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Arizona Public Service Company

2018 Peaking Capacity
Request for Proposals (“RFP”)

April 26, 2018
Table of Contents

A. OVERVIEW ................................................................................................ 4
1. Introduction ....................................................................................... 4
2. Resource Need ................................................................................... 4
3. Product Requested .............................................................................. 4
4. Interconnection .................................................................................. 5
5. Transmission and Distribution System ................................................... 6
B. General Minimum Requirements................................................................... 7
1. Commencement of Delivery and Delivery Time Periods ............................ 7
2. Timely Document Submittal ................................................................. 7
3. Eligible Resources ............................................................................... 7
4. Transaction Structure .......................................................................... 8
5. Commercial Viability ............................................................................ 8
6. Technical Characteristics ...................................................................... 9
7. Site Control ...................................................................................... 10
8. Development Security Costs ............................................................... 10
9. Post-Development Security Costs........................................................ 10
10. Duration of Proposal Pricing ............................................................... 11
C. Technology-Specific Minimum Requirements and APS Preferences .................. 11
1. Existing Thermal Generation .............................................................. 12
2. New Build Thermal Generation............................................................ 13
3. Renewable Energy + Energy Storage................................................... 14
4. Energy Storage................................................................................. 16
5. Dispatchable Demand Response ......................................................... 17
D. General Evaluation Process ....................................................................... 19
1. Process Overview .............................................................................. 19
2. Evaluation for Compliance with Minimum Requirements ......................... 19
3. Screening Evaluation ......................................................................... 20
4. Portfolio Analysis .............................................................................. 20
5. Short List Selection of Proposal(s) ....................................................... 21
6. Detailed Evaluation of Short List and Final Selection of Proposal(s) ......... 21
E. RFP Process and Schedule ......................................................................... 22
1. Independent Monitor ......................................................................... 22
2. RFP Website and PowerAdvocate......................................................... 22
APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 2
3. Respondent’s Notice of Intent to Bid .................................................... 23
4. Confidentiality Agreement .................................................................. 23
5. RFP Schedule ................................................................................... 24
F. Bid Submittal Information ......................................................................... 24
1. Schedule and Extensions ................................................................... 24
2. Currency .......................................................................................... 25
3. Reservation of Rights ........................................................................ 25
4. No Liability ....................................................................................... 25
5. Return of Documents......................................................................... 25
6. Proposal Fee .................................................................................... 25
7. Terms, Conditions and Pricing ............................................................ 26
8. PowerAdvocate ................................................................................. 26
Appendix A ............................................................................................... 28
Appendix B ............................................................................................... 29

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 3
A. OVERVIEW

1. Introduction

Arizona Public Service Company (“APS”) is a regulated public utility that
generates, transmits and distributes electricity for sale in Arizona. APS is
headquartered in Phoenix, Arizona. As Arizona’s largest and longest-serving
electric company, APS generates safe, affordable and reliable electricity for
more than 1.2 million commercial and residential customers in 11 of
Arizona’s 15 counties.
Through this Request for Proposals (“RFP”), APS is soliciting proposals for
new sources of peak generating capacity (“Peaking Capacity”) so that it can
maintain a reliable power supply during peak demand periods and provide a
flexible response to variable load requirements associated with increasing
intermittent energy resources. The Peaking Capacity being solicited through
this RFP is meant to satisfy a portion of APS’s capacity needs.
Persons or entities responding to this RFP are referred to herein individually
as a “Respondent” or collectively as “Respondents.” A Respondent may
consist of one or more persons or entities.

2. Resource Need

APS’s resource plan indicates a need for additional flexible summer capacity
beginning in 2021. This need is driven primarily by the expiration of existing
wholesale contracts, the retirement of coal fired generation resources, and
future anticipated load growth. Additionally, to complement its growing fleet
of intermittent generation, APS needs flexible, fast-ramping resources that
are shapeable.

3. Product Requested

In this RFP, APS requests competitive proposals (“Proposals”) for Peaking
Capacity totaling approximately 400-800 MW from existing or proposed new
resources (“Resource” or “Program”). Proposals for both supply side (in front
of the meter) and non-supply side (behind the meter) Resources are eligible
to participate. The maximum total capacity of Energy Storage or combined
Renewable Energy + Energy Storage technologies that APS will procure
under this RFP is 100 MW. The maximum total amount of non-supply side
capacity that APS will procure under this RFP is 100 MW. APS will not
consider Proposals for market-based wholesale capacity or energy
products.
Delivery of Peaking Capacity must start no earlier than January 1, 2021 and
no later than June 1, 2021.
APS’s Peaking Capacity need is in the summer months of June through
September, hours ending 1600 – 2100 Arizona time (Tier 3 of the Heat Map
found in Appendix A). In the Proposal evaluation process, preference will be
given to Proposals for Resources that will provide Peaking Capacity during

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 4
these periods at the maximum summer rating of the Resource. Proposals
that provide flexible, dispatchable Peaking Capacity provide the highest
overall value to APS and will be considered most favorably. APS will not
consider Proposals that require APS to take energy during the “No
Must Take Energy” time periods specified in Appendix A.

4. Interconnection

Any proposed Resource must interconnect directly to the APS system, or in
the alternative, the Respondent must demonstrate that it has or can secure
firm transmission for delivery from the Resource to the APS system for the
entire term of the proposed transaction. APS will evaluate Proposals based,
in part, on the ability of the proposed Resource to effectively serve APS’s
load. A proposed Resource with more effective deliverability will be viewed
more favorably than a Resource with constrained deliverability.
Parties are advised to review the most complete and up-to-date information
regarding interconnection in APS’s Open Access Transmission Tariff (“OATT”).
a. Interconnection Applications and Studies. APS recognizes that the
timeline for executing an interconnection agreement is a critical
element in the Resource development process. A proposed new
Resource must be constructed and interconnected to meet capacity
and energy deliveries by the June 1, 2021 deadline specified in
Section A(3) above. For purposes of this RFP, APS will not require
any Respondent to enter the APS interconnection queue process
unless and until its Proposal is Shortlisted (defined in Section D(4)
below), which APS expects to determine on or about September 13,
2018. Nevertheless, each Respondent is responsible for performing
its own diligence with respect to the interconnection process and
making its own determination regarding the timing of its application
to the APS interconnection queue and other relevant aspects of the
interconnection process. Nothing in this RFP document is
intended to provide definitive guidance to any potential
Respondent regarding the specifics of the interconnection
process that may be applicable to Respondent’s proposed
Resource.
b. Energy Delivery Costs. Pricing included in any Proposal must be
based on delivery to the APS system. If the Respondent is
proposing to interconnect the Resource directly to the APS system,
all losses between the Resource and the point of demarcation for
equipment ownership and transfer to APS (typically referred to as
the Delivery Point in the relevant agreement with APS) is the
Respondent’s responsibility. If the Respondent is proposing to
interconnect the Resource to another utility’s system, all
transmission wheeling costs to transmit energy to the APS system
on a firm basis are also the responsibility of the Respondent and
must be included in the Proposal pricing.

