Overview of Previous Workshop

1. Arizona Corporation Commission Fifth Biennial Transmission Assessment Commission Decision 70635 Workshop #2 on Transmission to Support Renewable Energy Development Overview of Previous Workshop Brian W. Cole Manager, Resource Planning Arizona Public Service Co. June 5, 2009 Docket E-00000D-07-0376

2. BTA Order 70635 “Commission-regulated electric utilities shall, by April 30th, 2009 conduct a joint workshop or series of planning meetings to develop ways in which new transmission projects can be: • Identified • Approved for construction • Financed in a manner that will support the growth of renewables in Arizona”

3. BTA Order 70635 Each Commission-regulated utility, either alone or in cooperation with other utilities, and by 10/31/09: • Use the results of the RTTF and identify the top three potential transmission projects • Develop plans to identify future renewable transmission projects • Develop plans and propose funding mechanisms to construct the top three renewable transmission projects

4. Workshop #1 Review“Overview of ACC BTA Order and Planned Utility Response” • Utility evaluation process includes: • Economic Evaluation • Policy Analysis • Economic value of various renewable projects are different for each utility and its customers • Solar capacity and energy value vs wind capacity and energy value • Utility evaluation using input from several groups • RTTF • RTTF ARRTIS • RTTF Finance • Workshops

5. Workshop #1 Review“Overall Utility Planning Process and Associated Transmission Issues” • Need determination made through resource planning process • The drivers for transmission projects for remote resources are different from reliability only transmission projects although there can be overlap • Robust transmission projects that satisfy several utility needs are best for utility customers • Uncertainties exist • Procurement process can change assumed project locations • Technology advancements and other assumption changes can change transmission priorities • Transmission for “import” vs transmission for “export” • In either case – commitments are needed

6. Workshop #1 Review“Overview of National, Regional and Sub Regional Transmission Planning Organizations” The WECC contains several regional and sub regional planning organizations and working groups – the following have direct input to and impact on the BTA processes WestConnect CRT SATS SWAT CATS-EHV & CATS-HV AZ/NM RTTF ARRTIS Finance

7. Workshop #1 Review“Overview of Federal and State regulatory Process for Siting of Transmission Lines & Other State Transmission Models” • State Transmission Authorities • Wyoming Infrastructure Authority (WIA) • New Mexico Renewable Energy Transmission Authority (RETA) • Colorado Clean Energy Development Authority (CEDA) • Other Models • Tehachapi • Potential for Federal Siting Authority

8. Workshop #1 Review“APS General Comments Concerning Policy Issues” • Timing • Objective is to eliminate “chicken and the egg” problem • There is a risk of building a line too early or too late • Funding • Many options – may not be one size fits all • Those who benefit should pay • Risk Considerations • Other Issues • Export vs import • Definition of renewable transmission project should be based on broad characteristics with advanced approval from ACC • Prioritization of projects

9. Workshop #1 Review“SRP General Comments Concerning Policy Issues” Timing Support identification and permitting of corridors Early permitting and broader evaluation of need Longer term CEC’s Who Pays SRP invests only in projects with direct benefit to SRP customers Those who benefit should pay Other Issues Export vs import … multi-purpose lines are best options Definition of renewable transmission project should be based on broad characteristics with advanced approval from ACC Certainty is important for investment and development Prioritization of projects 9

10. Workshop #1 Review“TEP and UNSE General Comments Concerning Policy Issues” • Timing • Coordination is essential • Economic inefficiency if transmission is built too early • Potential barrier to renewable energy development if transmission is late • Need advanced permitting, advanced ROW acquisition and timely return on capital • Who Pays • Not business as usual – new resources in new locations • Many options • Explore state transmission authority • Other Issues • Export vs import – focus on renewable transmission projects that enable Arizona resources to be delivered to Arizona loads • Recognize multi-use benefits (improved reliability, reduced congestion, increased load serving capability, future interconnections) • Definition of renewable transmission project should state that the primary intent is to transmit renewable energy to Arizona load serving entities • Prioritization of projects includes cost, size, location and timing

11. Workshop #1 Review“General Comments Concerning Policy Issues Arizona G&T Cooperatives, AEPCO & SWTC” • AEPCO is non-profit corporation as defined and organized under the generation and transmission electric cooperative laws of the state of Arizona – Generation company only • The Cooperatives are held to strict resource procurement standards stipulated by the Rural Utilities Service (RUS). • RUS insists on Cooperatives following a competitive selection process for all resource procurement, including renewables, that is based on a least cost model. • SWTC is non-profit corporation as defined and organized under the generation and transmission electric cooperative laws of the state of Arizona - Wires company only • Current RUS regulations: • Do not allow transmission in place prior to when it is needed. • Do not allow for funding of transmission for non-REAct beneficiaries, unless through a lien accommodation. • Small Distribution Cooperative customer base results in high cost per customer; less consumers per mile of line. • Access to market hubs limited