APS and RegionalAPS and RegionalTransmission SystemsTransmission Systems

OverviewOverview

Bob SmithBob SmithDirector Energy DeliveryDirector Energy Delivery

Asset Management and PlanningAsset Management and Planning

Agenda

• About APS

• Regional Transmission System Overview

• APS Transmission System Overview

• Industry Challenges

• APS Unique Challenges

About APS

• Service Territory and Statistics

• Financial structure and health

• Cost structure and pricing

• Resource and fuel mix overview

• APS Customer Initiatives

APS Service StatisticsAPS Service Statistics

• 11 counties

• 34,645 sq. mi.CC&N area

• 1.1 million customers

• 411 substations

• 28,022 distribution line miles

• 5,234 transmission line miles

• 54 generation units

Pinnacle West Financial SnapshotPinnacle West Financial Snapshot

APS SunCor APSES El Dorado

$12 Billion AssetsDecember 31, 2008$12 Billion Assets

December 31, 2008 Approximately $3 billion market cap

4th largest employer headquartered in Arizona

S&P 500 Index member

Approximately 75% of shareholders are institutional investors

$11 billion utility assets

$242 million net income

$2.10 per share annual dividend

Approximately $3 billion market cap

4th largest employer headquartered in Arizona

S&P 500 Index member

Approximately 75% of shareholders are institutional investors

$11 billion utility assets

$242 million net income

$2.10 per share annual dividend

Stock Price ComparisonDecember 31, 2007 – March 27, 2009

PNW (37.6)%S&P 500 (44.4)%S&P 1500 Electrics (38.0)%

Dec 312007

Mar 312008

Jun 302008

Mar 272009

Sep 302008

Dec 312008

(60)%

(50)%

(40)%

(30)%

(20)%

(10)%

0%

10%

APS PricesCompared to Other Utilities

June 2008 Average Electric Prices (¢/kWh) Selected Western Electric Utilities

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

SDGE

SCE

PG&E

EPE-TX

NPCAPS

UNSETEP

SRP

Excel

CO

PNMRM

P

Compared to All Other PricesAPS Average Retail Price and CPI

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

APS Price CPI

49%

14%

APS Cost ComponentsAPS Cost Components

Distribution Transmission Generation

$0.075671%

$0.027025%

$0.00444%

New EE2%

Renewable2%

Nuclear27%

Natural Gas31%

Coal38%

2009 Projected Energy Mix

Coal

Nuclear

GasCombined Cycle

Renewables

Gas Peaking

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

HOURS

1000 2000 3000 4000 5000 6000 7000 8000 8760

Load Duration CurveThe “guts” of utility supply

Gas Combined Cycle

Coal

Nuclear

APS Customer Initiatives

• Renewable energy development

• Energy efficiency programs

• “Smart Grid” development

• Pricing options

• Customer “experience” enhancements

Western Interconnection System

• US Electric Grid

• NERC and Regional Reliability Organizations

• Three US Interconnections

• WECC

• Major Western Interconnection Transmission

• Planning and Operational Issues

• DOE Congestion Study

WECC• Historical Reliability Coordination Organization

for Western US, Canada, Mexico

• Ensure Reliable Operation and Planning Coordination

• Provide Reliability Coordination Centers

• Delegated Compliance Monitoring from NERC

• Issues:

Transmission Planning

Delegation model

Regional deference

Tensions between CAISO, BPA, rest of Interconnection

500 kV DC 345 kV AC

500 kV AC 230 kV AC

Legend

Western Transmission Grid

SD

Mexico

NV

ID

UT

NM

CO

WY

MT

CA

British

Columbia

AZ

Canada

Alberta

OR

WA

NE

Pacific

Ocean

El PasoTucson

Laramie

Round Midpoint

Borah

Celilo

Portland

Colstrip

Jim

Reno

Peace River

San Diego

Phoenix

Malin

Mountain

Bridger

Market

Albuquerque

CornersFour

Salt Lake City

San Francisco

Los Angeles

Seattle

River

Place

Denver

Palo Verde

Planning and Operating Issues

• Planning Sub-Regional vs Regional (WECC)

Who

Decides

Builds

Pays

• Operations Relay misoperations

Right of way maintenance difficulties

DOE Congestion Study

Source:Figures ES-3 & 5-2U.S. Department of Energy National Electric TransmissionCongestion Study2006

Critical Congestion and Areas of Concernin the Western Interconnection

Conditional Constraint Areas

Source: Figures ES-4 & 5-5, U.S. Department of Energy, National Electric Transmission Congestion Study, 2006

APS Transmission System

State Area Transmission

SELIGMAN

ROUND VALLEY

ADAMS

MURAL

SAN MANUELORACLEJUNCTION

SAGUARO

N.GILA

PALO VERDE-HASSAYAMPA

YUCCA

GILA BEND

REDHAWK

JOJOBA

GILA RIVER/PANDA

RUDD

LIBERTY

KYRENE

SANTAROSA

WESTWING

BAGDAD

YAVAPAI VERDE

PINNACLEPEAK

PREACHERCANYON

CHOLLA

TO ELDORADO

TO CRYSTAL

TO MEAD /MARKETPLACE

MOENKOPI

NAVAJO

COCONINO

CASA GRANDE

TAT MOMOLI

KNOX

GAVILANPEAK

(WA

PA

)

