Arizona’s Energy Future

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Arizona’s Energy Future. Renewables + Energy Efficiency + Smart Technologies = More Control for Customers August xx, 2011. In 2009, a Long-Term Energy Vision Was Shared by 23 Arizona Groups. Environmental groups Business associations Community groups Arizona Corporation Commission - PowerPoint PPT Presentation

Text of Arizona’s Energy Future

Rate Case Communications

Arizonas Energy FutureRenewables + Energy Efficiency + Smart Technologies =

More Control for Customers

August xx, 2011 Were going to talk today about how APS and Arizona are seeking a cleaner, more efficient and much smarter energy future.

We all want more control over our future and that is what APS wants to give to customers more choices and more control over their energy costs.1In 2009, a Long-Term Energy Vision Was Shared by 23 Arizona GroupsEnvironmental groupsBusiness associationsCommunity groupsArizona Corporation CommissionResidential Utility Consumer OfficeArizona Public Service

In 2009, APS settled the major issues of our previous rate case before hearings began with our regulators, the Arizona Corporation Commission. We secured a settlement agreement with 21 other Arizona groups, and then the ACC agreed to the main features of the agreement,

Read list of groups emphasize broad representation, differing viewpoints

This agreement marked a new approach for APS and Arizona. Reaching consensus on a difficult set of electric issues was a real milestone. In fact, we believe it is one of the most innovative and comprehensive agreements between an electric utility and its customer groups in the entire country.

The 2009 agreement sets a high standard for the current rate case, but we are committed to open communication and will strive to reach consensus again.2That Shared Vision Is Important to ArizonaAggressive goals for renewable energy

Ambitious energy efficiency targets

Maintain reliability and upgrade power grid

Implement smart technologies to give customers greater choice and control

Renewable EnergyEnergy Efficiency2010 20252010 2020APS Goals The 2009 agreement addressed many of the major energy issues of our day. The major theme of this agreement was Arizonas energy future.

The agreement set some aggressive goals for creating a cleaner, more sustainable Arizona. The vision outlined in the agreement is not just our vision for Arizona, or even our regulators vision it is a shared vision of what Arizonas future can be.

The four goals ultimately all work together to create a whole new kind of energy system for Arizona.

The chart shows just how significant the goals that emerged from the 2009 agreement are.

In 2010, APS produced 3% of its energy from renewables, a respectable figure. But by 2025, our customers will receive more than 25% from renewables.

The energy efficiency goals that emerged from the 2009 agreement may be even more ambitious a whopping 22 percent reduction in energy usage by adopting more energy efficient practices and technologies.

3APS Is Meeting Arizonas Goals Meeting those goals requires continued investment:

Were spending about $1 billion dollars each year to create a

CleanerMore reliableMore efficient

energy future for Arizona.APS Capital Expenditures($ Millions)$952$962$1,340 Meeting the ambitious goals of the 2009 settlement requires APS to spend on average more than $1 billion each year

Thats what is needed to create a cleaner, more reliable and more efficient energy future for Arizona.

We will invest hundreds of millions each year in renewables, energy efficiency and upgrades to the power grid.4Energy Efficiency Saves Customers Money and Reduces Spending on New Power PlantsThe cheapest kilowatt-hour is the one never used

Energy efficiency is a viable resource, just like natural gas or coal

APS will invest nearly $800 million over 5 years to help customers reduce energy usage

Every megawatt saved = 250 homes off the grid

Energy efficiency doesnt mean doing without or lowering your lifestyle. Energy efficiency investments allow us to continue living our lives and being productive, but doing so with less energy usage.

We now view energy efficiency as much more than a customer relations program. Energy efficiency is our lowest-cost energy resource because the cheapest kilowatt-hour is the one never used.

And the cheapest power plant is the one we never have to build.

The cumulative effect [refer to charts] of APSs energy efficiency programs will be enough to offset the need for a huge 1,330 megawatt power plant.

