TO: EDITORS, NEWS DIRECTORS

DATE: February 1, 2001

FOR: IMMEDIATE RELEASE

Commission Issues Mandate Requiring Renewable Energy Technologies

PHOENIX - Arizona is one of the leading states in the nation to support the use of renewable energy sources for electric power generation. In May 2000, the Arizona Corporation Commission adopted a renewable portfolio standard requiring that utilities derive a portion of their electricity through renewable sources. The May decision ordered Commission staff to begin the rulemaking process. The Commission on Tuesday voted to codify the Environmental Portfolio Standard, as it's now known, as a formal rule.

The Environmental Portfolio Standard requires regulated utilities to generate a minimum of 0.2 percent of their total retail energy sales from renewable sources in 2001. The percentage will increase each year to 1 percent in 2005 and top out at 1.1 percent in 2007. The decision applies to all load-serving entities - companies that sell retail electricity in Arizona.

The Renewable Portfolio Standard covers solar technologies such as solar generation, solar water heating and solar air conditioning. Non-solar technologies such as landfill gas generators, wind generators and biomass generators are also qualifying technologies.

Key provisions of the Environmental Portfolio Standard are:

• Solar must make up at least 50 percent of the Environmental Portfolio resources in 2001. The remaining 50 percent can be other environmentally friendly technologies, solar hot water or research and development on solar electric resources. Research and development must be limited to 10 percent or less.

• All load-serving entities must meet the following portfolio requirements. The percentages are based on total retail energy sold.

• 0.2% in 2001
• 0.4% in 2002
• 0.6% in 2003
• 0.8% in 2004 - The Commission will review the costs and benefits of the portfolio requirement at this point to determine if the percentage should be frozen at 0.8% for a period of time or if it should continue to increase as currently anticipated.
• 1.0% in 2005
• 1.05% in 2006
• 1.1% from 2007 to 2012

• From 2004 through 2012 the portfolio must be 60 percent solar electric with no more than 40 percent solar hot water or other environmentally friendly renewable electricity technologies.

• The Commission's Utilities Division will establish an Environmental Portfolio Cost Evaluation Working Group in 2003. The group will assess the costs and benefits of the Portfolio and make recommendations as to whether the portfolio percentages should be increased.

• The Environmental Portfolio Standard also includes extra credit multipliers to encourage the early installation of these environmentally friendly technologies.

Are rates affected?

Beginning this spring, Arizona ratepayers will pay a portion of the costs associated with the increased investment in environmentally friendly technologies. The Environmental Portfolio Surcharge will be $0.000875 per kilowatt-hour when it takes effect. The Commission has set a rate cap for three different categories of ratepayers. There is a monthly cap of 35 cents for all residential customers. A typical residential customer who uses 400 kilowatt-hours or more will be assessed 35 cents per month. According to APS, approximately twenty-five percent of their residential customers use less than 400 kilowatt-hours per month and are therefore expected to be assessed less than 35 cents.

Business accounts will be assessed the same monthly surcharge rate of $0.000875 per kilowatt-hours. Over 99 percent of non-residential accounts will be subject to a maximum cap of $13.00 per month. Hotels, schools, office buildings and most medium to large retail stores are likely to reach the $13.00 cap. Smaller businesses such as beauty salons, barbershops, strip mall stores and others will probably fall below the $13.00 monthly assessment.

A $39.00 cap will apply to the state's largest non-residential users - those using more than 3 megawatts of power such as mining facilities and large manufacturing plants. There are fewer than 100 accounts statewide that will be affected by the larger monthly cap.

The Commission is committed to encouraging investment in renewable technology in Arizona without adversely impacting ratepayers. The Commissioners believe that this decision balances the need for sound environmental policy with sensitivity to ratepayers' concerns.

Voting in favor of the rules, Commissioner Marc Spitzer said: "Billions of dollars are being spent on clean air and clean water. It only follows that the utilities should be encouraged to invest in clean energy technologies. This, I believe, is a good example of government balancing the sometimes competing interests of cost with the very real issue of preserving our environment."

"The Environmental Portfolio Standard breaks new ground for Arizona," Commissioner Jim Irvin said. "If we are ever going to see a broader mix of fuels, we have to take the first step. My vote in favor of the rules sends a message that the time is now."

Chairman Bill Mundell cast the final vote in favor of the Environmental Portfolio Standard saying: "It is critical to encourage electricity providers to reduce their reliance on fossil fuels. Government has a responsibility to encourage change where public health and safety can be enhanced. These measures are intended to bring down the cost of solar and other renewable energy technologies so they become more cost competitive with other energy sources."

A copy of the Commission's final order will be posted on the Arizona Corporation Commission website, www.cc.state.az.us. It will be under Hot Topics, Electric Competition in the section labeled "Renewable Portfolio Standard Developments."