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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

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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

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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.

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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

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Load Forecast

Demand-Side

Options

Supply-Side Options

IntegrationProcess

Assumptions

A plan:Best Mix of

Demand and Supply-

Side Resources to add in the future

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Sensitivity & Risk

Analyses

The IRP

ExistingResources

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3% Average Annual Growth

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2.3% Average Annual Growth

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1.0% Average Annual Growth

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1.2% Average Annual Growth

Loss of customers to City of Safford

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2.9% Average Annual Growth

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APS TEP UNS SRP

Residential Programs

Consumer Products u u u u

Existing Homes u u u u

New Construction u u u u

Appl iance Recycl ing u u u u

Low Income Weatherization u u u u

Conservation Behavior Pi lot u u u

Multi-Fami ly Construction u u u

Shade Tree u u u

Clothes Washers x x x

Heat Pump Water Heaters x

Home Energy Reports u u u

Education and Outreach u u u

Energy Codes Enhancement Program u u

Res idential Energy Financing u u

SEER Ai r Conditioners x x

LED Chris tmas Lights u

Thermostatic-Control led Showerheads u

In Home Display u

Non-Residential Programs

Large Existing Faci l ities u u u

New Construction u u u

Smal l Bus iness u u u

Schools u u u

Energy Information Systems u

Window Fi lms x

Gaskets x

Bid for Effi ciency u u

Combined Heat & Power u u

Retro-Commiss ioning u u

EMS - Cold Deck Reset x x

Refrigerated Display LED Lighting Strips x x

Compressed Air Solutions u

u Included in IRP

x Cons idered but rejected

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APS TEP UNS SRP

Residential Programs

Direct Load Control u u

Time of Use Rates u u

Non-Residential Programs

APS Peak Solutions u

Interruptible Rates u

Direct Load Control u u u

Time of Use Rates u

u Included in IRP

x Cons idered but rejected

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APS TEP UNS AEPCoRenewable Technologies:

Wind Turbines u u uSolar Photovoltaic Fixed u u uSolar Photovoltaic Single-Axis Tracking u u uSolar Trough Concentrating without Storage u u uSolar Trough Concentrating with Storage u u uSolar Power Tower with Storage uCSP Hybrid Cooled with Storage uCSP Hybrid Cooled without Storage uGeothermal uBiomass Direct u u uBiogas u

Natural Gas-Fired GenerationCombustion Turbine - GE 7FA u u uCombustion Turbine - GE LMS100 u u uCombustion Turbine - GE LM6000 u u uCombined Cycle u u uWartsila 18V50 u

Coal-Fired GenerationSub-critical Pulverized Coal u u uIntegrated Gasification Combined Cycle u u u

Nuclear GenerationAdvanced Boiling Water Reactor u u u

Energy StoragePumped Hydro u uCompressed Air Energy Storage u uBatteries u uFlywheels u uUltracapacitors u u

Purchased PowerLong-TermShort-Term u u u u

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APS TEP UNS SRP

Solar Hot Water u u u uSolar Photovoltaic u u u uSolar Space Heating & Cooling u uSmall Hydro u u uSmall Wind u uBiogas or Biomass u u

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APS TEP UNS

Planning Reserve Margin 15% 15% 15%

Inflation 2.5% 2.5% 2.5%

Wind Integration Cost per MWh $3.25 $5.00 $5.00

Solar Integration Costs per MWh $2.50 $4.00 $4.00

Construction Costs in $/KW:

Natural Gas Combustion Turbine $716 $779 $779

Natural Gas Combined Cycle $892 $1,320 $1,320

Wind $2,190 $2,200 $2,200

Solar PV Fixed $1,783 $2,350 $2,350

Geothermal $4,639

Biomass $4,783 $3,250 $3,250

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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

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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

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Natural Gas Prices – High & Low

CO2 Prices – High & Low

Renewable Tax Credits Extended

EE Costs – High & Low

Externalities

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Reference Case No coal retirements New gas-fired generation EE and RES Compliance

Four Corners Retirement Navajo Retirement San Juan Retirement Springerville Replacement Externalities

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Natural Gas Prices – High & Low

Wholesale Market Prices – High & Low

Load Growth – High & Low

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Reference Case New gas-fired peaking units RES Compliance

Combined Cycle Case Joint ownership of combined-cycle unit RES Compliance

Externalities

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Natural Gas Prices – High & Low

Wholesale Market Prices – High & Low

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Base Plan Short-Term Purchases

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Information not supplied

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Firm Wholesale Sales End

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Long-term Purchases End

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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

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Average predicted annual rate increases:

APS 4.2% TEP 3.2% UNS 4.7% AEPCo Not supplied SRP Not supplied

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General Lack of consideration of conversion of coal plants to

natural gas Lack of consideration of jointly developed generation Excessive reliance on short-term market purchases Failure to consider all resource options

APS No capacity expansion model – plans developed

manually Questionable assumptions made

No consideration of new baseload generation Limited consideration of new nuclear

No load growth sensitivity

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UNS IRP does not meet EE requirement No load growth sensitivity

AEPCo Did not develop a complete IRP

Considered only two members - Graham & Duncan Missing required elements IRP does not meet EE and Renewable requirements

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The Commission should acknowledge the 2012 IRPs filed by APS, TEP and UNS, assuming the load-serving entities agree to correct identified issues in all future IRP filings

The Commission should not acknowledge the 2012 IRP filed by AEPCo

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