FLAGSTAFF(WAPA)

TO GLENCANYON (WAPA)

2 circuits

WILLOWLAKE

CORONADO

(SRP)

COOLIDGE

VALLEY FARMS

HARQUAHALA

TO IMPERIAL VALLEY

FOUR CORNERS

(WAPA)

(WA

PA

)

DESERTBASIN

SUNDANCE

SUGARLOAFDUGAS

MILLIGAN

Red = 500 kV

Green = 345 kV

Blue = 230 kV

Black = 115 kVTO DEVERS

(SCE)

Four Corners/Cholla System Transmission

• Four Corners and Cholla Power Plants

• Four Corners-Moenkopi-Eldorado 500kV line

• Four Corners-Cholla 345kV lines

• Cholla-Pinnacle Peak 345kV lines

• Cholla-Saguaro 500kV line

SELIGMAN

ROUND VALLEY

ADAMS

MURAL

SAN MANUELORACLEJUNCTION

SAGUARO

N.GILA

PALO VERDE-HASSAYAMPA

YUCCA

GILA BEND

REDHAWK

JOJOBA

GILA RIVER/PANDA

RUDD

LIBERTY

KYRENE

SANTAROSA

WESTWING

BAGDAD

YAVAPAI VERDE

PINNACLEPEAK

PREACHERCANYON

CHOLLA

TO ELDORADO

TO CRYSTAL

TO MEAD /MARKETPLACE

MOENKOPI

NAVAJO

COCONINO

CASA GRANDE

TAT MOMOLI

KNOX

GAVILANPEAK

(WA

PA

)

FLAGSTAFF(WAPA)

TO GLENCANYON (WAPA)

2 circuits

WILLOWLAKE

CORONADO

(SRP)

COOLIDGE

VALLEY FARMS

HARQUAHALA

TO IMPERIAL VALLEY

FOUR CORNERS

(WAPA)

(WA

PA

)

DESERTBASIN

SUNDANCE

SUGARLOAFDUGAS

MILLIGAN

TO DEVERS (SCE)

Navajo System Transmission

• Navajo Power Plant

• Navajo-Crystal 500kV line

• Navajo-Westwing 500kV lines

SELIGMAN

ROUND VALLEY

ADAMS

MURAL

SAN MANUELORACLEJUNCTION

SAGUARO

N.GILA

PALO VERDE-HASSAYAMPA

YUCCA

GILA BEND

REDHAWK

JOJOBA

GILA RIVER/PANDA

RUDD

LIBERTY

KYRENE

SANTAROSA

WESTWING

BAGDAD

YAVAPAI VERDE

PINNACLEPEAK

PREACHERCANYON

CHOLLA

TO ELDORADO

TO CRYSTAL

TO MEAD /MARKETPLACE

MOENKOPI

NAVAJO

COCONINO

CASA GRANDE

TAT MOMOLI

KNOX

GAVILANPEAK

(WA

PA

)

FLAGSTAFF(WAPA)

TO GLENCANYON (WAPA)

2 circuits

WILLOWLAKE

CORONADO

(SRP)

COOLIDGE

VALLEY FARMS

HARQUAHALA

TO IMPERIAL VALLEY

FOUR CORNERS

(WAPA)

(WA

PA

)

DESERTBASIN

SUNDANCE

SUGARLOAFDUGAS

MILLIGAN

TO DEVERS (SCE)

Palo Verde Hub Transmission

• Palo Verde Nuclear Plant and Hassayampa Gas Power Plants

• Palo Verde West

PV-Devers 500kV line

Hassayampa-North Gila 500kV line

• Palo Verde East

PV-Westwing 500kV lines

PV-Rudd 500kV line

Hassayampa-Jojoba-Kyrene500kV line

SELIGMAN

ROUND VALLEY

ADAMS

MURAL

SAN MANUELORACLEJUNCTION

SAGUARO

N.GILA

PALO VERDE-HASSAYAMPA

YUCCA

GILA BEND

REDHAWK

JOJOBA

GILA RIVER/PANDA

RUDD

LIBERTY

KYRENE

SANTAROSA

WESTWING

BAGDAD

YAVAPAI VERDE

PINNACLEPEAK

PREACHERCANYON

CHOLLA

TO ELDORADO

TO CRYSTAL

TO MEAD /MARKETPLACE

MOENKOPI

NAVAJO

COCONINO

CASA GRANDE

TAT MOMOLI

KNOX

GAVILANPEAK

(WA

PA

)

FLAGSTAFF(WAPA)

TO GLENCANYON (WAPA)

2 circuits

WILLOWLAKE

CORONADO

(SRP)

COOLIDGE

VALLEY FARMS

HARQUAHALA

TO IMPERIAL VALLEY

FOUR CORNERS

(WAPA)

