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Arizona Public Service Company

Arizona Public Service Company. ACC Natural Gas Forum September 8, 2005. Energy Markets and Hedging Practices. Tom Carlson Portfolio Manager APS Marketing & Trading. Overview of How APS Manages Gas Costs. General Market Issues APS Gas and Infrastructure Requirements

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Arizona Public Service Company

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  1. Arizona Public Service Company ACC Natural Gas Forum September 8, 2005

  2. Energy Markets and Hedging Practices Tom Carlson Portfolio Manager APS Marketing & Trading

  3. Overview of How APS Manages Gas Costs • General Market Issues • APS Gas and Infrastructure Requirements • APS Hedge Policy

  4. Natural gas prices at historical highs Wholesale power prices follow natural gas US economy remains strong Increased world demand on crude oil Natural gas storage surplus is shrinking Impact from Katrina still being assessed Deliverability issue on horizon LNG not a factor for Arizona until 2008 Energy Market Overview

  5. APS Energy Sources(Projected) Summer 2006Winter 2005 • Nuclear: 25% 37% • Coal 40% 43% • Natural Gas 22% 15% • Purchased Power 13% 5%

  6. APS Projected Gas Requirements

  7. Gas and Infrastructure Issues • Hedging • Gas Transportation • El Paso Natural Gas • Upcoming FERC rate case = higher costs • Transwestern? • North Baja – Yuma? • Gas Storage • Copper Eagle? • Red Lake? • Picacho?

  8. APS Hedge Policy • Natural Gas and Purchased Power • Designed to minimize price volatility • Strict guidelines – little trader discretion • Significant compliance requirements • Forward hedge for three years • Credit limitations • Liquidity limitations • Load forecast variability impacts hedge levels

  9. Current Hedge Position(Total Energy – Gas and Purchased Power) % Hedged • Balance of 2005: 85 • Calendar 2006: 85 • Calendar 2007: 55 • Calendar 2008: 30 • Natural gas hedges at NYMEX (Henry Hub) • Purchased power hedges at PV, FC, Mead

  10. Impact of Hurricane Katrina on NYMEX Natural Gas Futures • November 2005 – March 2006 Pricing Impact • August 1st: $ 9.28/mmBTU • August 31st: $11.93/mmBTU • Increase of $2.65/mmBTU

  11. Customer Education & Outreach Activities Terry Orlick Manager APS Customer Information & Programs

  12. Customer Programs and Outreach • PSA and Gas Cost Communication • How customers can mitigate the impact of high gas costs • Demand Side Management • Time of Use options • Equalizer • Low Income programs • What’s on the horizon

  13. PSA & Surcharge Impact Communication Plan - 2005

  14. Page from APS Web Site on PSA Costs

  15. Program Participation

  16. DSM Communication Plan

  17. Time-of-Use Rate Options • Two options • kWh only • kWh plus demand • Over 373,000 residential customers (42%) • The highest percentage nationally

  18. Equalizer Communication Plan

  19. Low Income Programs Communication Plan

  20. SHARE Communication Plan

  21. On the horizon… • DSM Portfolio and 10 program plans submitted for Commission approval • Compact Fluorescent Lighting promotion approved; available in stores fall of 2005 • Upon approval, DSM programs available for additional market segments and applications • Additional TOU rate

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