PIMA ASSOCIATION OF GOVERNMENTS SOLAR PARTNERSHIP SEPTEMBER 22, 2016 TERRY FINEFROCK 1

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1 THOUGHTS ABOUT OUR FUTURE POWER GRID PIMA ASSOCIATION OF GOVERNMENTS SOLAR PARTNERSHIP SEPTEMBER 22, 2016 TERRY FINEFROCK 1

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3 BITS ON OUR FUTURE TEP CEO HUTCHENS (2015 ADS GUEST OPINION) STATES DESIRE TO PROVIDE LOW COST SOLAR ELECTRICITY TO ALL RATEPAYERS TEP (APRIL 2016 ACC DOCKET ) 2016 PRELIMINARY IRP INCLUDES DOUBLING OF SOLAR FROM 15 TO 30% OF THE GENERATION MIX AND DEVELOPMENT OF A MODERN DISTRIBUTION GRID(MDG) BY 2030 ACC CHAIR LITTLE (AUGUST 2016) UTILITY DRIVE: AMEND THE RENEWABLE ENERGY STANDARDS & TARIFF(REST) TO INCREASE RE MIX TO 30% BY 2030, INCLUDE ENERGY STORAGE, COMMUNITY SOLAR, DELETE DISTRIBUTED GENERATION CARVE-OUT COMMISSIONER ROBERT BURNS(8/26/16 ADS) SUBPOENAS APS FINANCIAL EXPENDITURES TO POLITICAL CAMPAIGNS/SUPPORT ORGANIZATIONS ACC CANDIDATE DEBATE-PHOENIX(8/25/16) FOUR OF THE FIVE REPUBLICAN CANDIDATES FOR ARIZONA CORPORATION COMMISSION SAID AT A DEBATE THEY RE NOT CONVINCED THAT HUMAN ACTIVITY CONTRIBUTES TO CLIMATE CHANGE. HUMAN-ROLE-IN-CLIMATE/ARTICLE_D4175E95-E06F-59ED-8E DF HTML 3

4 IS A REGIONAL G & T MARKET IN OUR FUTURE? REGIONAL COMPETITIVE GENERATION & TRANSMISSION (G & T) MARKETS EACH UTILITY MAINTAINS SIGNIFICANT IDLE JUST-IN-CASE G & T CAPACITY (HIGHER COST/KWH) AGGREGATED CAPACITY CAN IMPROVE SYSTEM RELIABILITY; DEFER-AVOID CAPITAL INVESTMENT FOR INCREMENTAL CAPACITY; REDUCE COST/KWH COMPETITIVE BIDS PROMOTE CONTINUOUS IMPROVEMENT, STRANDING HIGHER COST GENERATION (ERCOT-COAL) ACC/WECC CONSIDERING PROPOSAL TO IMPLEMENT CAISO-WECC(AZ) REGIONAL MARKET WILL REDUCE FOCUS ON G & T REVENUE COMPONENTS; ENABLE USE OF RATEPAYER REVENUES TO DEVELOP MODERN DISTRIBUTION GRID 4

5 HOW ABOUT A FUTURE ENERGY AND ECONOMIC MICROGRID? LOCAL ENERGY & ECONOMIC MICROGRID ACCELERATE TEP S PLANNED DOUBLING OF SOLAR ELECTRIC GENERATION AND DEVELOPMENT OF THE ENABLING MDG BY 2020 (NOT 2030) BEFORE ITC REDUCES-EXPIRES (UTILITY COST REDUCTION, TAX BENEFIT ~48% OF 30% OF EQUIPMENT COST) PERHAPS, SUBSTATION SCALE ENERGY STORAGE EQUIPMENT AND OPERATING SYSTEM(SOFTWARE) WITH THE CAPACITY TO INTEGRATE ENERGY FROM ALL SOURCES, PROVIDE FREQUENCY-VOLTAGE REGULATION AND MANAGE RATEPAYER EQUIPMENT LOADS(LINE BALANCE) PROVIDE NEW UTILITY REVENUE CHANNELS: DEMAND MANAGEMENT AND OTHER SERVICES OF VALUE TO RATEPAYERS ENABLE LOWER FIXED COST DIVERSELY LOCATED UTILITY SCALE SOLAR FACILITIES WITHIN-IN CLOSE PROXIMITY TO THE DISTRIBUTION GRID VS. CURRENTLY PLANNED REMOTE GAS FIRED GENERATION ACQUIRE DOE-EPA DEMONSTRATION PROJECT FUNDING; PARTNER WITH SUPPLIERS TO DEVELOP NEEDED FUNCTIONALITY AND COST; ESTABLISH MFG. PLANTS IN PIMA COUNTY & EXPORT ECONOMY HIGHER WAGE JOBS ENABLE POPULATION GROWTH MORE RATEPAYERS AND TAXPAYERS 5

