TRANSMISSIONINFRASTRUCTURE IMPROVEMENTS

— Current Projects —

TRANSMISSIONINFRASTRUCTURE IMPROVEMENTS

— Current Projects —

The Center for the New West“The Sun Valley Energy Roundtables 2006”

November 30 – December 1, 2006

The Center for the New West“The Sun Valley Energy Roundtables 2006”

November 30 – December 1, 2006

Steve WheelerExecutive Vice President

Arizona Public Service Company

Steve WheelerExecutive Vice President

Arizona Public Service Company

22

About APSAbout APSAbout APSAbout APSLargest electric utility inLargest electric utility in Arizona Arizona

Second fastest growingSecond fastest growing utility in country utility in country

Peak Control Area loadPeak Control Area load over 7700 MW over 7700 MW

Over 1 million customersOver 1 million customers

$1 billion Ten-Year$1 billion Ten-Year In-state transmission In-state transmission expansion plan expansion plan

Largest electric utility inLargest electric utility in Arizona Arizona

Second fastest growingSecond fastest growing utility in country utility in country

Peak Control Area loadPeak Control Area load over 7700 MW over 7700 MW

Over 1 million customersOver 1 million customers

$1 billion Ten-Year$1 billion Ten-Year In-state transmission In-state transmission expansion plan expansion plan

A subsidiary of Pinnacle West Capital Corporation

SELIGMAN

ROUNDVALLEY

115KV & ABOVE SUBSTATION (EXISTING)

JOINT OWNSHIPJ/O

LEGEND

NORTH

ADAMS

MURAL

SAN MANUELORACLEJUNCTION

SAGUARO

N.GILA

YUMA

PALO VERDE-HASSAYAMPA

YUCCA

GILA BEND

500KVJ/O

TO CALIF.500KV

REDHAWK

JOJOBA

GILA RIVER/PANDA

RUDDLIBERTY

KYRENE

SANTAROSA

DESERTBASIN

WESTWING

BAGDAD

YAVAPAI VERDE

FLAGSTAFF

PRESCOTT

PINNACLEPEAK

PREACHERCANYON

CHOLLA

230KV

345KVTO CALIF.

500KV J/O

500KV J/O

TOCRYSTAL

TO MEAD /MARKETPLACE

MOENKOPI

NAVAJO

PAGE

FOURCORNERS

TUCSON

PHOENIXLIBERTY

12/1/05Transmission Planning

COCONINO

Substation locations and line routings depict an electrical connection only anddo not reflect any assumed physical locations or routing.

CASAGRANDE

TAT MOMOLI

KNOX

GAVILANPEAK

FLAGSTAFF(WAPA)

To GLENCANYON (WAPA)

EXISTING 500 KV LINESEXISTING 345 KV LINESEXISTING 230 KV LINESEXISTING 115 KV LINES

2 circuits

WILLOWLAKE

CORONADO

APS Service Areas

Non APS Service Areas

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Transmission – East vs. WestTransmission – East vs. WestTransmission – East vs. WestTransmission – East vs. West

44

Increasing Transmission CapabilityIncreasing Transmission CapabilityIncreasing Transmission CapabilityIncreasing Transmission Capability

OPTIONSOPTIONS

Upgrade existing systemUpgrade existing system

New conductor technologiesNew conductor technologies

New facilitiesNew facilities

Advanced technologies for controlAdvanced technologies for control

Integrated resource planningIntegrated resource planning

OPTIONSOPTIONS

Upgrade existing systemUpgrade existing system

New conductor technologiesNew conductor technologies

New facilitiesNew facilities

Advanced technologies for controlAdvanced technologies for control

Integrated resource planningIntegrated resource planning

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Use of New Conductor TechnologyUse of New Conductor TechnologyUse of New Conductor TechnologyUse of New Conductor Technology

Re-conductor West Phoenix-Lincoln Street Re-conductor West Phoenix-Lincoln Street 230kV line230kV line

3M 3M Aluminum Conductor Composite Reinforced Aluminum Conductor Composite Reinforced (ACCR)(ACCR)

Re-conductor West Phoenix-Lincoln Street Re-conductor West Phoenix-Lincoln Street 230kV line230kV line

3M 3M Aluminum Conductor Composite Reinforced Aluminum Conductor Composite Reinforced (ACCR)(ACCR)

66

Palo Verde Hub – TS5 – Raceway – Pinnacle PeakPalo Verde Hub – TS5 – Raceway – Pinnacle Peak 500kV Project 500kV Project

Palo Verde Hub – TS5 – Raceway – Pinnacle PeakPalo Verde Hub – TS5 – Raceway – Pinnacle Peak 500kV Project 500kV Project

