1. Arizona Power Authority Transmission Workshop August 7, 2015 APA Offices/On-line Webinar

2. APA Transmission Workshop August 7, 2015 Agenda Introductions Review Existing Transmission Available to APA Discuss Options for Transmission Post 2017 – Review Slideshow Coordinated by SRP Review Process for Delivery of BCP Power to Small Customers – Transmission Options – Net Metering/Billing APA Transmission Workshop 7 Aug 2015.pptx 2

3. APA Transmission Workshop August 7, 2015 Agenda Input from Balancing Authorities – AEPCO – APS – SRP – TEP – Western Summary and Recommendations Next Steps/Adjourn APA Transmission Workshop 7 Aug 2015.pptx 3

4. APA Transmission Workshop Introductions Review Existing Transmission Available to APA Discuss Options for Transmission Post 2017 – Review Slideshow Coordinated by SRP Review Process for Delivery of BCP Power to Small Customers – Transmission Options – Net Metering/Billing APA Transmission Workshop 7 Aug 2015.pptx 4

5. 5 Hoover Gen For APA Parker Mead 230kV Liberty 230kV Mead 345kV Liberty 345kV Parker-Davis 189 MW Intertie 188 MW 377 MW (Post-2017 = 410MW + 13MW tribes) APA A = 190,869 kW APA B = 189,860 kW D1 = 30,823 kW D2 = 11,510 kW Tribes = 13,000 kW APS = 94 MW SRP = 62 MW WAPA = 24 MW TEPCO = 8 MW AEPCO = 47 MW CAWCD = 163 MW D2 = 12 MW Total = 410 MW

6. APA Transmission Workshop Introductions Review Existing Transmission Available to APA Discuss Options for Transmission Post 2017 – Review Slideshow Coordinated by SRP Review Process for Delivery of BCP Power to Small Customers – Transmission Options – Net Metering/Billing APA Transmission Workshop 7 Aug 2015.pptx 6

7. APA Transmission Policy Options Perspectives Shared by AEPCO, CAWCD, IEDA and SRP February 17, 2015

8. APA’s Mission Acquire and market Arizona’s share of Hoover APA Transmission Workshop 7 Aug 2015.pptx 8 Source: www.powerauthority.org/about-us

9. APA Transmission Workshop 7 Aug 2015.pptx 9 Suggested APA Decision Sequence Hoover Allocation Decisions Dynamic Signal and Scheduling Entity Decisions APA Transmission Policy Decisions Unnecessary to resolve transmission, dynamic signal or scheduling entity issues prior to making Hoover allocation decisions. Unnecessary to resolve dynamic signal or scheduling entity issues prior to making APA transmission policy decisions. Can be satisfactorily accomplished after the Hoover allocation and transmission policy decisions have been made. 1 2 3

10. APA Transmission Workshop 7 Aug 2015.pptx 10 The Framework for Transmission Decision Making Has Changed 1980sToday 1Grid Access Law Transmission owners could deny service Non discriminatory access FERC 888 well established 2Transmission Business Systems No transparencyOASIS FERC 889 well established 3Transmission Capability Parker Davis System Mead – Liberty 345 Parker Davis System Mead – Liberty 345 Mead – Westwing 500

11. APA Transmission Workshop 7 Aug 2015.pptx 11 APA Transmission Policy Options OptionAPA’s Role 1Maximum Involvement APA plays a role in securing transmission services for all Hoover allocation recipients (Business As Usual) 2Moderate Involvement APA plays a role in securing transmission services for those Hoover allocation recipients that want APA to play such a role 3Minimal Involvement APA plays a minimal role, or no role, in securing transmission services for Hoover allocation recipients

12. APA Transmission Workshop 7 Aug 2015.pptx 12 Hoover Delivery in Arizona The fulfillment of APA’s mission can be accomplished without APA playing a role as an intermediary transmission service provider Hoover Generation Hoover Allocation Recipients Transmission Service Providers

