EIM DISALLOWANCE CASE: PROGRESS IN THE SOUTHWEST Aka: Continued Assault

 Meetings with AZ Commissioners in 2012  Utility Roundtable on EIM in 2013  June 2014 meetings with Commissioners EIM AS AN IDEA

DISALLOWANCE CASE Premise: Not joining an EIM as soon as practicable is imprudent – a commission should disallow utility costs.  Formed advocate group to identify venue and target for disallowance case  Focused on the Southwest – especially APS  Geography, projected savings, enabling of others  Retained Synapse to write a report focused on Southwest

EIM IN THE EMERGING TECHNOLOGIES DOCKET  July 2014 APS state that EIM is expected to save 1-1.5% on system production costs of $1 billion.  WGG Key Questions Presented – August 2014 ET workshop  Is APS doing a decision-quality study which will provide the necessary information for APS to determine when/if it will join the EIM?  For purposes of transparency, will APS have a technical review committee as part of their study process?  On what date can the Commission expect a decision from APS on EIM?  If APS chooses not to join the EIM at the earliest possible date (commitment by 4Q, 2014) will APS offer other cost savings for customers to compensate them for foregone savings from EIM?  As revenues generated from off-system sales from the EIM only accrue to customers and not shareholders, does this create a disincentive for APS to join the EIM as soon as practicable?  Should the Commission consider cost sharing to earning (between customers and shareholders) to ensure that APS is providing with incentives to maximize revenues?

EIM IN THE EMERGING TECHNOLOGIES DOCKET Commissioner Susan Bitter Smith Letter to Regulated Utilities  August 2014 Siting WGG and CAISO presentations  Request “APS provide……description of the anticipated evaluation process of EIM….a timeline regarding the state of this process.”  Also require Tucson Electric Power to report.  Response required by September 2014.

EIM IN THE EMERGING TECHNOLOGIES DOCKET  APS Response  “EIMs are not new and are demonstrating some value in other markets”  “APS is evaluating.....how the market will work, the costs involved and how CAISO start-up....will proceed.”  Market Economic – “reviewing production cost modeling studies and comparing operating costs within EIM against business as usual. “  Internal Costs – Start up and on-going costs, (IT costs are significant in other markets), internal and external transitional costs and data security.  Market Rules and Operation – “Seeking to understand….market rules, charges, workflows, timelines and effects on traders, transmission operators and scheduling coordinators.”  Will complete detailed analysis by spring 2015.

EIM IN BIENNIAL TRANSMISSION ASSESSMENT BTA - Transmission adequacy for Arizona -Filing of all 10-year transmission plans -RMR, stability and other studies  WGG argued in workshops (Nov 2014) that EIM increases system reliability and should be evaluated and assessed as part of each utility’s filing in 2016  Staff declined to recommend EIM evaluation in BTA and deferred to other dockets (Emerging Technologies)

SYNAPSE Balancing Market Opportunities in the West Report produced by Synapse for WGG – Oct 2014  Report reviewed CAISO EIM, reported on economic studies and recapped reliability benefits  Calculated Value of Lost Load from Sept 2011 APS San Diego outage  Provided considerations for southwest regulators  Introduced concept of imprudence for not joining an EIM  Suggested directing utility to conduct cost/benefit study  Recommended that commissioners consider EIM in context of operating environmental as part of IRPs  Suggested that muni and co-op leadership evaluate EIM  Postulated questions for policymakers

EIM IN INTEGRATED RESOURCE PLANNING PROCESS WGG Comments submitted in IRP process (Dec 2014)  APS has to carry unnecessary additional reserves  APS should focus the $300 million in planned smart grid technology through 2025 on upgrades that provide consumer savings  Numerous reports document potential savings – APS has shown no evidence to the contrary  APS will finish studying issue in “spring 2015”  Requested Commission “add a provision to 2014 IRP Order requiring APS to execute an agreement to join a market for trading of imbalance energy by July 1, 2015 or…..file a report…..explaining reasons for delay or decision not to join an imbalance market.” STAY TUNED!

NEXT UP  IRP hearing in February  Choose an additional utility to pursue?  Synapse to develop a Part II