelve months ended June 30, 1999, respectively, compared to the same periods last year, as follows (In thousands):
Six Months Ended June 30: 1999 1998 Increase/(Decrease) - ------------------------- ---- ---- ------------------- Texas Settlement Agreement: Palo Verde performance reward.......... $ 3,453 $ - $ 3,453 Retroactive base rate decrease......... (2,343) - (2,343) Change in estimated fuel cost reserves... 3,754 - 3,754 Other.................................... 208,673 222,428 (13,755) -------- -------- --------- Total operating revenues net of energy expenses............... $213,537 $222,428 $ (8,891) ======== ======== ========= Twelve Months Ended June 30: 1999 1998 Increase/(Decrease) - ----------------------------- ---- ---- ------------------- Texas Settlement Agreement: Palo Verde performance reward.......... $ 3,453 $ - $ 3,453 Change in estimated fuel cost reserves... 3,754 - 3,754 Other.................................... 456,063 464,656 (8,593) -------- -------- --------- Total operating revenues net of energy expenses............... $463,270 $464,656 $ (1,386) ======== ======== =========
Excluding the effects of the recognition of the Palo Verde performance reward, the retroactive base rate decrease, and the change in estimated fuel cost reserves, the six month decrease of $13.8 million was primarily due to the rate reductions in Texas and New Mexico, the loss of sales to CFE, and decreased retail kWh sales due to mild weather. These decreases were partially offset by increased economy sales at higher margins. Excluding the recognition of the Palo Verde performance reward and the change in estimated fuel cost reserves, the twelve month decrease of $8.6 million was primarily due to the rate reductions in Texas and New Mexico and the loss of sales to CFE. These decreases were partially offset by increased retail kWh sales and increased economy sales at higher margins. 21 Operating revenues from retail customers shown below include the recognition of the Palo Verde performance reward and the effects of the change in estimated fuel cost reserves for the six and twelve month periods ended June 30, 1999. Also included in the six month period is the effect of the retroactive base rate decrease. Comparisons of kWh sales and operating revenues are shown below (In thousands):
Increase/(Decrease) ------------------- Three Months Ended June 30: 1999 1998 Amount Percent - --------------------------- ---- ---- ------ ------- Electric kWh Sales: Retail Customers........................ 1,417,621 1,439,329 (21,708) (1.5)% Other Utilities......................... 225,163 469,239 (244,076) (52.0) (1) ---------- ---------- --------- Total.................................. 1,642,784 1,908,568 (265,784) (13.9) ========== ========== ========= Operating Revenues: Retail Customers........................ $ 115,866 $ 121,396 $ (5,530) (4.6)% Other Utilities......................... 16,856 25,007 (8,151) (32.6) (2) ---------- ---------- --------- Total.................................. $ 132,722 $ 146,403 $ (13,681) (9.3) ========== ========== ========= Increase/(Decrease) ------------------- Six Months Ended June 30: 1999 1998 Amount Percent - ------------------------- ---- ---- ------ ------- Electric kWh Sales: Retail Customers........................ 2,740,133 2,765,403 (25,270) (0.9)% Other Utilities......................... 372,423 928,573 (556,150) (59.9) (1) ---------- ---------- --------- Total.................................. 3,112,556 3,693,976 (581,420) (15.7) ========== ========== ========= Operating Revenues: Retail Customers........................ $ 226,612 $ 232,135 $ (5,523) (2.4)% Other Utilities......................... 35,979 51,213 (15,234) (29.7) (2) ---------- ---------- --------- Total.................................. $ 262,591 $ 283,348 $ (20,757) (7.3) ========== ========== ========= Increase/(Decrease) ------------------- Twelve Months Ended June 30: 1999 1998 Amount Percent - ----------------------------- ---- ---- ------ ------- Electric kWh Sales: Retail Customers........................ 5,922,951 5,869,776 53,175 0.9% Other Utilities......................... 1,201,730 1,943,469 (741,739) (38.2) (1) ---------- ---------- --------- Total.................................. 7,124,681 7,813,245 (688,564) (8.8) ========== ========== ========= Operating Revenues: Retail Customers........................ $ 492,307 $ 496,688 $ (4,381) (0.9)% Other Utilities......................... 89,157 100,566 (11,409) (11.3) (2) ---------- ---------- --------- Total.................................. $ 581,464 $ 597,254 $ (15,790) (2.6) ========== ========== =========
(1) Primarily due to the loss of sales to CFE. (2) Primarily due to the loss of sales to CFE partially offset by increased economy sales at higher margins. 22 Other operations and maintenance expense increased $3.8 million for the three months ended June 30, 1999 compared to the same period last year due to increased maintenance expense of $3.6 million and increased operations expense of $0.3 million, as follows (In thousands):
Three Months Ended June 30: 1999 1998 Increase/(Decrease) - --------------------------- ---- ---- ------------------- Generation and transmission operations expense................................ $ 2,053 $ 1,073 $ 980 Regulatory expense....................... 551 1,601 (1,050) Other.................................... 29,275 28,949 326 ------- ------- ------- Total other operations expense........ 31,879 31,623 256 ------- ------- ------- Maintenance at Company-owned generating plants...................... 3,850 1,835 2,015 (3) Maintenance at Palo Verde................ 5,108 3,929 1,179 Other.................................... 2,916 2,556 360 ------- ------- ------- Total maintenance expense............. 11,874 8,320 3,554 ------- ------- ------- Total other operations and maintenance expense.............. $43,753 $39,943 $ 3,810 ======= ======= =======
Other operations and maintenance expense increased $2.6 million for the six months ended June 30, 1999 compared to the same period last year due to increased maintenance expense of $4.3 million partially offset by decreased operations expense of $1.7 million, as follows (In thousands):
Six Months Ended June 30: 1999 1998 Increase/(Decrease) - ------------------------- ---- ---- ------------------- Regulatory expense........................ $ 372 $ 3,055 $(2,683) Generation and transmission operations expense................................. 3,858 2,348 1,510 Other..................................... 58,281 58,790 (509) ------- ------- ------- Total other operations expense......... 62,511 64,193 (1,682) ------- ------- ------- Maintenance at Company-owned generating plants....................... 7,497 3,381 4,116 (3) Other..................................... 13,291 13,141 150 ------- ------- ------- Total maintenance expense.............. 20,788 16,522 4,266 ------- ------- ------- Total other operations and maintenance expense............... $83,299 $80,715 $ 2,584 ======= ======= =======
23 Other operations and maintenance expense increased $5.4 million for the twelve months ended June 30, 1999 compared to the same period last year due to increased maintenance expense of $6.8 million partially offset by decreased operations expense of $1.4 million, as follows (In thousands):
Twelve Months Ended June 30: 1999 1998 Increase/(Decrease) - ---------------------------- ---- ---- ------------------- Outside services.......................... $ 7,567 $ 11,424 $(3,857) Regulatory expense........................ 3,360 5,673 (2,313) All employee bonus plan................... 5,606 2,200 3,406 Other..................................... 116,035 114,659 1,376 -------- -------- ------- Total other operations expense......... 132,568 133,956 (1,388) -------- -------- ------- Maintenance at Company-owned generating plants....................... 12,353 6,462 5,891 (3) Insurance settlements..................... - (1,192) 1,192 Other..................................... 26,868 27,195 (327) -------- -------- ------- Total maintenance expense.............. 39,221 32,465 6,756 -------- -------- ------- Total other operations and maintenance expense............... $171,789 $166,421 $ 5,368 ======== ======== =======
(3) Primarily due to scheduled maintenance and overhauls at Company-owned generating plants, including underestimated costs of overhauling a steam generator turbine of $0.4 million, $1.8 million and $2.9 million for the three, six and twelve months ended June 30, 1999, respectively. The New Mexico Settlement charge of $6.3 million for the twelve months ended June 30, 1999 represents the write-off of the book value of undercollected fuel revenues in the Company's New Mexico jurisdiction. Depreciation and amortization expense increased slightly for the three, six and twelve months ended June 30, 1999 compared to the same periods last year due to routine capital additions. Taxes other than income taxes were essentially unchanged for the three, six and twelve months ended June 30, 1999. Other income decreased $0.3 million and $1.5 million for the three and six months ended June 30, 1999, respectively, compared to the same periods last year primarily due to a decrease in investment income of $1.3 million in each period resulting from the investment of lower levels of cash. The three month decrease was partially offset by a gain on disposition of non-utility property of $1.0 million in 1999, with no comparable amount in 1998. Other income decreased $0.1 million for the twelve months ended June 30, 1999 compared to the same period last year primarily due to (i) a decrease in gains realized on disposition of non-utility property of $0.6 million; (ii) increased donations of $0.4 million in 1999 pursuant to the terms of the New Mexico Settlement; and (iii) an increase in other miscellaneous deductions. These decreases were partially offset by an increase in investment income of $1.3 million resulting from the investment of higher levels of cash. Interest charges decreased $1.6 million, $2.5 million and $3.9 million for the three, six and twelve months ended June 30, 1999, respectively, compared to the same periods last year, primarily due to a 24 reduction in outstanding debt as a result of open market purchases and redemptions of the Company's first mortgage bonds. Income tax expense decreased $3.9 million, $3.6 million and $3.6 million for the three, six and twelve months ended June 30, 1999 compared to the same periods last year primarily due to changes in pretax income and certain permanent differences. Extraordinary gain on discharge of debt of $3.3 million for the twelve months ended June 30, 1999, net of income tax expense of $2.1 million, represents unclaimed and undistributed funds designated for the payment of preconfirmation claims which reverted to the Company pursuant to the Company's Fourth Amended Plan of Reorganization, with no comparable amount for the same period in 1998. Extraordinary loss on repurchases of debt of $1.2 million for the three, six and twelve months ended June 30, 1999, net of income tax benefit of $0.8 million, represents the payment of premiums on debt repurchased and the recognition of unamortized issuance expenses on that debt with no comparable amounts for the same periods in 1998. The Company has an Energy Services Business Unit (the "ESBU") which began developing energy efficient products and services in 1997. The ESBU offers customers pricing options, as well as value-added products and services designed to give them greater value for the kWh purchased from the Company. The revenues and expenses related to the operations of the ESBU have not been material to date. Year 2000 Preparedness The Company faces the same concerns regarding the transition to the Year 2000 ("Y2K") as virtually all other companies. During the Y2K transition, computer hardware and software, or equipment with embedded computer chips, may encounter the year 2000 and interpret a two-digit year "00" as 1900, instead of 2000. As a result, equipment and applications that are date sensitive may not properly calculate information or otherwise may not function as intended. Because the Y2K challenge, if not addressed, could directly affect the Company's service reliability, the Company considers it to be of the highest priority. The Company's Y2K mission statement is to "provide for the safe, continuous operation of the Company's electric and business systems during the Y2K transition period." The Company has defined "mission critical" systems as those that could affect service to its customers or could otherwise result in a permanent and substantial loss to the Company, if they fail to function properly. Mission- critical systems have received top priority. As of June 30, 1999, the Company believes all of its mission-critical systems and applications are suitable for continued use into the year 2000 ("Y2K ready" as that term is defined by the North American Electric Reliability Council (the "NERC")) based on the "level 3" rating received during the Department of Energy's (the "DOE") review. All other systems and applications are scheduled to be Y2K ready by December 31, 1999. In late June 1999, the Company conducted a live, integrated test of its primary control and local generating facilities, including the Company's energy management system computer and local power plant and key substation equipment. Internal clocks for equipment included in the test were synchronously forwarded to roll over into the year 2000 and typical, individual operations were then performed to verify that the equipment will operate as expected in a year 2000 environment. All devices 25 handled the rollover without incident and all commands sent from the control computer to remote equipment were executed properly. The integrated test was observed by an assessment team of engineers on behalf of the DOE. Following the test, the DOE team issued the Company a "level 3" rating regarding its state of readiness, asserting that the Company's mission- critical systems and applications met the NERC's definition of Y2K ready. A level 3 rating is the most favorable that could be issued, and was based not only on the successful integrated test, but also on a review of the Company's entire Y2K program. The DOE team reviewed pertinent documentation for the project, queried Company personnel and observed a rerunning of embedded chip tests for digitally-controlled relays. The DOE team has been randomly reviewing 30 small utilities in North America in order to better predict an overall state of readiness. The Company began addressing the Y2K issue during the last quarter of 1996 with a program consisting of four major phases: inventory, assessment, remediation and testing for Y2K readiness. This readiness process was recommended by the NERC. For its mission-critical equipment and applications, the Company has completed each of these phases. For its non-critical equipment and applications, the Company is 100% complete with inventory, 91% complete with assessment and 73% complete with remediation/testing. Overall, the Company is 94% complete with the four-phase process. The Company is actively participating in Y2K planning sessions with other Western System Coordinating Council ("WSCC") members due to the interrelated nature of the Company's electric system and those of other neighboring utilities. WSCC utilities comprise the western United States electric "grid." The Company is monitoring the Y2K readiness status of Palo Verde and Four Corners power plants, for which the Company has joint ownership and which are operated by Arizona Public Service Company ("APS"). APS has reported to the NERC and the Nuclear Regulatory Commission that the mission-critical facilities at each plant are now Y2K ready. In addition, the Company is continuing to assess its financial institutions and critical suppliers to determine their respective states of readiness for the Y2K transition. The Company is scheduled to complete these assessments by September 30, 1999. The Company has provided Y2K information to its customers and community through a public outreach program, and has contacted large industrial customers to ascertain their plans for the transition period. Given the complex nature and uncertainties of the Y2K issue, the Company cannot absolutely assure that it will not experience some outages or operational failures during the Y2K transition period. Further, there are no guarantees that all vendor representations obtained by the Company will prove to be entirely accurate or that testing and remediation procedures employed by the Company will identify and correct 100% of potential Y2K-related problems. There remains a chance that on January 1, 2000 some equipment will not function properly. Therefore, the Company is also preparing contingency and continuity plans. The Company has always prepared for unexpected outages of its facilities (resulting from storms and other natural disasters and failures). Consequently, the Company's existing Emergency Procedure Manual forms the basis for the Company's Y2K Operational Contingency Plan. Procedures to deal with an array of scenarios resulting from the singular or simultaneous failure(s) of elements or systems during the Y2K transition period have also been developed. The Company's Y2K Operational Contingency Plan for its electric system was completed in June 1999. The Company is also developing a Y2K Business Continuity Plan for its business systems and processes that it expects to complete during the fourth quarter of 1999. 26 Failure by the Company to meet the challenges of the Y2K issue could have serious consequences. A malfunction in a system affecting the generation, transmission or distribution of energy to the Company's customers, whether caused by a problem with one of the Company's systems or a system operated by a third party, could result in a disruption of service. The severity and cost of the problem would depend on numerous factors, including the scope and duration of any such disruption. If the disruption is severe enough, the Company's operations and financial condition could be adversely affected, the extent of which cannot be predicted. However, given the completion of all mission critical readiness activities, the successful integrated test of the primary control equipment on the Company's electric system, and the independent verification by the DOE team regarding the Company's state of readiness, the Company does not believe that significant adverse impacts as a result of the Y2K issue are likely to occur. The Company has expensed substantially all costs of its Y2K program. Through June 30, 1999, the Company's expenditures on the Y2K program have been predominantly related to internal labor, diagnostic tools, server upgrades and consultation costs totaling approximately $2.1 million. Costs associated with hardware and software replacements and other technology "refresh" programs that may also remediate non-ready equipment and applications have not been included in the Company's accounting of Y2K expenses. These activities are considered to have been undertaken as part of the normal course of business. Future Y2K expenses, to be incurred through the year 1999, are not expected to exceed an additional $2.3 million and will likely include costs for remediation of non- critical equipment and applications, consultation, independent verification, participation in a September 1999 NERC-sponsored drill, documentation and business continuity planning. Approximately half of all the Company's Y2K program expenses are expected to be internal labor costs. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to market risk due to changes in interest rates, equity prices and commodity prices. See the Company's 1998 Form 10-K, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," for a complete discussion of the market risks faced by the Company and the Company's market risk sensitive assets and liabilities. As of June 30, 1999, there have been no material changes in the market risks faced by the Company or the fair values of assets and liabilities disclosed in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," in the Company's 1998 Form 10-K. 27 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company hereby incorporates by reference the information set forth in Part I of this report under Note G of Notes to Financial Statements. Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareholders of the Company was held May 27, 1999. The total number of common shares outstanding was 60,405,083, of which 55,862,447 were represented in person or by proxy. The following directors were elected to hold office for a three-year term expiring at the annual meeting of shareholders of the Company to be held in 2002: Director Votes For Votes Withheld -------- --------- -------------- James W. Harris 55,563,348 299,099 Kenneth R. Heitz 49,334,811 6,527,636 Michael K. Parks 55,561,001 301,446 Eric B. Siegel 55,553,037 309,410 James Haines 55,555,475 306,972 In addition to the individuals set forth above, the following individuals continued as directors following the meeting: George W. Edwards, Jr., Ramiro Guzman, Stephen Wertheimer, Charles A. Yamarone, Wilson K. Cadman, James A. Cardwell, James W. Cicconi and Patricia Z. Holland-Branch. The Board of Directors recommended and shareholders voted to approve the Company's 1999 Long-Term Incentive Plan, which authorized the issuance of up to two million shares of common stock for the benefit of directors, officers, managers, other employees and consultants through the award or grant of non- statutory stock options, incentive stock options, stock appreciation rights, restricted stock, bonus stock and performance stock. Shares voted in favor of approving the plan were 45,859,614 and shares voted against were 9,902,312. There were 100,521 abstentions. See Part I, Item 1, "Financial Statements - Note C of Notes to Financial Statements." No other matters were voted on at the annual meeting of shareholders. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: See Index to Exhibits incorporated herein by reference. (b) Reports on Form 8-K: None 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EL PASO ELECTRIC COMPANY By: /s/ Gary R. Hedrick ------------------------------------------ Gary R. Hedrick Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) Dated: August 13, 1999 29 EL PASO ELECTRIC COMPANY INDEX TO EXHIBITS Exhibit Number Exhibit ------ ------- 10.05 Stock Option Agreement, dated as of April 26, 1999, with James S. Haines, Jr. 10.06 Stock Option Agreement, dated as of May 28, 1999, with Helen Knopp. +10.07 Form of Directors' Restricted Stock Award Agreement between the Company and certain directors of the Company. 10.08 Stock Option Agreement, dated as of July 1, 1999, with Wilson K. Cadman. 10.09 Amendment No. 6, dated June 17, 1999, to the Southwest New Mexico Transmission Project Participation Agreement, dated April 11, 1977, between Public Service Company of New Mexico, Community Public Service Company and the Company, and Amendments 1 through 5 thereto. (Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995) 11 Statement re Computation of Per Share Earnings 15 Letter re Unaudited Interim Financial Information 27 Financial Data Schedule (EDGAR filing only) 99.01 Final Order, entered June 8, 1999, by the Public Utility Commission of Texas. + Agreements substantially identical in all material respects to this Exhibit have been entered into with George W. Edwards, Jr.; Ramiro Guzman; James W. Harris; Kenneth R. Heitz; James W. Cicconi; Patricia Z. Holland-Branch; Michael K. Parks; Eric B. Siegel; Stephen Wertheimer; Charles A. Yamarone; James A. Cardwell; and Wilson K. Cadman, directors of the Company. In addition, in lieu of non-employee director compensation, agreements substantially identical in all material respects to this Exhibit have been entered into with Patricia Z. Holland- Branch; Stephen Wertheimer; and Charles Yamarone, directors of the Company. 