13. APA Transmission Workshop 7 Aug 2015.pptx 13 Option 1: Maximum APA Involvement Hoover Generation Hoover Allocation Recipients Transmission Service Providers APA AdvantageDisadvantages Business as usual is familiar. If, or to the extent that, transmission rights acquisitions are not customized to account for the specific circumstances of each Hoover allocation recipient: o Some Hoover allocation recipients will experience unnecessary costs due to pancaked transmission tariff and transmission loss rates. o Some Hoover allocation recipients will not be able to make full use of the transmission rights that they are paying for. o Contract arrangements will be unnecessarily complicated. Customizing transmission rights for Hoover allocation recipients will result in cost redundancies and needless inefficiencies.

14. APA Transmission Workshop 7 Aug 2015.pptx 14 Option 2: Moderate APA Involvement Hoover Generation Hoover Allocation Recipients Transmission Service Providers APA AdvantagesDisadvantages Some Hoover allocation recipients will save money by avoiding pancaked transmission tariff and transmission loss rates. Some Hoover allocation recipients will be able to make better use of purchased transmission rights by dealing directly with the transmission service provider. Some Hoover allocation recipients will save money through less complicated contracting processes directly with transmission service providers. Same disadvantages as Option 1 for those Hoover allocation recipients who ask APA to act as a transmission service intermediary.

15. APA Transmission Workshop 7 Aug 2015.pptx 15 Option 3: Minimal APA Involvement All Hoover Allocations Are Delivered at Mead 230 Hoover Generation Hoover Allocation Recipients Transmission Service Providers AdvantagesDisadvantages Transmission delivery costs for Hoover allocation recipients are minimized. Hoover allocation recipients do not experience unnecessary costs due to the pancaked rates and inability to fully use transmission rights that would otherwise occur. Contract arrangements will be less complicated than today.

16. APA Transmission Workshop 7 Aug 2015.pptx 16 Alignment of Generation and Transmission Today Hoover Generation 377 MW Reserved Transmission 434 MW Alignment of reserved transmission rights with maximum available generation is a cost-effective, standard utility practice. Post 2017 Hoover Generation 423 MW Reserved Transmission 423 MW

17. APA Transmission Workshop 7 Aug 2015.pptx 17 Arizona’s Share of Hoover Generation Is Unlikely to Become Stranded Hoover Generation 423 MW Total Transmission Capability 2,207 MW Available Transmission Capability 1,520 MW Arizona has plenty of transmission to convey Hoover generation to Arizona’s Hoover allocation recipients.

18. Summary To ensure that all matters pertaining to Hoover are resolved by Oct 1, 2017, a sequential APA decision process is suggested. The framework for transmission business decision making has changed since the 1980s. The benefits of Hoover to Arizona may be increased by a shift from today’s APA transmission policy to a new approach. Arizona’s share of Hoover generation is unlikely to become stranded in the future. APA Transmission Workshop 7 Aug 2015.pptx 18

19. APA Transmission Workshop Introductions Review Existing Transmission Available to APA Discuss Options for Transmission Post 2017 – Review Slideshow Coordinated by SRP Review Process for Delivery of BCP Power to Small Customers – Transmission Options – Net Metering/Billing APA Transmission Workshop 7 Aug 2015.pptx 19

20. APA Transmission Workshop 7 Aug 2015.pptx 20 APS WAPA AEPCO TEP SRP Balancing Authorities APA Hoover Energy Delivery Town of Gilbert CAWCD No Wheeling Bill Credit Program Electrical District Tagged and Delivered

21. APA Transmission Workshop Input from Balancing Authorities – AEPCO – APS – SRP – TEP – Western Summary and Recommendations Next Steps/Adjourn APA Transmission Workshop 7 Aug 2015.pptx 21

22. APA Transmission Workshop Input from Balancing Authorities – AEPCO – APS – SRP – TEP – Western Summary and Recommendations Next Steps/Adjourn APA Transmission Workshop 7 Aug 2015.pptx 22