1. An Overview of Arizona’s Renewable Transmission Planning Process Southwest Renewable Energy Transmission Conference Amanda Ormond – Ormond Group LLC Brian Cole – Arizona Public Service May 21, 2010

2. Arizona’s Renewable Portfolio Standard 15% of retail electric load must be served by renewable resources by 2025 Of this percentage, 30% (i.e. 4.5% of total retail sales in 2025) must come from distributed renewable (DE) resources by 2012 and thereafter –One-half of the distributed renewable energy requirement must come from residential applications and the remaining one-half from nonresidential, non-utility applications 2

3. Regulatory Background & Stakeholder Forums Biennial Transmission Assessment (BTA) –Orders issued by the Arizona Corporation Commission (ACC) –Conducted every two years to assess the existing and future transmission system in Arizona –4 th and 5 th BTAs (2006 and 2008) emphasized renewable resource and associated transmission development 3

4. Regulatory Background & Stakeholder Forums Southwest Area Transmission (SWAT) Study Group –Comprised of utilities and stakeholders from AZ, NM, NV, and portions of southern CA –Conducts collaborative planning for the regional electrical transmission system –Forms committees to focus on specific topics or studies 4

5. Regulatory Background & Stakeholder Forums SWAT Renewable Transmission Task Force (RTTF) –Committee formed within SWAT as a result of the 4 th BTA –Tasked with identifying renewable resource potential and existing & future transmission –Will conduct technical modeling of proposed renewable transmission in the SWAT footprint 5

6. Arizona Statewide Planning In December of 2008, the ACC approved the Fifth BTA (Decision No. 70635). The Order directed Commission-regulated utilities to “take the results of the Arizona Renewable Transmission Task Force and…..identify the top three potential renewable transmission projects in its service territories” and “propose funding mechanisms to construct the top three renewable transmission projects.” AZ Renewable Resource and Transmission Identification Subgroup (ARRTIS) Renewable Transmission Task Force (RTTF) Southwest Area Transmission Group (SWAT) Utility Transmission Plans 6

7. ARRTIS Background Established by SWAT RTTF in January 2009 An open stakeholder process tasked with: –Identifying potential areas for Arizona renewable resource development –Assisting the RTTF group by providing information to assess transmission options –Informing and assisting the utilities in their response to the 5 th BTA Order 7

8. ARRTIS Process 1.Assemble group of key stakeholders 2.Gather AZ renewable resource potential 3.Identify constraint criteria 4.Identify likely developable areas for renewables 5.Provide information to RTTF, and ultimately utilities, for identification of transmission options 8

9. ARRTIS Final Sensitivity Map 9

10. RTTF Finance Subcommittee Created by the RTTF in January 2009 Primary Objectives –Provide the RTTF with recommendations for financing methodologies for renewable transmission projects (RTP) in Arizona –Determine what constitutes a RTP –Provide information & recommendations to support utilities responsible for filing responses to the 5 th BTA Order 10

11. Finance Subcommittee Final Report Report specifies types of RTP development costs that should be eligible for rate recovery by utilities Proposes development of utility-specific Renewable Transmission Action Plan (RTAP) –Utility will describe how each RTP is expected to advance renewable resource development in Arizona –Utility may request special cost recovery for the Commission’s consideration, which the Commission may order 11

12. 12 Finance Subcommittee Final Report RTPs include: –new transmission line(s), –upgrade(s) of existing line(s), or –the development of transmission project(s) previously identified by the utility which provide either: o access to renewable energy resource areas o enables renewable resources to be delivered to load centers Did not define the amount of renewable generation that needs to be on the line

13. Recommendations to the Commission: –Adopt the RTAP procedure as part of the Ten Year Plan filing requirement and the BTA process –Coordinate RTP cost recovery with related determinations made by FERC –RTP designation and special cost recovery should be determined by the Commission on a case-by-case basis Finance Subcommittee Final Report 13

14. 14 RTTF Final Transmission Options Map

15. 15 Utility Evaluation Process Overview

16. 16 Process Consisted of: Economic Evaluation Qualitative Evaluation Utility Evaluation Process

17. 17 Arizona Utilities' BTA Projects