30 EX-10.05 2 STOCK OPTION AGREEMENT, AS OF 4/26/1999 EXHIBIT 10.05 EL PASO ELECTRIC COMPANY STOCK OPTION AGREEMENT FOR EMPLOYEES (NON-QUALIFIED STOCK OPTIONS) El Paso Electric Company, a Texas corporation (the "Company"), hereby ------- grants to James S. Haines, Jr. (the "Optionee") as of March 18, 1999 (the "Option Date"), pursuant to the provisions of the El Paso Electric Company 1996 - ------------ Long-Term Incentive Plan (the "Plan"), a non-qualified option to purchase from ---- the Company (the "Option") 50,000 shares of its Common Stock, no par value ("Stock"), at the price of $7.3750 per share upon and subject to the terms and - ------- conditions set forth below. 1. Option Subject to Acceptance of Agreement. The Option shall be ----------------------------------------- null and void unless the Optionee shall accept this Agreement by executing it in the space provided below and returning such original execution copy to the Company. 2. Time and Manner of Exercise of Option. ------------------------------------- 2.1. Maximum Term of Option. In no event may the Option be ---------------------- exercised, in whole or in part, after March 17, 2009 (the "Expiration Date"). --------------- 2.2. Exercise of Option. (a) Except as otherwise provided by ------------------ Sections 2.2(b) and 2.2(c) hereof and by Section 6.8 of the Plan, the Option shall become exercisable on March 18, 1999. (b) If the Optionee's employment by the Company terminates by reason of "Total Disability", the Option may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 120 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. (c) If the Optionee's employment by the Company terminates by reason of voluntary retirement, the Option may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 120 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. (d) If the Optionee's employment by the Company terminates by reason of death, the Option may thereafter be exercised by the Optionee or the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is 120 days after the date of death and (ii) the Expiration Date. (e) If the Optionee's employment by the Company terminates for any reason other than "Total Disability", retirement or death, the Option may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 120 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. (f) If the Optionee dies during the period set forth in Section 2.2(b) following termination of employment by reason of "Total Disability", or if the Optionee dies during the period set forth in Section 2.2(c) following termination of employment, by reason of voluntary retirement, or if the Optionee dies during the period set forth in Section 2.2(e) following termination of employment for any reason other than "Total Disability" or retirement, the Option may thereafter be exercised by the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is 120 days after the date of death and (ii) the Expiration Date. 2.3 Method of Exercise. Subject to the limitations set forth in this ------------------ Agreement, the Option may be exercised by the Optionee (1) by giving written notice to the Company specifying the number of whole shares of Stock to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of previously owned whole shares of Stock (which the Optionee has held for at least six months prior to the delivery of such shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable pursuant to the Option by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing such documents as the Company may reasonably request. The Committee may disapprove an election pursuant to any of clauses (ii) - (iv) if the Committee determines, based on the opinion of recognized securities counsel, that the method of exercise so elected would result in liability to the Optionee under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the regulations promulgated thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a share of Stock shall be delivered until the full purchase price therefor has been paid. 2.4 Termination of Option. (a) In no event may the Option be --------------------- exercised after it terminates as set forth in this Section 2.4. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, on the Expiration Date. (b) In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, cancelled or forfeited, the Optionee shall, upon the Company's request, promptly return this Agreement to the Company for -2- full or partial cancellation, as the case may be. Such cancellation shall be effective regardless of whether the Optionee returns this Agreement. If the Optionee continues to have rights to purchase shares of Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of this Agreement to the Company, either (i) mark this Agreement to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the Optionee a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Agreement in form and substance. 2.5 Dividend Equivalents. The Company hereby grants to Optionee --------------------- 50,000 dividend equivalents (the "Dividend Equivalents"). Each Dividend Equivalent shall entitle Optionee to receive a cash payment on each dividend payment date after March 18, 1999 equal to the product of (i) of the amount any dividend declared with respect to a share of Stock and (ii) the number of shares of Stock subject to unexercised Non-Qualified Options hereunder that have not expired or terminated on the date of payment of such dividend. 3. Additional Terms and Conditions of Option. ----------------------------------------- 3.1. Nontransferability of Option. The Option may not be transferred ---------------------------- by the Optionee other than (i) by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be set forth in an amendment to this Agreement. Except to the extent permitted by the foregoing sentence, during the Optionee's lifetime the Option is exercisable only by the Optionee or the Optionee's Legal Representative. Except to the extent permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 3.2. Investment Representation. The Optionee hereby represents and ------------------------- covenants that (a) any share of Stock purchased upon exercise of the Option will be purchased for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities ---------- Act"), unless such purchase has been registered under the Securities Act and any - --- applicable state securities laws; (b) any subsequent sale of any such shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Optionee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of purchase of any shares hereunder or (y) is true and correct as of the date of any sale of any such shares, as applicable. As a further condition precedent to any exercise of the Option, the Optionee shall comply with all regulations and requirements of any regulatory -3- authority having control of or supervision over the issuance or delivery of the shares and, in connection therewith, shall execute any documents which the Board or the Committee shall in its sole discretion deem necessary or advisable. 3.3. Withholding Taxes. (a) As a condition precedent to the ----------------- delivery of Stock upon exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in addition to the purchase price of the shares, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to --------------------- such exercise of the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Optionee. (b) The Optionee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company of previously owned whole shares of Stock (which the Optionee has held for at least six months prior to the delivery of such shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), equal to the Required Tax Payments, (3) -------- authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the Optionee upon exercise of the Option having a Fair Market Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a cash payment by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The Committee may disapprove an election pursuant to any of clauses (2)-(5) if the Committee determines, based on the opinion of recognized securities counsel, that the method so elected would result in liability to the Optionee under Section 16(b) of the Exchange Act or the regulations promulgated thereunder. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a share of Stock which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a share of Stock shall be delivered until the Required Tax Payments have been satisfied in full. 3.4 Adjustment. In the event of any stock split, stock dividend, ---------- recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of securities subject to the Option and the purchase price per security shall be appropriately adjusted by the Committee without an increase in the aggregate purchase price. If any adjustment would result in a fractional security being subject to the Option, the Company shall pay the Optionee, in connection with the first exercise of the Option, in whole or in part, occurring after such adjustment, an amount in cash determined by -4- multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the exercise price of the Option. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.5. Compliance with Applicable Law. The Option is subject to the ------------------------------ condition that if the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 3.6. Delivery of Certificates. Upon the exercise of the Option, in ------------------------ whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.3. 3.7. Option Confers No Rights as Stockholder. The Optionee shall not --------------------------------------- be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until purchased and delivered upon the exercise of the Option, in whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered shares; and the Optionee shall not be considered a stockholder of the Company with respect to any such shares not so purchased and delivered. 3.8. Option Confers No Rights to Continued Employment. In no event ------------------------------------------------ shall the granting of the Option or its acceptance by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company. 3.9. Decisions of Board or Committee. The Board or the Committee ------------------------------- shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 3.10. Company to Reserve Shares. The Company shall at all times ------------------------- prior to the expiration or termination of the Option reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Option from time to time. -5- 3.11. Agreement Subject to the Plan. This Agreement is subject to ----------------------------- the provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. ------------------------ 4.1. Designation as Nonqualified Stock Option. The Option is hereby ---------------------------------------- designated as not constituting an "incentive stock option" within meaning of section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this Agreement shall be interpreted and treated consistently with such designation. 4.2. Meaning of Certain Terms. As used herein, the term "Legal ------------------------ ----- Representative" shall include an executor, administrator, legal representative, - -------------- guardian or similar person and the term "Permitted Transferee" shall include any -------------------- transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation procedures approved by the Company. 4.3. Successors. This Agreement shall be binding upon and inure to ---------- the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 4.4. Notices. All notices, requests or other communications provided ------- for in this Agreement shall be made, if to the Company, to Kayser Building, 100 North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to the Optionee, to 720 Wakefield, El Paso, TX 79922. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 4.5. Governing Law. This Agreement, the Option and all ------------- determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Texas and construed in accordance therewith without giving effect to principles of conflicts of laws. -6- 4.6. Counterparts. This Agreement may be executed in two ------------ counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. EL PASO ELECTRIC COMPANY By: /s/ Kenneth R. Heitz ----------------------------- Name: Kenneth R. Heitz Title: Director Accepted this 26th day of April, 1999. /s/ James S. Haines, Jr. - -------------------------------------- James S. Haines, Jr. -7- EX-10.06 3 STOCK OPTION AGREEMENT, AS OF 5/28/1999 EXHIBIT 10.06 EL PASO ELECTRIC COMPANY STOCK OPTION AGREEMENT (INCENTIVE STOCK OPTIONS) El Paso Electric Company, a Texas corporation (the "Company"), hereby ------- grants to Helen Knopp (the "Optionee") as of April 30, 1999 (the "Option Date"), ----------- pursuant to the provisions of the El Paso Electric Company 1996 Long-Term Incentive Plan (the "Plan"), an option to purchase from the Company (the ---- "Option") 61,535 shares of its Common Stock, no par value ("Stock"), at the ----- price of $8.125 per share upon and subject to the terms and conditions set forth below. 1. Option Subject to Acceptance of Agreement. The Option shall be ----------------------------------------- null and void unless the Optionee shall accept this Agreement by executing it in the space provided below and returning such original execution copy to the Company. 2. Time and Manner of Exercise of Option. ------------------------------------- 2.1. Maximum Term of Option. In no event may the Option be ---------------------- exercised, in whole or in part, after January 2, 2009 (the "Expiration Date"). --------------- "Any vested Option which has not bee exercised by Optionee or Optionee's Legal Representative by the Expiration Date shall be forfeited." 2.2. Exercise of Option. (a) Except as otherwise provided by ------------------ Sections 2.2(b) through (g) hereof and by Section 6.8 of the Plan, the Option shall vest and become exercisable ratably over a period of five (5) years from the date hereof as follows:
Date Exercisable No. of Shares Exercisable -------------------- --------------------------------- January 2, 2000 12,307 January 2, 2001 12,307 January 2, 2002 12,307 January 2, 2003 12,307 January 2, 2004 12,307
(b) Notwithstanding anything in this Agreement to the contrary, if a Triggering Event (as such term is defined in that certain Employment Agreement dated April 30, 1999, by and between the Company and Optionee, the "Employment Agreement") shall occur, then all unvested Options shall immediately vest and become exercisable in full and may be exercised by Optionee at any time prior to the Expiration Date. (c) If the Optionee's employment by the Company terminates by reason of Total Disability (as such term is defined in that certain Employment Agreement), the Option shall be exercisable only to the extent it is vested and exercisable on the effective date of the Optionee's termination of employment and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 90 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (d) If the Optionee's employment by the Company terminates by reason of retirement, (as such term is defined in the Employment Agreement) the Option shall be exercisable only to the extent it is vested and exercisable on the effective date of the Optionee's termination of employment and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 90 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (e) If the Optionee's employment by the Company terminates by reason of death, the Option shall be exercisable only to the extent it is vested and exercisable on the date of death and may thereafter be exercised by the Optionee or the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is 90 days after the date of death and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (f) If the Optionee's employment by the Company terminates for any reason other than Total Disability, retirement or death, the Option shall be vested and exercisable only to the extent it is vested and exercisable on the effective date of the Optionee's termination of employment and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 90 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (g) If the Optionee dies during the period set forth in Section 2.2(b) following termination of employment by reason of Total Disability, or if the Optionee dies during the period set forth in Section 2.2(c) following termination of employment, or if the Optionee dies during the period set forth in Section 2.2(e) following termination of employment for any reason other than Total Disability or retirement, the Option shall be exercisable only to the extent it is vested and exercisable on the date of death and may thereafter be exercised by the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is 90 days after the date of death and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." 2.3 Method of Exercise. Subject to the limitations set forth in this ------------------ Agreement, the Option may be exercised by the Optionee (1) by giving written notice to the Company specifying the number of whole shares of Stock to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of previously owned whole shares of Stock (which the Optionee has held for at least six months prior to the delivery -2- of such shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a fair market value ("Fair Market Value",) determined as of the date of ------------------- exercise, equal to the aggregate purchase price payable pursuant to the Option by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing such documents as the Company may reasonably request. The Compensation Committee of the Board of Directors of the Company (the "Committee") may disapprove an election pursuant to any of clauses (ii) - (iv) if the Committee determines, based on the opinion of recognized securities counsel, that the method of exercise so elected would result in liability to the Optionee under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the regulations -------------- promulgated thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a share of Stock shall be delivered until the full purchase price therefor has been paid. 2.4 Termination of Option. (a) In no event may the Option be --------------------- exercised after it terminates as set forth in this Section 2.4. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, on the Expiration Date. (b) In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, canceled or forfeited, the Optionee shall, upon the Company's request, promptly return this Agreement to the Company for full or partial cancellation, as the case may be. Such cancellation shall be effective regardless of whether the Optionee returns this Agreement. If the Optionee continues to have rights to purchase shares of Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of this Agreement to the Company, either (i) mark this Agreement to indicate the extent to which the Option has expired or been exercised, canceled or forfeited or (ii) issue to the Optionee a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Agreement in form and substance. 3. Additional Terms and Conditions of Option. ----------------------------------------- 3.1. Nontransferability of Option. The Option may not be transferred ---------------------------- by the Optionee other than (i) by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be set forth in an amendment to this Agreement. Except to the extent permitted by the foregoing sentence, during the Optionee's lifetime the Option is exercisable only by the Optionee or the Optionee's Legal Representative. Except to the extent permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. -3- 3.2. Investment Representation. The Optionee hereby represents and ------------------------- covenants that (a) any share of Stock purchased upon exercise of the Option will be purchased for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities ---------- Act"), unless such purchase has been registered under the Securities Act and any - --- applicable state securities laws; (b) any subsequent sale of any such shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Optionee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of purchase of any shares hereunder or (y) is true and correct as of the date of any sale of any such shares, as applicable. As a further condition precedent to any exercise of the Option, the Optionee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the shares and, in connection therewith, shall execute any documents which the Board or the Committee shall in its sole discretion deem necessary or advisable. 3.3. Withholding Taxes. (a) As a condition precedent to the ----------------- delivery of Stock upon exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in addition to the purchase price of the shares, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to --------------------- such exercise of the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Optionee. (b) The Optionee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company of previously owned whole shares of Stock (which the Optionee has held for at least six months prior to the delivery of such shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), equal to the Required Tax Payments, (3) -------- authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the Optionee upon exercise of the Option having a Fair Market Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a cash payment by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The Committee may disapprove an election pursuant to any of clauses (2)-(5) if the Committee determines, based on the opinion of recognized securities counsel, that the method so elected would result in liability to the Optionee under Section 16(b) of the Exchange Act or the regulations promulgated thereunder. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a share of Stock -4- which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a share of Stock shall be delivered until the Required Tax Payments have been satisfied in full. 3.4 Adjustment. In the event of any stock split, stock dividend, ---------- recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of securities subject to the Option and the purchase price per security shall be appropriately adjusted by the Committee without an increase in the aggregate purchase price. If any adjustment would result in a fractional security being subject to the Option, the Company shall pay the Optionee, in connection with the first exercise of the Option, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the exercise price of the Option. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.5. Compliance with Applicable Law. The Option is subject to the ------------------------------ condition that if the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 3.6. Delivery of Certificates. Upon the exercise of the Option, in ------------------------ whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.3. 3.7. Option Confers No Rights as Stockholder. The Optionee shall not --------------------------------------- be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until purchased and delivered upon the exercise of the Option, in whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered shares; and the Optionee shall not be considered a stockholder of the Company with respect to any such shares not so purchased and delivered. 3.8. Option Confers No Rights to Continued Employment. In no event ------------------------------------------------ shall the granting of the Option or its acceptance by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company. 3.9. Decisions of Board or Committee. The Board or the Committee ------------------------------- shall have the right to resolve all questions which may arise in connection with the -5- Option or its exercise. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 3.10. Company to Reserve Shares. The Company shall at all times ------------------------- prior to the expiration or termination of the Option reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Option from time to time. 3.11. Agreement Subject to the Plan. This Agreement is subject to ----------------------------- the provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. ------------------------ 4.1. Designation as an Incentive Stock Option. The Option is hereby ---------------------------------------- designated as constituting an "incentive stock option" within meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this Agreement shall be interpreted and treated consistently with such designation. 4.2. Meaning of Certain Terms. As used herein, the term "Legal ------------------------ ----- Representative" shall include an executor, administrator, legal representative, - -------------- guardian or similar person and the term "Permitted Transferee" shall include any -------------------- transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation procedures approved by the Company. 4.3. Successors. This Agreement shall be binding upon and inure to ---------- the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 4.4. Notices. All notices, requests or other communications provided ------- for in this Agreement shall be made, if to the Company, to Kayser Building, 100 North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to the Optionee, to Helen Knopp, 5756 Box Elder, El Paso, Texas 79932. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 4.5. Governing Law. This Agreement, the Option and all ------------- determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the -6- laws of the United States, shall be governed by the laws of the State of Texas and construed in accordance therewith without giving effect to principles of conflicts of laws. 4.6. Counterparts. This Agreement may be executed in two ------------ counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. EL PASO ELECTRIC COMPANY By: /s/ James Haines ------------------------------------ Name: James Haines Title: Chief Executive Officer and President Accepted this 28th day of May, 1999 /s/ Helen Knopp - ---------------------------------- Helen Knopp -7- EL PASO ELECTRIC COMPANY STOCK OPTION AGREEMENT FOR EMPLOYEES (NON-QUALIFIED STOCK OPTIONS) El Paso Electric Company, a Texas corporation (the "Company"), hereby ------- grants to Helen Knopp (the "Optionee") as of April 30, 1999 (the "Option Date"), -------- ----------- pursuant to the provisions of the El Paso Electric Company 1996 Long-Term Incentive Plan (the "Plan"), a non-qualified option to purchase from the Company ---- (the "Option") 38,465 shares of its Common Stock, no par value ("Stock"), at the ----- price of $8.125 per share upon and subject to the terms and conditions set forth below. 1. Option Subject to Acceptance of Agreement. The Option shall be ----------------------------------------- null and void unless the Optionee shall accept this Agreement by executing it in the space provided below and returning such original execution copy to the Company. 2. Time and Manner of Exercise of Option. ------------------------------------- 2.1. Maximum Term of Option. In no event may the Option be ---------------------- exercised, in whole or in part, after January 2, 2009 (the "Expiration Date"). --------------- "Any vested Option which has not been exercised by Optionee or Optionee's Legal Representative by the Expiration Date shall be forfeited." 2.2. Exercise of Option. (a) Except as otherwise provided by ------------------ Sections 2.2(b) through (g) hereof and by Section 6.8 of the Plan, the Option shall vest and become exercisable ratably over a period of five (5) years from the date hereof as follows:
Date Exercisable No. of Shares Exercisable -------------------- --------------------------------- January 2, 2000 7,693 January 2, 2001 7,693 January 2, 2002 7,693 January 2, 2003 7,693 January 2, 2004 7,693
(b) Notwithstanding anything in this Agreement to the contrary, if a Triggering Event (as such term is defined in that certain Employment Agreement dated April 30, 1999 by and between the Company and Optionee, the "Employment Agreement") shall occur, then all unvested Options shall immediately vest and become exercisable in full and may be exercised by Optionee at any time prior to the Expiration Date. (c) If the Optionee's employment by the Company terminates by reason of Total Disability (as such term is defined in the Employment Agreement), the Option shall be exercisable only to the extent it is vested and exercisable on the effective date of the Optionee's termination of employment and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 120 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (d) If the Optionee's employment by the Company terminates by reason of retirement, the Option shall be exercisable only to the extent it is vested and exercisable on the effective date of the Optionee's termination of employment and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 120 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (e) If the Optionee's employment by the Company terminates by reason of death, the Option shall be exercisable only to the extent it is vested and exercisable on the date of death and may thereafter be exercised by the Optionee or the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is 120 days after the date of death and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (f) If the Optionee's employment by the Company terminates for any reason other than Total Disability, retirement or death, the Option shall be exercisable only to the extent it is vested and exercisable on the effective date of the Optionee's termination of employment and may thereafter be exercised by the Optionee or the Optionee's Legal Representative until and including the earliest to occur of (i) the date which is 120 days after the effective date of the Optionee's termination of employment and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." (g) If the Optionee dies during the period set forth in Section 2.2(b) following termination of employment by reason of Total Disability, or if the Optionee dies during the period set forth in Section 2.2(c) following termination of employment, or if the Optionee dies during the period set forth in Section 2.2(e) following termination of employment for any reason other than Total Disability or retirement, the Option shall be exercisable only to the extent it is vested and exercisable on the date of death and may thereafter be exercised by the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is 90 days after the date of death and (ii) the Expiration Date. "Any Option which has not vested as of the effective date of Optionee's termination of employment shall be forfeited." 2.3 Method of Exercise. Subject to the limitations set forth in this ------------------ Agreement, the Option may be exercised by the Optionee (1) by giving written notice to the Company specifying the number of whole shares of Stock to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of previously owned whole -2- shares of Stock (which the Optionee has held for at least six months prior to the delivery of such shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a fair market value ("Fair Market Value"), determined as of ----------------- the date of exercise, equal to the aggregate purchase price payable pursuant to the Option by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing such documents as the Company may reasonably request. The Compensation Committee of the Board of Directors of the Company (the "Committee") may disapprove an election pursuant to any of clauses (ii) - (iv) if the Committee determines, based on the opinion of recognized securities counsel, that the method of exercise so elected would result in liability to the Optionee under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), -------------- or the regulations promulgated thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a share of Stock shall be delivered until the full purchase price therefor has been paid. 2.4 Termination of Option. (a) In no event may the Option be --------------------- exercised after it terminates as set forth in this Section 2.4. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, on the Expiration Date. (b) In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, cancelled or forfeited, the Optionee shall, upon the Company's request, promptly return this Agreement to the Company for full or partial cancellation, as the case may be. Such cancellation shall be effective regardless of whether the Optionee returns this Agreement. If the Optionee continues to have rights to purchase shares of Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of this Agreement to the Company, either (i) mark this Agreement to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the Optionee a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Agreement in form and substance. 3. Additional Terms and Conditions of Option. ----------------------------------------- 3.1. Nontransferability of Option. The Option may not be transferred ---------------------------- by the Optionee other than (i) by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be set forth in an amendment to this Agreement. Except to the extent permitted by the foregoing sentence, during the Optionee's lifetime the Option is exercisable only by the Optionee or the Optionee's Legal Representative. Except to the extent permitted by the foregoing, the Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, -3- transfer, assign, pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and all rights hereunder shall immediately become null and void. 3.2. Investment Representation. The Optionee hereby represents and ------------------------- covenants that (a) any share of Stock purchased upon exercise of the Option will be purchased for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities ---------- Act"), unless such purchase has been registered under the Securities Act and any - --- applicable state securities laws; (b) any subsequent sale of any such shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Optionee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of purchase of any shares hereunder or (y) is true and correct as of the date of any sale of any such shares, as applicable. As a further condition precedent to any exercise of the Option, the Optionee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the shares and, in connection therewith, shall execute any documents which the Board or the Committee shall in its sole discretion deem necessary or advisable. 3.3. Withholding Taxes. (a) As a condition precedent to the ----------------- delivery of Stock upon exercise of the Option, the Optionee shall, upon request by the Company, pay to the Company in addition to the purchase price of the shares, such amount of cash as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the "Required Tax Payments") with respect to --------------------- such exercise of the Option. If the Optionee shall fail to advance the Required Tax Payments after request by the Company, the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Optionee. (b) The Optionee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company of previously owned whole shares of Stock (which the Optionee has held for at least six months prior to the delivery of such shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Option (the "Tax Date"), equal to the Required Tax Payments, (3) -------- authorizing the Company to withhold whole shares of Stock which would otherwise be delivered to the Optionee upon exercise of the Option having a Fair Market Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a cash payment by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The Committee may disapprove an election pursuant to any of clauses (2)-(5) if the Committee determines, based on the opinion of recognized securities counsel, that the method so elected would result in liability to the Optionee under Section 16(b) of the Exchange Act or the regulations promulgated thereunder. Shares of Stock to be -4- delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a share of Stock which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a share of Stock shall be delivered until the Required Tax Payments have been satisfied in full. 3.4 Adjustment. In the event of any stock split, stock dividend, ---------- recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of securities subject to the Option and the purchase price per security shall be appropriately adjusted by the Committee without an increase in the aggregate purchase price. If any adjustment would result in a fractional security being subject to the Option, the Company shall pay the Optionee, in connection with the first exercise of the Option, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the exercise price of the Option. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.5. Compliance with Applicable Law. The Option is subject to the ------------------------------ condition that if the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 3.6. Delivery of Certificates. Upon the exercise of the Option, in ------------------------ whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.3. 3.7. Option Confers No Rights as Stockholder. The Optionee shall not --------------------------------------- be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until purchased and delivered upon the exercise of the Option, in whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered shares; and the Optionee shall not be considered a stockholder of the Company with respect to any such shares not so purchased and delivered. 3.8. Option Confers No Rights to Continued Employment. In no event ------------------------------------------------ shall the granting of the Option or its acceptance by the Optionee give or be deemed to give the Optionee any right to continued employment by the Company. -5- 3.9. Decisions of Board or Committee. The Board or the Committee ------------------------------- shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 3.10. Company to Reserve Shares. The Company shall at all times ------------------------- prior to the expiration or termination of the Option reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Option from time to time. 3.11. Agreement Subject to the Plan. This Agreement is subject to ----------------------------- the provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. ------------------------ 4.1. Designation as Nonqualified Stock Option. The Option is hereby ---------------------------------------- designated as not constituting an "incentive stock option" within meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this ---- Agreement shall be interpreted and treated consistently with such designation. 4.2. Meaning of Certain Terms. As used herein, the term "Legal ------------------------ ----- Representative" shall include an executor, administrator, legal representative, - -------------- guardian or similar person and the term "Permitted Transferee" shall include any -------------------- transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation procedures approved by the Company. 4.3. Successors. This Agreement shall be binding upon and inure to ---------- the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 4.4. Notices. All notices, requests or other communications provided ------- for in this Agreement shall be made, if to the Company, to Kayser Building, 100 North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to the Optionee, to Helen Knopp, 5756 Box Elder, El Paso, Texas 79932. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. -6- 4.5. Governing Law. This Agreement, the Option and all ------------- determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Texas and construed in accordance therewith without giving effect to principles of conflicts of laws. 4.6. Counterparts. This Agreement may be executed in two ------------ counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. EL PASO ELECTRIC COMPANY By: /s/ James Haines ------------------------------------ Name: James Haines Title: Chief Executive Officer and President Accepted this 28th day of May, 1999 /s/ Helen Knopp - -------------------------------- Helen Knopp -7- EX-10.07 4 FORM OF DIRECTORS' RESTRICTED STOCK AWARD AGREEMENT EXHIBIT 10.07 EL PASO ELECTRIC COMPANY DIRECTORS' RESTRICTED STOCK AWARD AGREEMENT El Paso Electric Company, a Texas corporation (the "Company"), hereby grants to ________ (the "Holder"), in accordance with the adopted resolution by the Board of Directors on May 27, 1999, a restricted stock award (the "Award") of _____ shares of the Company's Common Stock, no par value ("Stock"), upon and subject to the restrictions, terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Award Subject to Acceptance of Agreement. The Award shall be null ---------------------------------------- and void unless the Holder shall (a) accept this Agreement by executing it in the space provided below and returning it to the Company and (b) execute and return one or more irrevocable stock powers. As soon as practicable after the Holder has executed this Agreement and such stock power or powers and returned the same to the Company, the Company shall cause to be issued in the Holder's name a stock certificate or certificates representing the total number of shares of Stock subject to the Award. 2. Rights as a Stockholder. The Holder shall have the right to vote ----------------------- the shares of Stock subject to the Award and to receive dividends and other distributions thereon; provided, however, that a dividend or other distribution with respect to shares of Stock (including, without limitation, a stock dividend or stock split), other than a regular cash dividend, shall be delivered to the Company (and the Holder shall, if requested by the Company, execute and return one or more irrevocable stock powers related thereto) and shall be subject to the same restrictions as the shares of Stock with respect to which such dividend or other distribution was made. 3. Custody and Delivery of Certificates Representing Shares. The -------------------------------------------------------- Company shall hold the certificate or certificates representing the shares of Stock subject to the Award until the restrictions on such Award shall have lapsed, in whole or in part, pursuant to Paragraph 4 hereof, and the Company shall as soon thereafter as practicable, subject to Section 5.3, deliver the certificate or certificates for such shares to the Holder and destroy the stock power or powers relating to such shares. If such stock power or powers also relates to shares as to which restrictions remain in effect, the Company may require, as a condition precedent to delivery of any certificate pursuant to this Section 3, the execution and delivery to the Company of one or more stock powers relating to such shares. 4. Restriction Period and Vesting. The restrictions on the Award ------------------------------ shall lapse (i) with respect to all of the shares of Stock subject to the Award at the earlier of May 31, 2000 and the conclusion of the 2000 Annual Meeting of Shareholders of the Company, or (ii) earlier in accordance with Section 6.8 of the Plan (the "Restriction Period"). 5. Additional Terms and Conditions of Award. ---------------------------------------- 5.1. Nontransferability of Award. During the Restriction Period, the --------------------------- shares of Stock subject to the Award as to which restrictions remain in effect may not be transferred by the Holder other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Except to the extent permitted by the foregoing, during the Restriction Period, the shares of Stock subject to the Award as to which restrictions remain in effect may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate or encumber, or otherwise dispose of such shares, the Award shall immediately become null and void. 5.2. Investment Representation. The Holder hereby represents and ------------------------- covenants that (a) any share of Stock acquired upon the lapse of restrictions will be acquired for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), unless such acquisition has been registered under the Securities Act and any applicable state securities law; (b) any subsequent sale of any such shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Holder shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of acquisition of any shares hereunder or (y) is true and correct as of the date of any sale of any such shares, as applicable. As a further condition precedent to the delivery to the Holder of any shares subject to the Award, the Holder shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance of the shares and, in connection therewith, shall execute any documents which the Board or any committee authorized by the Board shall in its sole discretion deem necessary or advisable. 5.3. Withholding Taxes not applicable. 5.4. Adjustment. In the event of any stock split, stock ---------- dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of securities subject to the Award shall be appropriately adjusted by the Committee. If any adjustment would result in a fractional security being subject to the Award, the Company shall pay the Holder in connection with the vesting, if any, of such fractional security, an amount in cash determined by multiplying (i) such fraction (rounded to the nearest hundredth) by (ii) the Fair Market Value on the vesting date. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. -2- 5.5. Compliance with Applicable Law. The Award is subject to the ------------------------------ condition that if the listing, registration or qualification of the shares subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting or delivery of shares hereunder, the shares of Stock subject to the Award may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 5.6. Decisions of Board or Committee. The Board or the Committee ------------------------------- shall have the right to resolve all questions which may arise in connection with the Award. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Plan or this Agreement shall be final, binding and conclusive. 5.7. Agreement Subject to the Plan. This Agreement is subject to the ----------------------------- provisions of the Plan and shall be interpreted in accordance therewith. The Holder hereby acknowledges receipt of a copy of the Plan. 6. Miscellaneous Provisions. ------------------------ 6.1. Successors. This Agreement shall be binding upon and inure to ---------- the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Holder, acquire any rights hereunder in accordance with this Agreement or the Plan. 6.2. Notices. All notices, requests or other communications provided ------- for in this Agreement shall be made, if to the Company, to Kayser Building, 100 North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to the Holder, to ___________________________________. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission, or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. -3- 6.3. Governing Law. This Agreement, the Award and all determinations ------------- made and actions taken pursuant hereto and thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Texas and construed in accordance therewith without giving effect to conflicts of laws principles. 6.4. Counterparts. This Agreement may be executed in two ------------ counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. EL PASO ELECTRIC COMPANY By: /s/ James Haines ----------------------------------- Name: James Haines Title: Chief Executive Officer and President Accepted this ____ day of _________, 1999 - --------------------------------- Holder -4- EX-10.08 5 STOCK OPTION AGREEMENT, AS OF 7/1/99 EXHIBIT 10.08 EL PASO ELECTRIC COMPANY STOCK OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS (Non-Qualified Stock Options) El Paso Electric Company, a Texas corporation (the "Company"), hereby ------- grants to Mr. Wilson K. Cadman (the "Optionee") as of July 1, 1999 (the "Option ------ Date"), in accordance with the adopted resolution by the Board of Directors on - ---- May 27, 1999 pertaining to Non-Employee Directors compensation and by designation made in election form completed by the Director, a non-qualified option (the "Option") to purchase from the Company 2,703 shares of its Common Stock, no par value ("Stock") at the price of $8.9375 per share, upon and ----- subject to the terms and conditions set forth below. 