Ed Gerak, Executive Director Arizona Power Authority APA/Hoover 101 Ed Gerak, Executive Director April 17, 2017

Apa past, present, and future (APA history) March 27 - Arizona Power Authority created $100,000 appropriated to operate APA Hoover Dam construction begins Contracted with reclamation for transmission from Davis Dam. 1928 1931 1936 1944 1948 1950 Boulder Canyon Act signed Hoover Dam power produced for the first time (3 of the 17 units on line) $150,000 appropriated Arrangements to install two 82,500kw units at Hoover Dam and acquire transmission from Hoover

Apa past, present, and future (APA history) Due to Colorado River Power being short, APA purchased thermal power and resold it to Nevada Land purchased for APA headquarters building APA directed to take steps to build Bridge Canyon Dam or other sites April – First power delivered from Hoover Dam 1951 1952 1953 1954 Mid-1950’s 1956 APA moved from a planning to an operating organization March - First Colorado River power (Davis Dam) delivered APA executed a contract with APS to purchase 40,000kw from Saguaro Power Plant APA agreed to wheel 180,000 kw for APS. APA enters into thermal power contracts with its customers. Completed statewide pooling of power generation and transmission

Apa past, present, and future (APA history) Application to Federal Power Commission to build, operate and maintain Marble Canyon and Bridge Canyon Dams Arizona, Nevada, and California negotiations over Bridge Canyon Dam lasted about 6 months Marble Canyon Dam project on the Colorado River killed by the federal government APA filed an application to construct the Montezuma Pumped Storage Project 1957 1958 1960 1960-61 1962 1966 Poor hydro conditions so purchases of thermal power needed to deliver allocated Hoover Dam power to customers Competition for hydro-generation is fierce and the APA made plans to expend in excess of $100 million for transmission facilities Glen Canyon Dam completed

Apa past, present, and future (APA history) Montezuma Pumped Storage Project abandoned (price/no peaking needed) APA filed for an allotment of Colorado River Storage Project Power Central Arizona Project authorized 1967 1968 1969 1971 1972 1982 Legislation enacted to establish Arizona’s first State water and power plan APA continued efforts to develop Montezuma, Bridge canyon, and Havasu. FPC granted APA license for construction of the Montezuma Pumped Storage Project APA awarded permit to study the Havasu Project (portion of CAP)

Apa past, present, and future (APA history) Shelved a plan to build a 500mw underground power plant at Hoover Push by WAPA for Integrated Resource Planning (5-year updates) Hoover Power Plant Act of 1984 signed by Ronald Reagan. Increased the capacity by 528mw. APA share 377mw SRP replaces Western as power scheduling agent 1983 1984 1987 1988 1990 1992 Hoover Dam spillways were used for the first and last time in history ED5 Substation destroyed by flooding (APA rebuilt Feb 1984) June 1 - Signed 30-year contracts with Western (power & transmission). APA contracts with 39 customers (22 new). Arizona, Nevada, and California reps attend first E&OC meeting

Apa past, present, and future (APA history) Orders 888 and 889 (impacting transmission access) under review by AP and customers APA and SRP sign a new scheduling entity agreement, expired 2011 50th annual report prepared by the APA staff 1994 1996 1997 2004 2005 2008 April 19th - APA celebrates its 50th birthday APA worked with utilities, marketers, and customers from Arizona, New Mexico, Nevada, west Texas, Colorado to evaluate the feasibility of an ISO, Desert Southwest Transmission and Reliability Operator (Desert Star) Voluntary lower Colorado River Multi-Species Conservation Program was adopted by the Secretary of the Interior for Arizona, California, and Nevada. This is a 50-year agreement, $626 million.

Apa past, present, and future (where are we today?) Waiting for commissioner and customer input and direction for the future Hoover power contract negotiations begin 2010 -2011 2015 2016 2016 September 30 - USBR commemorated Hoover Dam’s 75th anniversary May 2016 contract negotiations completed September 16th - Contracts with customers and Western signed

What is “ARS Title 30”? The authority is a body corporate and politic with an official seal The purposes of the authority are effectuated through the commission The commission consists of five members appointed by the governor for six year terms who take and subscribe to an official oath to perform duties of the office The authority must cooperate with the state land department and the director of water resources and will cooperate in the planning of the hydroelectric power generation and use of the states water resources All meetings of the commission are public

What is “ARS Title 30”? The authority has the powers and duties formerly held by the Colorado river commission including: Gathering of data regarding projects for the development and use in the state of power from the waters of the Colorado river Discovery of the potential uses of power and encouragement of feasible enterprises looking at utilization of Colorado river power Any other rights of the Colorado river commission pertaining to the development and sale of power, including a permit to construct Bridge Canyon Dam, Etc.