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c. Resource Interconnection Costs. Each Respondent must include
reasonable Resource interconnection cost estimates, as
appropriate, as part of its submitted Proposal. Respondents may
wish to retain third party services for cost estimating, but this is at
the discretion of each Respondent. A detailed description of such
interconnection costs must be included in each Proposal and should
include a breakdown of the significant equipment costs together
with anticipated system improvement costs including, without
limitation, fault duty mitigation. For interconnection-related
questions or information, please contact:
Robert Bean
(602) 250-4330
E-mail: Robert.Bean@aps.com
URL: http://www.oatioasis.com/azps/index.html

5. Transmission and Distribution System

Respondents should review Appendix B to this RFP for product deliverability
guidance. Appendix B was prepared by APS Resource Planning personnel
and represents, as of the date of this RFP, an estimate of what deliverability
of Resource energy to the majority of APS load (the “APS Phoenix Metro Load
Pocket”) may be in the year 2021. This indicative guidance is neither binding
nor definitive and is subject to change.
In Appendix B, deliverability is described using three (3) ratings: Less
Preferred, Preferred, and More Preferred. A Less Preferred deliverability
rating indicates a route that is less likely to be available to support delivery
to the Phoenix Metro Load Pocket in 2021; a Preferred deliverability rating
indicates a route that is reasonably likely to support such delivery, but may
be size dependent or require additional evaluation; and a More Preferred
deliverability rating indicates a route that is more likely to support such
delivery. Any Proposal that includes a Resource that is positioned to use
infrastructure with a Less Preferred or Preferred deliverability rating may be
less competitive than those positioned to use infrastructure with a high
deliverability rating.
Nothing in this Section A (5) is intended to provide definitive guidance to any
potential Respondent regarding the specifics of the available transmission
capacity that may be applicable to Respondent’s proposed Resource. Each
Respondent is responsible for including as part of each Proposal what it
believes will be the successful deliverability of power from its proposed
Resource to the APS system and to the Phoenix Metro Load Pocket. The
currently available transmission capacity on the APS system can be found on
the APS OASIS website: http://www.oatioasis.com/azps/index.html.

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B. General Minimum Requirements

The following are minimum requirements that must be met by a Proposal
regardless of the Resource technology proposed (“General Minimum
Requirements”). Proposals that do not satisfy these General Minimum
Requirements will be considered non-responsive and will not be evaluated.

Additional minimum requirements specific to each Resource technology are
provided in Section C below.
Further detailed requirements regarding the RFP process, schedule, and
Proposal deliverables are provided in Sections D, E, and F below.

1. Commencement of Delivery and Delivery Time Periods

A Proposal must provide for Resource commercial operation and delivery of
Peaking Capacity no earlier than January 1, 2021 and no later than June 1,
2021.

All Proposals must provide Peaking Capacity during the period of June 1 –
September 30 each year of the proposed transaction (the “Summer Delivery
Period”). A Proposal must not require APS to take delivery of energy
during the “No Must Take Energy” time periods specified in Appendix
A.

2. Timely Document Submittal

Respondent must complete and submit all deliverables (documents and fees)
required for a complete Proposal as specified in Sections E and F below and
in PowerAdvocate, no later than the due dates detailed in the RFP Schedule
found in Section E(5) below. Any deliverable submitted after its respective
due date will be considered non-responsive and will not be evaluated. APS’s
use of the PowerAdvocate platform for purposes of this RFP is explained in
Section E (2) below.

3. Eligible Resources

Below are examples of technologies, or combinations of technologies, for
which APS will consider receiving Proposals (in no particular order):
a. Supply Side:
1. Combined cycle combustion turbines
2. Simple cycle combustion turbines
3. Reciprocating Units
4. Combined Renewable Energy + Energy Storage technologies
5. Energy Storage

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b. Non-Supply Side:
1. Demand Response, both Commercial and Industrial (“C&I”) and
Residential
A Respondent that is considering submitting a Proposal for a technology or
combination of technologies not listed above should first submit a question
via PowerAdvocate to confirm eligibility of the potential Proposal, keeping in
mind that APS is seeking Peaking Capacity resources not energy resources.

4. Transaction Structure

Proposals must be based on one of the following transaction structures (in
each case limited to the delivery term for the proposed technology as
specified in Section C below):
a. Tolling Power Purchase Agreement (thermal generating Resources only)
b. Energy Storage Tolling Power Purchase Agreement
c. Renewable Energy + Energy Storage Power Purchase Agreement
d. Load Management Agreement (demand response Resources only)
APS’s pro forma agreement or term sheet for each type of transaction
structure can be found on the “Download Documents” tab in PowerAdvocate.
APS will consider only Power Purchase Agreement (“PPA”) or Load
Management Agreement structures. APS will not consider an asset
acquisition of any type.