1. Options Subject to Acceptance of Agreement. The Options shall be ------------------------------------------ null and void unless the Optionee shall accept this Agreement by executing it in the space provided below and returning such original execution copy to the Company. 2. Time and Manner of Exercise of Option. ------------------------------------- 2.1. Maximum Term of Option. In no event may the Options be ---------------------- exercised, in whole or in part, after May 29, 2008 (the "Expiration Date"). --------------- 2.2. Exercise of Options. (a) The Options are fully exercisable ------------------- from and after the date hereof. (b) If the Optionee shall cease for any reason to serve as a Director of the Company, the Options may thereafter be exercised by the Optionee or the Optionee's Legal Representative or Permitted Transferees, as the case may be, until and including the earliest to occur of (i) the date which is 120 days after the termination of such person's service on the Board and (ii) the Expiration Date. 2.3 Method of Exercise. Subject to the limitations set forth in ------------------ this Agreement, the Options may be exercised by the Optionee (1) by giving written notice to the Company specifying the Option or Options being exercised, and the number of whole shares of Stock to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of previously owned whole shares of Stock (which the Optionee has held for at least six months prior to the delivery of such shares or which the Optionee purchased on the open market and for which the Optionee has good title, free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable pursuant to the Option by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the Optionee has submitted an irrevocable notice of exercise, (iv) a combination of (i) and (ii), and (2) by executing such documents as the Company may reasonably request. The Committee may disapprove an election pursuant to any of clauses (ii) - (iv) if the Committee determines, based on the opinion of recognized securities counsel, that the method of exercise so elected would result in liability to the Optionee under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the regulations promulgated thereunder. Any fraction of a share of Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the Optionee. No certificate representing a share of Stock shall be delivered until the full purchase price therefor has been paid. 2.4 Termination of Options. (a) In no event may an Option be ---------------------- exercised after it terminates as set forth in this Section 2.4. The Option shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier terminated pursuant to Section 2.2, on the Expiration Date. (b) In the event that rights to purchase all or a portion of the shares of Stock subject to the Option expire or are exercised, cancelled or forfeited, the Optionee shall, upon the Company's request, promptly return this Agreement to the Company for full or partial cancellation, as the case may be. Such cancellation shall be effective regardless of whether the Optionee returns this Agreement. If the Optionee continues to have rights to purchase shares of Stock hereunder, the Company shall, within 10 days of the Optionee's delivery of this Agreement to the Company, either (i) mark this Agreement to indicate the extent to which the Option has expired or been exercised, cancelled or forfeited or (ii) issue to the Optionee a substitute option agreement applicable to such rights, which agreement shall otherwise be substantially similar to this Agreement in form and substance. 3. Additional Terms and Conditions of Option. ----------------------------------------- 3.1. Nontransferability of Options. The Options may not be ----------------------------- transferred by the Optionee other than (i) by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be set forth in an amendment to this Agreement. Except to the extent permitted by the foregoing sentence, during the Optionee's lifetime the Options are exercisable only by the Optionee or the Optionee's Legal Representative. Except to the extent permitted by the foregoing, the Options may not be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of an Option, the Option and all rights hereunder shall immediately become null and void. 3.2. Investment Representation. The Optionee hereby represents ------------------------- and covenants that (a) any share of Stock purchased upon exercise of the Option will be purchased for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities ---------- Act"), unless such purchase has been registered under the Securities Act and any - --- applicable state securities laws; (b) any subsequent sale of any such shares shall be made either -2- pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Optionee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of purchase of any shares hereunder or (y) is true and correct as of the date of any sale of any such shares, as applicable. As a further condition precedent to any exercise of the Option, the Optionee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the shares and, in connection therewith, shall execute any documents which the Board or the Committee shall in its sole discretion deem necessary or advisable. 3.3. Withholding Taxes. Not applicable ----------------- 3.4 Adjustment. In the event of any stock split, stock dividend, ---------- recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of securities subject to the Options and the purchase price per security shall be appropriately adjusted by the Committee without an increase in the aggregate purchase price. If any adjustment would result in a fractional security being subject to the Options, the Company shall pay the Optionee, in connection with the first exercise of the Option, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date over (B) the exercise price of the Option. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive. 3.5. Compliance with Applicable Law. The Options is subject to the ------------------------------ condition that if the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Options may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. 3.6. Delivery of Certificates. Upon the exercise of the Option, in ------------------------ whole or in part, the Company shall deliver or cause to be delivered one or more certificates representing the number of shares purchased against full payment therefor. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery, except as otherwise provided in Section 3.3. -3- 3.7. Options Confer No Rights as Stockholder. The Optionee shall not --------------------------------------- be entitled to any privileges of ownership with respect to shares of Stock subject to the Option unless and until purchased and delivered upon the exercise of an Option, in whole or in part, and the Optionee becomes a stockholder of record with respect to such delivered shares; and the Optionee shall not be considered a stockholder of the Company with respect to any such shares not so purchased and delivered. 3.8. Company to Reserve Shares. The Company shall at all times prior ------------------------- to the expiration or termination of the Options reserve and keep available, either in its treasury or out of its authorized but unissued shares of Stock, the full number of shares subject to the Options from time to time. 3.9. Agreement Subject to the Plan. This Agreement is subject to the ----------------------------- provisions of the Plan and shall be interpreted in accordance therewith. The Optionee hereby acknowledges receipt of a copy of the Plan. 4. Miscellaneous Provisions. ------------------------ 4.1. Designation as Stock Option. The Option is hereby designated as --------------------------- not constituting an "incentive stock option" within meaning of Section 422 of the Internal Revenue Code of 1986, as amended. This Agreement shall be interpreted and treated consistently with such designation. 4.2. Meaning of Certain Terms. As used herein, the term "Legal ------------------------ ----- Representative" shall include an executor, administrator, legal representative, - -------------- guardian or similar person and the term "Permitted Transferee" shall include any -------------------- transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation procedures approved by the Company. 4.3. Successors. This Agreement shall be binding upon and inure to ---------- the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Optionee, acquire any rights hereunder in accordance with this Agreement or the Plan. 4.4. Notices. All notices, requests or other communications provided ------- for in this Agreement shall be made, if to the Company, to Kayser Building, 100 North Stanton, El Paso, Texas 79901, Attention: Corporate Secretary, and if to the Optionee, to 8905 East Douglas Avenue. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery to the party entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing in the United States mails to the last known address of the party entitled thereto or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a -4- notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. 4.5. Governing Law. This Agreement, the Option and all ------------- determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Texas and construed in accordance therewith without giving effect to principles of conflicts of laws. 4.6. Counterparts. This Agreement may be executed in two ------------ counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument. EL PASO ELECTRIC COMPANY By: /s/ James Haines -------------------------------------------- Name: James Haines Title: Chief Executive Officer and President Accepted this 1st day of July, 1999 /s/ Wilson K. Cadman - ------------------------------------- Mr. Wilson K. Cadman -5- EX-10.09 6 SWNMT LETTER AGREEMENT - AMENDMENT #6 EXHIBIT 10.09 SWNMT Amendment #6 TEXAS-NEW MEXICO POWER COMPANY Subject: SWNMT LETTER AGREEMENT - AMENDMENT #6 Public Service Company of New Mexico ("PNM"), Texas-New Mexico Power Company ("TNMP") and El Paso Electric Company ("EPE") (herein individually the "Party" and collectively the "Parties") are parties to the Southwest New Mexico Transmission Project Participation Agreement "SWNMT Agreement", dated April 11, 1977, and amended and supplemented at various times by the Parties. Section 10.0 of the SWNMT Agreement sets forth the terms and conditions under which the Parties may interconnect facilities and/or equipment with the Southwest New Mexico Transmission ("SWNMT") Project. This SWNMT Letter Agreement - Amendment #6 sets forth the terms and conditions under which the Parties agree to the interconnection of TNMP's Hidalgo 345-115 kV autotransformer and associated equipment and agree to supplement the SWNMT Agreement. Texas-New Mexico Power Company formally notified the Parties by letter dated March 5, 1993, of its plans to install a second 345-115 kV 200 MVA autotransformer at Hidalgo Substation. The facilities and particulars for the installation were identified in that letter. The letter specifically stated, "For the immediate future, this second autotransformer shall be considered a de- energized spare for TNMP's existing Hidalgo 345-115 kV, 200 MVA autotransformer". Additionally, the March 5, 1993 letter explained the location and rationale behind the proposed installation plans. The letter also indicated that in the future, the second autotransformer would be electrically interconnected on a continuous basis to the 345 kV bus in accordance with the original plans for expansion of the Hidalgo 345 kV Substation. With the above being known, TNMP requests that the other Parties (PNM and EPE) approve interconnection of the second 345-115 kV, 200 MVA autotransformer in its final configuration (the "New Autotransformer") at the Hidalgo 345 kV Substation. Such an interconnection will require the installation of one (1) 345 kV circuit breaker, two (2) 345 kV motor operated disconnects, and one (1) 345 kV circuit-switcher (collectively, the "Related Equipment"). I. In connection with such approval, the Parties agree: a) TNMP will be responsible for all design, construction and equipment costs for interconnecting the New Autotransformer, installing the Related Equipment, moving of the phases of the existing strain bus, bus work, protective relaying and other necessary items directly associated with this project. 2 SWNMT Amendment #6 TEXAS-NEW MEXICO POWER COMPANY b) TNMP will interconnect the New Autotransformer and Related Equipment to the SWNMT facilities in the manner displayed in the drawings attached to and incorporated into this Letter Agreement (refer to drawing numbers: Hidalgo 1, 2 and 3). TNMP shall submit its interconnection design plans to the SWNMT Project Coordinating Committee for review and approval prior to the interconnection to SWNMT. c) i) The New Autotransformer shall be wholly owned by TNMP, shall not be part of the SWNMT, and shall be for the sole use of TNMP. ii) TNMP shall be the sole owner of the Related Equipment and any other equipment installed by TNMP for the interconnection of the New Autotransformer, and such Related Equipment shall not be part of the SWNMT facilities. Notwithstanding the foregoing, the 345 kV circuit breaker and 345 kV motor operated disconnect shall be controlled by EPE acting in its role as Operating Agent of the SWNMT facilities. The 345 kV circuit- switcher will remain under the control of TNMP. iii) TNMP shall be responsible for the cost of operating and maintaining the equipment associated with this interconnection. iv) TNMP shall be responsible for the cost of installing sufficient equipment such that the line flows (MW and MVAR) over the New Autotransformer will be sent to EPE's Energy Management System (EMS) for SCADA purposes. The above line flows will be made available to PNM at the Luna Substation. v) TNMP shall be responsible for the cost of installing sufficient equipment such that operating status indications for the 345 kV circuit breaker and 345 kV motor operated disconnect for SCADA purposes and operating status indication for the 345 kV circuit-switcher for SCADA and control purposes will be sent to EPE's EMS. The above operating status indications will be made available to PNM at the Luna Substation. II. In consideration of the Parties granting the interconnection of the New Autotransformer to the SWNMT facilities as proposed, TNMP hereby agrees to the following: a) TNMP shall cooperate with EPE in performance of EPE's responsibilities as Operating Agent and with EPE and PNM as SWNMT participants to minimize the potential for unforeseen difficulties resulting from TNMP's planned interconnection to the SWNMT facilities. 3 SWNMT Amendment #6 TEXAS-NEW MEXICO POWER COMPANY b) The installation of the New Autotransformer and Related Equipment will not (i) increase TNMP's firm transmission rights into the Southern New Mexico Transmission system above the firm transmission rights of 110 MW as delineated in Amendment #5 of the SWNMT Agreement, or (ii) in any way limit TNMP from pursuing additional transmission rights in the event such transmission rights become available on the SWNMT Project at a future date pursuant to the SWNMT Agreement. c) Metering shall be at the 115 kV level and such metered amounts will be adjusted as appropriate to account for losses in the New Autotransformer. d) TNMP shall ensure that with the interconnection of the proposed facilities, the two future positions planned for terminations of the Greenlee-Hidalgo- Luna 345 kV #2 line as part of the SWNMT shall not be compromised. e) TNMP will make available, at its cost, two communication channels for the Greenlee-Hidalgo-Luna 345 kV #2 line when the line is constructed. f) TNMP will provide first response activities regarding SWNMT facilities in the Hidalgo Switchyard. g) TNMP will perform the routine inspections and maintenance for the SWNMT facilities at Hidalgo Substation, with the exception of the relaying and communication facilities. Records of these activities shall be kept in accordance with the requirements of EPE as Operating Agent. III. In the event of a conflict between this Amendment #6 and the SWNMT Agreement, as amended in Amendments #1 through #5, the provisions of this Amendment #6 shall control. The remaining terms and conditions of the SWNMT Agreement, as amended in Amendments #1 through #5, shall remain in full force and effect, as if fully set forth in this letter. If the forgoing terms and conditions are acceptable to the Parties, please so indicate by signing this Letter Agreement and returning one original to TNMP. /s/ Allan B. Davis --------------------------------- Texas-New Mexico Power Company 4 SWNMT Amendment #6 TEXAS-NEW MEXICO POWER COMPANY Accepted and agreed to this 17th day of June, 1999. /s/Roger Flynn - ------------------------------------- Public Service Company of New Mexico /s/John C. Horne - ------------------------------------- El Paso Electric Company 5 SWNMT Amendment #6 TEXAS-NEW MEXICO POWER COMPANY Explanation of Diagrams to SWNMT Letter Agreement - Amendment #6 Exhibit 10.09 also includes three diagrams of the facilities at Hidalgo Substation. The first diagram shows the existing 345 kV Ring Bus. The second diagram is a 345 kV One Line Diagram showing the new autotransformer. The third diagram is a 345 kV Partial One Line/Relay Diagram showing the relay detail. 6 EX-11 7 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Exhibit 11 El Paso Electric Company Computation of Earnings Per Share (In Thousands Except for Share Data)
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- ------------- Net income applicable to common stock: Income before extraordinary item $ 7,038 $ 10,071 $ 4,313 $ 17,063 Extraordinary loss on repurchases of debt, net of income tax benefit (1,183) - (1,183) - ------------- ------------- ------------- ------------- Net income applicable to common stock $ 5,855 $ 10,071 $ 3,130 $ 17,063 ============= ============= ============= ============= Basic earnings per common share: Weighted average number of common shares outstanding 60,206,105 60,169,436 60,208,059 60,167,618 ============= ============= ============= ============= Net income per common share: Income before extraordinary item $ 0.117 $ 0.167 $ 0.072 $ 0.284 Extraordinary loss on repurchases of debt, net of income tax benefit (0.020) - (0.020) - ------------- ------------- ------------- ------------- Net income $ 0.097 $ 0.167 $ 0.052 $ 0.284 ============= ============= ============= ============= Diluted earnings per common share: Weighted average number of common shares outstanding 60,206,105 60,169,436 60,208,059 60,167,618 ------------- ------------- ------------- ------------- Effect of dilutive potential common stock options based on the treasury stock method using average market price: Quarter ended March 31 - - - 262,998 Quarter ended June 30 385,405 538,986 385,405 538,986 Quarter ended September 30 - - - - Quarter ended December 31 - - - - Effect of dilutive potential restricted common stock based on the treasury stock method using average market price: Quarter ended March 31 - - - 14,496 Quarter ended June 30 29,186 31,840 29,186 31,840 Quarter ended September 30 - - - - Quarter ended December 31 - - - - ------------- ------------- ------------- ------------- 414,591 570,826 414,591 848,320 Divided by number of quarters 1 1 2 2 ------------- ------------- ------------- ------------- Net effect of dilutive potential common stock 414,591 570,826 207,296 424,160 ------------- ------------- ------------- ------------- Weighted average number of common shares and dilutive potential common shares outstanding 60,620,696 60,740,262 60,415,355 60,591,778 ============= ============= ============= ============= Net income per common share: Income before extraordinary item $ 0.116 $ 0.166 $ 0.071 $ 0.282 Extraordinary loss on repurchases of debt, net of income tax benefit (0.019) - (0.019) - ------------- ------------- ------------- ------------- Net income $ 0.097 $ 0.166 $ 0.052 $ 0.282 ============= ============= ============= =============
Exhibit 11 El Paso Electric Company Computation of Earnings Per Share (In Thousands Except for Share Data)
Twelve Months Ended June 30, ---------------------------------------------- 1999 1998 --------------------- --------------------- Net income applicable to common stock: Income before extraordinary items $ 29,616 $ 42,933 Extraordinary gain on discharge of debt, net of income tax expense 3,343 - Extraordinary loss on repurchases of debt, net of income tax benefit (1,183) - ===================== ===================== Net income applicable to common stock $ 31,776 $ 42,933 ===================== ===================== Basic earnings per common share: Weighted average number of common shares outstanding 60,188,290 60,151,260 ===================== ===================== Net income per common share: Income before extraordinary items $ 0.492 $ 0.714 Extraordinary gain on discharge of debt, net of income tax expense 0.056 - Extraordinary loss on repurchases of debt, net of income tax benefit (0.020) - ===================== ===================== Net income $ 0.528 $ 0.714 ===================== ===================== Diluted earnings per common share: Weighted average number of common shares outstanding 60,188,290 60,151,260 --------------------- --------------------- Effect of dilutive potential common stock options based on the treasury stock method using average market price: Quarter ended March 31 - 262,998 Quarter ended June 30 385,405 538,986 Quarter ended September 30 457,905 220,412 Quarter ended December 31 479,130 299,744 Effect of dilutive potential restricted common stock based on the treasury stock method using average market price: Quarter ended March 31 - 14,496 Quarter ended June 30 29,186 31,840 Quarter ended September 30 35,468 12,636 Quarter ended December 31 39,433 16,496 --------------------- --------------------- 1,426,527 1,397,608 Divided by number of quarters 4 4 --------------------- --------------------- Net effect of dilutive potential common stock 356,632 349,402 --------------------- --------------------- Weighted average number of common shares and dilutive potential common shares outstanding 60,544,922 60,500,662 ===================== ===================== Net income per common share: Income before extraordinary items $ 0.489 $ 0.710 Extraordinary gain on discharge of debt, net of income tax expense 0.055 - Extraordinary loss on repurchases of debt, net of income tax benefit (0.019) - ===================== ===================== Net income $ 0.525 $ 0.710 ===================== =====================
EX-15 8 LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION Exhibit 15 El Paso Electric Company El Paso, Texas Ladies and Gentlemen: Re: Registration Statement No's. 333-17971 and 333-82129 With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated July 26, 1999 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such a report is not considered part of the registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. Very truly yours, KPMG LLP El Paso, Texas July 26, 1999 EX-27 9 FINANCIAL DATA SCHEDULE
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET OF EL PASO ELECTRIC COMPANY AS OF JUNE 30, 1999 AND THE RELATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 PER-BOOK 1,437,338 0 138,885 70,639 20,241 1,667,103 56,169 241,024 121,585 418,778 0 0 827,810 0 0 0 91 0 22,189 27,311 370,924 1,667,103 262,591 9,302 200,258 209,560 53,031 1,935 54,966 38,456 15,327 12,197 3,130 0 66,238 102,331 0.052 0.052 Net income is net of extraordinary loss on repurchases of debt (net of income tax benefit) of ($1,183). Includes $9,581 of redemption costs.
