1.  2005 Pinnacle West Capital Corporation Special Open Meeting of the Arizona Corporation Commission 2005 Summer Assessment March 18, 2005 Arizona Public Service Company Steve Wheeler – Executive Vice President Jan H. Bennett – Vice President, Customer Service Cary B. Deise – Director, Transmission Operations and Planning March 18, 2005 Arizona Public Service Company Steve Wheeler – Executive Vice President Jan H. Bennett – Vice President, Customer Service Cary B. Deise – Director, Transmission Operations and Planning

2. 2 Overview  Westwing Update  Load/Resources Adequacy  Transmission Adequacy  Planned Maintenance Activities  Contingency Planning  Coordination/Training  Future Plans  Conclusions  Westwing Update  Load/Resources Adequacy  Transmission Adequacy  Planned Maintenance Activities  Contingency Planning  Coordination/Training  Future Plans  Conclusions

3. 3 Westwing Update Jan Bennett Westwing Update Jan Bennett

4. 4 Original Schedule n One transformer scheduled to arrive each week starting March 30th n T-1 bank scheduled to be back in service before summer peak n Replacement of BPA unit scheduled to follow T-1 installation n Replacement of spare to follow BPA replacement n One transformer scheduled to arrive each week starting March 30th n T-1 bank scheduled to be back in service before summer peak n Replacement of BPA unit scheduled to follow T-1 installation n Replacement of spare to follow BPA replacement

5. 5 Issue Identified n The schedule has been revised  First two of seven transformers did not pass initial testing  Corrections required before units could be shipped  Manufacturer was on schedule prior to the initial test results  Continuing to work with manufacturer on revised schedule n The schedule has been revised  First two of seven transformers did not pass initial testing  Corrections required before units could be shipped  Manufacturer was on schedule prior to the initial test results  Continuing to work with manufacturer on revised schedule

6. 6 Revised Schedule n Mid-JuneBPA replacement unit commissioned n Mid-JulyThe T-1 Bank commissioned n By year-endThe original two transformers in the T-4 Bank and the spare unit will be in service - Removed units will become spares - Sale pending on BPA unit n Mid-JuneBPA replacement unit commissioned n Mid-JulyThe T-1 Bank commissioned n By year-endThe original two transformers in the T-4 Bank and the spare unit will be in service - Removed units will become spares - Sale pending on BPA unit

7. 7 The Issue n Gassing occurred during testing that indicates a hot spot  Results are similar for both units  Unit One has been un-tanked  All connections inspected  All internal components inspected  Tanks shunts removed  Problem has been identified and corrections are being made to all units n Consultation with Jim Templeton on test procedures and corrective action n Gassing occurred during testing that indicates a hot spot  Results are similar for both units  Unit One has been un-tanked  All connections inspected  All internal components inspected  Tanks shunts removed  Problem has been identified and corrections are being made to all units n Consultation with Jim Templeton on test procedures and corrective action

8. 8 The Issue

9. 9 Actions Taken n APS and SRP sent technical teams to Canada to work with ABB n Notified all owners n Consulted with independent experts on the issue n Made ABB aware of the critical need for this equipment n APS and SRP sent technical teams to Canada to work with ABB n Notified all owners n Consulted with independent experts on the issue n Made ABB aware of the critical need for this equipment

10. 10 Next Steps n Corrections will be made first to units one and five  Unit one has been un-tanked  Unit five is yet to be tanked  Allows for quickest delivery of one unit to replace BPA unit n Corrections will be made first to units one and five  Unit one has been un-tanked  Unit five is yet to be tanked  Allows for quickest delivery of one unit to replace BPA unit