5. Commercial Viability

In the case of a Proposal for a Resource yet to be constructed, the
Respondent must demonstrate in the Proposal that it has previously
successfully developed and constructed a Resource of the same technology
that is at least ten percent (10%) of the capacity of the proposed Resource
and operated a same technology Resource for a minimum of one (1) year as
of July 20, 2018. If the Respondent consists of one or more entities, APS will
evaluate the experience of the entities collectively in determining if this
requirement has been met.
In the case of a Proposal for an existing Resource, the Respondent must
demonstrate in the Proposal that it has previously successfully owned a
Resource for a minimum of six (6) months, and operated a Resource, either
directly or through a single operating agent, utilizing the same technology as
the Resource being proposed, with a capacity that is at least fifty percent
(50%) of the Resource being proposed, for a minimum of one (1) year as of
July 20, 2018. If the Respondent consists of one or more entities, APS will
evaluate the experience of the entities collectively in determining if this
requirement has been met.
A Respondent that consists of one or more entities must show in its Proposal
the legal and operational relationship among the entities and must state how

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such legal and operational relationship supports the Proposal being
submitted.

6. Technical Characteristics

a. Resource Size:
1. Supply Side Proposal: Proposal must offer a minimum of 25 MW
and a maximum of 800 MW of Peaking Capacity per site. The
maximum capacity for an Energy Storage or a combined Renewable
Energy + Energy Storage Resource is 100 MW.
2. Non-Supply Side Proposal: Proposal must offer a minimum of 25
MW and a maximum of 100 MW of Peaking Capacity and must
aggregate APS customer load accordingly. A demand response
Program may not aggregate more than 25 MW of C&I customers.
b. Interconnection: Supply side Resources must deliver capacity and energy
either by directly interconnecting to the APS transmission system (greater
than 69 kV), sub-transmission system (69 kV), or by means of firm
transmission service through any third party system to the APS system.
Non-supply side Resources must interconnect to the APS distribution
system (less than 69kV). Each Proposal must include Respondent’s plan
to interconnect, at its own cost, to the APS system as described in the
previous sentence in order to support commercial operation by the June
1, 2021 deadline; provided however, that no Respondent is required by
APS to enter the applicable interconnection queue at the time it submits
its Proposal (as described in Section A (4) (a) above).
c. Rights to Product. A Proposal may not offer a partial Resource to be
shared with APS. Proposals must allow APS to have exclusive rights to
dispatch and receive energy from the Resource, provided however that
APS will not require these exclusive rights during the hours when APS is
refusing to accept energy shown as the “No Must Take Energy” hours in
Appendix A.
d. Ancillary Services. A Proposal must describe the capability of the proposed
Resource to provide energy, capacity, and/or ancillary services for
exclusive APS use.
e. Operations. Proposed supply side Resources must be able to operate
autonomously and interface with APS’s Energy Management System
(“EMS”). As set forth in Section C below, some Resources must also be
fully dispatchable by APS via APS’s Automatic Generation Control (“AGC”)
system. For those Resources not required to have AGC capability, APS
will nonetheless consider them to have higher value with such capability
than without it. All Proposals for supply side Resources must allow the
associated capacity and energy purchased by APS to be used by APS in
the California Independent System Operator (“CAISO”) Energy Imbalance
Market (“EIM”).

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7. Site Control

A Proposal may not propose that a Resource be developed on an existing
APS-owned site. In addition, a Proposal for a supply side resource may not
involve more than one (1) site location. A Proposal must demonstrate that
the Respondent has or will have site control for the proposed Resource
beginning at time of Shortlist announcement currently targeted to be no later
than September 13, 2018 and continuing through the term of any associated
agreements with APS. Examples of site control include, but are not limited to
the following: an executed option to purchase or lease; an executed lease;
an executed purchase agreement; a BLM right-of-way grant; an executed
agreement with a State land department; any other document evidencing
site control satisfactory to APS in its sole discretion.

APS recognizes that a Respondent’s ability to achieve site control may vary
depending upon the nature of the Proposal and the specific land in question
however; APS does have an expectation that Respondents demonstrate
suitable progress toward achievement of site control prior to September 13,
2018. Accordingly, each Respondent shall provide the following no later than
the Proposal submission deadline (July 20, 2018):

a. Copy of submitted application of site control for any portion of public
land needed to support its Proposal;

b. Proof, acceptable to APS in its sole discretion, that material
negotiations are underway toward achievement of site control for any
portion of private land needed to support its Proposal

8. Development Security Costs

A proposed price for Peaking Capacity shall include all costs for development
security. The proposed development security must be in the form of a letter
of credit or cash deposit and must be submitted to APS following contract
execution as provided in the applicable agreement or term sheet. In the
case of a letter of credit, it must be in the form and from an issuing bank
acceptable to APS in its sole discretion. Development security must be
calculated in accordance with Table 1 below, based upon the Resource type
and amount of Peaking Capacity proposed.

9. Post-Development Security Costs

A proposed price for Peaking Capacity shall include all costs for post-
development security. The proposed post-development security must be in
the form of a letter of credit or cash deposit and must be submitted to APS
on or before COD as provided in the applicable agreement or term sheet.
Post-development security must be calculated in accordance with Table 1
below, based on the Resource type and amount of Peaking Capacity
proposed.

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Table 1

Post-
Development/
Development/
Resource Contract
Start of
Execution
Contract Term
Existing
$40/kW $40/kW
Thermal
New Build
$100/kW $40/kW
Thermal
Energy
$100/kW $40/kW
Storage
Renewable
+ Energy $100/kW $40/kW
Storage
Demand
$100/kW $40/kW
Response

10. Duration of Proposal Pricing

A proposed price for Peaking Capacity shall be fixed for the duration of the
proposed term, or it may be a fixed price with a fixed annual escalation rate.
APS will not accept a Proposal with a price escalation rate tied to any
index.

C. Technology-Specific Minimum Requirements and APS
Preferences
In addition to satisfying the General Minimum Requirements described in Section
B above, a Proposal must satisfy certain minimum requirements specific to the
Resource technology being proposed (“Technology-Specific Minimum
Requirements”). These requirements are listed below under the Minimum
Requirements section for each Resource technology. A Proposal that does not
satisfy the Technology-Specific Minimum Requirements relevant to the Resource
technology proposed will be considered non-responsive and will not be
evaluated.
Also listed below are features that APS prefers for each Resource type (“APS
Preferences”). Satisfaction of any of the APS Preferences is not required, but
Proposals that satisfy relatively more of the APS Preferences will be evaluated
more favorably. APS has also developed either a pro forma agreement or term
sheet for each Resource technology, which is available for review by
Respondents in PowerAdvocate. The terms of the pro forma agreements and
term sheets provide further indication of APS’s preferred transaction structure.

