1. APS Overview Richard Nicosia

2. APS Snapshot Largest and longest serving electric utility Operations dating back to 1886. 4th largest employer headquartered in Arizona Largest taxpayer in the state, paying $400M annually, mostly in sales and property taxes 2

3. APS Service Territory 11 of 15 counties 35K square miles 1.2 million customers 29K distribution line miles 5K transmission line miles 54 generation units Phoenix Holbrook Prescott Flagstaff Parker Payson Gila Bend Yuma Douglas Casa Grande Grand Canyon Seligman Casa Grande Show Low 3

4. Electrical System Generating Station Bulk Power Station Transmission Lines 230 kV Transmission Substation Distribution Lines 12 kV Distribution Substation Transmission Lines 69 kV Step-up Transformer Transmission Lines 500 kV and 345 kV Step-down Transformer 120/240 V Service 4

5. Regulatory Environment Overview -- Traditional Utility Business Model “Regulatory Compact” Utility Plan for, and provide, reliable service to ALL customers upon request in defined service territory under strict government supervision Regulator Set rates that allow utility to recover its reasonable costs, including a fair profit, and regulate terms and conditions of service 5

6. Some Agencies that Regulate APS Arizona Corporation Commission (ACC) Nuclear Regulatory Commission (NRC) Federal Energy Regulatory Commission (FERC) Western Electricity Coordinating Council (WECC) North American Electric Reliability Corporation (NERC) Arizona Line Siting Committee 6

7. Arizona Corporation Commission Independent fourth branch of government, created by the Arizona Constitution Elected, not appointed, Commissioners Legislative, judicial and executive responsibilities Requires economic, technical and legal expertise Balance of public interest, legal duties and customer standards Federal vs. state responsibilities 7

8. Comprehensive Regulation of Public Utilities Rates and Pricing Terms and conditions of service Products offered Territory served Affiliate and business unit relations Asset sales External financing Power procurement System operations Resource plans Enforcement and compliance Regulation includes: 8

9. Major Challenges Confronting APS and the Utility Industry Economic turmoil Aging workforce Regulatory uncertainty Climate change Infrastructure investment Capital access Financial health Technology Rate Pressure Upward pressure on prices 9

10. APS Load Growth Challenges at Peak 10

11. Flexibility and Response 11

12. Shift to natural gas 12

13. Projected load growth 13

14. The 2014 Resource Plan at a Glance The 2014 Integrated Resource Plan (2014 IRP) lays out how APS is planning to meet the projected nearly 13,000 MW resource requirement within its service territory by 2029. 14

15. How the Portfolio May Change 15

16. Investing in Arizona’s Energy Future 16

17. In Summary, What Can You Expect From Us? Reliability Sustainability Community Support Investments in the Future Fiscal Responsibility Customer Programs 17

18. Conclusion Complex, capital intensive, pervasively regulated business Economic challenges and uncertainty Significant changes ahead for the electric utility industry A prosperous Arizona requires a healthy APS 18