1. Arizona Public Service Company 2012 Renewable Energy Standard Implementation Plan Arizona Corporation Commission Open Meeting
August 17, 2011

2. Commission Policy Questions
Reaching a
Balance
Market Support
Customer Costs
Should distributed energy programs and budgets continue to exceed annual requirements, and if so, by how much?
What is the right mix of…
1) DE and utility-scale projects?
2) Utility and 3rd party ownership?

3. APS Observations External Factors APS Plan
Solar costs are declining and Arizona solar-related development is increasing
Market maturity is impacting the industry
APS Plan
APS will exceed most RES requirements through 2016 with existing 2011 commitments
Continued transparency

4. The 2012 Implementation Plan…
Provides long-term customer value
Supports the successful APS model of building, buying, and encouraging customers to add solar
Creates market opportunities
Provides options to the Commission for how APS will meet its renewable energy requirements

5. Over the Five Years of the APS Plan…
5,500
jobs will be created
$800 million
impact on local economies
*Based on NREL Jobs and Economic Data Impact Model for PV (

6. 2011 Performance Update

7. Under Contract and Authorized
2015 Energy Requirements
Remaining Need
Subject of this Plan
Under Contract and Authorized
In Development
In Operation
Approximately 300 MW of PV capacity is needed through 2015

8. Cumulative Non-Residential DE Capacity
125.8 MW
Projects up to 270 days into development
104.1 MW expected in-service by 12/31/11
~98 MW
2012 requirement
Significant construction and interconnections in progress
~70 MW
2011 requirement
54.1 MW in-service through 8/16/2011
Installed capacity includes 4.5 MW of PV-equivalent capacity from non-PV technologies

9. More Solar at Lower Costs
Cumulative Residential DE Installations
Incentive Cost per Watt
16,000 $4
Incentive $ per watt $3
8,000 $2
# of installations $1

10. Diversity of Ownership - 2011
APS Owned
Customer Owned
Purchased

11. Renewable Energy Requirements

12. Balanced Approach to Meeting Renewable Energy Requirements

13. Balanced Approach to Meeting Renewable Energy Requirements
(No 2012 Cost Impact)
(No 2012 Cost Impact)

14. Diversity of Ownership
APS Owned
Purchased
Customer Owned
2011
2015

15. 2012 Plan Options

16. Commission Policy Questions
Reaching a
Balance
Market Support
Customer Costs
Should distributed energy programs and budgets continue to exceed annual requirements, and if so, by how much?
What is the right mix of…
1) DE and utility-scale projects?
2) Utility and 3rd party ownership?

17. 2012 Implementation Plan Options
150 MW
0 MW
$20 M ~
Option 2
125 MW
25 MW
150 MW
$30 M
Option 3
100 MW
50 MW
150 MW
$40 M
Third -
party PPAs
Non -
residential DE
Incentives
Total MW
Residential DE
Incentives

18. Non-Residential DE Requirements
Option 3
Non-residential
DE Incentive Options:
Option 1 – 0 MW
Option 2 – 25 MW
Option 3 – 50 MW
Option 2
2016
Requirement
Total Authorized
$670 million
total lifetime authorization
2012
Requirement
Expected
Installed by
YE 2011

19. 2012 Residential DE Options

20. APS Plan Budget and Adjustor  
Option 1
Option 2
Option 3
2012 Budget
$129.2 M
$141.2 M
$151.5 M
2012 – 2016 Budget
$783.1 M
$810.2 M
$873.8 M
Residential Cap
$5.43
$5.96
$6.41
Non-Residential
(<3 MW cap)
$201.84
$221.47
$238.27
(>3 MW cap)
$605.53
$664.40
$714.81

21. Utility Ownership

22. APS Owned Projects Create Value for Customers
Lower overall costs for customers
APS has ready access to capital even in difficult financial markets
Ownership expands the market for developers and suppliers
APS is here to stay and committed to the community
Why lease when you can own?
Under a PPA, APS customers are paying for the cost of this facility plus a developer profit through monthly payments similar to a lease – but they never get the benefit of receiving low-cost energy once the facility is “paid-off”
AZ Sun allows customers to benefit from low-cost energy once the facility is “paid-off”
APS can finance projects needed to meet our renewable goals, even in difficult financial markets
APS can use the strength of it’s balance sheet to finance the projects while still employing independent developers to construct them
Increase certainty with a balanced procurement approach
Balancing the renewable portfolio with AZ Sun ownership increases the financing and timing certainty for our entire renewable plan
Financial uncertainty exists for PPA’s even once a PPA reaches commercial operation
Changes in tax law levelized the ultimate cost of AZ Sun and PPA’s for customers
Federal tax laws were changed in 2008 to allow public utilities to claim a 30% Investment Tax Credit when investing in renewable projects; prior to this change, utilities were barred from this credit
Through utility ownership, customers are assured a benefit from the tax credit
Certainty of success

23. Success Under AZ Sun Cost-effective, market-based solution 17 MW
Paloma
Cotton Center
Hyder
17 MW
Operational Sept. 2011
17 MW
Operational Q4 2011
16 MW
Operational Q1 2012
Cost-effective, market-based solution
Created 700+ construction jobs in 2011

24. Lower Costs to Customers from Utility Ownership
Utility-scale (15-20 MW, PV)
Ownership is 10-15% less expensive than PPA
~$60MM nominal savings over life of system
~$8-10MM net present value savings
Customer-sited (350kW, Distributed PV)
Ownership is 5-10% less expensive than PBI
$300K nominal savings over life of each system
$70-80K net present value savings

25. Cost Components Utility-scale
Ownership costs based on standard rate base approach
Capital investment converted into annual revenue requirement
Depreciation
Property taxes
Income taxes
Cost of debt and equity
Plus operations and maintenance costs, annually
PPA costs based on market bids
Vintage of capital costs the same as ownership
Same providers, same projects

26. Cost Components (cont’d)
Customer-sited (Distributed)
Ownership costs based on standard rate base approach
Similar to utility-scale, plus add’l costs
Drives redistribution of fixed costs through net metering
APS Solar Rate provides offset
Recoupment of redistributed fixed costs
Partial contribution to system capital cost
PBI costs
Incentive payments
Redistributed fixed costs

27. Arizona Public Service Company 2012 Renewable Energy Standard Implementation Plan Arizona Corporation Commission Open Meeting
August 17, 2011