(WA

PA

)

DESERTBASIN

SUNDANCE

SUGARLOAFDUGAS

MILLIGAN

TO DEVERS (SCE)

Mead-Phoenix Transmission

• Mead-Phoenix 500kV lineSELIGMAN

ROUND VALLEY

ADAMS

MURAL

SAN MANUELORACLEJUNCTION

SAGUARO

N.GILA

PALO VERDE-HASSAYAMPA

YUCCA

GILA BEND

REDHAWK

JOJOBA

GILA RIVER/PANDA

RUDD

LIBERTY

KYRENE

SANTAROSA

WESTWING

BAGDAD

YAVAPAI VERDE

PINNACLEPEAK

PREACHERCANYON

CHOLLA

TO ELDORADO

TO CRYSTAL

TO MEAD /MARKETPLACE

MOENKOPI

NAVAJO

COCONINO

CASA GRANDE

TAT MOMOLI

KNOX

GAVILANPEAK

(WA

PA

)

FLAGSTAFF(WAPA)

TO GLENCANYON (WAPA)

2 circuits

WILLOWLAKE

CORONADO

(SRP)

COOLIDGE

VALLEY FARMS

HARQUAHALA

TO IMPERIAL VALLEY

FOUR CORNERS

(WAPA)

(WA

PA

)

DESERTBASIN

SUNDANCE

SUGARLOAFDUGAS

MILLIGAN

TO DEVERS (SCE)

Navajo 2,250 MW 545 Employees

Four Corners 2,060 MW597 employees

Cholla 1,021 MW290 Employees

47% MWH

APS Coal Fired Plants2008 Data

33% FUEL $

28% APS CAPACITY

Redhawk 984 MW48 Employees

Ocotillo 330 MW27 Employees

Sundance 420 MW11 Employees

Yucca 340 MW25 Employees

Saguaro 399 MWDouglas 16 MW

20 Employees

West Phoenix 988 MW56 Employees

61% FUEL $

APS Gas Fired Plants2008 Data

23% MWH53% APS CAPACITY

APS OWNED CAPACITY

Coal28%

Nuclear18%

Gas/Oil54%

2008 ACTUALS - APS OWNED GENERATION

FUEL CAPACITY GWH FUEL EXP

Nuclear 1,146 8,512 $ 41,591

Coal 1,741 13,166 252,651

Gas/Oil 3,380 6,346 461,204

Renewable 6 10 0

Total 6,273 28,034 $ 755,446

APS FUEL EXPENSE

Gas/Oil61%

Nuclear6%

Coal33%

APS GENERATION

Coal47%

Nuclear30%

Gas/Oil23%

7.2 Million Tons of Coal

47.6 BCF Natural Gas

Fossil Generation Plays a Key Role

Major Challenges ConfrontingAPS and the Utility Industry

• Infrastructure investment

• Capital Access

• Financial Health

• Technology

• Economic Turmoil

• Aging Workforce

• Regulatory Uncertainty

• Climate Change

• Upward pressure on pricing

• Economic Turmoil

• Aging Workforce

• Regulatory Uncertainty

• Climate Change

• Upward pressure on pricing

APS – Unique Challenges

• Cost Recovery

• Desert Climate

Heavy summer peak loading

Low load factor

Heavy inductive air conditioner load

• Expansive Service Territory

• Transmission Line Permitting

• Increased System Utilization

• Monsoon Storm Season

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

APS RatesHave Become Noncompensatory

APS RatesHave Become Noncompensatory

Revenue LessFuel Expense

Non-Fuel Costs(Including Return)

8¢Per kWh

6¢Per kWh

4¢Per kWh

0

0

3

7

31

33

31

26

6

2

0 5 10 15 20 25 30 35

AA-

A+

A

A-

BBB+

BBB

BBB-

BB+

BB

BB-

APS

Number of Companies

Non-Investment Grade – “Junk”

Standard & Poor’sRatings

Credit Ratings DistributionInvestor-Owned Electric Utilities

Credit Ratings DistributionInvestor-Owned Electric Utilities

MW

Meeting Challenges of Peak Load GrowthMeeting Challenges of Peak Load Growth

2008 - 2020 Average Annual Load Growth 2.7%

Projected

4,000

6,000

8,000

10,000

12,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Long-Term Resources Native Load Peak & Reserves

Transmission Line PermittingTransmission Line Permitting

http://www.aps.com/general_info/Siting/siting_38.html

MaintenanceMaintenance

• Predictive Maintenance

• Preventative Maintenance

• Line inspections

• Right of Way Maintenance

LIDAR

• Remote Equipment Monitoring

EEI AwardEEI Award

Emergency Equipment

• Mobile 69/12kV Transformers

• Emergency Towers - two Lindsey towers

• Generator – 1,500 KW Mobile Unit

• Mobile Command Center

Mobile Transformer

Lindsey Towers

Mobile Generator

Mobile Command Center

Storm ResponseStorm Response

QuestionsQuestions…………