1. TRANSMISSION INFRASTRUCTURE IMPROVEMENTS — Current Projects — The Center for the New West “ The Sun Valley Energy Roundtables 2006” November 30 – December 1, 2006 Steve Wheeler Executive Vice President Arizona Public Service Company

2. 2 About APS  Largest electric utility in Arizona  Second fastest growing utility in country  Peak Control Area load over 7700 MW  Over 1 million customers  $1 billion Ten-Year In-state transmission expansion plan  Largest electric utility in Arizona  Second fastest growing utility in country  Peak Control Area load over 7700 MW  Over 1 million customers  $1 billion Ten-Year In-state transmission expansion plan A subsidiary of Pinnacle West Capital Corporation

3. 3 Transmission – East vs. West

4. 4 Increasing Transmission Capability OPTIONS OPTIONS Upgrade existing system Upgrade existing system New conductor technologies New conductor technologies New facilities New facilities Advanced technologies for control Advanced technologies for control Integrated resource planning Integrated resource planning OPTIONS OPTIONS Upgrade existing system Upgrade existing system New conductor technologies New conductor technologies New facilities New facilities Advanced technologies for control Advanced technologies for control Integrated resource planning Integrated resource planning

5. 5 Use of New Conductor Technology Re-conductor West Phoenix-Lincoln Street 230kV line Re-conductor West Phoenix-Lincoln Street 230kV line 3M Aluminum Conductor Composite Reinforced (ACCR) 3M Aluminum Conductor Composite Reinforced (ACCR) Re-conductor West Phoenix-Lincoln Street 230kV line Re-conductor West Phoenix-Lincoln Street 230kV line 3M Aluminum Conductor Composite Reinforced (ACCR) 3M Aluminum Conductor Composite Reinforced (ACCR)

6. 6 Palo Verde Hub – TS5 – Raceway – Pinnacle Peak 500kV Project New 500 kV system connecting SW Phoenix to NE Phoenix New 500 kV system connecting SW Phoenix to NE Phoenix Add 1500 MW import capability to Phoenix Area Add 1500 MW import capability to Phoenix Area Provide additional export capability for generation at Palo Verde Hub Provide additional export capability for generation at Palo Verde Hub Provide voltage support for NE Phoenix Area Provide voltage support for NE Phoenix Area $0.6B for 110 miles of line and substation equipment $0.6B for 110 miles of line and substation equipment New 500 kV system connecting SW Phoenix to NE Phoenix New 500 kV system connecting SW Phoenix to NE Phoenix Add 1500 MW import capability to Phoenix Area Add 1500 MW import capability to Phoenix Area Provide additional export capability for generation at Palo Verde Hub Provide additional export capability for generation at Palo Verde Hub Provide voltage support for NE Phoenix Area Provide voltage support for NE Phoenix Area $0.6B for 110 miles of line and substation equipment $0.6B for 110 miles of line and substation equipment

7. 7 Palo Verde Hub to Yuma 500kV Provide 2 nd 500kV source from Palo Verde Hub to Yuma Provide 2 nd 500kV source from Palo Verde Hub to Yuma Provide transmission import capability to serve rapid load growth in the Yuma Area Provide transmission import capability to serve rapid load growth in the Yuma Area Provide additional export capability for generation at the Palo Verde Hub Provide additional export capability for generation at the Palo Verde Hub In service date 2012 In service date 2012 Permitting work underway Permitting work underway $300M cost estimate for 115 mile line and substation equipment $300M cost estimate for 115 mile line and substation equipment Provide 2 nd 500kV source from Palo Verde Hub to Yuma Provide 2 nd 500kV source from Palo Verde Hub to Yuma Provide transmission import capability to serve rapid load growth in the Yuma Area Provide transmission import capability to serve rapid load growth in the Yuma Area Provide additional export capability for generation at the Palo Verde Hub Provide additional export capability for generation at the Palo Verde Hub In service date 2012 In service date 2012 Permitting work underway Permitting work underway $300M cost estimate for 115 mile line and substation equipment $300M cost estimate for 115 mile line and substation equipment

8. 8 Conceptual TransWest Express Project DC Option Dave Johnston

9. 9 TransWest Express Project Summary Driven from LSE need Driven from LSE need Enables renewable wind and advanced clean coal technologies Enables renewable wind and advanced clean coal technologies Open stakeholder process Open stakeholder process Transmission and permitting feasibility analysis essentially complete Transmission and permitting feasibility analysis essentially complete Coordinating with Frontier activities Coordinating with Frontier activities Driven from LSE need Driven from LSE need Enables renewable wind and advanced clean coal technologies Enables renewable wind and advanced clean coal technologies Open stakeholder process Open stakeholder process Transmission and permitting feasibility analysis essentially complete Transmission and permitting feasibility analysis essentially complete Coordinating with Frontier activities Coordinating with Frontier activities