* APSs energy efficiency programs will benefit the customers who participate. But all customers will benefit in the long run because APS wont have to invest in and customers wont have to pay for - as many new power plants and power lines.5APS and Its Customers Are Rapidly Adding Renewables, Especially SolarRenewable portfolio grew from 1 MW in 2001 to 304 MW today

APS is spending up to $500 million for 100 MW of Arizona solar panels

Arizonas Solana solar plant of 250 MW will be one of worlds largest in 2013

Nearly 16,000 customers used APS incentives to install solar on their homes and businesses since 2006Our customers are investing in solar power for their homes at an ever-increasing rate and they want APS to be a leader in renewable energy, especially solar.

[Go over bullet points to emphasize our progress in solar energy.]

We have already seen rapid growth in renewables, but as shown in the chart, in less than a decade from now we will have four times as much renewable energy as we do today.

One of our major energy goals is to help make Arizona the Solar Capital of the World.6Smart Technologies: control and options for customers; efficiency, responsiveness for utilityNearly 610,000 smart meters installed greater flexibility in rate, demand response development

Self-healing grid pilot project in Flagstaff shows potential

Home Energy Information Pilot initiates smart thermostat / in-home display / appliance control elements

Infrastructure improvements over last two years 6 substations and 493 miles of distribution linesFlagstaff Smart Grid pilot reduced customer outage minutes by 66%.The electric system is steadily changing. It is becoming faster and more responsive, less like a machine and more like a computer.

We refer to these changes as smart technologies. Together, they will give customers more control over their bill and more options. And they will make APS more efficient and more responsive.

In some cases, the electric grid will recognize potential problems that could lead to an outage and correct them without human intervention.

The potential for smart technologies is great: Were testing how they work together in Flagstaff. Early results point to a dramatic improvement reliability, which is already in the top 25% of utilities nationwide.

APS is rapidly installing smart meters that will give customers greater flexibility in rates and more ways to cut their energy costs.

7Modernized Rates Will Encourage Energy Efficiency Investment Todays outmoded rate structure dates from the early 1900s

APS is modernizing rates to align its energy efficiency interests with those of customers

Energy efficiency gains will reduce the need for new power plants

Customers will also see greater predictability with modernized rates

APS Fossil Energy Growth by 2025 (Megawatts) The energy goals in the 2009 rate case will benefit Arizona in many ways.

For example, if we meet our energy efficiency goals, by 2025 we will avoid the need for nearly 1,300 megawatts of fossil generation.

However, it will be impossible for APS to meet Arizonas energy goals under todays outmoded rate structure. That rate structure is a relic of the days when electric utilities encouraged customers to use more electricity. Today, energy efficiency is a clean affordable way to meet increased customer demand for energy.

We are asking the ACC to change the rate structure and so that our interest in energy efficiency is better aligned with our customers.

For APS to invest large sums in energy efficiency, we are asking not to be punished financially when our energy efficiency programs work and customer use less electricity.

Ultimately, without a change in the rate structure, our ability to maintain the electric system would be jeopardized and Arizona could not meet its energy efficiency goals.

8Like the 2009 Settlement, the 2012 Rate Case Seeks Benefits for Customers, APS and ArizonaFor customers . . . Continuing support for energy efficiency and renewablesGreater choice and control More predictable and consistent ratesFewer rate casesFor APS . . . Modernized rates to support energy efficiency, renewables and grid upgradesAbility to achieve Arizonas energy goalsFor Arizona . . . A growing renewables industry and jobsProgress toward a sustainable energy future

So to summarize thus far:

Meeting Arizonas energy goals is expensive.

But the benefits are worth it for customers [read bullets] for APS and for Arizona

Thats why were pursuing those benefits in our 2012 rate case.9Weve Tightened Our Belt And Productivity Remains HighAPS is working to limitcurrent and future rate increases by diligently managing costs.

Achieved $37 million in cost savings in 2010

Reduced staff by 380 positions

Employee Productivity Improvement(APS Customers Served per Employee)Were very aware of the fragile position of our national and state economies. And were doing all we can reasonably do to contain costs without harming reliability or jeopardizing Arizonas future economic recovery.

In 2010 alone . . . [read bullets]

And weve seen striking improvements in productivity. In 1990, one APS employee served 131 customers. Today, one employee serves 242 customers an 85% improvement.10Lower Fuel Costs Significantly Reduce the Propose