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1. Existing Thermal Generation

Minimum Requirements:

a. Transaction Structure. The proposed transaction must be in the form of a
Tolling PPA with a delivery term of at least seven (7) years and not more
than ten (10) years.
b. Unit Contingent Toll. The product must be delivered as a unit contingent
toll with no ability for the Respondent to substitute product from another
source, and with APS supplying natural gas fuel and related transportation
service for delivery to the point(s) of interconnection between the
Resource and the delivering pipeline(s).
c. Technical Characteristics.
1. The Resource must be connected to either the El Paso or
TransWestern interstate natural gas pipeline. APS will evaluate the
proposed point of connection and determine if there are any gas
delivery constraints specific to that location.
2. The Resource must have adequate water rights to support delivery
of the full contract Peaking Capacity for the proposed term of the
Tolling PPA.
3. The Resource must be capable of operating at 114° F and twenty
percent (20%) humidity, at 100% of contract Peaking Capacity for
a minimum of four (4) consecutive hours.
4. The Resource must be fully dispatchable by APS via AGC (load
following capability).
5. The Resource must guarantee ninety-six percent (96%) availability
during the Summer Delivery Period.
6. To the extent that carbon allowances are allocated to the Resource
or part thereof, those allowances will be provided to APS for the
term of the associated Tolling PPA at no additional charge and may
be allocated by APS toward its requirements under any and all
regulatory requirements applicable to APS.
APS Preferences:

1. A transaction length of seven (7) years.
2. Resource is capable of stable operation at a minimum operating
level of fifty percent (50%) loading or lower without exceeding the
legal limits for emissions (CO, CO2, NOx, SO2, VOC, PM10),
whether pursuant to an applicable air permit or otherwise.
3. Resource is capable of at least two (2) starts per day.
4. Resource is connected to both El Paso and TransWestern interstate
natural gas pipelines.

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5. Resources with faster ramp rates will be evaluated more favorably
than those with slower ramp rates.
6. Resources with shorter minimum run, minimum down, and start-up
times will be evaluated more favorably than those with longer
times.

2. New Build Thermal Generation

Minimum Requirements:

a. Transaction Structure. The proposed transaction must be in the form of a
Tolling PPA with a delivery term of at least seven (7) years and not more
than twenty (20) years.
b. Unit Contingent Toll. The product must be delivered as a unit contingent
toll with no ability of the Respondent to substitute product from another
source, and with APS supplying natural gas fuel and related transportation
service for delivery to the point(s) of interconnection between the
Resource and the delivering pipeline(s).
c. Technical Characteristics.
1. The Resource must be connected to either the El Paso or
TransWestern interstate natural gas pipeline. APS will evaluate the
proposed point of interconnection and determine if there are any
gas delivery constraints specific to that location.
2. The Resource must have adequate water rights to support delivery
of the full contract Peaking Capacity for the proposed term of the
Tolling PPA.
3. The Resource must be capable of operating at 114° F and twenty
percent (20%) humidity, at 100% of contract Peaking Capacity for
a minimum of four (4) consecutive hours.
4. The Resource must be fully dispatchable by APS via AGC (load
following capability).
5. The Resource must guarantee ninety-six percent (96%) availability
during the Summer Delivery Period.
6. To the extent that carbon allowances are allocated to the Resource
or part thereof, those allowances will be provided to APS for the
term of the associated Tolling PPA at no additional charge and may
be allocated by APS toward its requirements under any and all
regulatory requirements applicable to APS.
APS Preferences:

1. Resource is connected to both El Paso and TransWestern interstate
natural gas pipelines.
2. Resource is capable of stable operation at a minimum operating
level of twenty-five percent (25%) loading or lower without

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exceeding the legal limits for emissions (CO, CO2, NOx, SO2, VOC,
PM10), whether pursuant to an applicable air permit or otherwise.
3. Resource is capable of at least two (2) starts per day.
4. Resources with faster ramp rates will be evaluated more favorably
than those with slower ramp rates.
5. Resources with shorter minimum run, minimum down, and start-up
times will be evaluated more favorably than those with longer
times.
6. Resource is capable of being online and dispatchable in ten (10)
minutes or less (quick-start).
7. Shorter-term transactions are preferred over longer-term
transactions, assuming that the levelized price of the product
delivered over the duration range remains competitive.

3. Renewable Energy + Energy Storage

Minimum Requirements:
a. Transaction Structure. The proposed transaction must offer a Renewable
Energy + Energy Storage Resource pursuant to a Renewable Energy +
Energy Storage PPA with a term of at least five (5) years and not more
than twenty (20) years. The PPA must give APS ownership of all
Environmental Attributes associated with energy generated and delivered
to APS. “Environmental Attributes” has the meaning given to it in the
Renewable Energy + Energy Storage pro forma agreement which can be
found on the “Download Documents” tab in PowerAdvocate.
b. Technology: The following technologies are examples of eligible
Renewable Energy + Energy Storage Resources:
1. Photovoltaic solar facility combined with a bulk battery energy
storage system located on the same site and behind a common
interconnection point.
2. Wind generation facility combined with a bulk battery energy
storage system located on the same site and behind a common
interconnection point.
3. Other renewable energy technologies combined with an energy
storage system that meet the minimum requirements in Section B
above and this Section C(3), located on the same site and behind a
common interconnection point.

