TEP Integrated Resource P lan Load Forecast

Greg Strang, Lead Forecast AnalystPublic Meeting

May 20, 2020

Forecast Overview

o Customer, energy, and peak forecasto The forecast period runs from 2020-2035o Wherever possible, the forecast relies on sound statistical

practice and shuns personal judgmentso Bottom up forecasto Forecast accounts for Weather, Economic, and Seasonal

variableso Projection made in early December

2

Changes From Prior IRP, Weather Trend Adjustment

3

65

66

67

68

69

70

71

72

73

74

1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 2021

Tem

pera

ture

°F

Rolling Annual Average 10 Year Rolling Average 30 Year Rolling Average Trend

Changes from Prior IRP, Electric Vehicles

4

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

US Total New Electric Vehicle Sales

Vendor 1 Vendor 2 Vendor 3 Vendor 4 TEP Average

Residential Use Per Customer by Temperature

5

0

200

400

600

800

1000

1200

1400

1600

45 50 55 60 65 70 75 80 85 90 95

kWh

January February March April May June July August September October November December

TEP Residential Customer Growth

6

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1995 2000 2005 2010 2015 2020 2025 2030 2035

Year over Year Change in Customers TEP

95th Percentile Confidence Bands

TEP Residential Use Per Customer Forecast

7

8500

9000

9500

10000

10500

11000

11500

12000

1995

2000

2005

2010

2015

2020

2025

2030

2035

Weather Normalized Annual Use Per Customer (kWh)

1% annual growth heavily influenced by the electrification of the transportation sector

-1.2% annual growth heavily influenced by the Great Recession, Energy Efficiency and Distributed Generation1.6% annual growth

TEP Total Sales

8

TEP Peak Forecast

9

2000

2100

2200

2300

2400

2500

2600

2700

2800

2900

300020

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

TEP

Reta

il Pe

ak D

eman

d (M

W)

1/10 Year Confidence Band

Historical Forecast Performance

o “Prediction is very difficult, especially about the future.”--Danish Proverb

o The Company evaluates forecast performance on a monthly basis

o Through this process we have identified what are the causes of the majority of forecast error—In the medium term, weather drives the forecast variance—In the long term, errors in economic forecasts drive the variance

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IRP Forecast Projection

11

First Economic Re-Projections

12

Most Recent Economic Projections

13