Arizona Corporation Commission Docket No. E-00000D Biennial Transmission Assessment Workshop II September 18, 2008

2008 BTA Workshop II 2 Agenda 1.Introductions and Workshop Overview 2.Review of BTA Workshop 1 Action Items 3.Summary of Comments Received on 2008 First Draft BTA Report 4.Overview of Second Draft BTA Report Significant Additions/Modifications Responses to Docketed Comments Not Incorporated in Second Draft 5.Workshop 2 Participants’ Responses to 2008 Second Draft BTA 6.Closing Remarks Regarding 2008 BTA Process

September 18, BTA Workshop II 3 Workshop I Action Items Workshop I Presentations Filed with Docket Control - Completed SCE to file PVD2 Study Work with Docket Control - Completed Salt River Project to file a summary of EHV Transmission Upgrades occurring in Arizona as it relates to transmission path rating increases - Completed WAPA agreed to provide a letter in response to two questions regarding their transmission plan: –The CATS EHV Ten Year Snapshot and N-1-1 presentation indicates that the “N-1 contingencies overload conditions associated with WAPA’s transmission elements were not resolved.” The question posed was – “were Western’s planned upgrade of 115 kV lines to 230 kV modeled as 230 kV lines in the 2016 case and if not would doing so have resolved the overloads?” The context of this question relates both to the WAPA system in Pinal County and along the Colorado River. –The status and modeling of the San Luis Rio Colorado generation project and North Branch 230 kV lines were questioned during the Yuma RMR study presentation. What is the current status of these projects? APS agreed to file a supplement to the 2007 SWAT Renewable Energy Transmission Task Force Report - Completed APS agreed to file an explanation of what has been done to address California’s Market Redesign and Technology Upgrade (“MRTU”) tariff impact on transmission seams issues with neighboring states - Completed

September 18, BTA Workshop II 4 Parties Commenting on First Draft BTA Report Arizona Public Service Salt River Project Southwest Transmission Cooperative Tucson Electric Power / UniSource Electric Western States Energy Solutions Interwest Energy Alliance Sulphur Springs Valley Electric Cooperative Robert S. Lynch and Associates Southwestern Power Group SkyFuel

September 18, BTA Workshop II 5 Nature of Filed Comments Comments to the First Draft Report revealed four specific areas of key concern regarding adequacy of Arizona’s transmission system: 1. Cochise County Transmission 2. RMR Study Work 3. Renewables and Related Transmission 4.“To Be Determined” In-Service Date Projects

September 18, BTA Workshop II 6 Cochise County - Comments and Responses - CommentResponseBTA Reference Location SSVEC disagreed that a consensus had been reach on a third 230 kV injection point The section was re-written to address the concern Comment references Cochise County Import Assessment (Second Draft pages 29-30) SWTC/SSVEC stated they looked forward to Staff meeting with parties to address concerns in this area The section was re-written after meeting with SWTC and SSVEC Comment references Cochise County Import Assessment (Second Draft pages 29-30) SWTC disagreed with the statement beginning with “New technical studies are once again…” The section was re-written to better portray the area’s status Comment references Cochise County Import Assessment (Second Draft pages 29-30) SSVEC believes the first paragraph beginning “The Cochise County load…” language is not strong enough to emphasis the need for continuity of service The paragraph was not modified to address this concern because the BTA is an impartial assessment of transmission adequacy, and the re-write of this section describes the need for continuity of service Comment references Cochise County Import Assessment (Second Draft pages 29-30) APS noted there are numerous solutions for providing reliable service other than simply eliminating radial lines The section was re-written to emphasize the importance of “continuity of service” rather than eliminating radial transmission lines Comment referencing Cochise County Import Assessment (Second Draft pages 29-30) SSVEC noted that the N-1 violations had also been noted in pervious BTAs The language was modified to reflect the continuing nature of problems and concerns in Cochise County Comment references Adequacy of System to Reliably Serve Local Load (Second Draft page 66)

September 18, BTA Workshop II 7 Cochise County Findings SWTC complied with ACC 4 th BTA order to file transmission plan to solve overloads for three N-1 outages Staff finds SWTC’s Sloan to Huachuca 230 kV line (TBD) inadequate due to perpetuating “restoration of service” practices through 2026 A.C.C. R B places the obligation for ensuring adequate transmission import capability with the Utility Distribution Company –TEP unable to restore full service to Ft. Huachuca for N-1 outage of Vail to Huachuca 138 kV line –APS contemplating 2 nd emergency 69 kV tie with SSVEC –SSVEC vulnerable to lengthy customer outages for N-1 outages and proposes looped transmission service Staff recommends a long range study to establish “continuity of service” plan for Cochise County and transition within 5-10 years. Appropriate elements to be incorporated in ten year plans filed for the next BTA

September 18, BTA Workshop II 8 Proposed Change to Recommendation 3.d. APS, SSVEC, and TEP are to perform collaborative studies and file a report of those studies for the next BTA that establishes a long range system plan for Cochise County that is founded on the principle of continuity of service following a transmission line outage. SWTC will participate in this study as the sole transmission service provider for SSVEC. Relevant elements of that plan are to be incorporated in APS’, SWTC’s and TEP’s respective ten year plans with a defined in service date and filed with the Commission in January 2010.

