TO: EDITORS, NEWS DIRECTORS

DATE: May 5, 2000

FOR: IMMEDIATE RELEASE

Arizona Leads Nation with Passage of
Renewable Power Source Mandate
Utilities Required to Generate Portion of Power from Renewable Sources

Phoenix - Arizona is the first state to require public utilities to generate a portion of their electricity through renewable sources. The Arizona Corporation Commission's decision requires regulated utilities to generate a minimum of 0.2 percent of their total power from renewable sources by January 2001. The percentage will increase each year to 1 percent in 2005 and top out at 1.1 percent in 2007.

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 covered by the new plan.

Some key provisions of the Renewable Portfolio Standard are as follows:

• Solar must make up at least 50 percent of the power generation portfolio 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.

• In 2002, the portfolio requirement doubles to 0.4 percent and research and development expenditures are reduced to no more than 5 percent.

• In 2003, the portfolio requirement will be 0.6 percent with the same stipulations for R&D.

• 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 order states that the director of the Commission's Utilities Division shall establish, not later than January 1, 2003, an Environmental Portfolio Cost Evaluation Working Group. The group will assess the costs and benefits of the Portfolio and make recommendations as to whether the portfolio percentages should be increased.

Beginning in 2001, Arizona ratepayers will pay a portion of the costs associated with the increased investment in environmentally friendly technologies. The Commission has set a rate cap for three different categories of ratepayers. The Environmental Portfolio Surcharge will be $0.000875 per kilowatt-hour when it takes effect. There will be 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 non-residential 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 last week's decision balances the need for sound environmental policy with sensitivity to ratepayers concerns.

Prior to casting his vote, Commissioner Bill Mundell, the architect of two amendments to the hearing officer's proposal, said: "Sometimes government mandates are appropriate when the public welfare is at stake. I would compare this to the government requiring the auto industry to install the seatbelts that we now take for granted. I think it will become obvious that today's action gives the market a boost and ensures that our utilities explore all safe, environmentally friendly and viable generation sources."

Voting in favor of the plan, Commissioner Jim Irvin - who had voted in favor of the original Solar Portfolio when adopting electric competition rules last year - commended his fellow commissioners for their hard work. "This Portfolio Standard breaks new ground for the Arizona," he said. "I believe this is an excellent first step in the right direction. The Portfolio allows utilities to recoup some of their costs while, at the same time, expediting the adoption of a wider scope of new technologies."

Chairman Carl Kunasek also voted for the plan after drafting one of the key amendments to the proposed order. "I have always been in favor of exploring alternatives that will reduce pollution and use a natural resource like the sun which cannot be depleted. The costs of solar and other renewable technology will come down as usage increases. It's the law of supply and demand." He added that he was also pleased that other applications such as solar water heating, solar air conditioning and landfill gas generators were incorporated in the final Renewable Portfolio Standard.

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." Anyone wishing further information is encouraged to call the Public Information Office at 602-542-0844.