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c. Price:
APS requests respondent to create a pricing structure based on the
following parameters:

• Tier 1 is Must Take by APS during times indicated in green on the
Heat Map found in Appendix A of 2018 Peaking Capacity RFP
• Tier 2 is Must Take by APS during times indicated in yellow on the
Heat Map found in Appendix A of 2018 Peaking Capacity RFP
• Tier 3 is Must Take by APS during months of June – September
with hours indicated in red on the Heat Map found in Appendix A of
2018 Peaking Capacity RFP
• APS will not purchase any energy during months and hours
indicated in black on the Heat Map found in Appendix A of 2018
Peaking Capacity RFP
• Pricing ratio between Tier 1 and Tier 2 shall be at least 1:3
(example: Tier 1 = $1/MWh, Tier 2 = or > $3/MWh)
• Pricing ratio between Tier 1 and Tier 3 shall be at least 1:9
(example: Tier 1 = $1/MWh, Tier 3 = or > $9/MWh)

d. Technical Characteristics.
1. In any given hour the output of the entire Resource may not
exceed the capacity of the Interconnect Agreement.
2. In any given hour the output of the entire Resource may not
exceed the capacity of the energy storage portion of the Resource.
3. The Proposal must include a forecasted Resource output profile for
the proposed term of the PPA, which profile must conform to the
requirements regarding “No Must Take Energy” specified in
Appendix A.
4. The Proposal must provide for charging 100% of the energy
storage portion of the Resource with the renewable energy portion
of the Resource (i.e. grid power may not be used to charge the
energy storage portion unless mutually agreed to by both Parties).
5. The energy storage portion of the Resource must be charged first
and fully, prior to using the renewable energy portion of the
Resource for any other permissible purposes.
6. Seasonal Capacity Factor shall not be less than 80% during the
“Tier 3, More Preferred” hours specified in Appendix A for each year
of the term of the Proposal.
7. The Resource must be able to complete at least two (2) dispatches
each day during Tier 2 hours, as detailed in Appendix A.

8. The Resource must be a supply side resource located in Arizona,
interconnected to APS’s transmission or sub-transmission system
(69kV or higher) or have secured firm transmission to the APS
system.

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9. Proposal must specify either an AC-coupled or DC-coupled solution
in Respondent’s discretion, bearing in mind that APS is seeking the
least-cost/best fit Resources including, but not limited to,
considerations of production volume and the potential future ability
to charge the energy storage system from the grid. Additionally,
Respondent shall provide a narrative explaining why it chose the
proposed configuration.
APS Preferences:
1. The Resource delivers its energy only during the “More Preferred”
and “Preferred” hours shown in Appendix A.
2. The energy storage portion of the Resource has the ability to
discharge partially during an evening peak load period and
complete the full discharge during the following day’s morning peak
load period during Tier 2 hours shown in Appendix A.
3. The Resource is located in close proximity to APS’s Phoenix Metro
Load Pocket.
4. Shorter-term transactions are preferred over longer-term
transactions, assuming that the levelized price of the product
delivered over the duration range remains competitive.

4. Energy Storage

Minimum Requirements:
a. Transaction Structure: The proposed transaction must offer energy
storage pursuant to an Energy Storage Tolling PPA with a term of at least
five (5) years and not more than twenty (20) years.
b. Technology: The following technologies are examples of eligible Energy
Storage Resources:
1. Bulk battery energy storage systems
2. Flywheel
3. Compressed air energy storage system (“CAES”)
4. Pumped Storage Hydro
5. Other energy storage technologies that meet the minimum
requirements specified in Section B above and this Section C (4).
c. Technical Characteristics:
1. The Resource must be capable of operating at 114° F and twenty
percent (20%) humidity, at 100% of the proposed contract Peaking
Capacity for a minimum of four (4) consecutive hours.
2. The Resource must be able to complete at least one (1) full duty
cycle (one full charge and discharge) for each day during the
months of June through September, for a minimum of four (4)

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 16
consecutive hours during Tier 3 hours defined in the Heat Map
found in Appendix A.
3. APS must have the ability to choose when to charge and discharge
the Resource at its sole discretion.
4. Bulk battery energy storage Resources must allow APS to provide
100% of the charging energy for the Resource.
5. The Resource must be a supply side resource, located in APS’s
service territory and interconnected to APS’s transmission or sub-
transmission system (69kV or higher).
6. The Resource must guarantee a monthly Availability requirement
(as that term is defined in the applicable Energy Storage Tolling
Agreement with APS) of at least ninety-six percent (96%).
APS Preferences:
1. The Resource can deliver the full proposed contract Peaking
Capacity for up to six (6) consecutive hours.
2. Resources with faster charging times will be evaluated more
favorably than those with slower charging times.
3. Resources that can achieve more full duty cycles, preferably for the
full calendar year rather than only during the period of June
through September, will be evaluated more favorably. Resources
that can achieve more than the required one (1) cycle per day will
also be evaluated more favorably.
4. Resources that are located inside APS’s Phoenix Metro Load Pocket
will be evaluated more favorably.
5. Shorter-term transactions are preferred over longer-term
transactions, assuming that the levelized price of the product
delivered over the duration range remains competitive.

5. Dispatchable Demand Response

Respondents assume the risk and impact of any future APS rate design
changes when submitting a Proposal for a demand response Program. In
addition, nothing in this RFP is intended to limit APS’s ability to offer its own
demand response program of any type in the future, regardless of whether
or not APS enters into a demand response Load Management Agreement as a
result of this RFP.
Minimum Requirements:

a. Transaction Structure. The proposed transaction must offer a demand
response Program pursuant to a Load Management Agreement that
satisfies the terms specified in the Term Sheet found on the “Download
Documents” tab in PowerAdvocate with a term of at least five (5) years
but not more than ten (10) years. The agreement must permit APS to

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 17
count any energy savings that results from the proposed Program toward
any of APS’s regulatory requirements.
b. Technical Characteristics.
1. The Program must pass the Societal Cost Test (“SCT”) as defined
by the ACC Energy Efficiency Standards. APS will screen the
Program using the SCT as prescribed by the ACC. A Proposal must
include all the necessary input assumptions and calculations for the
Program to pass the SCT.
2. The Program must be APS-branded.
3. The Program may only aggregate customers within the APS service
territory.
4. The Proposal must include a proposed Measurement and
Verification Plan (“M&V Plan”) for the Program to verify actual MWh
& MW savings delivered, including estimated costs for
implementing the M&V Plan. Load reductions must be verifiable by
APS by using then-available APS metering.
5. The Program must not exceed 25 MW of load reduction from C&I
customers. Total residential and C&I load reduction under the
Program may not exceed 100 MW. Resources included in a
proposed Program must be dispatchable by APS.
6. The C&I component of the Program must be able to deliver the
proposed Peaking Capacity upon two (2) hours prior notice and in
accordance with APS dispatch instructions. The residential
component of the Program must be able to deliver the proposed
Peaking Capacity upon four (4) hours prior notice and in
accordance with APS dispatch instructions. In each case the
Peaking Capacity must be available to APS for at least twenty (20)
events over the Summer Delivery Period, for a minimum of four (4)
consecutive hours per event.
7. The Program must provide 100% of the proposed Peaking Capacity
seven (7) days a week for a minimum of any four (4) consecutive
hours, if and as dispatched by APS, during the summer months of
June through September hours ending 1600 – 2100 Arizona time
(Tier 3 of the Heat Map found in Appendix A).
8. If an energy storage system is implemented, APS requires
exclusive dispatch rights to the entire storage system (entire
nameplate rating) and the system cannot be used for purposes
other than the proposed demand response purpose during the
summer months of June through September, hours ending 1600 –
2100 Arizona time (Tier 3 of the Heat Map found in Appendix A).
9. The storage system must be fully charged at the beginning of the
“Tier 3, More Preferred” hours shown in Appendix A.