New 500 kV system connecting SW Phoenix to NE PhoenixNew 500 kV system connecting SW Phoenix to NE Phoenix

Add 1500 MW import capability to Phoenix AreaAdd 1500 MW import capability to Phoenix Area

Provide additional export capability for generation at Palo Verde HubProvide additional export capability for generation at Palo Verde Hub

Provide voltage support for NE Phoenix AreaProvide 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 PhoenixNew 500 kV system connecting SW Phoenix to NE Phoenix

Add 1500 MW import capability to Phoenix AreaAdd 1500 MW import capability to Phoenix Area

Provide additional export capability for generation at Palo Verde HubProvide additional export capability for generation at Palo Verde Hub

Provide voltage support for NE Phoenix AreaProvide 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

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Palo Verde Hub to Yuma 500kVPalo Verde Hub to Yuma 500kVPalo Verde Hub to Yuma 500kVPalo Verde Hub to Yuma 500kV Provide 2Provide 2ndnd 500kV source from Palo Verde Hub to Yuma 500kV source from Palo Verde Hub to Yuma Provide transmission import capability to serve rapid load growth in theProvide transmission import capability to serve rapid load growth in the

Yuma AreaYuma Area Provide additional export capability for generation at the Palo Verde HubProvide additional export capability for generation at the Palo Verde Hub In service date 2012In service date 2012 Permitting work underwayPermitting work underway $300M cost estimate for 115 mile line and substation equipment$300M cost estimate for 115 mile line and substation equipment

Provide 2Provide 2ndnd 500kV source from Palo Verde Hub to Yuma 500kV source from Palo Verde Hub to Yuma Provide transmission import capability to serve rapid load growth in theProvide transmission import capability to serve rapid load growth in the

Yuma AreaYuma Area Provide additional export capability for generation at the Palo Verde HubProvide additional export capability for generation at the Palo Verde Hub In service date 2012In service date 2012 Permitting work underwayPermitting work underway $300M cost estimate for 115 mile line and substation equipment$300M cost estimate for 115 mile line and substation equipment

88

Conceptual TransWest Express ProjectConceptual TransWest Express ProjectDC OptionDC Option

Conceptual TransWest Express ProjectConceptual TransWest Express ProjectDC OptionDC Option

DaveJohnston

99

TransWest Express Project SummaryTransWest Express Project SummaryTransWest Express Project SummaryTransWest Express Project Summary

Driven from LSE needDriven from LSE need

Enables renewable wind and advanced Enables renewable wind and advanced clean coal technologiesclean coal technologies

Open stakeholder processOpen stakeholder process

Transmission and permitting feasibility Transmission and permitting feasibility analysis essentially completeanalysis essentially complete

Coordinating with Frontier activitiesCoordinating with Frontier activities

Driven from LSE needDriven from LSE need

Enables renewable wind and advanced Enables renewable wind and advanced clean coal technologiesclean coal technologies

Open stakeholder processOpen stakeholder process

Transmission and permitting feasibility Transmission and permitting feasibility analysis essentially completeanalysis essentially complete

Coordinating with Frontier activitiesCoordinating with Frontier activities

1010

TransWest Express Project TimelineTransWest Express Project TimelineTransWest Express Project TimelineTransWest Express Project Timeline

20062006 Phase 1 feasibility studyPhase 1 feasibility study

2007-2011 2007-2011 Phase 2 permittingPhase 2 permitting

2012-2015 2012-2015 Phase 3 constructionPhase 3 construction

2015 2015 Phase 4 commercial Phase 4 commercial operationoperation

20062006 Phase 1 feasibility studyPhase 1 feasibility study

2007-2011 2007-2011 Phase 2 permittingPhase 2 permitting

2012-2015 2012-2015 Phase 3 constructionPhase 3 construction

2015 2015 Phase 4 commercial Phase 4 commercial operationoperation

1111

Feasibility Study ConclusionsFeasibility Study ConclusionsFeasibility Study ConclusionsFeasibility Study Conclusions

Technically feasibleTechnically feasible

Economics indicate DC or AC/DCEconomics indicate DC or AC/DChybrid alternativeshybrid alternatives

Multiple routes viable with minimal Multiple routes viable with minimal impact on sensitive environmental areasimpact on sensitive environmental areas

Existing plans for AZ-CA expansion Existing plans for AZ-CA expansion provide increase transfer capability in provide increase transfer capability in excess of 3000MWexcess of 3000MW

Technically feasibleTechnically feasible

Economics indicate DC or AC/DCEconomics indicate DC or AC/DChybrid alternativeshybrid alternatives

Multiple routes viable with minimal Multiple routes viable with minimal impact on sensitive environmental areasimpact on sensitive environmental areas