September 18, BTA Workshop II 9 Transmission Import and RMR Study Work - Comments and Responses - CommentResponseBTA Reference Location TEP/UNSE requested multiple removal or modifications to language related to the transmission import and RMR study work and conclusions TEP supplied additional information justifying all requested deletions for Tucson and Santa Cruz RMR Studies and most requested deletions for Mohave County. Mohave County language was modified Comments referencing Mohave, Santa Cruz and Tucson RMR Assessments and Conclusions (Second Draft pages 31-32, and pages 66-67, 73) APS disagreed with the use of “perspective” in the statement “system perspective of the RMR conditions for the entire Yuma County area in the future, rather than limiting the RMR analysis solely to the APS 69 kV system.” and recommended the use of “known impact” in place of “perspective” No change was made; the existing language was deemed appropriate. The BTA is a system assessment rather than an assessment of a particular utility’s facilities or planned transmission improvements Comment references Yuma RMR Assessment (Second Draft page 39) SWTC requested a modification to the statement beginning “TEP reports that the thermal overload does not pose a problem because….” The requested changed was inadvertently not incorporated in the second draft. It will appear in the final report Comment references Tucson Area RMR Assessment (Second Draft page 37) TEP/UNSE requested removal of “Santa Cruz RMR study did not establish or document at what point the emergency restoration plan becomes deficient.” The sentence was removed and replaced with supplemental information provided Comment references Efficacy of Commission Ordered Studies (Second Draft page 66)

September 18, BTA Workshop II 10 Renewables and Related Transmission - Comments and Responses - CommentResponseBTA Reference Location SRP indicated that the NREL WWSIS was not referenced in the first draft and should be included because it is relevant to the BTA This is a relevant topic and the section was added to the Second Draft relating the NREL Western Wind and Solar Integration Study Comment references NREL WWSIS now provided (Second Draft page 46) Interwest Energy Alliance recommended that four main factors relating to public policy and interest in renewable resources be deleted and noted the volatility of the price natural gas be captured The four factors described were identified in other relevant renewable studies cited and referenced. The factors are relevant and therefore were retained. Factor three was modified to read “Diversity and price volatility of fuel sources for growing load” to reflect the price volatility of a number of resources Comment references Renewable Energy Initiatives (Second Draft page 45) Interwest Energy Alliance recommended the Commission establish a resource planning process that will allow for public dialog that will influence transmission planning. This recommendation was not adopted. The Commission is already addressing the public resource planning process in another proceeding. The BTA is an assessment of the transmission plan for the future and is not the correct forum for establishing or recommending resource planning requirements Comment references Renewable Energy Initiatives (Second Draft page 45) SkyFuel presented the concept of concentrating solar fields buffering power plants from neighboring land uses Comments relating to renewable resource generation development are being left open to allow Commissioners to discuss relevant policy direction Comment is ad hoc and refers to no particular section of the report

September 18, BTA Workshop II 11 “To Be Determined” In-Service Dates Comments and Responses CommentResponseBTA Reference Location SWTC noted that future studies within the SATS group will result in further refinements with respect to projects referred to as TBD No changes were made to address this comment Comment references SATS section (Second Draft pages 62-63) TEP offered clarifying purpose of TBD projects outside of the ten year horizon as being in the public’s interest The sentence was replaced with modified language to address the concern Comment references Recommendations 6.3.b (Second Draft pages 73) SWTC noted that the statement relating to TBD projects and ensured they would work to resolve in-service dates for projects within the ten year horizon No changes were made to address this comment Comment references SATS section (Second Draft pages 62-63)

September 18, BTA Workshop II 12 Other Non-Adequacy Related Items - Comments and Responses - CommentResponseBTA Reference Location Robert Lynch requested APS note projects at risk of being deferred or eliminated without rate increase No change was made. The BTA does not address rate matters and only considers ten year plans as filed per statute by January 31 of each year Comment references BTA Exhibit 22 (APS Project Summary) Western State Energy Solutions noted WestConnect Market Initiatives section is out dated and needs to be updated to reflect recent FERC Decisions regarding flow based rating requirements No change was made. Flow based rating methodology is being used by RTOs in the Eastern Interconnection, CAISO and BPA. FERC is poised to consider different rating methodologies once NERC approves and files standards Comment references Second Draft page 57 SSVEC noted that the ten year snap shot did not reference any of the Cochise County issues No additions or changes were made. The ten year snap shot is a stand alone report and study group. Only the results are reported here Comment referencing Ten Year Snapshot (Second Draft page 39) SWTC noted that Graham County Electric Cooperative, a local load serving entity, had not been a participant in the SATS study effort and Ft. Huachuca Military Reservation had been No changes were made to address these comments. This will be incorporated in the Final Report Comment references SATS section (Second Draft page 62-63) SWTC states the last sentence of Appendix page B-1 stating “In addition, technical studies….N-1 outage in 2007” is really an N-1-1 condition This will be corrected in the Final ReportComment made by SWTC, referencing Appendix B

September 18, BTA Workshop II 13 Workshop II Participants’ Response Has the Second Draft BTA adequately addressed your concerns with the First Draft? Does the Second Draft BTA raise any new issues or concerns? Additional Comments or Concerns regarding Second Draft?

September 18, BTA Workshop II 14 Conclusion Utilities Division will submit Final Report and Proposed Order to the Commission by October 17, 2008 Open Meeting date for Commission consideration of the 2008 BTA is unresolved. Watch for an open meeting notice Thank you for your participation and feedback. Please ensure you have signed in so we have a record of your attendance