APS 2012 Annual Report Download - page 38

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(a) Includes Flagstaff Community Power Project and APS Schools and Government
Program.
(b) Represents contracted capacity.
(c) Details of these agreements have not yet been publicly announced.
(d) Distributed generation is produced in DC and is converted to AC for reporting
purposes.
(e) Achieved through incentive-based programs. Includes resources with production-based
incentives that have terms of 10-20 years.
Demand Side Management
In recent years, Arizona regulators have placed an increased focus on energy efficiency and
other demand side management programs to encourage customers to conserve energy, while
incentivizing utilities to aid in these efforts that ultimately reduce the demand for energy. In December
2009, the ACC initiated its Energy Efficiency rulemaking, with a proposed Energy Efficiency Standard
of 22% cumulative annual energy savings by 2020. This standard was adopted and became effective
on January 1, 2011. This ambitious standard will likely impact Arizona's future energy resource needs.
(See Note 3 for energy efficiency and other demand side management obligations resulting from the
settlement agreement related to APS’s 2008 retail rate case.)
Government Awards
Through the American Recovery and Reinvestment Act of 2009 (“ARRA”) and other DOE
initiatives, the Federal government made a number of programs available for utilities to develop
renewable resources, improve reliability and create jobs.
APS has received two awards from the DOE. The first is a $3 million non-ARRA award for a
high penetration photovoltaic generation study related to the Community Power Project in Flagstaff,
Arizona. This award will conclude on March 31, 2015 and is contingent upon APS meeting certain
project milestones, including DOE-established budget parameters. Second, APS was a sub-recipient
under a $3.4 million ARRA award received through the State of Arizona for the implementation of
various distributed energy and energy efficiency programs in Arizona. This project concluded on
April 30, 2012.
Competitive Environment and Regulatory Oversight
Retail
The ACC regulates APS’s retail electric rates and its issuance of securities. The ACC must
also approve any significant transfer or encumbrance of APS’s property used to provide retail electric
service and approve or receive prior notification of certain transactions between Pinnacle West, APS
and their respective affiliates.
APS is subject to varying degrees of competition from other investor-owned electric and gas
utilities in Arizona (such as Southwest Gas Corporation), as well as cooperatives, municipalities,
electrical districts and similar types of governmental or non-profit organizations. In addition, some
customers, particularly industrial and large commercial customers, may own and operate generation
facilities to meet some or all of their own energy requirements. This practice is becoming more