E000004749ORIGINAL

9 \ aps Rodney J. RossManagerState Regulatory Affairs

maia Station 9708PO Box 53999Phoenix, Arizona 850723999Tel 6022504944Rodney.Ross@aps.com

February 4, 2020

Docket ControlArizona Corporation Commission1200 W. Washington StreetPhoenix, AZ 85007

RE: Arizona Public Service Company 2018-2019 Test Year Rate CaseDocket No. E-01345A-19-0236

On February 3, 2020 Arizona Public Service Company (APS) conducted its first RateCase Technical Conference, in the above-referenced matter. APS is providing a copy ofthe presentation, attached hereto.

If you have any questions regarding this information please contact me at 602-250-4944.

Sincerely,

$389Rodney J. Ross

RJR/bgsAttachments

ACC - Docket Control - Received 2/4/2020 10:39 AMACC - Docket Control - Docketed 2/4/2020 10:49 A.M

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Agenda

Introduction

Rate Request Overview and Pro FormaAdjustments (B-2 and C-2)

Deferral Orders Requested

Extranet Site

Topics and Date for next Technical Conference

2

Rate Request Overv iewCustomer B i l l Impact : Net Base Rate Increase +

Dol lar s am Imp ac tNet Adjustor Changes

($119M)$4M

(3.5%).1%

$119m

($4M)$11sm

Base Rate Increase

Tax Expense Adjustor Mechanism (TEAM)All other Adjustors

Adjustor ChangesRemoval of TEAM credit

All other Adustors transfer to base ratesNet Adjustor Changes

3.6%.1%)3.5%

cos: of Capital (S In dlot lsands)

96Amount Cost Rate Com osite Cost

Other Details

$8.87B

1.0%

ACCAdjusted Original Cost Rate Base

Return on Fair Value Increment

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Pro Forma AdjustmentsWhere can you find these adjustments in the filing?

- Standard Filing Requirements B-2 and C-2

- Testimony: Elizabeth Blankenship.- Detail on extranet site: Workpapers: EAB_WP7-14DR, EAB_WP21-52DR

JEH_WP4-6DR

Testimony: Barbara Lockwood- Detail on extranet site: Work papers: BDL_WP1-5DR

Testimony: Jessica Hob bick- Detail on extranet site: Work papers:

Testimony: Leland Snook- Detail on extranet site: Workpapers: LRS_WP1DR, LRS_WP5-9DR

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Rate Base Pro Forma Adjustments (B-2)

Column #Page(s) DescriptionIncrease/(Decrease)

(S in thousands)*

(+) numberincreasesrevenuerequirement;(-) numberdecreases therevenuerequirement

$196,115

$12,779

(55,889)

($1,654)

($10,486)

$62,009

$33,200

Post-Test Year Plant Additions

Cloud Computing

West Phoenix Unit 4 Regulatory Disallowance

Property Tax Deferral

Cash Working Capital

Ocotillo Deferral

Four Corners Selective Catalytic Reduction (SCR) Deferral

Excess Deferred Tax $29195

2-6

7

8

9

10

1 1

12

13

14

1-2

3

3

3

4

4

4

5

5 $376,770Total Original Cost Rate Base Pro Forma Adjustments

*Amount reflects Total Company impact on Rate Base. See B-2 for ACC jurisdictional amount.

6

Income Statement Pro Forma Adjustments (C-2)

Column # Descr iptionPage(s)Increase/(Decrease)

(S in thousands)*

($36,959)

$38,573

Post-Test Year Plant Additions

Base Fuel and Purchased Power

PSARevenue and Deferred Fuel Amortization

1-5

6

7

1-2

2

3

Retail Deferred Fuel Expense and Non-Cash Mark-to-Market Accruals3

3

(-) numberincreasesrevenuerequirement,(+) numberdecreases therevenuerequirement4

4

4

Deferred Chemical Expense

Normalize Weather Conditions

Annualize Customer Levels

Schedule 1 Fees

Uncollectible Bad Debt

8

9

10

1 1

12

135

($30,427)

($2,403)

($3,188)

$6,815

($4,S45)

($4,836)

*Amount reflects Total Company impact on Operating Income Before Income Tax. See C-2 for ACCjurisdictional amount and other income statement impacts.

7

Income Statement Pro Forma Adjustments (C-2), Cont .