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 18
10. Proposal shall include recommendations of how to minimize impact
of “snap back” to participants who utilize APS retail rates which
include a demand component.
APS Preferences:

1. The Proposal provides details of calculations for additional Program
cost effectiveness tests including the Utility Cost Test, Participant
Test and Ratepayer Impact Measure (“RIM”). APS prefers that
proposed Program passes the RIM test.
2. The Program can provide 100% of proposed Peaking Capacity for six
(6) consecutive hours, if and as dispatched by APS, during the
summer months of June through September, hours ending 1600 –
2100 Arizona time (Tier 3 of the Heat Map found in Appendix A).
3. The Program can be dispatched by APS with one (1) hour prior
notice, and provides guaranteed Peaking Capacity for at least ninety-
six (96) hours during the summer months of June through
September, hours ending 1600 – 2100 Arizona time (Tier 3 of the
Heat Map found in Appendix A).

D. General Evaluation Process

1. Process Overview

APS will use both quantitative and qualitative criteria to evaluate Proposals.
APS will first determine if a Proposal satisfies the General Minimum
Requirements specified in Section B and the Technology-Specific
Requirements in Section C. APS will then perform the screening evaluation
process described below. Proposals that satisfy both the minimum
requirements and the screening evaluation will then be further evaluated
through a portfolio evaluation, which considers the fit of a Proposal relative
to APS’s existing resources, other Proposals, projected resource needs, and
additional qualitative criteria. If at any time during the evaluation process
APS determines that a Proposal does not meet its requirements, including
timely submission of all documents and fees required pursuant to this RFP,
fails to remain competitive with other Proposals, or fails to satisfy APS’s
needs in the course of subsequent portfolio and qualitative analyses, such
Proposal may no longer be considered and APS will notify the Respondent
accordingly during its notification process.

2. Evaluation for Compliance with Minimum Requirements

a. Compliance with Minimum Requirements. APS will review Proposals for
compliance with the General Minimum Requirements described in Section
B and the applicable Technology-Specific Minimum Requirements
described in Section C.

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 19
b. Failure of Proposal to Meet Minimum Requirements. APS may reject any
Proposal that fails to meet the minimum requirements specified in
Sections B and C, or otherwise contains incomplete or inaccurate
responses as determined by APS in its sole discretion. APS may, in its
sole discretion, ask a Respondent for clarification or remediation of its
Proposal prior to making a final determination regarding acceptance or
rejection of the Proposal.

3. Screening Evaluation

a. Screening of Proposals. For Proposals that pass the minimum
requirements described above, APS will then screen and rank them by
price within each resource type. Proposals with prices significantly higher
than other Proposals with similar characteristics may be removed from
further consideration at APS’s discretion. APS will then perform an initial
quantitative analysis (such as levelized busbar cost) on the remaining
Proposals to identify and rank superior Proposals, and select the highest
ranked for further portfolio analysis and review of additional qualitative
factors. Although qualitative factors will be considered as described
below, price is the primary factor in the selection.

b. Qualitative Analysis. The qualitative analysis takes into account a
comprehensive risk assessment of the Proposal and underlying Resource
or Program. The risk assessment will consider numerous factors,
including but not limited to technology, project viability, developer
experience, safety record, quality assurance and quality control
(“QA/QC”) experience, credit risk, counterparty viability, supply-chain
risk, and contract risk related to the development of the proposed
Resource or Program. APS will also consider the Respondent’s proposed
modifications to the relevant pro forma agreement or term sheet.
Proposals that request fewer changes to the pro forma agreement or term
sheet will be evaluated more favorably than those that request more
changes (either in number or scope).

4. Portfolio Analysis

For Proposals which rank highest after performing quantitative and
qualitative analysis, APS will utilize production cost modeling software to
evaluate how well the selected Proposals meet APS system reliability
requirements while minimizing projected APS system costs. Resources will
be modeled as if they were added to the APS resource portfolio with costs
expressed on a present value of revenue requirements (“PVRR”) basis.

Inputs and assumptions utilized in the production cost modeling are
proprietary to APS and will not be disclosed to Respondents; however, they
will be provided to the Independent Monitor (“IM”), referenced in Section
E(1) below, in advance of the modeling to ensure the inputs and assumptions
are reasonable and are not changed or applied differently to different
Proposals.

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 20
5. Short List Selection of Proposal(s)

Proposals that are judged acceptable following the quantitative and
qualitative evaluations described in Section D(3) and the portfolio analysis
described in Section D(4) above, may be selected for further detailed
evaluation (“Shortlisted”) at APS’s sole discretion. APS will notify Shortlisted
Respondents, in accordance with the RFP schedule set forth in Section E (5)
below.

