2014 Integrated Resource Plan

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1 2014 Integrated Resource Plan Resource Planning Overview Mike Sheehan Director of Resource Planning 0

2 Workshop Overview Building Overview Presentations and Q&A Resource Planning Website Contact Resource Planning at Introductions 1

3 Workshop Agenda Morning Agenda 9:00AM - 11:45AM Lunch 11:45AM - 1:00 PM Afternoon Agenda 1:00PM - 3:20PM Resource Planning Overview TEP and UNSE History Load Forecast Climate Changes for Arizona and the Desert Southwest Environmental Regulation and BART Forecasting Renewable Generation Assets Energy Efficiency Renewables and Distributed Generation Gas and Power Market Outlooks Loads and Resources TEP and UNSE Reference Cases 2

4 Integrated Resource Planning Process Inform customers, regulators and public stakeholders Seek both customers and stakeholder feedback Discussion is focused on the near-term action items Reference Case Plan Reference Case Plan Reference Case Plan Contingency 3 Reference Case Plan Contingency 1 Contingency 4 Contingency 2 Contingency 2 3

5 Corporate Resource Planning and Procurement 4

6 Resource Planning Data Assumptions Future Resource Assumptions PACE Global Wood MacKenzie Electric Power Research Institute (EPRI) Black & Veatch National Renewable Energy Laboratory (NREL) IHS CERA National Energy Technology Laboratory (NETL) Request for Proposals (RFPs) Independent Third-Party Data Sources Avoid internal biases In-depth analysis behind data Forward thinking outcomes 5

7 Input Assumptions Existing Resources Resource Portfolios Evaluation Criteria Thermal Resources Planning Requirements Energy Efficiency Renewables Environmental Impacts Transmission Capacity Planning & Risk Simulation Models Financial Requirements Preferred Portfolios Uncertainties Economic Development Load Growth Environmental Policy Customer Rates Fuel & Market Prices Energy Efficiency Effectiveness Future Scenarios Risk Management Competitive Procurement Process Technology Innovations 6

8 Range of Portfolios by Resource Types Portfolio 1 Heavy Coal and Combustion Turbines 13% 5% 9% Portfolio 2 Highly diverse, including Nuclear and Wind 13% 21% Portfolio 3 Coal and Natural Gas 13% 14% Portfolio 4 Heavy Coal and Combined Cycle 13% 8% 77% 17% 37% 68% 75% Portfolio 5 Diverse Gas and Coal Portfolio 6 High Solar Portfolio 7 No Coal High Solar/Wind Portfolio 8 Low Coal High Combined Cycle 13% 17% 4% 34% 24% 1% 3 45% 6% 19% 35% 57% 39% 2 3 7% CC Peaker Coal Nuclear Wind Solar

9 Integrated Resource Planning Regulatory Compliance 15-year plan required every two years Renewable Energy Standards 15% by 2025 Energy Efficiency Standards 2 by 2020 Reliability Planning Capacity Reserve Margins 15% Planning Reserve Adequate Load Serving Capability Business Planning Helps drive internal business strategies Support for the Arizona economy Determine viable financial and regulatory options 8

10 Managing Customer Risks Future Load Growth and Demand Risk Scalable resources with short lead times Joint project participation with regional partners Plans that emphasize transmission access to the wholesale market Performance and Reliability Risk Proven technologies Counterparty diversity Integrating intermittent resources Fuel & Environmental Risk Portfolio diversity Committed to a cost effective coal reduction strategy Target cost effective zero-emission resources 9

11 Percentile Scenario Cases and Stochastic Risk Analysis Scenarios Cases High Renewables Case 25% by 2025 Full Retirement of TEP s Coal Fleet Additional Capacity Commitments Stochastic Risk Analysis and Customer Rate Impacts Low Risk / Low Cost Portfolio 20% 18% 16% 14% 1 10% 8% 6% 4% 0% Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Customer Rate Impacts /kwh

12 Updates Since the 2012 IRP Significant changes in forward assumptions Load Forecast Market & Gas Prices More certainty regarding EPA regulatory outcomes Reference Cases Significant coal reductions for TEP over the next 5 years Large investments in new generation resources such as natural gas and renewables Investments in new transmission assets