Descr iption

Increase/(Decrease)

($ in thousands)*Page(s)

(5941)

$13,381

$2,741

($2,482)

S

5

6

6

6

14

i s

16

17

18

(-) numberincreasesrevenuerequirement;(+) numberdecreases therevenuerequirement7 8 19,20,22

Crisis Bill

Customer Affordability

Active Union Medical Trust (VEBA)

Fire Mitigation

Remove Test Year Regulatory Assessment

Remove Adjustor Revenue and Expense (TCA, LFCR,

DSMAC)

Remove and Transfer Adjustors (Els, REAC, TEAM)7-8

9

21,23,24

25

$104,790

($6,21S)Four Corners SCR Deferral Amortization

Ocotillo Modernization Project Deferral Amortization9 26 ($6,9S7)

*Amount reflects Total Company impact on Operating Income Before Income Tax. See C-2 for ACCjurisdictional amount and Other income statement impacts. 8

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Income Statement Pro Forma Adjustments (C-2), Cont.

DescriptionPage(s)Increase/(Decrease)

(S in thousands)*

(-) numberincreasesrevenuerequirement,(+) numberdecreases therevenuerequirement

Four Corners Inventory

Cholla Inventory

West Phoenix Unit 4 Regulatory Disallowance

Remove Navajo Power Plant Costs

Ocotillo O&M Normalization

Interest Expense on Customer Deposits

Adjust Depreciation Expense

Annualize Payroll Expense

Normalize Employee Benefits

27

28

29

30

3 1

32

33

34

35

9

10

10

10

1 1

1 1

1 1

12

12

($786)

($1,146)

$220

$12,396

($5,064)

($1,593)

($67,501)

$372

($8,466)

*Amount reflects Total Company impact on Operating Income Before Income Tax. See C-2 for ACCjurisdictional amount and other income statement impacts.

9

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Income Statement Pro Forma Adjustments (C-2), Cont .

Increase/(Decrease)

(S in thousands)*DescriptionPage(s)

(-) numberincreasesrevenuerequirement,(+) numberdecreases therevenuerequirement

RemoveSupplemental Excess Benefit Retirement Plan(SERP)

Remove Stock Comp

Normalize Cash Incentive

Normalize Income Tax Expense/Interest Synchronization

Annualize Property Tax Expense

Amortize Property Tax Deferral

West Phoenix Removal Costs

Annualize Four Corners Coal Reclamation Costs

Annualize Navajo Coal Reclamation Costs

36

37

38

39

40

41

42

43

44

12

13

13

13

14

14

14

15

15

$6,343

$11,951

(54,218)

$5,857

($3,423)

$436

($751)

$2,367

($1,437)

*Amount reflects Total Company impact on Operating Income Before Income Tax. See C-2 for ACCjurisdictional amount and other income statement impacts.

10

Income Statement Pro Forma Adjustments (C-2), Cont.

Column is DescriptionIncrease/(Decrease)

(S in thousands*Page(s)

(-) numberincreasesrevenuerequirement;(+) numberdecreases therevenuerequirement

Adjust Cash Working Capital

Normalize Advertising

Normalize Nuclear Maintenance Expense

Normalize Fossil Maintenance Expense

Adjust Sundance Maintenance

Remove Out of Period and Miscellaneous

Cholla Unit 2 Regulatory Asset Amortization

(548)

$1,704

($1,043)

(54,407)

(51,119)

$10,691

$8_..§§1

Total Income Statement Adjustments

15

16

16

16

17

17

17

18

45

46

47

48

49

S0

5 1

52 $27,314

*Amount reflects Total Company impact on Operating Income Before Income Tax. See C-2 for ACCjurisdictional amount and other income statement impacts.

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Arizona Property Tax Deferral

Request: a deferral for any changes (increase or decrease) in the Arizonaproperty tax rates until the next rate case

Background: APS received a property tax deferral in its last two rate casesand proposes it should continue

Estimated Cost Deferral: estimates dependent on property tax rates in thefuture

Where to find information in the filingTestimony: Elizabeth Blankenship

13

Limited-Income Program Deferral

Request: a deferral of amounts paid to customers under limited-incomediscount programs, Rate Riders E-3 and E-4, including any credits issued forcredit card fees

Background: APS included the test year amount of funds for limited incomeprograms. Enrollment increased 18% during the Test Year, and APS iscontinuing efforts to grow the program. In lieu of asking for additional fundingvia a pro forma, the deferral allows recovery of exactly what was spent tosupport the program going forward

Estimated Cost Deferral: estimates dependent on growth of the programs untilthe next rate case

Where to find information in the filingTestimony: Jessica Hobbick

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© Rate and Service Schedules. Standard Filing Requirements

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Next Technical Conference

Thursday, March 12, 2020 from 1:00pm - 3:30pm- At APS CHQ

- Agenda- Rate Design

Residential (including RCP)- Commercial (including AG-Y)

- Adjustor Mechanisms- Formula Rate

If have any questions, please email rafecase@aps.com18