What is “ARS Title 30”? The authority shall bargain for, take, and receive electric power developed on the Colorado river The authority shall encourage activities deemed to be feasible for the production of electric power from solar, nuclear, or geothermal energy and shall take and receive this power in its own name on behalf of the state The authority may acquire or construct and operate electric transmission systems, standby and auxiliary plants and facilities and generate, produce, sell at wholesale, transmit and deliver such electric power to qualified purchasers

What is “ARS Title 30”? If conducive to efficiency and convenience the authority may enter into agreements for interconnection or pooling of projects, plants, systems, or facilities of other distributors of power The authority may purchase, transmit, or deliver for the state, or any person or operating unit, power generated or produced from projects or works owned or operated by the united states A purchaser under this title must obtain a power purchase certificate The authority is not authorized to engage in retail distribution of power

What is “ARS Title 30”? The authority shall formulate plans and development programs for the practical, equable, and economic utilization of electric power placed under its supervision and control The authority may make application for, obtain, hold, and use permits and licenses from the united states or any of its agencies for power sites, rights-of- way, rights and uses and other privileges The authority may exercise the privilege and right of eminent domain and may condemn private property for public use

What is “ARS Title 30”? The authority shall take steps as may be necessary, convenient, or advisable to construct, operate, and maintain at the bridge canyon dam site or other sites, dams for the generation of electrical energy and in connection therewith the facilities in or at the site of said dams for the storage and diversion of water The authority may establish appropriate rate schedules for its different classes of service or for different zones of service The authority shall designate certain sections of main transmission lines and facilities in the state for delivery of Colorado river power to distribution centers including lines constructed or acquired by the authority

What is “ARS Title 45 – chapter 10”? Development of an adequate water supply for agricultural, municipal, industrial, and fish and wildlife uses within Arizona is vital to the well being, health, and prosperity of the people of the state Development of the states power resources is an essential and integral part of utilizing state water resources Development of Power resources and the use of energy therefrom promotes general welfare, health, safety, and prosperity of the people of Arizona Note: Construction of a dam or enlargement of an existing dam shall not be commenced until a written approval of plans and specification has been obtained from the director of water resources

What is “ARS Title 45 – chapter 10”? Established a state water and power plan consisting of (naming only a few): Central Arizona Project Granite reef aqueduct from lake havasu to central Arizona Salt-gila aqueduct from Granite Reef to Tucson Alternates to Orme dam: New Waddell, Cliff, Mods to Roosevelt/st. mtn. dams Montezuma pumped storage project The authority’s rights to hoover dam power, including the uprating See 45-1703 (also see 45-1707 Issuance of bonds and notes)

Apa past, present, and future (where are we today?) 2011 – Legislation passed to proceed with Hoover Power allocation 2012 – APA allocation process started 2015 – July 19th allocation process completed 2015 – July contract negotiations began 2016 – May contract negotiations completed 2016 – September 16th 50-year Contracts signed by APA and customers

Arizona power authority Established by the State of Arizona in 1944 to acquire and market Hoover power and other renewable resources 5 Commissioners appointed by the Governor to serve six year non-concurrent terms Seasoned Board of Commissioners with extensive experience in Arizona power, water, agricultural and business issues Consistent delivery of low cost hydro power to customers.

Arizona power authority Hoover power provided to 63 Arizona customers Electrical Districts Irrigation Districts Water Conservation Districts Power and Water Districts Municipalities Serve residential, commercial, agricultural and irrigation loads throughout Arizona Current Hoover Power allocation 50-year take Or Pay contracts Terminate September 30, 2067

Largest APA Power Customers Arizona power authority Largest APA Power Customers Central Arizona Water Conservation District - Largest APA customer - Manages Central Arizona Project water resources - Delivered 1.6 million acre feet of water in 2012 - Hoover is lowest cost pumping energy resource - Accounts for 30% of APA’s customer sales revenue Salt River Project -2nd largest APA customer - Among largest public power utilities in the nation - Serves 1 million customers in greater Phoenix area - Provides scheduling and seasonal power banking arrangements for Authority and customers - Hoover is a low cost supplemental power resource - Accounts for 13% of APA’s customer sales revenue