10. 10 TransWest Express Project Timeline 2006Phase 1 feasibility study 2006Phase 1 feasibility study 2007-2011 Phase 2 permitting 2007-2011 Phase 2 permitting 2012-2015 Phase 3 construction 2012-2015 Phase 3 construction 2015 Phase 4 commercial operation 2015 Phase 4 commercial operation 2006Phase 1 feasibility study 2006Phase 1 feasibility study 2007-2011 Phase 2 permitting 2007-2011 Phase 2 permitting 2012-2015 Phase 3 construction 2012-2015 Phase 3 construction 2015 Phase 4 commercial operation 2015 Phase 4 commercial operation

11. 11 Feasibility Study Conclusions Technically feasible Technically feasible Economics indicate DC or AC/DC hybrid alternatives Economics indicate DC or AC/DC hybrid alternatives Multiple routes viable with minimal impact on sensitive environmental areas Multiple routes viable with minimal impact on sensitive environmental areas Existing plans for AZ-CA expansion provide increase transfer capability in excess of 3000MW Existing plans for AZ-CA expansion provide increase transfer capability in excess of 3000MW Technically feasible Technically feasible Economics indicate DC or AC/DC hybrid alternatives Economics indicate DC or AC/DC hybrid alternatives Multiple routes viable with minimal impact on sensitive environmental areas Multiple routes viable with minimal impact on sensitive environmental areas Existing plans for AZ-CA expansion provide increase transfer capability in excess of 3000MW Existing plans for AZ-CA expansion provide increase transfer capability in excess of 3000MW

12. 12 TransWest Express Current Status Phase 2 Agreement in negotiation Phase 2 Agreement in negotiation Participants: Participants: –APS –SRP –SCE –TEP –National Grid –Wyoming Infrastructure Authority Phase 2 Agreement in negotiation Phase 2 Agreement in negotiation Participants: Participants: –APS –SRP –SCE –TEP –National Grid –Wyoming Infrastructure Authority

13. 13 Phase 2 Work Plan Five year schedule 2007- 2011 Five year schedule 2007- 2011 Estimated cost of approximately $115M Estimated cost of approximately $115M Engineering and design Engineering and design Routing Routing Permitting and approvals Permitting and approvals Outreach and coordination Outreach and coordination Options on right of way Options on right of way Five year schedule 2007- 2011 Five year schedule 2007- 2011 Estimated cost of approximately $115M Estimated cost of approximately $115M Engineering and design Engineering and design Routing Routing Permitting and approvals Permitting and approvals Outreach and coordination Outreach and coordination Options on right of way Options on right of way

14. 14 Coordination with Frontier Line Activities APS participant in Frontier Line feasibility study APS participant in Frontier Line feasibility study TransWest Express one of transmission options in Frontier study TransWest Express one of transmission options in Frontier study Frontier economic analysis will include TransWest Express Frontier economic analysis will include TransWest Express Possible participation in TransWest Express by Southern California load serving entities Possible participation in TransWest Express by Southern California load serving entities APS participant in Frontier Line feasibility study APS participant in Frontier Line feasibility study TransWest Express one of transmission options in Frontier study TransWest Express one of transmission options in Frontier study Frontier economic analysis will include TransWest Express Frontier economic analysis will include TransWest Express Possible participation in TransWest Express by Southern California load serving entities Possible participation in TransWest Express by Southern California load serving entities

15. 15 Increasing Transmission Capability Key Considerations Resource needs Resource needs Renewable requirements Renewable requirements Resource diversity Resource diversity Financial considerations Financial considerations Business model Business model Siting feasibility Siting feasibility EPACT provisions EPACT provisions FERC initiatives FERC initiatives Resource needs Resource needs Renewable requirements Renewable requirements Resource diversity Resource diversity Financial considerations Financial considerations Business model Business model Siting feasibility Siting feasibility EPACT provisions EPACT provisions FERC initiatives FERC initiatives

16. 16 Coordination of Generation and Transmission Can’t invest in one without assurance of the other Can’t invest in one without assurance of the other Timing issues Timing issues –Permitting –Construction FERC Standards of Conduct FERC Standards of Conduct IRPs IRPs Regional transmission planning activities Regional transmission planning activities Can’t invest in one without assurance of the other Can’t invest in one without assurance of the other Timing issues Timing issues –Permitting –Construction FERC Standards of Conduct FERC Standards of Conduct IRPs IRPs Regional transmission planning activities Regional transmission planning activities

17. 17 ConclusionConclusion Transmission expansion remains a daunting exercise in engineering, siting, technology, economics, and public policy Transmission expansion remains a daunting exercise in engineering, siting, technology, economics, and public policy Coordinated planning and cooperation at all levels is essential Coordinated planning and cooperation at all levels is essential A stout heart is required A stout heart is required Transmission expansion remains a daunting exercise in engineering, siting, technology, economics, and public policy Transmission expansion remains a daunting exercise in engineering, siting, technology, economics, and public policy Coordinated planning and cooperation at all levels is essential Coordinated planning and cooperation at all levels is essential A stout heart is required A stout heart is required