APS 2015 Annual Report Download - page 53

Table of Contents
of decision on July 17, 2015. The record of decision provided the authority for the Bureau of Indian Affairs to sign the lease
amendments and rights-of-way renewals, which occurred in late July 2015. On December 21, 2015, several environmental groups filed
a notice of intent to sue with OSM and other federal agencies under the Endangered Species Act alleging that OSM's reliance on the
Biological Opinion and Incidental Take Statement prepared in connection with the environmental review described above were not in
accordance with applicable law. We are monitoring this matter and will intervene if a lawsuit is filed. We cannot predict the timing or
outcome of this matter.
Natural Gas. APS has six natural gas power plants located throughout Arizona, including Ocotillo. Ocotillo is a 330 MW 4-
unit gas plant located in the metropolitan Phoenix area. In early 2014, APS announced a project to modernize the plant, which involves
retiring two older 110 MW steam units, adding five 102 MW combustion turbines and maintaining two existing 55 MW combustion
turbines. In total, this increases the capacity of the site by 290 MW, to 620 MW, with completion targeted by summer 2019. APS
completed a competitive solicitation process in which the Ocotillo project was evaluated against other alternatives. Consistent with the
independent monitor’s report, the Ocotillo project was selected as the best alternative. APS must finalize the permitting process before
construction can begin.
Transmission and Delivery. APS is working closely with regulators to identify and plan for transmission needs that continue to
support system reliability, access to markets and renewable energy development. The capital expenditures table presented in the
"Liquidity and Capital Resources" section below includes new APS transmission projects through 2018, along with other transmission
costs for upgrades and replacements. APS is also working to establish and expand advanced grid technologies throughout its service
territory to provide long-term benefits both to APS and its customers. APS is strategically deploying a variety of technologies that are
intended to allow customers to better monitor their energy use and needs, minimize system outage durations, as well as the number of
customers that experience outages, and facilitate greater cost savings to APS through improved reliability and the automation of certain
distribution functions, including remote meter reading and remote connects and disconnects.
Renewable Energy. The ACC approved the RES in 2006. The renewable energy requirement is 6% of retail electric sales in
2016 and increases annually until it reaches 15% in 2025. In the 2009 Settlement Agreement, APS agreed to exceed the RES standards,
committing to use APS’s best efforts to obtain 1,700 GWh of new renewable resources to be in service by year-end 2015, in addition to
its RES renewable resource commitments. APS met its settlement commitment and RES target for 2015. A component of the RES
targets development of distributed energy systems.
In 2013, the ACC conducted a hearing to consider APS's proposal to establish compliance with distributed energy requirements
by tracking and recording distributed energy, rather than acquiring and retiring renewable energy credits. On February 6, 2014, the
ACC established a proceeding to modify the renewable energy rules to establish a process for compliance with the renewable energy
requirement that is not based solely on the use of renewable energy credits. On September 9, 2014, the ACC authorized a rulemaking
process to modify the RES rules. The proposed changes would permit the ACC to find that utilities have complied with the distributed
energy requirement in light of all available information. The ACC adopted these changes on December 18, 2014. The revised rules
went into effect on April 21, 2015.
On July 1, 2014, APS filed its 2015 RES implementation plan and proposed a RES budget of approximately $154 million. On
December 31, 2014, the ACC issued a decision approving the 2015 RES implementation plan with minor modifications, including
reducing the requested budget to approximately $152 million.
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