6 MODELING ANALYTICS: FUTURE ACC INTEGRATED RESOURCE PLANNING? ACC DEVELOPMENT OF MODERN RESOURCE MODELING APPLICATION TO CALCULATE AND DEFINE, VERSUS DEBATE, THE OPTIMAL SYSTEM CONFIGURATION COSTS AND BENEFITS AND TO SIMULATE IMPACTS OF COMPONENT CHANGES ON TOTAL SYSTEM FOR THE LIFE OF THE PROPOSED COMPONENT ELIMINATE COSTLY AND ADVERSARIAL DEBATES (VOS; NEM; ADMINISTRATIVE & ANALYST COSTS; PURCHASED STUDIES, ETC.) EACH UTILITY HAS DEFINED THEIR SYSTEM, COMPONENT DEPENDENCIES, USAGE DATA, COSTS AND OPTIMIZATION VALUES EMBED ACC OPTIMIZATION VALUES, INITIATE WITH DATA FROM LEGACY UTILITY SYSTEMS, INCLUDE OTHER COMPARATIVE DATA SUCH AS COMPETITIVE MARKET COST OF O & M. USE THE APPLICATION TO IDENTIFY AND MANDATE IMPROVEMENT ACTIONS, OPTIMIZE BENEFIT TO RATEPAYERS, AND DEFINE REASONABLE COSTS AND RATES IS THIS FEASIBLE? MODERN COMPETITIVE MARKET CORPORATIONS DEVELOP SIMULATION-COMPUTER MODELING-DATA ACQUISITION TO GUIDE THEIR BUSINESS DECISIONS AND ASSURE THEIR FINANCIAL SUSTAINABILITY ALEVO (ENERGY STORAGE) PLANS TO SELL UTILITY SCALE TURNKEY GRIDBANKS (AND PERHAPS MODELING SERVICES? TF) BEGINS-TO-STIR/#A53EE6460E46 INVESTED IN HIGH-PERFORMANCE COMPUTING CAPACITY(3 PETAFLOPS) TO IDENTIFY PROSPECTIVE CUSTOMER COSTS AND VALUES SIMULATED ENTIRE US WESTERN GRID (ARIZONA.) 6

7 HOW CAN I HELP FORM OUR FUTURE POWER GRID? ELECT INTELLIGENT, PROGRESSIVE, UNBIASED COMMISSIONERS TO THE ACC ACTIVELY EXPRESS SUPPORT FOR ACTIONS THAT REDUCE INFLUENCE OF CAMPAIGN DONATIONS, PROHIBIT EMPLOYMENT OF ACC/STATE EMPLOYEES BY UTILITIES WITHIN 3- YEARS OF EMPLOYMENT BY GOVERNMENT PROVIDE COMMENTS TO THE ACC ASK TEP TO CONDUCT A WORKSHOP TO PRESENT AND EXPLAIN THEIR 2016 PRELIMINARY IRP SUBMITTAL*, DOCKET , THEN DOCUMENT COMMENT TO TEP & ACC *PAGE 9: THE PURPOSE OF THIS REPORT IS TO PROVIDE REGULATORS, CUSTOMERS AND OTHER INTERESTED STAKEHOLDERS THE OPPORTUNITY TO UNDERSTAND THE CURRENT PLANNING ENVIRONMENT AND PROVIDE FEEDBACK ON THE COMPANY S(TEP)FUTURE RESOURCE PLANS PRIOR TO THE 2017 FINAL IRP SUBMITTAL ON APRIL 1,

8 FUTURE POWER GRID BE ACTIVE IN COLLABORATING WITH THE ACC & TEP TO CREATE THE UNBIASED CONTINUOUS IMPROVEMENT CULTURE NECESSARY TO AGGRESSIVELY HARNESS AND DEPLOY NEW TECHNOLOGY THAT STABILIZES ENERGY AND WATER COSTS, REDUCES THE ECONOMIC BURDEN OF THOSE NON-DISCRETIONARY COMMODITIES, IMPROVES SYSTEM RELIABILITY, ENABLES UTILITIES TO EARN MARGINS TO SUSTAIN THEMSELVES, AND UTIMATELY PROVIDES DIVERSE SIGNIFICANT BENEFITS TO OUR COMMUNITY. END OF PRESENTATION MR. TERRY FINEFROCK, CPIM 8

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