EX-99.01 10 FINAL ORDER BY THE PUBLIC UTILITY COMMISSION OF TX EXHIBIT 99.01 (S) PUBLIC UTILITY COMMISSION CONSOLIDATED ORDER (S) (S) OF TEXAS DOCKET NO. 20291 Petition of Northeast Texas Electric Cooperative, Inc. to Reconcile Fuel Expense for the Period of July 1, 1995 through June 30, 1998 DOCKET NO. 20450 Application of El Paso Electric Company for Authority to Reconcile Fuel Costs DOCKET NO. 20583 Application of Texas Utilities Electric Company to Amend Certificated Service Area Boundaries within Howard County DOCKET NO. 20591 Application of Pedernales Electric Cooperative, Inc. to Amend Certificated Service Area Boundaries within Williamson County and the City of Georgetown DOCKET NO. 20632 Application of Nueces Electric Cooperative, Inc. to Amend Certificated Service Area Boundaries (Service Area Exception) within Nueces County and the City of Corpus Christi DOCKET NO. 20681 Application of Voice2, Inc. for a Service Provider Certificate of Operating Authority DOCKET NO. 20734 Application of Advanced TelCom Group, Inc. for a Service Provider Certificate of Operating Authority CONSOLIDATED ORDER PAGE 2 The Commission adopts the attached findings of fact and conclusions of law and issues the orders set out therein. SIGNED AT AUSTIN, TEXAS on the 8th day of June 1999. PUBLIC UTILITY COMMISSION OF TEXAS /s/ Pat Wood, III -------------------------------------------------- PAT WOOD, III, CHAIRMAN /s/ Judy Walsh -------------------------------------------------- JUDY WALSH, COMMISSIONER /s/ Brett A. Perlman -------------------------------------------------- BRETT A. PERLMAN, COMMISSIONER DOCKET NO. 20450 APPLICATION OF EL PASO ELECTRIC (S) PUBLIC UTILITY COMMISSION COMPANY FOR AUTHORITY TO (S) RECONCILE FUEL COSTS (S) OF TEXAS ORDER This Order approves the application of El Paso Electric Company for authority to reconcile fuel and fuel-related revenues and costs and implement certain voluntary base rate reductions and refunds. The docket was processed in accordance with applicable statutes and Commission rules. No requests for hearing were filed. The parties filed a stipulation resolving all outstanding issues. The application, consistent with the stipulation, is approved. I. Findings of Fact Procedural History - ------------------ 1. On March 22, 1999, El Paso Electric Company (EPE) filed with the Public Utility Commission of Texas (Commission) an application to reconcile its fuel and fuel-related revenues and costs for the period of July 1, 1995 through December 31, 1998 and implement a voluntary base rate reduction and refund. In its application, EPE requested the Commission: (a) find good cause to extend the reconciliation period to include December 31, 1998; (b) find good cause to waive the fuel reconciliation filing requirements of P.U.C. Subst. R. 23.23(b)(3); (c) grant EPE authority to roll the reconciliation period under- recovery forward to EPE's next reconciliation period; and (d) grant EPE interim approval of its voluntary base rate reductions, effective April 1, 1999. The application was supported by a stipulation resolving all outstanding issues in this proceeding. The stipulation was signed by EPE, Texas Industrial Energy Consumers, Office of Public Utility Counsel, U.S. Department of Defense (DOD), City of El Paso, Commission's General Counsel, Phelps Dodge Refining Corporation, and Border Steel, Inc. 2. The DOD filed a motion to intervene in this proceeding. The motion was subsequently granted. 3. At its open meeting of March 25, 1999, the Commission granted EPE interim authority to implement the voluntary rate base reductions for bills rendered on or after April 1, 1999. DOCKET NO. 20450 ORDER PAGE 2 of 8 4. On May 13, 1999, the parties filed joint proposed findings of fact and conclusions of law (Supplemental Stipulation). Notice - ------ 5. Notice of this application was provided by: (a) bill insert to EPE's Texas customers; (b) mail to affected municipalities at least 35 days prior to the proposed final effective date of the voluntary base rate reduction; (c) mail to each signatory in Docket No. 12700;/1/ (d) mail to each of the parties in Docket Nos. 18629/2/ and 20180;/3/ (e) mail to City of El Paso, Texas, Commission's General Counsel, Office of Public Utility Counsel, ASARCO, Inc., Phelps Dodge Refining Corporation, Texas State Agencies, U.S. Department of Defense, Border Steel, Inc., and Texas Industrial Energy Consumers; (f) publication once a week for two consecutive weeks in newspaper of general circulation in EPE's service area; and (g) publication in the Texas Register. Evidence of Record - ------------------ 6. The following items are admitted into evidence: (a) Application and Stipulation including supplemental signature pages; (b) Affidavits of Notice, filed on May 6, 1999; (c) Texas Register Submission Form; and (d) Revised Proposed Findings of Fact and Conclusions of Law. Fuel and Fuel-Related Revenues and Expenses - ------------------------------------------- 7. EPE is an investor-owned electric utility providing retail electric service within the State of Texas. 8. EPE's Texas jurisdictional fuel under-recovery balance for the reconciliation period is as follows: - -------------------- /1/ Application of El Paso Electric Company for Authority to Change Rates, Docket No. 12700 (Aug. 30, 1995)(not published). /2/ Application of El Paso Electric Company for Authority to Implement a Revised Composite Fixed Fuel Factor and to Implement an Interim Fuel Surcharge, Docket No. 18629 (April 2, 1998). /3/ Petition of El Paso Electric Company for Expedited Consideration and Approval of Good Cause exception of Fuel Reconciliation Filing Deadline, Docket No. 20180 (Feb. 5, 1999). DOCKET NO. 20450 ORDER PAGE 3 of 8 Fuel Factor Revenues $ 221,168,009 Fuel & Purchased Power Expense (adjusted) (235,639,248) Interest on Net Over/(Under)-Recovery (1,882,729) Net Interim Surcharge/(Refund) 845,041 CFE and IID-C Margins Credits and Interest 17,237,552 Docket No. 13966 Remaining Balance and Interest 331,480 Net Palo Verde Performance Rewards and Interest (3,644,843) -------------- Cumulative Over/(Under)-Recovery Balance $ (1,584,738) ==============
9. EPE properly accounted for the amount of fuel-related revenues collected pursuant to the fuel factors in effect during the reconciliation period. 10. EPE's eligible fuel costs incurred during the reconciliation period were reasonable and necessary to provide reliable electric service. 11. It is reasonable to reconcile EPE's fuel and fuel-related revenues and expenses for the period of July 1995 through December 1998 consistent with the terms of the stipulation. Palo Verde Performance Rewards - ------------------------------ 12. During the reconciliation period, Palo Verde accrued net performance rewards in the amount of $3,644,843, including $191,790 in interest, under the performance standards established in Docket No. 8892,/4/ as continued in Docket No. 12700. 13. The net Palo Verde performance rewards, including interest calculated through December 31, 1998 have been debited to EPE's under-recovery balance for the reconciliation period for use consistent with the agreed treatment in Docket No. 19545./5/ 14. As part of the overall settlement of this case, El Paso Electric agreed to commit 50% of future Palo Verde Performance Standard Rewards (net of any Palo Verde Performance Standard Penalties) accrued for the evaluation periods ending December 31, 1998 through December 31, 2004, after approval in future fuel reconciliation proceedings, to the initiatives listed below. All amounts deemed collected and not subject to a surcharge will be paid upon issuance of a final - ------------------------ /4/ Application of El Paso Electric Company to Establish Performance Standards for the Palo Verde Nuclear Generation Station, Docket No. 8892 17P.U.C. Bull. 547 (March 27, 1991). /5/ Application of El Paso Electric Company for Approval of Preliminary Integrated Resource Plan, Docket No. 19545 (Jan. 21, 1999). DOCKET NO. 20450 ORDER PAGE 4 of 8 order, and any other amounts will be paid as collected over the applicable recovery period. These amounts will be applied for the benefit of customers in the following initiatives: a. one-half to Project Care (or successor organization) to assist low income customers of El Paso Electric Company in paying their utility bills; and b. one-half to demand side management programs such as weatherization with a focus on programs to assist small business and commercial customers. Cumulative Under-Recovery Balance - --------------------------------- 15. EPE's cumulative under-recovery balance at December 31, 1998, including interest and the applicable Palo Verde performance rewards, $1,584,738. EPE has correctly calculated the under-recovery balance. 16. EPE calculated interest on the ending cumulative over/under-recovery balance in the manner and at the rate established by the Commission for overbilling and underbilling./6/ EPE compounded interest annually. 17. EPE's cumulative under-recovery balance for the reconciliation period is below the Company's materiality threshold of approximately $2.8 million, as defined in P.U.C. Subst. R. 23.23(b)(2)(A)(iii)(II). Therefore, it is reasonable for EPE, instead of surcharging customers the under-recovery balance at this time, to carry that balance forward as the reconciled beginning balance for the next reconciliation period beginning January 1, 1999. 18. The allocation factors used to allocate EPE's eligible fuel and fuel- related revenues and expenses to the Texas jurisdiction are appropriate. Certain Voluntary Base Rate Reductions and Refunds - -------------------------------------------------- 19. EPE agrees to implement voluntary base rate reductions of approximately 8.79% for customers receiving service under Rate Schedule No. 01--the Residential Service Rate--and voluntary base rate reductions of approximately 3.18% for customer classes receiving reductions other than Rate Schedule No. 01. - ------------------------ /6/ See P.U.C. Subst. R. 23.45(h)(repealed and recodified at P.U.C. Subst. R. 25.28(c), effective May 6, 1999). DOCKET NO. 20450 ORDER PAGE 5 of 8 20. These voluntary base rate reductions equal approximately $15.4 million on an annual basis. 21. EPE further agrees to implement voluntary base rate refunds over a period of three months for the same customers receiving base rate reductions, as detailed in Appendix III of the Supplemental Stipulation. 22. EPE's agreement to implement certain voluntary base rate reductions and base rate refunds is just and reasonable and not unreasonably preferential, prejudicial, or discriminatory. Low-Income Assistance - --------------------- 23. EPE's commitment to coordinate with local community service agencies and the Texas Department of Human Services to foster customer education regarding low-income assistance programs offered by the Company is reasonable. Informal Disposition - -------------------- 24. More than 30 days have passed since completion of the notice provided in this docket. 25. All parties are signatories to the stipulation; therefore, resolution of this proceeding consistent with the stipulation is not adverse to any party. The parties have waived their rights to a hearing on the merits in this docket, subject to final approval of the stipulation. 26. No issues of fact or law are disputed by any party. II. Conclusions of Law 1. EPE is a public utility, as defined in (S)(S) 11.004 and 31.002(1) of the Public Utility Regulatory Act (PURA)./7/ 2. The Commission has jurisdiction and authority over this application pursuant to PURA (S)(S) 14.001, 32.001, 36.001, 36.003, 36.051, 36.109, and 36.203. - -------------------------- /7/ Tex. Util. CODE ANN. (S)(S) 11.01--63.063 (Vernon 1998). DOCKET NO. 20450 ORDER PAGE 6 of 8 3. Notice of the application was provided in compliance with PURA (S) 36.103(b), P.U.C. SUBST. R. 23.23(b)(4), and P.U.C. PROC. R. 22.51(b) and 22.54. 4. Good cause exists to extend the reconciliation period addressed in this docket through December 31, 1998. 5. Good cause exists to waive the fuel reconciliation filing package requirements set forth in P.U.C. SUBST. R. 23.23(b)(3). 6. EPE's fuel reconciliation meets the requirements of P.U.C. SUBST. R. 23.23(b)(3). 7. The eligible fuel costs incurred by EPE during the reconciliation period were reasonable and necessary expenses incurred to provide reliable electric service to EPE's customers, as required by P.U.C. SUBST. R. 23.23(b)(3)(B)(i)(I). 8. Good cause exists to carry the cumulative under-recovery balance of $1,584,738 forward as the reconciled beginning balance for EPE's next reconciliation period beginning January 1, 1999. 9. EPE's voluntary base rate reductions and refunds are just and reasonable and do not grant an unreasonable preference or advantage to any customer or subject any customer to unreasonable prejudice or disadvantage, consistent with PURA (S) 36.003. 10. Approval of the stipulation represents a reasonable resolution of the issues in this proceeding and is in the public interest. 11. This application does not constitute a major rate proceeding as defined by P.U.C. PROC. R. 22.2. 12. As no requests for hearing have been filed, the application may be approved without a hearing pursuant to the Administrative Procedure Act, TEX. GOV'T CODE ANN. (S) 2001.001 et seq. (Vernon 1999). DOCKET NO. 20450 ORDER PAGE 7 of 8 III. Ordering Paragraphs In accordance with these findings of fact and conclusions of law, the Commission issues the following Order: 1. EPE's proposed reconciliation of eligible fuel and fuel-related revenues and expenses and implementation of certain voluntary base rate reductions and refunds as set forth in the application and supported by the stipulation are approved. 2. EPE shall carry its cumulative under-recovery balance forward as the reconciled beginning balance for the reconciliation period beginning January 1, 1999. The balances established for each customer class in Appendix II of the Supplemental Stipulation are adopted and shall not be subject to change. 3. The tariffs implementing EPE's voluntary base rate reductions (Attachment 1) are approved, effective the date of this Order. 4. The tariff implementing EPE's base rate refunds (Attachment 2) is approved, effective for a period of three months, beginning with EPE's first billing cycle following the issuance of this Order. 5. EPE shall commit 50% of future Palo Verde Performance Standard Rewards (net of any Palo Verde Performance Standard Penalties) accrued for the evaluation periods ending December 31, 1998 through December 31, 2004, after approval in future fuel reconciliation proceedings, to the initiatives listed below. All amounts deemed collected and not subject to a surcharge shall be paid upon issuance of a final order, and any other amounts shall be paid as collected over the applicable recovery period. These amounts shall be applied for the benefit of customers in the following initiatives: (a) one-half to Project Care (or successor organization) to assist low income customers of El Paso Electric Company in paying their utility bills; and (b) one-half to demand side management programs such as weatherization with a focus on programs to assist small business and commercial customers. DOCKET NO. 20450 ORDER PAGE 8 of 8 6. Subject to the specific voluntary base rate reductions and base rate refund approved in this docket, the terms of the Stipulation, Settlement Agreement, and Agreed Order in Docket No. 12700 shall remain in full force and effect and shall continue to apply as stated therein. 7. The entry of an order consistent with the stipulation does not indicate the Commission's endorsement or approval of any principle or methodology that may underlie the stipulation. Neither should the entry of an order consistent with the stipulation be regarded as binding precedent as to the appropriateness of any principle underlying the stipulation. 8. All other motions, requests for entry of specific findings of fact and conclusions of law, and any other requests for general or specific relief, if not expressly granted herein, are hereby denied for want of merit. Attachment 1
EL PASO ELECTRIC COMPANY TABLE OF CONTENTS ----------------- Rate Schedule Sheet Title Number Number ----- ------ ------ Section 1 - --------- Table of Contents - 1 Description of Company Operations - 2 State of Texas Service Area - 3 Rate Schedules - -------------- Residential Service Rate 01 4 Small Commercial Service Rate 02 5 Outdoor Recreational Lighting Service Rate 07 6 Governmental Street Lighting and Signal Service Rate 08 7 Municipal Pumping Service Rate 11 8 Municipal Pumping Service Rate 11-A 8.1 Electrolytic Refining Service Rate 15 9 Standby Service Rate 18 10 Irrigation Service Rate 22 11 General Service Rate 24 12 Large Power Service Rate 25 13 Petroleum Refinery Service Rate 26 14 Petroleum Refinery Service Rate 26-A 14.1 Interruptible Power Service Rate 27 15 Area Lighting Service Rate 28 16 Transmission Voltage Service Rate 29 17 Electric Furnace Rate 30 18 Military Reservation Service Rate 31 19 Economic Development Rate 33 21 Cotton Gin Service Rate 34 22 Interruptible Power Service for Large Power Rate 38 (LP) 23 City and County Service Rate 41 24 University Service Rate 43 25 Supplementary Power Service for Cogeneration and Small 45 26 Power Production Facilities Maintenance Power Service for Cogeneration and Small 46 27 Power Production Facilities Backup Power Service for Cogeneration and Small 47 28 Power Production Facilities Non-Firm Purchased Power Service 48 29 State University Discount Rate Rider 49 29.1
- -------------------------------------------------------------------------------- Section Number 1 Revision Number 21 -------------------- --------------------- Sheet Number 1 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 4 after ------------------------------ -------------------
EL PASO ELECTRIC COMPANY TABLE OF CONTENTS ----------------- Rate Schedule Sheet Title Number Number ----- ------ ------ Fixed Fuel Factor 98-FFF 30 Fixed Fuel Surcharge Factor 98-FS 31.2 Miscellaneous Service Charges 99 32 Rate Case Expense Surcharge 33 Base Rate Refund BRR 34 Section 2 - --------- Table of Contents - 1 Company Rules and Regulations Regarding Electric - 2 Service Agreement for Purchase of Electric Service from El Paso - 3 Electric Company Residential Level Payment Plan Agreement - 4 Area Lighting Service Agreement - 5 Deferred Payment Plan Agreement - 6 Absolute Guaranty of Payment of Obligation for Electric - 7 Service Application for Service - 8 Save Utilities Deposit System (SUDS) - 9 Easement - 10 Cutback Service Program - 11 Alternate Time-of-Use Service Agreement - 12 Verification from Army Community Service if Soldier is in - 13 Combat or War Zone Section 3 - --------- Line Extension Policy - - Table of Contents - 1 Purpose - 3 Definitions - 4 Policies - 5
- -------------------------------------------------------------------------------- Section Number 1 Revision Number 21 -------------------- --------------------- Sheet Number 1 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY DESCRIPTION OF COMPANY OPERATIONS --------------------------------- The El Paso Electric Company serves the County of El Paso and portions of the Counties of Culberson and Hudspeth in the State of Texas. The Company serves portions of Dona Ana, Sierra, Otero and Luna Counties in the State of New Mexico. The Company generates, transmits and distributes electric energy for the entire Company service area. The Company has transmission line interconnections in the states of Arizona, New Mexico and to the Republic of Mexico and provides (FERC Jurisdictional) electrical energy to Rio Grande Electric Cooperative, Inc., for Cooperative's Culberson and Hudspeth Counties service areas and to Texas-New Mexico Power Company for its Lordsburg, New Mexico, service area and to Imperial Irrigation District in California. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 6 -------------------- --------------------- Sheet Number 2 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY STATE OF TEXAS SERVICE AREA --------------------------- Incorporated Cities, Towns and Villages --------------------------------------- City of El Paso Town of Anthony Town of Clint Town of Horizon City of Socorro Town of Van Horn Village of Vinton Unincorporated Service Areas ---------------------------- County of El Paso Portion of County of Culberson Portion of County of Hudspeth - -------------------------------------------------------------------------------- Section Number 1 Revision Number 6 -------------------- --------------------- Sheet Number 3 Effective with energy consumed on or ---------------------- -------------------------- Page 4 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 01 --------------- RESIDENTIAL SERVICE RATE ------------------------ APPLICABILITY - ------------- This rate is applicable for all domestic purposes in single family residences or individually metered apartments. Service will be 120/240 volt, single phase, except that three-phase service may be provided for motors over 5 horsepower (HP) if economically feasible. Single or three-phase motors shall not exceed 10 HP individual capacity without the written approval of the Company. TERRITORY - --------- Texas Service Area MONTHLY RATE - ------------ $4.50 Customer Charge plus SUMMER BASE ENERGY RATE - ----------------------- $0.08027 per kilowatt-hour for all kilowatt-hours during the (R) billing months of June through September. NON-SUMMER BASE ENERGY RATE - --------------------------- $0.07527 per kilowatt-hour for all kilowatt-hours during the (R) billing months of October through May. ALTERNATE TIME-OF-USE RATE - -------------------------- This voluntary billing alternative will only be made available to residential customers. The residential customer must contract for this provision for a minimum of eighteen (18) months. The on-peak hours are 10:00 a.m. through 8:00 p.m., Mountain Standard Time, for weekdays of Monday through Friday. Off-peak hours are all other hours of the week not covered in the on-peak period plus weekends. This alternative is available only to the first 250 customers who sign up to take service under this alternative. MONTHLY RATE - ------------ $6.00 Customer Charge plus ON-PEAK BASE ENERGY RATE - ------------------------ $0.12517 for all on-peak KWH. (R) - -------------------------------------------------------------------------------- Section Number 1 Revision Number 14 -------------------- --------------------- Sheet Number 4 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 01 --------------- RESIDENTIAL SERVICE RATE ------------------------ OFF-PEAK BASE ENERGY RATE - ------------------------- $0.04746 for all off-peak KWH. (R) MONTHLY MINIMUM - --------------- Customer Charge OFF-PEAK WATER HEATING RIDER - ---------------------------- For domestic electric water heating service (swimming pool water heating and water heating utilized for space heating excluded). The service shall be metered on a circuit which shall include only water heating elements and excluded all other service. Periods of electric supply service may be scheduled to conform to off-peak conditions of the Company's system, the Company reserving the right to change the off-peak periods of supply to meet the changing off-peak conditions of its system. The Company, at its option, will furnish and connect to the customer's wiring and retain ownership of a time switch or suitable device to regulate the hours of use. Service under this schedule shall be limited to water heaters of thirty (30) gallons or more capacity. All water heaters will be controlled by a thermostat and if two or more heating elements are used, the water heater will be wired so that only one element will operate at one time. The minimum wattage of all heating elements shall total not less than 3,000 watts. Service may be limited where customer has an abnormally large connected load, and is only available as a secondary service in conjunction with a main service. MONTHLY RATE FOR OFF-PEAK WATER HEATING - --------------------------------------- $1.00 Customer Charge plus $0.04401 per kilowatt-hour for all kilowatt-hours. (R) MONTHLY MINIMUM FOR OFF-PEAK WATER HEATING - ------------------------------------------ Customer Charge LOW INCOME RIDER - ---------------- Upon qualification under the below defined criteria, the Customer Charge will not be applicable. All other charges (credits) and/or provisions of Schedule No. 01 will remain unchanged. