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ARIZONA CORPORATION COMMISSION

MEETING MINUTES

DATE:   August 24, 2005

TIME:   10:00 a.m.

PLACE: Arizona Corporation Commission, 1200 W.
Washington Street, Hearing Room, Phoenix, Arizona 85007

ATTENDANCE: Commissioners Spitzer, Gleason, and Mayes attended. 
See list in Attachment 1.

TOPIC:  RESOURCE PLANNING WORKSHOP

MATTERS DISCUSSED:

Bill
Gehlen of the Commission Staff welcomed everyone.  Each participant
made a self-introduction.

Mr.
Gehlen gave an overview of the comments that were filed by participants
on August 4, 2005.  There was agreement that there should be regulatory
certainty of cost recovery and that some sort of resource planning process
is required.  One comment was to list at the end of each meeting:
(1) items of agreement, (2) items agreed to disagree, and (3) items
to discuss next time.

Pat
Ferguson of 3M made a presentation on a new transmission technology. 
The technology consists of a new metal composite material to replace
steel.  It increases the capacity of existing transmission lines
and has been extensively tested.  It's primary application is in
thermal upgrades.  There is a 2 to 3 times gain in ampacity, and
it avoids tower replacement.

Vivian
Scott, of Southwest Gas, presented a view of a perfect storm gathering
in Arizona.  There is explosive population growth, huge and escalating
power needs (4 percent/year), decreasing water supply, and Arizona's
resources being used to benefit other states.  It is time to think
about energy and whether things need to be done differently.  Southwest
Gas has 900,000 customers in Arizona.  The issue is not insufficient
amount of natural gas; it is how the gas is used.  Most of the
new electric generating units in North America use natural gas. 
The Energy Policy Act of 2005 provides incentives for increasing natural
gas production and supply.  Electricity generation is not an efficient
use of natural gas.  Ms. Scott also suggested that DG and CHP targets
be set in resource planning.  Natural gas should be used as a bridge
to renewable resources.

Ed
Beck, of Tucson Electric Power, talked about what a resource plan should
look like.  We need a new resource planning process, not the old
resource planning process.  However, we should use existing processes,
such as the Biennial Transmission Assessment (BTA).  The 2006 BTA
should include resource adequacy and all resources.

David
Berry, of Western Resource Advocates, summarized his proposed straw
man for resource planning.  The objectives of resource planning
include reducing impacts on the environment and managing risk. 
There must be an interactive public process.  Results from resource
planning should include an action plan, a procurement process, and Commission
approval of resource acquisition.  Utility filings should be made
every two years with a Commission decision within one year or there
should be a three-year process with one-year updates.

Eric
Bronner, of Gila River Power, also spoke about wanting all resources
to be considered in resource planning.  Jeff Schlegel, of Southwest
Energy Efficiency Project (SWEEP), commented on the Arizona Public Service
(APS) Settlement Agreement and all-resource bidding.  Mr. Schlegel
mentioned that least cost resources have not been selected in the past.

Barbara
Klemstine, of APS, said that the existing resource planning rules need
to change.  There is no clear objective, only a consistency finding. 
The process needs to be timely.  A resource planning process needs
to complement or incorporate other processes, such as Environmental
Portfolio Standard and demand-side management (DSM).  In the Certificate
of Environmental Compatibility process, the Commission has looked at
siting, water usage, and other things.  We need individual plans
for utilities.  Nevada has a three- or four-month review process. 
What is most important is demand and supply balance and a time horizon. 
In response to the comments of Southwest Gas, Ms. Klemstine mentioned
that air conditioning load requires peaking units which use natural
gas and that DSM is a better alternative than more efficient natural
gas use.

Mr.
Schlegel was impressed by the amount of agreement expressed at the workshop. 
It is a bad thing if planning gets in the way of doing.  At a minimum,
there should be a level playing field for all resources.  Reliable
resources should be provided at least cost.  The BTA should be
opened to other resources, and the process must be fair.  The time
horizon should be 20-year planning and analysis with a five to ten-year
action plan.  Natural gas should be included in resource planning. 
We should not get paralyzed by data.  Plans should be short, with
detail in appendices.  Mr. Schlegel was concerned about how DSM
is included in other planning processes..  There needs to be consistency
in utility plans as to how DSM is included.  Separate processes
for resources are needed.  SWEEP expects one-third of growth to
be met by energy efficiency, one-third to be met by renewable resources,
and one-third to be met by conventional resources.  Anything less
would be a bad plan.

The
group then discussed how to proceed with resource planning.  The
discussion included: need to establish a mechanism, parts of the old
rules may be OK, many processes are going on, need to look regionally,
identify what you need and how to get there, forecast load by year for
10 years, look at all resources at once, should be adequate cost recovery
for utilities, utilities need an action plan to go forward, and need
to look at both a planning process and a procurement process (how resources
are valued).  It was agreed that the utilities would form a subcommittee
to identify existing regional and in-state processes related to resource
planning.  The information would be sent to Staff within two weeks
of the workshop.  Staff would address Commission processes, such
as the Biennial Transmission Assessment and demand-side management rulemaking. 
Staff would then send either the information or links to the information
to workshop participants.

There
was discussion about what should be the resource planning process. 
Topics discussed included: uncertainty, risk management, load forecasts,
direct access, fuel diversity, and assumptions.  Three steps/categories
in resource planning were identified: (1) need determination, (2) filling
need requirements, and (3) procurement.  It was decided that Staff would prepare a list of issues grouped within
the three categories.  All interested parties would then send comments
to Staff on the issues within three weeks of receiving the list of issues. 
Staff would consolidate the comments and distribute the consolidated
comments to workshop participants.

The
date for the next Resource Planning Workshop was not yet set.

Barbara Keene

Utilities Division

Attachment
1

Attendees at the Resource
Planning Workshop

August 24, 2005

Name

Organization

Dan Austin

Converge

Prem Bahl

Commission Staff

R. Martin Bailey

Southwestern Power Group

Ed Beck

Tucson Electric Power

David Berry