11. 11 Summary n With the replacement of the BPA transformer we will have adequate capacity to meet our load under expected conditions  Full capacity and redundancy will be restored with the installation of the new T-1 bank n The problem has been identified and corrections are being made n We do not anticipate any voluntary or involuntary curtailment of customer load this summer n ABB is working diligently to remedy the problem n With the replacement of the BPA transformer we will have adequate capacity to meet our load under expected conditions  Full capacity and redundancy will be restored with the installation of the new T-1 bank n The problem has been identified and corrections are being made n We do not anticipate any voluntary or involuntary curtailment of customer load this summer n ABB is working diligently to remedy the problem

12. 12 Summer Preparedness Cary Deise Summer Preparedness Cary Deise

13. 13 312 MW 2-Xfmr Banks 1-BPA Xfmr Reconfigured 11,172 MW 2005 1,240 MW 3-Xfmr Banks 12,100 MW 2005 530 MW 2-Xfmr Banks 1-New Xfmr Normal 11,390 MW 2005 2-Xfmr Banks 1-BPA Xfmr Reconfigured 10,800 MW 2004 10,003 MW 2004 Valley Peak Load Valley Maximum Load Serving Capability 10,860 MW Forecast 2005 Valley Peak Westwing Update 6,000 7,000 8,000 9,000 10,000 11,000 12,000 MW

14. 14 APS Peak Load Forecast 6954 MW 2005 Forecast 6402 MW 2004 Actual Loads/Resources Adequacy 8.6% Phoenix is the second fastest-growing metropolitan area in U.S. Adding 160 APS customers every day

15. 15 Fuel n Nuclear  Full requirements under contract. n Coal Cholla  Current inventory and contract commitments provide adequate coal for the projected 2005 burn.  43 days of inventory on the ground. n Nuclear  Full requirements under contract. n Coal Cholla  Current inventory and contract commitments provide adequate coal for the projected 2005 burn.  43 days of inventory on the ground. Loads/Resources Adequacy

16. 16 n Coal (cont.) Four Corners  Mine mouth plant with full supply contract in effect.  30 days of inventory on the ground by May. n Gas  85% of supply is under contract  Firm transportation contracts with EPNG in effect.  Fuel oil back-up at the Yucca, West Phoenix and Saguaro Plants. n Coal (cont.) Four Corners  Mine mouth plant with full supply contract in effect.  30 days of inventory on the ground by May. n Gas  85% of supply is under contract  Firm transportation contracts with EPNG in effect.  Fuel oil back-up at the Yucca, West Phoenix and Saguaro Plants. Fuel, continued Loads/Resources Adequacy

17. 17 APS Resources – Existing Generation Fuel TypeCapacity - MW Nuclear1107 Coal1725 Gas1054 Oil 70 Other 5 Total3961 Loads/Resources Adequacy

18. 18 Resources – Existing PWEC/Other APS Committed Capacity – MW Redhawk1020 Saguaro 76 West Phoenix 640 Sundance 325 Total2061 Plant Loads/Resources Adequacy

19. 19 Resources  Generation 2005 (MW) Existing Generation 3961 PWEC/Other2061 Subtotal6022  Long-term Contracts Pacificorp Exchange 480 SRP 364 Subtotal 844  Market Contracts 900  Total Resources 7766  Generation 2005 (MW) Existing Generation 3961 PWEC/Other2061 Subtotal6022  Long-term Contracts Pacificorp Exchange 480 SRP 364 Subtotal 844  Market Contracts 900  Total Resources 7766 Loads/Resources Adequacy

20. 20 APS System Load and Resources 812 MW Loads/Resources Adequacy

21. 21 Substation Transformers NEWXfmr Banks n 69/12kV15 n 115/69kV 1 n 230/69kV 1 n 500/69kV 1 UPGRADED n 69/12kV 8 n 230/69kV 5 n 345/230kV 1 Total32 NEWXfmr Banks n 69/12kV15 n 115/69kV 1 n 230/69kV 1 n 500/69kV 1 UPGRADED n 69/12kV 8 n 230/69kV 5 n 345/230kV 1 Total32 Transmission Adequacy