6. Detailed Evaluation of Short List and Final Selection of
Proposal(s)

a. Meetings with Shortlisted Parties. APS may conduct meetings or phone
calls with each Shortlisted Respondent individually in order to gain a
greater understanding of the Respondent and the Proposal. APS may also
require a Shortlisted Respondent to submit Resource/Program and/or
Respondent-specific pro forma financial statements by year for the
applicable Resource/Program development and construction period.
Information requested may include but is not limited to income
statements, balance sheets and statements of cash flows. APS may then
re-evaluate the Proposal based on new information provided in response
to the request or as a result of the meetings and calls. APS would perform
any such re-evaluation in a manner similar to the evaluation process
described in Sections D(3), D(4) and D(5) above. Final Evaluation and
Selection. Following the meeting and potential re-evaluation process
described above, APS may make a final selection of one or more
Proposals for negotiation of an agreement in a form substantially similar
to that set forth in the relevant pro forma agreement or based on the
terms contained in the relevant term sheet. APS will notify Shortlisted
Respondents whose Proposals are eliminated from further consideration in
accordance with the RFP schedule, set forth in Section E(5) below.

b. Final Evaluation and Selection. Following the meeting and potential re-
evaluation process described above, APS may make a final selection of
one or more Proposals for negotiation of an agreement in a form
substantially similar to that set forth in the relevant pro forma agreement
or based on the terms contained in the relevant term sheet. APS will
notify Shortlisted Respondents whose Proposals are eliminated from
further consideration in accordance with the RFP schedule, set forth in
Section E(5) below.

c. Right to Terminate Negotiations. APS reserves the right, in its sole
discretion, to determine that no Proposals warrant selection for
negotiation. APS may also, in its sole discretion, determine that further
negotiation with a selected Respondent is unlikely to result in a final
agreement between the parties. In either event, APS reserves the right
at any time to terminate negotiations, begin or continue negotiations with
other Respondents, begin a new solicitation, and/or cancel this RFP.

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 21
d. Regulatory Approval. APS performance under an executed agreement
resulting from this RFP is conditioned upon actions and/or approvals by
regulatory authorities, satisfactory to APS in its sole discretion.
E. RFP Process and Schedule

1. Independent Monitor

In accordance with the Arizona Corporation Commission Procurement Rules, APS
has engaged an IM to provide feedback to APS regarding the objectivity,
transparency, and fairness of the RFP and associated Proposal evaluation
process. The IM will have access to all documentation provided by the
Respondents in response to this RFP and will produce a final report summarizing
its observations for use by APS, which may be submitted to the ACC in
connection with APS’s regulatory requirements. The IM is obligated to maintain
the confidentiality of all information that it receives. Respondents and potential
Respondents must not contact the IM directly.

2. RFP Website and PowerAdvocate

a. Registration. Respondents must register online using the web form
provided at http://www.aps.com/rfp (the “RFP Website”). Bidders are to
complete the Notice of Intent to Bid (referenced in Section E(3) below) on
or before June 8, 2018 at 5:00 PM Arizona time. New registration
requests for the 2018 Peaking Capacity RFP will not be approved after the
June 8, 2018 deadline. Registration enables each Respondent to access
all RFP-related documents and to receive relevant messages and notices
from APS through PowerAdvocate, a third party web-based platform for
hosting solicitations. PowerAdvocate is subject to a confidentiality
agreement with APS that prohibits the disclosure of confidential
information submitted via the platform to unauthorized third parties. APS
encourages each Respondent to carefully review the PowerAdvocate
Terms of Use, which are located at:
https://www.poweradvocate.com/web/terms-of-use.html, before
submitting a Proposal.

b. Communications. All communications from Respondents to APS, including
questions regarding this RFP, should be submitted via the PowerAdvocate
messaging system. Depending upon the nature and frequency of the
questions APS receives, APS will choose to either respond to individual
Respondents directly, post a response to the question in PowerAdvocate
(without disclosing the Respondent’s name), or address any generic or
non-confidential and non-project specific questions during the
Respondent’s Webinar, which is referenced in Section E(5) below.
c. APS Contact. The PowerAdvocate messaging tool is the primary medium
of communication for this RFP and will be monitored and responded to by
APS. Respondents that experience any difficulty should contact:

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 22
Arizona Public Service Company
Attention: Sonja Schroder
Email: Sonja.Schroder@aps.com

3. Respondent’s Notice of Intent to Bid

Each Respondent must submit a Notice of Intent to Bid (found on the
“Commercial” tab in PowerAdvocate) no later than June 8, 2018 at 5:00 PM
Arizona time, indicating its intent to submit a Proposal in connection with this
RFP. Any Respondent that fails to submit in PowerAdvocate its Notice
of Intent to Bid at or before 5:00 PM Arizona time on June 8, 2018
will be removed from the PowerAdvocate system and will no longer
be eligible to participate in the 2018 Peaking Capacity RFP.
Submission of a Notice of Intent to Bid does not obligate a
Respondent to submit a Proposal; however, only Respondents that
submit a Notice of Intent to Bid are eligible to submit a Proposal.

4. Confidentiality Agreement

Each Respondent must sign the Confidentiality Agreement (“CA”) that is
available in PowerAdvocate and upload the signed copy via PowerAdvocate
no later than June 8, 2018 at 5:00 PM Arizona time, as specified in the RFP
schedule found in Section E(5) below. Upon receipt, APS will then execute
and return a copy for the Respondent’s records. Given the large amount of
information APS will receive and the number of agreements APS is entering
in connection with the 2018 Peaking Capacity RFP process, APS must
maintain consistency throughout the process and across all commitments
and contractual obligations. As such APS can permit changes to the CA only
in very limited circumstances, primarily where a Respondent is uniquely
situated such that the terms of the CA, as proposed, are unworkable.
Modified CAs should not be executed by Respondents without APS’s
agreement; rather, a Respondent should make requested modifications using
PowerAdvocate and such requests may be reviewed and either approved or
rejected by APS. APS does not guarantee that any requested changes will be
made nor does it guarantee its ability to review such requests, depending
upon the nature, volume and timing of requested changes. Any
Respondent that fails to upload in PowerAdvocate its clean, signed
CA (i.e., with no changes, or with changes expressly agreed upon by
APS) at or before 5:00 PM Arizona time on June 8, 2018 will be
eliminated from further participation in this RFP. Submission of a
clean, signed CA does not obligate a Respondent to submit a
Proposal; however, only Respondents that submit a clean, signed CA
are eligible to submit a Proposal.

