Arizona Corporation Commission Industry and Public Workshop Integrated Resource Plan Assessment

1. Arizona Corporation CommissionIndustry and Public WorkshopIntegrated Resource Plan Assessment October 25, 2012 Global Energy & Water Consulting, LLC Evans Power Consulting, Inc.

2. Arizona Corporation CommissionIndustry and Public WorkshopIntegrated Resource Plan Assessment October 25, 2012 • Purpose • To present Staff’s Preliminary Findings on the 2012 Integrated Resource Plans of: • APS – Arizona Public Service Company • TEP – Tucson Electric Power Company • UNS – UNS Electric, Inc. • AEPCo – Arizona Electric Power Cooperative, Inc. • As required by the Commission’s IRP Rules • To solicit input from all stakeholders

8. Integrated Resource Planning • The purpose of Integrated Resource Planning (IRP) • To develop a long-term plan to meet customers’ electric needs taking into consideration: • Input of all stakeholders • All Relevant Costs • Reliability of service • Environmental and societal impacts • Demand Reduction and Increased Supply on an equal basis

9. Arizona IRP Requirements • Each IRP must be reasonable and in the public interest , considering the following factors: • The total cost of electric energy services; • The degree to which the factors that affect demand, including demand management, have been taken into account; • The degree to which supply alternatives, such as self-generation, have been taken into account; • Uncertainty in demand and supply analyses, forecasts, and plans, and whether plans are sufficiently flexible to enable the entity to respond to unforeseen changes in demand and supply factors; • The reliability of power supplied, including fuel diversity and non-cost considerations; • The reliability of the transmission grid; • The environmental impacts of resource choices and alternatives; • The degree to which the entity considered all relevant resources, risks, and uncertainties; • The degree to which the entity’s plan for future resources is in the best interest of its customers; • The best combination of expected costs and associated risks for the entity and its customers; and • The degree to which the entity’s resource plan allows for coordinated efforts with other entities.

10. Arizona IRP Requirements • Renewable Energy Requirement: • 3.5% of retail energy sold in 2012 • Increasing to 15% by 2025 • Distributed Renewable Energy Requirement: • 30% of the Annual Renewable Energy Requirement • Energy Efficiency Standard: • 3.0% of retail energy sold in 2012 • Increasing to 22% by 2020

11. Integrated Resource Planning

12. The Basic IRP Process Load Forecast Sensitivity & Risk Analyses A plan: Best Mix of Demand and Supply-Side Resources to add in the future Existing Resources Integration Process Demand-Side Options The IRP Supply-Side Options Assumptions

13. APS – Existing Resources8,840 megawatts

14. APS Peak Demand Load Forecast 3% Average Annual Growth

15. TEP – Existing Resources2,859 megawatts

16. TEP Peak Demand Load Forecast 2.3% Average Annual Growth

17. UNS – Existing Resources526 megawatts

18. UNS Peak Demand Load Forecast 1.0% Average Annual Growth

19. AEPCo Existing Resources645 megawatts

20. AEPCo Peak Demand Load ForecastArizona All Requirements Members Only Loss of customers to City of Safford 1.2% Average Annual Growth

21. SRP Existing Resources7,866 megawatts

22. SRP Peak Demand Forecast 2.9% Average Annual Growth

23. All Peak Demand Load Forecasts

26. Energy Efficiency Options Considered

27. Demand Response Programs Considered

28. Supply-Side Options Considered

29. Distributed Generation Considered

30. Assumptions

31. Natural Gas Prices

32. CO2 Emissions Costs

33. Retirements • APS • Four Corners Coal Plant • Retire Units 1-3, purchase SCE shares of Units 4 & 5 • Net Gain of 179 MW • Long-term Purchases • UNS • Long-term Purchases • No other fossil retirements

34. APS – Plans Considered • Base Case • Retire Four Corners 1-3, purchase SCE share of 4&5 • New gas-fired generation • EE & RES Compliance • Four Corners Contingency • Retire all Four Corners units • Replace with gas-fired generation • Enhanced Renewable • Base Case Four Corners • 30% additional energy needs met with RE • Coal Retirement • Retire all coal-fired generation • Replace with gas-fired generation and RE

35. APS – Sensitivities • Natural Gas Prices – High & Low • CO2 Prices – High & Low • Renewable Tax Credits Extended • EE Costs – High & Low • Externalities

36. TEP – Plans Considered • Reference Case • No coal retirements • New gas-fired generation • EE and RES Compliance • Four Corners Retirement • Navajo Retirement • San Juan Retirement • Springerville Replacement • Externalities

37. TEP - Sensitivities • Natural Gas Prices – High & Low • Wholesale Market Prices – High & Low • Load Growth – High & Low

38. UNS – Plans Considered • Reference Case • New gas-fired peaking units • RES Compliance • Combined Cycle Case • Joint ownership of combined-cycle unit • RES Compliance • Externalities

39. UNS - Sensitivities • Natural Gas Prices – High & Low • Wholesale Market Prices – High & Low

40. AEPCo – Plans Considered • Base Plan • Short-Term Purchases SRP – Plans Considered • Information not supplied

42. Firm Wholesale Sales End

43. Long-term Purchases End

45. SRP Additions • SRP Fiscal Year 2011 Resource Plan • EE programs at 3-4% of retail requirements • DR programs - 100 mw • Interruptible programs - 100 mw • TOU programs - 100-200 mw • Renewable generation - 450 mw • Purchased power – 500 mw • Natural gas generation – 1360 mw

47. Capacity Mix ChangeAPS, TEP, UNS and AEPCo

48. Energy Mix ChangeAPS, TEP, UNS and AEPCo

49. CO2 Emissions - Combined

50. NOX Emissions - Combined