APA Customer Delivery Points & Contract Transmission System Hoover Generators Mead Sub 230 kV APA Customer Delivery Points & Contract Transmission System Parker Sub 230 kV Davis Sub 230 kV Wellton-Mohawk CAP Aguila & McMullen Northeast Phoenix CAP Buckeye Sub 230 kV Westwing Sub 230 kV West Central Arizona Buckeye Recipients* Pinnacle Peak Sub 230 kV Liberty Sub 230 kV Pinnacle Peak Recipients** CAP *Buckeye Recipients: Buckeye WCD, ED 7, ED 8, Harquahala PD, Maricopa WD, Roosevelt ID, Tonopah ID ED 6 Maricopa Sub 115 kV Coolidge Sub 230 kV ED 1 & ED 3 ED 2 ED 4 ED 2 **Pinnacle Peak (PPK) Recipients: CAP, ED 5 Maricopa, Chandler Heights ID, ED 6, RID, OWCD, Page, QCID, RWCD, SRP, STID, Wickenburg CAP ED 5p C-M & ED 5p C-M, Avra, Silverbell CAP Southeast Arizona Safford Thatcher

Arizona power authority Hoover Power Allocation Act of 2011 Allocated Hoover Power to current Hoover Contractors to September 30, 2067 95% of existing capacity and energy entitlement allocated proportionately to AZ, CA and NV 5% of capacity and energy entitlement (Schedule D power) to be allocated to new entities in states APA engaged in allocation process with existing customers and new applicants

Hoover Dam Power Production Data Arizona power authority Hoover Dam Power Production Data Generator Description 17 turbine generators 61.5 MW – 130 MW unit capability 2,074 MW combined installed capacity Power Production 4.2 billion kWh average annual production Dispatched as peaking power 100 MW per min. ramp-up to full capability 590 ft.(1,220 ft. AMSL) max. hydraulic head 303 ft.(950 ft. AMSL) min. hydraulic head Continuous power production since 1936 Ranked first in peer hydro generation study

Reclamation and Western Revenue Requirements at Hoover Dam Arizona power authority Reclamation and Western Revenue Requirements at Hoover Dam Capital projects, O&M, debt service (Uprating Project, Visitor Center/Air Slots, other) APA Review and Input on Hoover Budget and Rates: - Implementation Agreement - Technical Review Committee - Engineering and Operations Committee - 10-Year Plan

Competitive Rate Position Arizona power authority Competitive Rate Position Among lowest power costs in United States Rates significantly below other power providers Low projected escalation Favorable comparison with Palo Verde spot market On-peak firm prices Palo Verde prices exclude transmission Projected future APA rates are below current Palo Verde rates Renewable hydro resource base Authority has direct input into Hoover power costs

APA Power Rate Components Arizona power authority APA Power Rate Components Hoover Purchased Power Costs Administrative and General Expenses Lower Colorado River Basin Development Fund

Arizona power authority Visitor Center Financial Overview Completed in 1995 at cost of $126,265,344 Paid for by Federal appropriations evidenced by loans to Bureau of Reclamation Hoover Contractors obligated to repay loans Loan repayment embedded in Hoover power rate Completed in 1987 at cost of $11,324,291 Paid for by Federal appropriations evidenced by loans to Bureau of Reclamation Air Slots Financial Overview January 6, 2016

Contract Mgmt & Cust. Relations (1) Admin & Finance (2) Executive Director (11 Total) Executive Secretary Deputy Director (1) (1) Executive Secr Assist APA Staff Notary Reception Legal (2) IT (1) Power Operations (2) Contract Mgmt & Cust. Relations (1) Admin & Finance (2) Data Bases Communication Monitor Tech Support APA Website Planning Budget Hoover Gen Tracking E&OC Support Approve Dam & Transmission Work Supplemental Energy Power Accounting Maintain Contracts Customer Liaison Schedule Mtgs: Customers Legislatures ACC Staff Commissioner Mtgs Customer Allocation/ Entitlement Budgets Commission Mtgs Records Mgmt Personnel/HR Finances/Accounting Audits Liaison to Agencies Annual Report IT Buy/Sell Supplemental Legal Issues Billing/Financing Power Development Rate Setting Customer Relations Audits Legislature FERC, NERC, WECC, ACC Contract Administration Bonds

Arizona Power Authority ?