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 23
5. RFP Schedule

The following schedule applies to this RFP:

Activity RFP Deadline Date

RFP Issued/PowerAdvocate
Registration Open April 26, 2018

Press Release Issued
April 26, 2018

RFP Respondent’s Webinar May 16, 2018, at 10:00 AM (Arizona
time)

Respondent’s Notice of Intent to Bid
June 8, 2018 no later than 5:00 PM
DUE DATE
(Arizona time)

Confidentiality Agreement Submittal
June 8, 2018 no later than 5:00 PM
DUE DATE
(Arizona time)

Respondent Proposal and RFP
July 20, 2018 no later than 5:00 PM
Proposal Fee DUE DATE
(Arizona time)

Shortlisted Respondents Notified
September 13, 2018

Final Selection
October 25, 2018

Contract Execution
December 14, 2018

F. Bid Submittal Information

1. Schedule and Extensions

Proposals shall be submitted in strict accordance with the RFP schedule. APS
will not grant any extensions to the RFP schedule and will not accept late
Proposals. Any Proposal received after the scheduled date will be disqualified
and the Respondent will be notified of its elimination.

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 24
2. Currency

All prices must be clearly stated in United States Dollars.

3. Reservation of Rights

APS reserves the right to accept or reject in its sole discretion any or all
Proposals for any reason at any time after submittal. APS also reserves the
right to select an offer that is not the lowest price, if APS determines that in
its judgment the overall Proposal may result in the greatest value to APS’s
customers.

4. No Liability

Respondents that submit Proposals do so without legal recourse against APS
or its officers, directors, employees, agents, contractors or the IM based on
APS’s rejection of any Proposal or for failure to execute any agreement in
connection with this RFP. Neither APS, nor any of its officers, directors,
employees, agents, or contractors, nor the IM, shall be liable to any
Respondent or to any other party, in law or equity, for any reason
whatsoever relating to APS’s acts or omissions arising out of or in connection
with this RFP.

5. Return of Documents

None of the materials received by APS from Respondents in response to this
RFP will be returned. All Proposals and exhibits will become the property of
APS, subject to the provisions of the CA described in Section E(4) above.

6. Proposal Fee

A non-refundable RFP submission fee (the “Proposal Fee”) of ten thousand
dollars ($10,000.00) must be submitted with each Proposal.
Respondents are entitled to submit one (1) Proposal and two (2) alternative
pricing variations using the same single Proposal Fee. The alternative pricing
variations may include different terms for characteristics of the Proposal, in
Respondent’s discretion (e.g., a different capacity or energy charge, different
variable O&M costs, a different price escalation schedule, a different number
of starts for the proposed Resource, etc.), provided that the following terms
may NOT change:
a. Term of transaction
b. Technology
c. Site/Location of Resource
d. Size/Capacity/Storage duration
e. In the case of demand response Proposals, proposed Program shape

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 25
If any of the foregoing characteristics of Respondent’s Proposal change, then
the changes amount to a separate Proposal for which Respondent will be
required to submit a separate Proposal Fee.

APS must receive the Proposal Fee by the response date shown in
Section E(5) above. The only form of payment APS will accept is a
Fed Funds Wire Transfer using the information below. Any costs or
fees associated with wiring the funds shall be paid directly by the
Respondent.
Company: Arizona Public Service Company
Bank: Wells Fargo
ABA/Routing No.: 121000248
Account No.: 4159540921
OBI Field: 114903; AR114903555; 2018 Peaking RFP Bid Fee;
Respondent’s name

7. Terms, Conditions and Pricing

Respondent shall include in each Proposal all costs necessary to deliver
capacity and energy to the APS system including, but not limited to,
construction of the Resource or Program, transmission (if necessary),
development security, post-development security, and all costs related to
interconnection. Respondent will be bound to honor all terms of its Proposal,
including but not limited to its price, which shall remain binding through the
final selection notification and subsequent contract negotiations, as well as
ACC approval (if required).

8. PowerAdvocate

Respondents are required to use PowerAdvocate to enter or upload all
requested information. Respondents are encouraged to submit Proposals as
early as possible in order to avoid filing delays due to heavy use of
PowerAdvocate immediately prior to the Proposal submission deadline. In
order for a Respondent’s proposal to be considered eligible, the Respondent
shall timely post to PowerAdvocate the following documents:

a. Completed Proposal, including a detailed Executive Summary of the
Proposal;
b. Notice of Intent to Bid posted in PowerAdvocate no later than June 8,
2018 at 5:00 PM Arizona time;
c. Executed CA posted in PowerAdvocate no later than June 8, 2018 at 5:00
PM Arizona time;
d. A complete response to each question, and a legible copy of each
document specified on the “Commercial,” “Technical,” and “Pricing” tabs
in PowerAdvocate;

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 26
e. Executed certification page which demonstrates that the signatory has full
authority to bind the Respondent to all of the terms and conditions
contained in its Proposal. Respondents must use the certification page
posted by APS on PowerAdvocate;
f. For a new build supply side Resource, a Resource development schedule
shown in weeks, based on an assumed date for contract execution (which
shall be stated in the schedule);
g. For a supply side Resource, a preliminary one-line diagram for the
Resource showing meter location and specified delivery location, which
shall be the Delivery Point as that term is defined in the contract;
h. Completion of the entire Technical Data form(s), found on the “Download
Documents” tab in PowerAdvocate, which identifies certain criteria used to
calculate the expected energy production for the Resource. Although APS
has provided certain default assumptions based on industry standards, a
Respondent may use criteria that differs from these assumptions if it
identifies the difference and reason for this variation. The energy
production profile submitted via PowerAdvocate must be calculated based
on the same set of technical criteria supplied by the Respondent in the
Technical Data form(s);
i. A copy of the relevant pro forma agreement or term sheet, redlined to
reflect Respondent’s required modifications, if any. APS expects minimal,
if any, redlines to the posted pro forma agreements and/or term sheets.
Proposals that contain significant substantive changes will be viewed less
favorably by APS and may be eliminated from further consideration.

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 27
Appendix A

Time of Day Relative Net Load Heat Map
AM AM AM AM AM AM AM AM AM AM AM AM PM PM PM PM PM PM PM PM PM PM PM PM
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Tier 3 (More Preferred)
Tier 2 (Preferred)
Tier 1 (Less Preferred)
No Must Take Energy

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 28
Appendix B

2018 Peaking Capacity RFP: High Voltage Deliverability Map

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 29
Appendix B (continued)

APS 2018 Peaking Capacity RFP - Proprietary and Confidential Information Page 30