APS and Its Smart Grid Initiatives September 26, 2012 Tony J. Tewelis Director, Technology Innovation

Agenda APS Overview Smart Grid Objectives AMI Activity Utility Technologies Customer Programs Questions

Key Statistics Serve over 1.1 million customers Largest IOU in Arizona Serving ½ of Arizona’s population in 11 of 15 Arizona counties Peak demand ~7,100 MW Owns and operates about 6,000 miles of transmission lines and 28,000 miles of distribution lines Over 36,000 square miles of territory 2012 Energy Innovation Recognition #4 Most Intelligent Utility Top 10 in Smart Grid #3 in Solar Deployed APS Overview

Smart Grid – Why? The primary objectives of deploying a smarter grid are to: Optimize System Reliability & Performance Empower Customers Enable Alternative Energy Image Source: Climateinc.org APS is piloting and/or implementing a number of advanced technologies in order to meet these key objectives

The APS Smart Grid Timeline-to-Date The major launch of APS’s Smart Grid strategy occurred in 2006 with AMI … followed by Flagstaff 1970s DOMS TOAN TOU Rates Electric Vehicle Pilot Program Home Energy Information Pilot Peak Solutions Flagstaff AMI 2012 Pioneer Battery Storage 5

Deployment of nearly 1,000,000 “Smart Meters” by end of 2013 Over 85% way completed with meters in Phoenix, Prescott, Yuma, and Flagstaff –More than 890,000 meters deployed Remote meter reading, connect/disconnect, and rate change –Over 1,000,000 field orders avoided to date Receiving more than 23,000,000 intervals per day Greater customer information and flexibility Operational and planning benefits AMI / Smart Meters 6

Use of AMI for Non-Billing Activity 7 Today Next Months Revenue Protection/TheftSolar Assets Monitoring (Cust) Voltage Schedules (IVVC)Voltage Exception Reporting Remote Connects/DisconnectsOutage Management Solar Assets Monitoring (APS)Home Area Network Pre-pay PilotOps Pinging/Point-in-Time Read Loss ModelingOps Remote Disconnect Renewable Feeder ToolSolar Forecasting EE/DE/ER M&VRevenue Forecast/Unbilled Revenue

Transformer Load Profile Full Rating 50 kVA Transformer Transformer Load Management

Use of AMI for Non-Billing Activity

Leveraging AMI Data Analytics

Renewable Energy Standard (RES) 15% of Retail Sales by 2025 –< 70% from Utility Scale –> 30% from Distributed Energy o 50% from Residential o 50% from Non-Residential Within the year, > 250 MWs of DE Utility Scale PV –200 MWs Approved Schools & Governmental Program –~15 MWs Approved 280 MWs of Concentrating Solar ~ 1,000 MWs Owned or In Development

Predictive/Preventative: – Transformer Oil Analysis Notification (TOAN) – Substation Health Equipment Monitoring – Distribution Asset Monitoring – Distribution Fault Anticipation – Phasor Measurement Units APS is piloting and/or implementing a number of advanced technologies in order to improve overall system performance Utility Technologies 20

Restorative/Post-Event: – Self-Isolating / Self-Healing Feeders – Distribution Automation (remote supervisory control) – Outage Notification Performance Optimization: – Battery Storage – Integrated Volt/Var Control – Conservation Voltage Reduction Utility Technologies 21

Flagstaff Area Pilots Community Power Project: – 125 Residential Installations (438 kW) – Cromer Elementary School (400 kW) 325 kW Ground Mount 75 kW Rooftop – Doney Park Renewable Energy Site (500kW) – Battery Energy Storage ( 500 kW – 1.5MWh) Elden Sub (bulk storage, peak shaving, operational control) Doney Park (renewable variability, capacity firming)

Flagstaff Area Pilots Department of Energy Grant: – High Penetration Study (Beginning of Phase 3) Smart Circuit Technologies: – Distribution Fault Anticipation Four Feeders and Two Subs (CQ12&14, PR2&6) – Fault Location Isolation Service Restoration (FLISR) Ten Automated Feeders Peer-to-Peer Communication & Logic S&C’s “IntelliTeam” IT2 / SG

Metro Area Pilots Pioneer (Objectives): – Test a second FLISR control strategy – Demonstrate Volt/Var Optimization – Position SC technologies as a qualified measure towards meeting EE Standard (22% by 2020) Scope: – Integrated Volt Var Control (IVVC) Pioneer 17, 20, 21, & 22 Mazatzal 2 & 6 Conservation Volt Reduction (CVR) – FLISR Technology (Self-Isolating) Pioneer 12, 20 and Gavilan Peak 41 Cooper’s Yukon Centralized Logic – 3 rd Party Testing & Validation

Home Area Network (Residential EE & DR): – Five Program Types being tested: Peak Event Pricing with Enabling Technology In-Home Displays Direct Load Control Smart Phone & PC App Pre-Pay Energy Service – Leveraging AMI & broadband communications – Targeting both consumption and demand reduction – Rigorous assessment of technology & consumer behavior – Up to 2,800 customers – Pre-Pay launched in July 2012 – Full Deployment in Q2 of 2013 Home Energy Information Pilot

Combination of utility technologies & customer facing programs Preventative/Predictive, Restoration/Post-event, & Performance Optimization Utilize pilots and small scale deployments Leverage existing systems and investments Cross collaboration and support are essential!!! Summary

Questions