22. 22 Transmission Lines Line Sections New n 69kV4 Upgraded n 69kV9 Line Sections New n 69kV4 Upgraded n 69kV9 Transmission Adequacy

23. 23 APS EHV System Transmission Capacity less wheeling obligations 500kV 345kV N.Gila Kyrene Four Corners Palo Verde Westwing Yavapai Pinnacle Peak Cholla Saguaro Moenkopi Navajo Mead 236 MW 559 MW 315 MW 782 MW 1175 MW 615 MW 1683 MW 2380 MW 1107 MW 140 MW 310 MW Rudd Jojoba Gila River Generation Capacity Transmission Capacity Transmission Adequacy

24. 24 APS EHV System 5248 MW 4969 MW Tx to Load = 4998 MW Purch Tx = 250 MW 279 MW Transmission Adequacy

25. 25 Yuma Maximum Load Serving Capability 375 MW Forecasted Peak 60 MW 2004 Peak 347 MW Transmission Adequacy 435 MW 375 MW 100 150 200 250 300 350 400 450 20042005 MW Generation & Transmission

26. 26 n APS Planned Maintenance Scheduled to be completed by May 31:  Palo Verde 2 & 3  Cholla 2  Navajo 1  Four Corners 1 and 5  W. Phoenix Combined Cycle 1 – 3 and CT 1 & 2  Saguaro Steam 1 & 2 and CT 1 & 2  Yucca CT 1-4  Ocotillo Steam 1 & 2 and CT 1 & 2  Douglas CT Generation Planned Maintenance

27. 27 Transmission n Key lines/substations on schedule n Special emphasis on critical transformers n Tree trimming in northern area due to damage from snow storms n Key lines/substations on schedule n Special emphasis on critical transformers n Tree trimming in northern area due to damage from snow storms Planned Maintenance

28. 28 Contingency Planning Jan Bennett Contingency Planning Jan Bennett

29. 29 Contingency Planning n Updated Load Curtailment Plans will be filed with ACC by June 1, 2005  Essential  Critical  Major-use customers/other with notice  Other n EMS Load Shedding program annual update by May 16, 2005 n Coordination with emergency organizations Contingency Planning

30. 30 Emergency Equipment n Mobile 69/12kV Transformers n Emergency Towers  Two Lindsey towers LocationXfmrs Phoenix4 Flagstaff2 Yuma1 Total7 Contingency Planning

31. 31 Training & Drills Cary Deise Training & Drills Cary Deise

32. 32 Training & Drills n Regional Black Start DrillMarch n Usage of Load Curtailment toolsApril n Summer StudiesMay n Transmission Path OperationsMay n Emergency OperationsMarch-June Power Simulator n NERC policies addressingMarch-June emergency operations n DOE simulator trainingMarch-Oct. n Regional Black Start DrillMarch n Usage of Load Curtailment toolsApril n Summer StudiesMay n Transmission Path OperationsMay n Emergency OperationsMarch-June Power Simulator n NERC policies addressingMarch-June emergency operations n DOE simulator trainingMarch-Oct. Coordination / Training

33. 33 EHV Transmission Future Plans

34. 34 West Valley 230kV Future Plans

35. 35 East Valley 230kV 345KV 2 0 0 9 J/O (SRP) ( S R P ) TO RACEWAY NE3 2010 ( S R P ) T B D Substation locations and line routings depict an electrical connection only and donot reflect any assumed physical locations or routing. Future Plans

36. 36 Conclusions Steve Wheeler Conclusions Steve Wheeler

37. 37 Conclusions  Adequate resources to meet load and reserve requirements  Sufficient transmission to import remote generation and purchases  Plans in-place to respond to extreme conditions  Coordination/training has been established with various State and local agencies  Anticipate meeting customers needs  Adequate resources to meet load and reserve requirements  Sufficient transmission to import remote generation and purchases  Plans in-place to respond to extreme conditions  Coordination/training has been established with various State and local agencies  Anticipate meeting customers needs