Existing plans for AZ-CA expansion Existing plans for AZ-CA expansion provide increase transfer capability in provide increase transfer capability in excess of 3000MWexcess of 3000MW

1212

TransWest ExpressTransWest ExpressCurrent StatusCurrent Status

TransWest ExpressTransWest ExpressCurrent StatusCurrent Status

Phase 2 Agreement in negotiationPhase 2 Agreement in negotiation

ParticipantsParticipants::– APSAPS– SRPSRP– SCESCE– TEPTEP– National GridNational Grid– Wyoming Infrastructure AuthorityWyoming Infrastructure Authority

Phase 2 Agreement in negotiationPhase 2 Agreement in negotiation

ParticipantsParticipants::– APSAPS– SRPSRP– SCESCE– TEPTEP– National GridNational Grid– Wyoming Infrastructure AuthorityWyoming Infrastructure Authority

1313

Phase 2 Work PlanPhase 2 Work PlanPhase 2 Work PlanPhase 2 Work Plan

Five year schedule 2007- 2011Five year schedule 2007- 2011

Estimated cost of approximately $115MEstimated cost of approximately $115M

Engineering and designEngineering and design

RoutingRouting

Permitting and approvalsPermitting and approvals

Outreach and coordinationOutreach and coordination

Options on right of wayOptions on right of way

Five year schedule 2007- 2011Five year schedule 2007- 2011

Estimated cost of approximately $115MEstimated cost of approximately $115M

Engineering and designEngineering and design

RoutingRouting

Permitting and approvalsPermitting and approvals

Outreach and coordinationOutreach and coordination

Options on right of wayOptions on right of way

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Coordination with Frontier Line ActivitiesCoordination with Frontier Line ActivitiesCoordination with Frontier Line ActivitiesCoordination with Frontier Line Activities

APS participant in Frontier Line feasibility studyAPS participant in Frontier Line feasibility study

TransWest Express one of transmission options TransWest Express one of transmission options in Frontier studyin Frontier study

Frontier economic analysis will include Frontier economic analysis will include TransWest ExpressTransWest Express

Possible participation in TransWest Express by Possible participation in TransWest Express by Southern California load serving entitiesSouthern California load serving entities

APS participant in Frontier Line feasibility studyAPS participant in Frontier Line feasibility study

TransWest Express one of transmission options TransWest Express one of transmission options in Frontier studyin Frontier study

Frontier economic analysis will include Frontier economic analysis will include TransWest ExpressTransWest Express

Possible participation in TransWest Express by Possible participation in TransWest Express by Southern California load serving entitiesSouthern California load serving entities

1515

Increasing Transmission CapabilityIncreasing Transmission CapabilityKey ConsiderationsKey Considerations

Increasing Transmission CapabilityIncreasing Transmission CapabilityKey ConsiderationsKey Considerations

Resource needsResource needs

Renewable requirementsRenewable requirements

Resource diversityResource diversity

Financial considerationsFinancial considerations

Business modelBusiness model

Siting feasibilitySiting feasibility

EPACT provisionsEPACT provisions

FERC initiativesFERC initiatives

Resource needsResource needs

Renewable requirementsRenewable requirements

Resource diversityResource diversity

Financial considerationsFinancial considerations

Business modelBusiness model

Siting feasibilitySiting feasibility

EPACT provisionsEPACT provisions

FERC initiativesFERC initiatives

1616

Coordination of GenerationCoordination of Generationand Transmissionand Transmission

Coordination of GenerationCoordination of Generationand Transmissionand Transmission

Can’t invest in one without assuranceCan’t invest in one without assuranceof the otherof the other

Timing issuesTiming issues– PermittingPermitting– ConstructionConstruction

FERC Standards of ConductFERC Standards of Conduct

IRPsIRPs

Regional transmission planning activitiesRegional transmission planning activities

Can’t invest in one without assuranceCan’t invest in one without assuranceof the otherof the other

Timing issuesTiming issues– PermittingPermitting– ConstructionConstruction

FERC Standards of ConductFERC Standards of Conduct

IRPsIRPs

Regional transmission planning activitiesRegional transmission planning activities

1717

ConclusionConclusionConclusionConclusion

Transmission expansion remains a daunting Transmission expansion remains a daunting exercise in engineering, siting, technology, exercise in engineering, siting, technology, economics, and public policyeconomics, and public policy

Coordinated planning and cooperation at all Coordinated planning and cooperation at all levels is essentiallevels is essential

A stout heart is requiredA stout heart is required

Transmission expansion remains a daunting Transmission expansion remains a daunting exercise in engineering, siting, technology, exercise in engineering, siting, technology, economics, and public policyeconomics, and public policy

Coordinated planning and cooperation at all Coordinated planning and cooperation at all levels is essentiallevels is essential

A stout heart is requiredA stout heart is required