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 14 -------------------- --------------------- Sheet Number 4 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 01 --------------- RESIDENTIAL SERVICE RATE ------------------------ The Low Income Rider is available to qualified residential customers who apply for the discount. The applicant must provide an approved referral form from the Texas Department of Human Services. The applicant must be the EPEC customer of record at his or her address. Once the customer has established qualification for the Low Income Rider, the Rider will be in effect for the following twelve (12) months. At the end of this twelve (12) month period, recertification will be required. If no new referral is received by EPEC, the customer, without notification, will be placed on the applicable Residential Service Rate. A reminder notice will be printed on the customer's electric bill at least two (2) months prior to the expiration date. No other notice will be provided. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. APPLICATION OF RESIDENTIAL SERVICE RATE - --------------------------------------- This rate is available only under the following conditions: -- 1. For a single household or single family for domestic purposes in individual private residences or individually metered apartments. 2. For separately metered living quarters recognized as single-family living quarters for domestic home use. 3. Service under this rate shall include home lighting and residential power for operation of household appliances. 4. Single-phase motors for domestic use may not exceed 10 HP without the written approval of the Company. The use of all single-phase motors over 5 HP must be approved by the Company concerning the motor's lock rotor amperes. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 14 -------------------- --------------------- Sheet Number 4 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 01 --------------- RESIDENTIAL SERVICE RATE ------------------------ 5. If the three-phase service is supplied, sizes of motors and other loads will be subject to Company approval. Three-phase service is only available if it is existing at the location or economically feasible to bring to the location. 6. Wiring may be extended from the residence circuit to private garages, barns and similar structures and/or wells which are located on the same property as the residence and used exclusively for domestic purposes in connection with the residence. 7. For residences where rooms are rented or meals served to boarders if this is incidental to the maintenance of a private residence. This rate is not available under the following conditions: ------ 1. If a separate meter and service are provided to garages, barns and similar structures and/or wells even though their use may be in connection with the residence. 2. When it is evident, both visually and/or electrically, that activity of a business or professional character is being conducted in the residence. Service to a combination residential and commercial establishment will be supplied under the appropriate commercial service rate, but the portion used as living quarters may be wired and metered separately and served on the Residential Service Rate. 3. When service in the primary residence is resold or shared with one or more other family residences, i.e., a garage apartment or a separate living quarters connected to the main residence electric service, or a duplex with one meter. The additional residence or separate living quarters may be placed on the residential rate if local zoning ordinances permit such use and the additional residence is served and metered separately. 4. When the customer operates devices which cause undue fluctuation of voltage. Service may be limited where the customer has an abnormally large connected load or kilowatt demand. 5. For a recognized or accepted boarding or rooming house. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 14 -------------------- --------------------- Sheet Number 4 Effective with energy consumed on or ---------------------- -------------------------- Page 4 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 02 --------------- SMALL COMMERCIAL SERVICE RATE ----------------------------- APPLICABILITY - ------------- The Small Commercial Service Rate is available to all commercial customers for lighting, power and heating service. All service will be taken at one point of delivery designated by the Company and at one of the Company's standard types of service. Service under this rate shall be limited to those small commercial customers having usage levels that preclude them from proper classification under the Company's other commercial service rates. TERRITORY - --------- Texas Service Area MONTHLY RATE - ------------ $5.50 Customer Charge plus Energy Charge $0.11573 per kilowatt-hour for the first 1,500 kilowatt-hours (R) $0.10288 per kilowatt-hour for all additional kilowatt-hours (R) MONTHLY MINIMUM - --------------- Customer Charge OFF-PEAK WATER HEATING RIDER - ---------------------------- For domestic electric water heating service (swimming pool water heating, commercial dishwasher water heating and water heating utilized for space heating excluded). The service shall be metered on a circuit which shall include only water heating elements and exclude all other service. Periods of electric supply service may be scheduled to conform to off-peak conditions of the Company's system, the Company reserving the right to change the off-peak periods of supply to meet the changing off-peak conditions of its system. The Company, at is option, will furnish and connect to the customer's wiring and retain ownership of a time switch or suitable device to regulate the hours of use. Service under this schedule shall be limited to water heaters of thirty (30) gallons or more capacity. All water heaters will be controlled by a thermostat and if two or more heating elements are used, the water heater will be wired so that only one element will operate at - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 5 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 3 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 02 --------------- SMALL COMMERCIAL SERVICE RATE ----------------------------- one time. The minimum wattage of all heating elements shall total not less than 3,000 watts. Service may be limited where customer has an abnormally large connected load, and is only available as a secondary service in conjunction with a main service. MONTHLY RATE - OFF-PEAK WATER HEATING - ------------------------------------- $1.00 Customer Charge plus $0.04401 per kilowatt-hour for all kilowatt-hours (R) MONTHLY MINIMUM - OFF-PEAK WATER HEATING - ---------------------------------------- Customer Charge NON-METERED SERVICE - ------------------- In instances when metering of energy would be impractical because of the low monthly level of usage and when estimates of this usage can be accurately calculated, the Company may at its option, provide non-metered service. Billing for non-metered service shall be based on the customer charge and the monthly energy usage calculated by the Company and applied to the energy charge of the rate. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. The Company shall install metering equipment to measure the customers thirty (30) minute average kilowatt load for purposes of determining the applicable rate schedule. If a customer's highest measured thirty (30) minute average kilowatt load exceeds 15 KW three (3) consecutive times during the months of May through October, that customer shall be placed on the General Service Rate Schedule No. 24 for a minimum of twelve (12) months, at which time a determination will be made for the applicable rate schedule. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 5 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 3 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 02 --------------- SMALL COMMERCIAL SERVICE RATE ----------------------------- If the Company determines that a customer's bill under this schedule is unduly burdensome and the Customer will benefit from a lower bill, the Company, at its option, will bill said customer under Schedule No. 24, General Service Rate. Specifically, this option will be applied to a customer who, for the preceding twelve (12) months has an average monthly demand greater than 10 KW and operates at greater than a thirty (30) percent load factor. Under this option, the billing demand will be the highest measured demand. Any new customer that has not established a prior service history with the Company shall be classified under the appropriate rate schedule in accordance with a demand estimate performed by the Company. For the purpose of this rate schedule, commercial customers is defined as to include all non-public schools and institutions of higher learning or facilities not eligible under Schedule No. 41, municipal, county, State of Texas and federal installations. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 5 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 3 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 07 --------------- OUTDOOR RECREATIONAL LIGHTING SERVICE RATE ------------------------------------------ APPLICABILITY - ------------- This rate is available to all customers who desire outdoor recreational lighting service under the conditions specified herein. All service will be taken at one delivery point designated by the Company and will be separately metered from any additional service that may be provided to the customer under other rates. This rate is not available for any service other than for lighting of recreational activities such as athletic fields, race tracks and other sport and recreational facilities. TERRITORY - --------- Texas Service Area TYPE OF SERVICE - --------------- The type of service available will be determined by the Company and will normally be single or three phase at the option of the Company and at a standard Company approved voltage. MONTHLY RATE - ------------ $18.00 Customer Charge Energy Charge $0.06692 per kilowatt-hour (R) MONTHLY MINIMUM - --------------- The Customer Charge. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of the Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. The initial Term of Contract for service under this schedule shall be not less than one(1) year. The Company reserves the right to remove all equipment furnished under this schedule, after issuance of disconnect notice, and void the contract if in the opinion of the Company, there is excessive breakage or vandalization of its facilities. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 3 -------------------- --------------------- Sheet Number 6 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 1 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- APPLICABILITY - ------------- Cities of El Paso and Socorro, Towns of Anthony, Clint, Horizon and Van Horn, Village of Vinton and Counties of Culberson, El Paso and Hudspeth, State of Texas and Federal facilities for Mercury Vapor and High Pressure Sodium Vapor street lights, freeway lighting and for traffic signal lights. TERRITORY - --------- Texas Towns, Counties and Cities RATE - ---- Street Lights MERCURY VAPOR - OVERHEAD SYSTEM - COMPANY OWNED ----------------------------------------------- 30 FOOT MOUNTING HEIGHT - WOOD POLE ----------------------------------- Lamp ---- Wattage Charge ------- ------ 7,000 Lumen Single 195 $ 13.50 each per month (R) 11,000 Lumen Single 275 $ 16.11 each per month (R) 11,000 Lumen Double 550 $ 25.01 each per month (R) 20,000 Lumen Single 460 $ 19.22 each per month (R) 20,000 Lumen Double 920 $ 31.23 each per month (R) MERCURY VAPOR - DOWNTOWN EL PASO AREA - COMPANY OWNED - 30 FOOT --------------------------------------------------------------- MOUNTING HEIGHT - STEEL POLE - ORNAMENTAL LUMINAIRE --------------------------------------------------- Lamp ---- Wattage Charge ------- ------ 60,000 Lumen 1,120 $ 76.32 each per month (R) Underground System - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- HIGH PRESSURE SODIUM VAPOR - DOWNTOWN EL PASO AREA - COMPANY OWNED ------------------------------------------------------------------ 30 FOOT MOUNTING HEIGHT - STEEL POLE - ORNAMENTAL LUMINAIRE ----------------------------------------------------------- Lamp ---- Wattage Charge ------- ------ 119,500 Lumen Overhead System 1,102 $ 48.48 each per month (R) 119,500 Lumen Underground System 1,102 $ 79.21 each per month (R) HIGH PRESSURE SODIUM VAPOR - DOWNTOWN EL PASO AREA - COMPANY OWNED ------------------------------------------------------------------ 30 FOOT MOUNTING HEIGHT - STEEL POLE ------------------------------------ Lamp ---- Wattage Charge ------- ------ 45,000 Lumen Overhead System 485 $ 47.87 each per month (R) MERCURY VAPOR - OVERHEAD SYSTEM - COMPANY OWNED ----------------------------------------------- 30 FOOT MOUNTING HEIGHT - STEEL POLE ------------------------------------ Lamp ---- Wattage Charge ------- ------ 20,000 Lumen Single 460 $ 29.69 each per month (R) 20,000 Lumen Double 920 $ 41.70 each per month (R) - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- MERCURY VAPOR - NON-COMPANY OWNED SYSTEMS ----------------------------------------- Lamp ---- Wattage Charge ------- ------ 11,000 Lumen - Wall Mounted 292 $ 7.79 each per month (R) 20,000 Lumen - 40 Foot Maximum Mounting Height 450 $ 10.72 each per month (R) 60,000 Lumen - 50 Foot Maximum Mounting Height 1,102 $ 28.10 each per month (R) MERCURY VAPOR - NON-COMPANY OWNED - WOOD POLE --------------------------------------------- UNDERGROUND RESIDENTIAL SERVICE ------------------------------- Lamp ---- Wattage Charge ------- ------ 7,000 Lumen - 30 Foot Maximum Mounting Height 195 $ 5.89 each per month (R) 11,000 Lumen - 30 Foot Maximum Mounting Height 275 $ 7.49 each per month (R) - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- HIGH PRESSURE SODIUM VAPOR - NON-COMPANY OWNED SYSTEMS ------------------------------------------------------ Lamp ---- Wattage Charge ------- ------ 16,000 Lumen - Wall Mounted 193 $ 6.21 each per month (R) 23,200 Lumen - Wall Mounted 313 $ 8.36 each per month (R) 23,200 Lumen - 40 Foot Maximum Mounting Height 313 $ 8.36 each per month (R) 45,000 Lumen - 50 Foot Maximum Mounting Height 485 $ 11.49 each per month (R) 45,000 Lumen - Tower Structure 150 Foot Maximum Mounting Height 10 Luminaires per Tower 485 $ 12.13 each per month (R) Rate per fixture HIGH PRESSURE SODIUM VAPOR - NON-COMPANY OWNED ---------------------------------------------- OPERATED AND MAINTAINED ----------------------- Lamp ---- Wattage Charge ------- ------ 45,000 Lumen 485 $ 11.84 each per month (R) - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 4 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- HIGH PRESSURE SODIUM VAPOR - NON-COMPANY OWNED - RESIDENTIAL SERVICE -------------------------------------------------------------------- STANDARD POLE - STANDARD FIXTURE -------------------------------- Lamp ---- Wattage Charge ------- ------ 8,500 Lumen - 30 Foot Maximum Mounting Height 124 $ 4.91 each per month (R) 14,400 Lumen - 30 Foot Maximum Mounting Height 193 $ 6.21 each per month (R) 23,200 Lumen - 30 Foot Maximum Mounting Height 313 $ 8.36 each per month (R) HIGH PRESSURE SODIUM VAPOR - OVERHEAD - NON-COMPANY OWNED --------------------------------------------------------- STANDARD FIXTURE - COMPANY OWNED EXISTING WOOD POLE --------------------------------------------------- Lamp ---- Wattage Charge ------- ------ 8,500 Lumen - 30 Foot Maximum Mounting Height 124 $ 6.58 each per month (R) 14,400 Lumen - 30 Foot Maximum Mounting Height 193 $ 7.88 each per month (R) 23,200 Lumen - 30 Foot Maximum Mounting Height 313 $ 10.03 each per month (R) 23,200 Lumen Double - 30 Foot Maximum Mounting Height 626 $ 16.46 each per month (R) 45,000 Lumen - 50 Foot Maximum Mounting Height 485 $ 13.16 each per month (R) - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 5 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- OVERHEAD SYSTEM - HIGH PRESSURE SODIUM VAPOR -------------------------------------------- COMPANY OWNED - WOOD POLE ------------------------- Lamp ---- Wattage Charge ------- ------ 8,500 Lumen - 30 Foot Mounting Height 124 $ 13.36 each per month (R) 14,400 Lumen - 30 Foot Mounting Height 193 $ 14.48 each per month (R) 23,200 Lumen - 30 Foot Mounting Height 313 $ 17.03 each per month (R) 45,000 Lumen - 50 Foot Maximum Mounting Height 485 $ 23.98 each per month (R) Obstruction Lights Incandescent 40 Foot Maximum Mounting Height 116 $ 3.92 each per month (R) 150 Foot Tower 116 $ 4.72 each per month (R) ORNAMENTAL HIGH PRESSURE SODIUM VAPOR - --------------------------------------- NON-COMPANY OWNED, OPERATED AND MAINTAINED ------------------------------------------ Lamp ---- Wattage Charge ------- ------ 14,400 Lumen 325 $ 5.87 each per month (R) 5,300 Lumen 82 $ 1.48 each per month (R) 14,400 Lumen 150 $ 2.70 each per month (R) 16,000 Lumen 193 $ 3.49 each per month (R) - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 6 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- STATE OF TEXAS LIGHTING ----------------------- NON-COMPANY OWNED, OPERATED AND MAINTAINED ------------------------------------------ Lamp ---- Wattage Charge ------- ------ State of Texas Lighting 100 $ 1.81 each per month (R) State of Texas Lighting 250 $ 4.51 each per month (R) RATE - ---- Traffic Signal Lights MONTHLY RATE PER UNIT - --------------------- WATTAGE OF TYPE AND HOURS INCANDESCENT MONTHLY TYPE OF UNIT OF OPERATION LAMP RATE - ------------ -------------- ------------ ---------- 3 Lamp Head 24 Hours 61 $ 1.10 (R) 4 Lamp Head 24 Hours 61 $ 1.10 (R) 3 Lamp Head 24 Hours 103 $ 1.86 (R) 3 Lamp Head 18 Hours Normal, 103 $ 1.86 (R) 6 Hours Flashing 5 Lamp Head 24 Hours 133 $ 2.41 (R) 4 Lamp Head 18 Hours Normal, 6 Hours Flashing 103 $ 1.86 (R) 3 Lamp Head 24 Hours 133 $ 2.41 (R) 3 Lamp Head 18 Hours Normal, 6 Hours Flashing 133 $ 2.41 (R) 4 Lamp Head 24 Hours 133 $ 2.41 (R) 4 Lamp Head 18 Hours Normal, 6 Hours Flashing 133 $ 2.41 (R) 2 Unit Walk Light 24 Hours 61 $ 1.10 (R) 2 Unit Walk Light 24 Hours 103 $ 1.86 (R) 2 Unit Walk Light 18 Hours Normal, 6 Hours Flashing 103 $ 1.86 (R) - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 7 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 08 --------------- GOVERNMENTAL STREET LIGHTING ---------------------------- AND SIGNAL SERVICE RATE ----------------------- WATTAGE OF TYPE AND HOURS INCANDESCENT MONTHLY TYPE OF UNIT OF OPERATION LAMP RATE - ------------ -------------- ------------ ---------- 1 Unit Flashing 24 Hours 103 $ 1.86 (R) 1 Unit Flashing 24 Hours 133 $ 2.41 (R) 2 Unit Flashing 24 Hours 103 $ 1.86 (R) 2 Unit School Flashers 351 Annual Burning Hours 103 $ 1.86 (R) 2 Unit School Flashers 790 Annual Burning Hours 133 $ 2.41 (R) 30 Watt Controller 24 Hours 30 $ .54 (R) MONTHLY RATE PER UNIT - --------------------- Street lights and traffic signal lights that do not operate under any of the preceding conditions will be billed under the rate with the closest operating conditions. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company Rules and Regulations apply to service under this schedule. Specific terms are as covered in various written agreements. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 17 -------------------- --------------------- Sheet Number 7 Effective with energy consumed on or ---------------------- -------------------------- Page 8 of 8 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 11 ---------------- MUNICIPAL PUMPING SERVICE RATE ------------------------------ APPLICABILITY - ------------- Service to towns, counties and municipalities in the Company's Texas service area and other legal property taxing authorities for pumping of water, sewage, storm water and sewage disposal. All service will be taken at one point of delivery. As of November 1979, El Paso Electric Company will provide the transformation necessary for all new accounts except those receiving service at primary voltages (2,400 volts and higher). TERRITORY - --------- Texas Service Area SERVICE VOLTAGES - ---------------- Service to locations existing as of December 1, 1974, to be maintained on existing voltages. All new locations will have the following type of service: 10 HP or less connected - 120/240 volt, single phase; 11 HP to 49 HP connected - 120/240 volt, three phase; 50 HP to 1,000 HP connected - 277/480 volt, three phase; and over 1,000 HP connected at the Company's specified standard primary voltage. MONTHLY RATE - ------------ $23.25 Customer Charge plus $0.05201 per kilowatt-hour for all kilowatt-hours (R) MONTHLY MINIMUM - --------------- Customer Charge FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. The Term of Contract under this schedule shall be not less than one (1) year. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 8 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 1 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 22 --------------- IRRIGATION SERVICE RATE ----------------------- APPLICABILITY - ------------- This rate is available to irrigation water pumps dedicated solely for irrigation water pumping. Only irrigation water pumps of seven and one-half (7-1/2) horsepower or larger will be served under this schedule. TERRITORY - --------- Texas Service Area ALTERNATIVE BILLING PROVISION - ----------------------------- An Alternative Billing Provision is available to any customer who has an alternative supply of irrigation water. Customer can only select once on an annual basis his choice of the billing provision. MONTHLY RATE - ------------ $12.50 Customer Charge Plus Horsepower Charge $1.50 per connected horsepower during the billing periods April through September Energy Charge $0.08382 per kilowatt-hour for all kilowatt-hours (R) ALTERNATE MONTHLY RATE - ---------------------- Customer Charge $12.50 Customer Charge plus Energy Charge $0.09280 per kilowatt-hour for all kilowatt-hours (R) MONTHLY MINIMUM - --------------- Customer Charge plus Horsepower Charge when applicable. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 12 -------------------- --------------------- Sheet Number 11 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 22 --------------- IRRIGATION SERVICE RATE ----------------------- FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than 16 days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under the schedule. The Term of Contract for service under this schedule shall be not less than one year during which time the customer will maintain an active account and will pay the monthly minimum regardless of whether or not service is consumed. TYPE OF SERVICE SUPPLIED - ------------------------ Service may be single or three phase at the option of the Company and at a standard Company approved voltage. CONDITIONS FOR SERVICE AVAILABILITY - ----------------------------------- Service will be provided under the provisions of the Company's Line Extension Policy. DISCONTINUANCE OF USE BY CUSTOMER - --------------------------------- Where use of service is discontinued by customer or payments for any billing year are not made in accordance with the rate, the Company may at such time, after issuance of disconnect notice, remove the facilities installed by it to provide the service with no further liability by the Company to the customer. Such removal shall not relieve the customer of any payments due Company for service. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 12 -------------------- --------------------- Sheet Number 11 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 24 --------------- GENERAL SERVICE RATE -------------------- APPLICABILITY - ------------- The General Service Rate is available to all customers for lighting, power and heating service with a highest measured demand as defined by the Determination of Demand. All service will be taken at one point of delivery designated by the Company and at one of the Company's standard types of service. Service under this rate shall be limited to customers who otherwise do not qualify for service under the Company's other commercial service rates and whose thirty (30) minute average kilowatt demand is (i) greater than 15 kilowatts and (ii) does not exceed 600 kilowatts for three (3) consecutive months during the months of May through October. A new customer whose estimated monthly demand exceeds 600 kilowatts three (3) consecutive months during the aforementioned period will not be eligible for this rate schedule and will be billed in accordance with the billing provisions of Rate Schedule No. 25. TERRITORY - --------- Texas Service Area MONTHLY RATE - ------------ $13.00 Customer Charge plus Demand Charge $12.75 per kilowatt for all kilowatts of Demand Energy Charge $0.04589 per kilowatt-hour for the first 200 hours times the maximum measured demand. (R) $0.03593 per kilowatt-hour for the next 150 hours times the maximum measured demand. (R) $0.02295 per kilowatt-hour for all additional kilowatt- hours. (R) MONTHLY MINIMUM - --------------- Customer charge plus the greater of 15 kilowatts of demand or applicable minimum demand charge. DETERMINATION OF DEMAND - ----------------------- Maximum demand will be defined as the highest measured thirty (30) minute average kilowatt load determined by measurement. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 12 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 24 --------------- GENERAL SERVICE RATE -------------------- The billing demand will be the highest of: A. 15 kilowatts of Demand, or B. the maximum measured demand, or C. 60% of the highest measured on-peak demand established during the billing months of May through October in the 12-month period ending with the current month. The exception to this will occur when the 1/2 on-peak - 1/2 off-peak provision is invoked. At that time, the measured billing demand shall be used for the purposes of this paragraph. For customers with demands in excess of 300 KW for 3 consecutive months, the demand used for billing will be 1/2 the on-peak period demand plus 1/2 the off- peak demand when the demand established during the daily off-peak exceeds the demand established during the daily on-peak period. On-peak period shall be from 10:00 A.M. to 8:00 P.M., Mountain Standard Time, for weekdays Monday through Friday. Off-peak period shall be all other hours of the week not covered in the on-peak period. The Company may refuse service to another customer at the same address when service is terminated to avoid or evade payment of the minimum demand charges as set forth in this rate. PRIMARY VOLTAGE DISCOUNT - ------------------------ If electric service is delivered at one of Company's standard primary voltages and the Company is not providing a transformation solely to serve the customer and if the customer owns, operates, and maintains all the facilities for receiving such service at delivery voltage, the following primary voltage discount (PVD) will be given: PVD = $0.60 per kilowatt of measured demand. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 12 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 24 --------------- GENERAL SERVICE RATE -------------------- OFF-PEAK WATER HEATING RIDER - ---------------------------- For domestic electric water heating service (swimming pool water heating, commercial dishwasher water heating and water heating utilized for space heating excluded). The service shall be metered on a circuit which shall include only water heating elements and exclude all other service. Periods of electric supply service may be scheduled to conform to off-peak conditions of the Company's system, the Company reserving the right to change the off-peak periods of supply to meet the changing off-peak conditions of its system. The Company, at its option, will furnish and connect to the customer's wiring and retain ownership of a time switch or suitable device to regulate the hours of use. Service under this schedule shall be limited to water heaters of thirty (30) gallons or more capacity. All water heaters will be controlled by a thermostat and if two (2) or more heating elements are used, the water heater will be wired so that only one element will operate at one time. The minimum wattage of all heating elements shall total not less than 3,000 watts. Service may be limited where customer has an abnormally large connected load, and is only available as a secondary service in conjunction with a main service. MONTHLY RATE - OFF-PEAK WATER HEATING - ------------------------------------- $1.00 Customer Charge plus $0.04401 per kilowatt-hour for all kilowatt-hours (R) MONTHLY MINIMUM - OFF-PEAK WATER HEATING - ---------------------------------------- Customer Charge OFF-PEAK DEMAND RIDER - ---------------------- When a customer who takes service under this rate establishes an average monthly off-peak demand greater than or equal to three (3) times the average monthly on- peak demand, then the maximum on-peak monthly demand shall be utilized for the determination of billing demand. MONTHLY RATE - ------------ $13.00 Customer Charge plus Demand Charge $24.00 per kilowatt of demand - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 12 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 24 --------------- GENERAL SERVICE RATE -------------------- Energy Charge $0.00729 per kilowatt-hour (R) Determination of Demand (Off-Peak Demand Rider) Maximum demand will be defined as the highest measured thirty (30) minute average kilowatt load determined by measurement. On-peak period shall be 8:00 A.M. to 10:00 P.M., Mountain Standard Time, for weekdays of Monday through Friday. Off-peak periods shall be all other hours of the week not covered in the on-peak period. Terms and Conditions A customer requesting service under the Experimental Off-Peak Demand Rider must sign an agreement for an initial one (1) year term after which the customer must sign subsequent one (1) year agreements with the Company. The Company, however, is under no obligation to renew any agreement for service under this rider. This rider may not be taken in conjunction with any other rider offered under this rate. A customer taking service under this rider who fails to maintain an off-peak to on-peak ratio of 3.0 or greater, for that month, shall be billed under the applicable standard rate. In addition, the billing KW will be adjusted upward by 30% to account for noncompliance with the off-peak provisions of this rider. Any customer who fails to maintain an off-peak to on-peak ratio of 3.0 or greater for two (2) consecutive months shall be declared ineligible for this rider for a period of one (1) year and will be billed under the standard rate. The Company, at its option, may request payment for any special metering installation costs required for the customer to take service under this rider. THERMAL ENERGY STORAGE RIDER - ---------------------------- Available to customers with separately metered Thermal Energy Storage (TES) Systems whose maximum demand does not exceed the maximum demand of the building after completion of the necessary contract arrangements and installation of necessary metering equipment. The billing demand for this separately metered load will be the highest measured thirty (30) minute average kilowatt load established during the on-peak period. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 12 Effective with energy consumed on or ---------------------- -------------------------- Page 4 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 24 --------------- GENERAL SERVICE RATE -------------------- On-peak period shall be from 11:00 A.M. to 7:00 P.M., Mountain Standard Time for weekdays of Monday through Friday. Off-peak period shall be all other hours not covered in the on-peak period. No other options or riders are applicable to consumption covered under this rider. Both separately metered TES systems and total building loads must be served under this rate schedule. The Company reserves the right to close this rider to additional customers if, in the Company's judgment, system load characteristics no longer warrant such a rider. CHURCH RIDER - ------------ The kilowatt demand for billing for churches shall be the highest measured thirty (30) minute average kilowatt load determined by measurement, which has been established during the current billing month. This rider is not applicable to meeting halls, schools or other ancillary buildings which may be associated with the church. At its option, the Company may switch this service to the Alternative Rate applicable to Schedule No. 02, Small Commercial Service Rate. Refer to terms provided under the Terms and Conditions of this Schedule. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 12 Effective with energy consumed on or ---------------------- -------------------------- Page 5 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 24 --------------- GENERAL SERVICE RATE -------------------- TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. If a customer's highest measured thirty (30) minute average kilowatt load exceeds 600 KW three (3) consecutive times during the months of May through October, that customer shall be placed on the Large Power Service Rate Schedule No. 25 for a minimum of twelve (12) months, at which time a determination will be made for the applicable rate schedule. If a customer's highest measured thirty (30) minute average kilowatt load has not exceeded 15 KW three (3) consecutive times during the months of May through October, at the Company's option, that customer shall be placed on Schedule No. 02, Small Commercial Service Rate. Any new customer that has not established a prior service history with the Company shall be classified under the appropriate rate schedule in accordance with a demand estimate performed by the Company. If the Company determines that a customer's bill under this schedule is unduly burdensome, the Company may, at its option, bill said customer under Schedule No. 02, Small Commercial Service Rate. Specifically, a customer who operates at less than a ten (10) percent load factor, based on the average of the preceding twelve (12) month period and/or its unit rate is three (3) times greater than the overall base unit rate of the Small Commercial class will qualify for this billing alternative. For the purpose of this rate schedule, customers is defined as to include all non-public schools and institutions of higher learning or facilities not eligible under Schedule No. 41, municipal, county, State of Texas and federal installations. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 12 Effective with energy consumed on or ---------------------- -------------------------- Page 6 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 25 --------------- LARGE POWER SERVICE RATE ------------------------ APPLICABILITY - ------------- This rate is applicable to all customers for lighting, power, and heating service whose highest measured demand as defined by the Determination of Demand exceeds 600 kilowatts for three (3) consecutive months during the months of May through October or to new customers whose estimated monthly demand load exceeds 600 kilowatts for three (3) consecutive months during the months of May through October. All service will be taken at the point of delivery designated by the Company and at one of the Company's standard types of service. TERRITORY - --------- Texas Service Area MONTHLY RATE - ------------ $100.00 Customer Charge plus Demand Charge $20.25 per kilowatt for all kilowatts of Demand Energy Charge $0.02074 per kilowatt-hour for the first 400 hours times the maximum measured demand. (R) $0.00550 per kilowatt-hour for all additional kilowatt-hours. (R) MONTHLY MINIMUM - --------------- Customer charge plus the greater of the demand charge for 600 kilowatts or applicable minimum demand charge. DETERMINATION OF DEMAND - ----------------------- Maximum demand will be defined as the highest measured thirty (30) minute average kilowatt load determined by measurement. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 13 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 25 --------------- LARGE POWER SERVICE RATE ------------------------ The billing demand will be the highest of: A. 600 kilowatts B. the maximum demand or C. 75% of the highest measured on-peak demand established during billing months of May through October in the 12-month period ending with the current month. The exception to this will occur when the 1/2 on-peak - 1/2 off-peak provision is invoked. At that time, the measured billing demand shall be used for the purposes of this paragraph. When the demand established during the daily off-peak period exceeds the demand established during the daily on-peak period, the demand used for billing will be 1/2 the on-peak period demand plus 1/2 the off-peak demand. On-peak period shall be from 10:00 A.M. to 8:00 P.M., Mountain Standard Time, for weekdays of Monday through Friday. Off-peak period shall be all other hours of the week not covered in the on-peak period. The Company may refuse service to another customer at the same address when service is terminated to avoid or evade payment of the minimum demand charges as set forth in this rate. RATING PERIOD SELECTION OPTION - ------------------------------ Upon written request by the customer and approval by the Company, a customer may shift his 10-hour peak period for billing purposes by two (2) hours around the normally defined on-peak period. The customer may exercise this option twice during a twelve (12) month billing period. FIXED RATE RIDER - ---------------- This rider is available to new customers with a projected minimum demand of 1,000 KW or existing customers with increased load of at least 1,000 KW as measured by the average of the three (3) highest peaks for the preceding twelve (12) months. Upon the execution of a five (5) year service contract, EPEC will guarantee fixed rates for a two (2) year period. Customers electing to take service under this rider will not be eligible for the Economic Development Rate Schedule No. 33. A new customer is defined-as one who has never taken electrical service from EPEC within the Texas service area. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 13 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 25 --------------- LARGE POWER SERVICE RATE ------------------------ Existing businesses which change ownership, location or name do not qualify as new customers, but would instead be treated as existing customers for purposes of this rider. If a business ceases to exist and the premises are occupied by a new owner and a new business is opened, it may qualify as a new customer. The designation as a new customer shall be determined by the Company, subject to the customer's right to seek PUCT review of such determination. THERMAL ENERGY STORAGE RIDER - ---------------------------- Available to customers with separately metered Thermal Energy Storage (TES) Systems whose maximum demand does not exceed the maximum demand of the building after completion of the necessary contract arrangements and installation of necessary metering equipment. The billing demand for this separately metered load will be the highest measured thirty (30) minute average kilowatt load established during the on-peak period. On-peak period shall be from 11:00 A.M. to 7:00 P.M., Mountain Standard Time for weekdays of Monday through Friday. Off-peak period shall be all other hours not covered in the on-peak period. No other options or riders are applicable to consumption covered under this rider. Both separately metered TES systems and total building loads must be served under this rate schedule. The Company reserves the right to close this rider to additional customers if, in the Company's judgment, system load characteristics no longer warrant such a rider. POWER FACTOR ADJUSTMENT - ----------------------- If the power factor at the time of the highest measured thirty (30) minute interval kilowatt demand for the entire plant is below 90% lagging, a charge of $0.0700 per KVAR will be made for each KVAR by which customer's computed KVAR demand exceeds 48.432% of the measured kilowatt demand. If the power factor is greater than or equal to 90%, then no power factor adjustment will be made. PRIMARY VOLTAGE DISCOUNT - ------------------------ If electric service is delivered at one of the Company's standard primary voltages and the Company is not providing a transformation solely to serve the customer and if the customer owns, operates and maintains all the facilities for receiving such service at delivery voltage, the following primary voltage discount (PVD) will be given: - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 13 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 25 --------------- LARGE POWER SERVICE RATE ------------------------ PVD = $0.36 per kilowatt of measured Demand FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. For the purpose of this rate schedule, customers is defined as to include all non-public schools and institutions of higher learning or facilities not eligible under Schedule No. 41, municipal, county, State of Texas and federal installations. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 13 Effective with energy consumed on or ---------------------- -------------------------- Page 4 of 4 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 28 --------------- AREA LIGHTING SERVICE RATE -------------------------- APPLICABILITY - ------------- All customers who desire overhead outdoor lighting service under the conditions specified herein. TERRITORY - --------- Texas Service Area MONTHLY RATE - ------------ Single Fixture Charge per Each Standard Service: Wattage Per Month - ----------------- ------- --------------- 7,000 Lumen Mercury Vapor Lamp - 195 $12.79 (R) 11,000 Lumen Mercury Vapor Lamp - 275 $14.29 (R) 20,000 Lumen Mercury Vapor Lamp - 460 $17.49 (R) 8,500 Lumen High Pressure Sodium Vapor - 124 $12.54 (R) 23,200 Lumen High Pressure Sodium Vapor - 313 $15.71 (R) Floodlight Service: - ------------------- Without Company Supplied 30' Wood Pole 9,500 Lumen High Pressure Sodium Vapor 137 $ 8.19 (R) 27,500 Lumen High Pressure Sodium Vapor 312 $11.31 (R) 50,000 Lumen High Pressure Sodium Vapor 485 $14.32 (R) With Company Supplied 30' Wood Pole 9,500 Lumen High Pressure Sodium Vapor 137 $11.70 (R) 27,500 Lumen High Pressure Sodium Vapor 312 $14.82 (R) 50,000 Lumen High Pressure Sodium Vapor 485 $17.83 (R)
TYPE OF SERVICE - --------------- Outdoor all night lighting service contracted for by customer for overhead service, automatically controlled, standard mercury vapor and high pressure sodium vapor luminarie units mounted on Company-owned wood poles. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 16 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 28 --------------- AREA LIGHTING SERVICE RATE -------------------------- FACILITIES PROVIDED - ------------------- The Company will install a 30-foot wood pole, luminaire and necessary equipment and extend overhead secondary wiring up to 125 feet where necessary. The Company will own, operate and maintain the installation. Facilities necessary to provide lighting in addition to above will be paid for by customer. All facilities installed by the Company will remain the property of the Company. The Company has the option to not install poles and/or luminaries in areas inaccessible to the Company trucks. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. The initial Term of Contract for service under this schedule shall be not less than two (2) years. The Company reserves the right to remove all equipment furnished under this schedule, after issuance of disconnect notice, and void the contract if in the opinion of the Company, there is excessive breakage or vandalization of its facilities. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 15 -------------------- --------------------- Sheet Number 16 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 34 --------------- COTTON GIN SERVICE RATE ----------------------- APPLICABILITY - ------------- This rate is available to cotton gins who purchase entire power requirements from the Company and is applicable to electric service other than separately metered light and miscellaneous office electric load furnished to the cotton gin. Service will be furnished at one point of delivery. The separately metered lighting and miscellaneous office electric load will be billed under the applicable commercial rate schedule. Customer's operating season will start September 1st of each year, or such later date as customer first takes service. The above season shall not be for a period of less than three (3) months, and season shall not last longer than eight (8) months or April 30th of the following year, whichever comes first. Electrical usage which occurs other than during the regular operating season will be billed on the applicable commercial rate schedule. TERRITORY - --------- Texas Service Area RATE - ---- Customer Charge - $277.75 Annually payable with the first month of the operating season as defined above Demand Charge - Monthly Billing $13.75 per kilowatt for all kilowatts of Demand Energy Charge - Monthly Billing $0.01146 per kilowatt-hour (R) DETERMINATION OF DEMAND - ----------------------- Maximum demand will be defined as the highest measured thirty (30) minute average kilowatt load determined by measurement. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 22 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 34 --------------- COTTON GIN SERVICE RATE ----------------------- FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 22 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 41 --------------- CITY AND COUNTY SERVICE RATE ---------------------------- APPLICABILITY - ------------- This schedule is limited to all public schools, Kindergarten through 12th grade, and to those municipal and county customer service points currently taking service under this schedule prior to the effective date of Rate Schedule 41 as authorized in Docket No. 9945 and have continued to take service without disconnection. Reconnections of existing service points, new customers or new service points shall be classified under other appropriate schedules in accordance with a demand estimate determined by the Company. TERRITORY - --------- Texas Service Area MONTHLY RATE - ------------ $15.25 Customer Charge plus Demand Charge $16.25 per kilowatt in excess of 15 kilowatts (R) Energy Charge $0.11757 per kilowatt-hour for the first 3,000 kilowatt-hours (R) $0.01245 per kilowatt-hour for all additional kilowatt-hours (R) MONTHLY MINIMUM - --------------- Customer Charge DETERMINATION OF DEMAND - ----------------------- Maximum demand will be defined as the highest measured thirty (30) minute average kilowatt load determined by measurement. NON-METERED SERVICE - ------------------- In instances when metering of energy would be impractical because of the low monthly level of usage and where estimates of this usage can be accurately calculated, the Company may, at its option, provide non-metered service. Billings for non-metered service shall be based on the customer charge plus the monthly energy usage calculated by the Company and applied to the energy charge of this rate. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 24 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 41 --------------- CITY AND COUNTY SERVICE RATE ---------------------------- THERMAL ENERGY STORAGE RIDER - ---------------------------- Available to public schools, Kindergarten through 12th grade, with separately metered Thermal Energy Storage (TES) Systems whose maximum demand does not exceed the maximum demand of the building after completion of the necessary contract arrangements and installation of necessary metering equipment. The billing demand for this separately metered load will be the highest measured thirty (30) minute average kilowatt load established during the on-peak period. On-peak period shall be from 11:00 A.M. to 7:00 P.M., Mountain Standard Time for weekdays of Monday through Friday. Off-peak period shall be all other hours not covered in the on-peak period. No other options or riders are applicable to consumption covered under this rider. Both separately metered TES systems and total building loads must be served under this rate schedule. The Company reserves the right to close this rider to additional customers if, in the Company's judgment, system load characteristics no longer warrant such a rider. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- The Company's Rules and Regulations apply to service under this schedule. