APS 2013 Annual Report Download - page 18

Table of Contents
Demand Side Management
In December 2009, Arizona regulators 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. The ACC initiated its Energy
Efficiency rulemaking, with a proposed Energy Efficiency Standard (“EES”) 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 2009 Settlement Agreement).
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 continues its work on 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 during 2015 and
is contingent upon APS meeting certain project milestones, including DOE-established budget parameters.
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 popular with customers installing or having installed products such as rooftop solar panels to meet or supplement their energy
needs.
On April 14, 2010, the ACC issued a decision holding that solar vendors that install and operate solar facilities for non-profit schools and
governments pursuant to a specific type of contract that calculates payments based on the energy produced are not “public service corporations” under the
Arizona Constitution, and are therefore not regulated by the ACC. A second matter is pending with the ACC to determine whether that ruling should extend to
solar providers who serve a broader customer base under the same business model. Use of such products by customers within our territory would result in an
increasing level of competition. APS cannot predict when, and the extent to which, additional electric service providers will enter or re-enter APS’s service
territory.
In 1999, the ACC approved rules for the introduction of retail electric competition in Arizona. As a result, as of January 1, 2001, all of APS’s retail
customers were eligible to choose alternate energy suppliers. Although some very limited retail competition existed in APS’s service territory in
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