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 13 -------------------- --------------------- Sheet Number 24 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 2 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 46 --------------- MAINTENANCE POWER SERVICE FOR ----------------------------- COGENERATION AND SMALL POWER PRODUCTION FACILITIES -------------------------------------------------- APPLICABILITY - ------------- This Rate Schedule is applicable to customers qualifying as small power production and cogeneration facilities as defined in 18 CFR, Part 292, Subpart B, of the final rules issued by the Federal Energy Regulatory Commission to implement Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978. Customer will furnish to the Company such data as required by the Company to determine that customer meets the requirements for qualification. The facility may be connected for (1) parallel operation with the Company's service, or (2) isolated operation with Maintenance Power Service provided by the Company by means of a double-throw switch. This rate schedule is applicable to use of service for light, heat and power supplied by the Company on a scheduled basis to a qualifying facility during an outage scheduled for the purpose of performing maintenance to the qualifying facility equipment, subject to the special provisions of this rate schedule. TERRITORY - --------- Texas Service Area TYPE OF SERVICE - --------------- Maintenance Power Service: Firm power service provided in pre-specified blocks - ------------------------- of capacity on a scheduled basis to replace capacity and energy normally generated by customer during periods when a customer's generation facility is not available due to a maintenance outage, and Customer's total purchase demand does not exceed the Supplementary Power Demand established during the billing month. Maintenance power shall be available to qualifying facilities for a maximum period of sixty (60) days in aggregate per calendar year, scheduled outside of the designated peak months (May through October) of the Company. MONTHLY RATE - ------------ Determination of a customer's Rate category for the purposes of this schedule shall be based on the customer's contract capacity. Maintenance power for residential customers with qualifying facilities shall be charged at the rates currently in effect for the Company's - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 27 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 5 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 46 --------------- MAINTENANCE POWER SERVICE FOR ----------------------------- COGENERATION AND SMALL POWER PRODUCTION FACILITIES -------------------------------------------------- Residential Service Rate Schedule No. 01 and for non-residential customers with qualifying facilities shall be as follows: Rate I: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity is 15 kilowatts (KW) or less. Rate II: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity is between 15 KW through 600 KW. Rate III: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity is between 600 KW through 5,000 KW. Rate IV: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity for Supplementary Power Service is 5,000 KW or more. The monthly demand charge shall be the greater of the product of (i) the capacity which had been scheduled in advance by the customer or (ii) the minimum demand of the rate classification group and the demand charge stated below adjusted by a monthly scheduled outage rate to reflect the duration of the scheduled outage. The monthly scheduled outage rate shall be calculated by dividing the number of days that Maintenance Power Service had been scheduled by the total number of days within that billing month. I II III IV - -- --- -- Customer Charge $ 6.50 $ 165.00 $ 255.00 $ 155.00 Demand Charge per KW $ 8.38 $ 10.13 $ 10.63 Energy Charge $0.10970 $0.02781 $0.01832 $0.00645 per KWH for (R)(R)(R) all KWH
COMMON PROVISIONS - ----------------- Interconnection Charge: Customers under this rate schedule shall be subject to a charge for interconnection costs. Interconnection costs are the reasonable costs of connection, switching, metering, transmission, distribution, safety provisions, engineering and administrative costs incurred - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 27 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 5 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 46 --------------- MAINTENANCE POWER SERVICE FOR ----------------------------- COGENERATION AND SMALL POWER PRODUCTION FACILITIES -------------------------------------------------- by the Company directly related to the installation of the physical facilities necessary to permit interconnected operations with a qualifying facility, to the extent such costs are in excess of the corresponding costs that the Company would have incurred if it had not engaged in interconnected operations, but instead generated an equivalent amount of electric energy itself or purchased an equivalent amount of electric energy or capacity from other sources. The customer shall pay in full the actual reasonable costs of interconnection prior to commencement of service under this rate schedule. In addition, the customer shall pay an annual charge of 8% of the capital costs of interconnection to cover property taxes and operation and maintenance expenses. The annual charge of 8% is payable by the customer in monthly installments at the rate of 2/3 of 1% per month. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. DETERMINATION OF CONTRACT CAPACITY - ---------------------------------- The contract capacity for the purpose of classifying a customer into the appropriate rate group of this rate schedule shall be the amount of capacity for Maintenance Power Service that is requested by the customer and agreed to by the Company. When a higher kilowatt demand for Maintenance Power Service is established, the higher kilowatt demand based on a thirty (30) minute interval shall become the new contract capacity for that month and for each month hereafter, unless and until exceeded by a still higher kilowatt demand which in turn shall be subject to the foregoing conditions. POWER FACTOR ADJUSTMENT - ----------------------- For those customers under Rate III and Rate IV: If the power factor at the time of the highest measured thirty (30) minute interval kilowatt demand for the entire plant is below 90% lagging, a charge of $0.0700 per KVAR will be made for each KVAR by which customer's computed KVAR demand exceeds 48.432% of the measure kilowatt demand. If the power factor is greater than or equal to 90%, then no power factor adjustment will be made. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 27 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 5 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 46 --------------- MAINTENANCE POWER SERVICE FOR ----------------------------- COGENERATION AND SMALL POWER PRODUCTION FACILITIES -------------------------------------------------- TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- This schedule shall be binding upon the Company and the customer for a period conterminous with the interconnection agreement; provided, however, that the customer may terminate this schedule at any time during such term by providing the Company with written notice at least thirty (30) days prior to the effective date of such termination and the Company may terminate in accordance with regulatory regulations. Any change in this schedule approved by a regulatory authority with the requisite jurisdiction, shall become effective upon such approval and remain in force until the expiration of the term of this schedule or the termination by customer in accordance with the requirements herein contained, whichever event occurs first in time. The service supplied hereunder is to be used exclusively within the premises of the customer, as described in his application for service. The Company's Rules and Regulations and the contract provisions shall apply under this rate schedule. INDEMNITY CLAUSE - ---------------- The provisions of the Indemnity Clause in the customer's contract for service under this schedule shall apply. SPECIAL PROVISIONS - ------------------ A. In the event a customer receives a combination of services providing for separate customer charges, only the greater of the separate charges shall be applied. B. If the contracted capacity as determined above exceeds 15 KW, the Company shall install a recording meter for purposes of measuring power taken under this service schedule. C. All maintenance power service supplied by the Company that has not been scheduled with the Company and approved by the Company through prior written notice shall be billed under the provisions of Backup Power Service. If this situation occurs more than twice during any consecutive six (6) month period, the customer - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 27 Effective with energy consumed on or ---------------------- -------------------------- Page 4 of 5 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 46 --------------- MAINTENANCE POWER SERVICE FOR ----------------------------- COGENERATION AND SMALL POWER PRODUCTION FACILITIES -------------------------------------------------- shall be required to contract for Backup Power Service in the event that customer previously had not contracted for such service. D. In the event maintenance occurs during the designated peak months (May through October) of the Company or exceeds a maximum of 60 days in aggregate, the total per calendar year, unless it is agreed to extend Maintenance Power, by written request by the Customer and written consent of the Company, such excess use of capacity will be billed as Supplementary Power. E. The following defines outage types for operational purposes: 1. A qualifying facility shall schedule its maintenance by giving the Company advance notice on the length of the outage as follows: Pre-Scheduled Required Maintenance Outage Advanced Notice ------------------ --------------- 1 day or less 5 calendar days 2 to 5 days 30 calendar days 6 to 30 days 90 calendar days F. Maintenance power requested during the designated peak months (May through October), that is scheduled in advance and agreed to by the Company, shall be billed according to the terms of Maintenance Power Service. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 27 Effective with energy consumed on or ---------------------- -------------------------- Page 5 of 5 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 47 --------------- BACKUP POWER SERVICE FOR COGENERATION ------------------------------------- AND SMALL POWER PRODUCTION FACILITIES ------------------------------------- APPLICABILITY - ------------- This Rate Schedule is applicable to customers qualifying as small power production and cogeneration facilities as defined in 1 8 CFR, Part 292, Subpart B, of the final rules issued by the Federal Energy Regulatory Commission to implement Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978. Customer will furnish to the Company such data as required by the Company to determine that customer meets the requirements for qualification. The facility may be connected for (1) parallel operation with the Company's service, or (2) isolated operation with Backup Power Service provided by the Company by means of a double-throw switch. This rate schedule is applicable to use of service for light, heat and power supplied by the Company on an unscheduled outage at a qualifying facility subject to the special provisions of this rate schedule. TERRITORY - --------- Texas Service Area TYPE OF SERVICE - --------------- Backup Power Service: Firm power service provided in contracted blocks of - -------------------- capacity on an unscheduled basis to replace capacity and energy normally generated by customer during periods when a Customer's generation facility experiences an unscheduled forced outage, and Customer's total purchases demand does not exceed the Supplementary Power Demand established during the billing month. MONTHLY RATE - ------------ Determination of a customer's Rate category for purposes of this schedule shall be based on the customer's contract capacity. Backup power for residential customers with qualifying facilities shall be charged at the rates currently in effect for the Company's Residential Service Rate Schedule No. 01 and for non- residential customers with qualifying facilities shall be as follows: - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 28 Effective with energy consumed on or ---------------------- -------------------------- Page 1 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 47 --------------- BACKUP POWER SERVICE FOR COGENERATION ------------------------------------- AND SMALL POWER PRODUCTION FACILITIES ------------------------------------- Rate I: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity is 15 kilowatts (KW) or less. Rate II: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity is between 15 KW through 600 KW. Rate III: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity is between 600 KW through 5,000 KW. Rate IV: Applicable to commercial or industrial customers with qualifying facilities whose contract capacity for Supplementary Power Service is 5,000 KW or more. The monthly demand charge shall be the product of the Backup Power Service Demand, as defined in the following sections, and the demand charge stated below adjusted by a monthly forced outage rate to reflect outage hours of the customer's generation unit(s). The monthly forced outage rate is defined as the Monthly Forced Outage Rate and is calculated as the total number of hours during which Backup Power Service was provided during the billing month, divided by the total number of operating hours in that month. In no event will the actual monthly forced outage rate be less than zero. I II III IV - -- --- -- Customer Charge $ 6.50 $ 165.00 $ 255.00 $ 155.00 Demand Charge per KW $ 16.75 $ 20.25 $ 21.25 Energy Charge $0.10970 $0.02781 $0.01832 $0.00645 per KWH for (R)(R)(R) all KWH
MONTHLY MINIMUM - --------------- Customer Charge plus the applicable Minimum Monthly Reservation Factor and energy charges. MONTHLY RESERVATION FACTOR - -------------------------- For customers contracting for service under this schedule a minimum monthly reservation factor per KW of contract capacity will be charged as follows: - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 28 Effective with energy consumed on or ---------------------- -------------------------- Page 2 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 47 --------------- BACKUP POWER SERVICE FOR COGENERATION ------------------------------------- AND SMALL POWER PRODUCTION FACILITIES ------------------------------------- Rate I: n/a Rate II: .10 Rate III: .10 Rate IV: .10 This rate assumes a minimum monthly reservation factor (MRF) for backup power service of 10% for the first three years. At the end of the first three years billing, the actual three year average Forced Outage Rate (FOR) experienced by the individual customer's cogeneration system shall replace the initial 10% MRF. The determination of FOR will be calculated based on a weighted average of actual backup demand during each forced outage period. The initial startup period of 3 months will be excluded from the calculation of the three year average Forced Outage Rate. DETERMINATION OF DEMAND - ----------------------- The Backup Power Service Demand to be used in billing shall be the highest measured thirty (30) minute kilowatt average load for customers who take only- Backup- Power Service. The Backup Power Service Demand, for those customers that receive a combination of Maintenance Power Service and Backup Power Service, shall be the greater of (i) the highest measured thirty (30) minute kilowatt average load during periods of forced outages when Maintenance Power Service was not scheduled or (ii) the highest thirty (30) minute kilowatt average load less the scheduled Maintenance Power Service during periods of forced outages when Maintenance Power Service was scheduled. The Backup Power Service Demand for those customers that received Supplementary Power Service shall be based on metered demand, less demand attributed to Supplementary Power and/or Maintenance Power. DETERMINATION OF CONTRACT CAPACITY - ---------------------------------- The contract capacity for the purpose of this rate schedule shall be the amount of capacity for Backup Power Service that is requested by the customer and agreed to by the Company. In the event that the Backup Power Service Demand, as determined above, exceeds the contract capacity, then that Backup Power Service Demand shall establish a new contract capacity for purposes of this schedule for the duration of the interconnection agreement or until a new contract capacity has been negotiated according to the provisions of the interconnection agreement. The contract capacity for Backup Power Service may be specified for each individual unit for customers owning a multi-unit cogeneration facility. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 28 Effective with energy consumed on or ---------------------- -------------------------- Page 3 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 47 --------------- BACKUP POWER SERVICE FOR COGENERATION ------------------------------------- AND SMALL POWER PRODUCTION FACILITIES ------------------------------------- COMMON PROVISIONS - ----------------- Interconnection Charge: Customers under this rate schedule shall be subject to a charge for interconnection costs. Interconnection costs are the reasonable costs of connection, switching, metering, transmission, distribution, safety provisions, engineering and administrative costs incurred by the Company directly related to the installation of the physical facilities necessary to permit interconnected operations with a qualifying facility, to the extent such costs are in excess of the corresponding costs that the Company would have incurred if it had not engaged in interconnected operations, but instead generated an equivalent amount of electric energy itself or purchased an equivalent amount of electric energy or capacity from other sources. The customer shall pay in full the actual reasonable costs of interconnection prior to commencement of service under this rate schedule. In addition, the customer shall pay an annual charge of 8% of the capital costs of interconnection to cover property taxes and operation and maintenance expenses. The annual charge of 8% is payable by the customer in monthly installments at the rate of 2/3 of 1% per month. FIXED FUEL FACTOR - ----------------- The above rates are subject to the provisions of Company's Tariff Schedule No. 98 entitled Fixed Fuel Factor. POWER FACTOR ADJUSTMENT - ----------------------- For those customers under Rate III and Rate IV: If the power factor at the time of the highest measured thirty (30) minute interval kilowatt demand for the entire plant is below 90% lagging, a charge of $0.0700 per KVAR will be made for each KVAR by which customer's computed KVAR demand exceeds 48.432% of the measure kilowatt demand. If the power factor is greater than or equal to 90%, then no power factor adjustment will be made. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 28 Effective with energy consumed on or ---------------------- -------------------------- Page 4 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 47 --------------- BACKUP POWER SERVICE FOR COGENERATION ------------------------------------- AND SMALL POWER PRODUCTION FACILITIES ------------------------------------- TERMS OF PAYMENT - ---------------- The due date of the bill for utility service shall not be less than sixteen (16) days after issuance. A bill becomes delinquent if not received at the Company by the due date. TERMS AND CONDITIONS - -------------------- This schedule shall be binding upon the Company and the customer for a period conterminous with the interconnection agreement; provided, however, that the customer may terminate this schedule at any time during such term by providing the Company with written notice at least thirty (30) days prior to the effective date of such termination and the Company may terminate in accordance with regulatory regulations. Any change in this schedule approved by a regulatory authority with the requisite jurisdiction, shall become effective upon such approval and remain in force until the expiration of the term of this schedule or the termination by customer in accordance with the requirements herein contained, whichever event occurs first in time. The service supplied hereunder is to be used exclusively within the premises of the customer, as described in his application for service. The Company's Rules and Regulations and the contract provisions shall apply under this rate schedule. INDEMNITY CLAUSE - ---------------- The provisions of the Indemnity Clause in the customer's contract for service under this schedule shall apply. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 28 Effective with energy consumed on or ---------------------- -------------------------- Page 5 of 6 after ------------------------------ ------------------- EL PASO ELECTRIC COMPANY SCHEDULE NO. 47 --------------- BACKUP POWER SERVICE FOR COGENERATION ------------------------------------- AND SMALL POWER PRODUCTION FACILITIES ------------------------------------- SPECIAL PROVISIONS - ------------------ A. In the event a customer receives a combination of services providing for separate customer charges only the greater of the separate charges shall be applied. B. If the contracted capacity as determined above exceeds 15 KW, the Company shall install a recording meter for purposes of measuring power taken under this service schedule. C. On the date the meter is read the customer must provide the Company with the date and times of all forced outage hours that occurred in that billing month. If such information is not provided on the day the meter is read, then the demand charge to be applied for Backup Power Service Demand shall be the same as the demand charge under Supplementary Power Service. D. The following defines outage type for operational purpose: 1. Forced Outage: An unplanned component failure or other condition that requires the unit(s) be removed from service immediately. - -------------------------------------------------------------------------------- Section Number 1 Revision Number 5 -------------------- --------------------- Sheet Number 28 Effective with energy consumed on or ---------------------- -------------------------- Page 6 of 6 after ------------------------------ ------------------- Attachment 2 EL PASO ELECTRIC COMPANY SCHEDULE NO. BRR (N) ---------------- BASE RATE REFUND ---------------- APPLICABILITY - ------------- This refund is applicable to the Rate Schedules listed below. TERRITORY - --------- Texas Service Area MONTHLY BILL - ------------ A refund, calculated using the refund factor per KWH shown below will be added as a separate line item to the base portion of the customer's Monthly Bill. The line item will be titled "Base Rate Refund." The $/KWH refund will begin June 1999 and continue for three (3) months. A customer who leaves the system during the refunding period will forfeit further refunds. A customer who enters the system during the refunding period will receive a refund for only the remaining refunding period. Filed Refund to the Filed Refund Rate Schedule Nos. Classes $/KWH Factor ------------------ ------- ------------ 01 $3,657,419 $0.00981 02 $ 249,679 $0.00455 07 $ 3,998 $0.00378 08 $ 39,354 $0.00490 11 $ 61,171 $0.00166 11A $ 0 15 $ 0 W/H Rider $ 21,245 $0.00393 22 $ 1,853 $0.00165 24 $1,112,215 $0.00286 25 $ 455,387 $0.00305 26 $ 0 27 $ 0 28 $ 20,191 $0.00837 29 $ 0 30 $ 0 31 $ 0 33 $ 0 34 $ 5,008 $0.04317 38 $ 0 41 $ 226,318 $0.00346 43 $ 0 45 $ 1,297 $0.00811 ---------- $5,855,135 ========== - -------------------------------------------------------------------------------- Section Number 1 Original -------------------- --------------------- Sheet Number 34 Effective with bills rendered on or ---------------------- -------------------------- Page 1 of 1 after ------------------------------ ------------------- -----END PRIVACY-ENHANCED MESSAGE-----