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Electrical generation is at the heart of our business and provides the electricity that we ultimately sell to our customers as product. We obtain our energy from both APS owned generating sources and from purchased power from merchant power producers (mostly natural gas plants). In 2007, 23.3 percent of our total energy sources were from purchased power, generally under long term contracts with merchant generators. The majority of our renewable energy comes from purchased power, and is primarily reflected in the purchased energy section of the below energy mix chart. Renewable energy is discussed in more detail in the Renewable Energy section of this report. In addition to the purchased power, our 2007 energy mix included APS owned generation consisting of: coal 36.8 percent; nuclear 21.5 percent; and gas 18.4 percent. Renewable energy from APS owned generation accounts for less than 1 percent of our overall energy mix.
Our electric generating facilities use a mix of fuels including coal, natural gas, oil and nuclear, as well as renewable sources. Having a balanced fuel mix has provided APS with a number of financial and environmental benefits. This fuel mix allows us to enter into long-term fuel-purchasing agreements with our suppliers, which reduces our costs and provides stable fuel sources into the future. In addition, it gives us operational flexibility so we can respond to changing markets and current events. Our fuel mix has been a significant factor in our ability to decrease our air emissions intensity while continuing to add generation resources to meet our rapid customer growth. This is discussed in more detail in the Air Emissions section of this report.
We also remain committed to our policy of producing energy from natural resources in the most economic and efficient ways possible. We purchase approximately 97 percent of our coal locally. When feasible, energy is produced from local and regional fuel sources in an effort to limit the economic and environmental impact of transportation.
More detail on our fuel supply and purchased power may be found in the Investors section of our Pinnacle West Web site.
APS owned generating capacity in 2007 is shown below:
Nuclear energy is an important part of our generation mix, and will be into the future, providing economic and environmental benefits, including significant air emissions avoidance. APS nuclear generation is from the Palo Verde Nuclear Generating Station, located about 50 miles west of Phoenix, Arizona. APS operates the plant and owns 29.1 percent of PV Units 1 and 3 and about 17 percent of Unit 2. In addition, APS leases about 12.1 percent of Unit 2, resulting in a 29.1 percent combined interest in that Unit. Nuclear energy is also one of the four scenarios for potential additional future generation resources, as discussed in the Integrated Resource Plan section of this report.
Palo Verde's third major equipment-replacement project began in late September, 2007. The planned refueling outage included the replacement of Unit 3's two steam generators and three low-pressure turbine rotors. Similar work was completed for Unit 2 in 2003 and Unit 1 in 2005. This work resulted in the design electric rating of the three units increasing from 3,810 MW to 4,008 MW, an increase of 198 MW in net generating capacity.
Nuclear power is a critical aspect of climate change response, generating large amounts of electricity with essentially no carbon emissions. Each year Palo Verde Nuclear Plant, the nation's largest energy producer, helps avoid 31.7 million tons of CO2 emissions when compared to equivalent generation from a coal fired power plant.
Nuclear power plant operators are required to enter into spent fuel disposal contracts with the DOE, and the DOE is required to accept and dispose of all spent nuclear fuel and other high-level radioactive wastes generated by domestic power reactors. Although the Nuclear Waste Policy Act required the DOE to develop a permanent repository for the storage and disposal of spent nuclear fuel by 1998, the DOE has announced that the repository cannot be completed before at least 2017.
The Palo Verde Nuclear Generating Station and other nuclear power plants produce two forms of radioactive waste: high-level waste and low-level waste. High-level waste consists primarily of spent nuclear fuel. This spent fuel is highly radioactive for many years, but can be safely stored in spent fuel storage pools or specially designed and licensed spent fuel storage casks.
We have existing spent fuel storage pools at Palo Verde and have constructed and are using a facility for on-site dry cask storage of spent fuel while we are awaiting the completion of the Nuclear Waste Storage facility at Yucca Mountain in Nevada. With the existing storage pools and the addition of the on-site dry cask storage facility, we believe spent fuel storage methods will be available for use by Palo Verde on-site to allow continued safe operation through the term of the operating license for each of Palo Verde’s three units. On average, Palo Verde replaces 200 fuel assemblies annually.
Some low-level waste has been stored on-site in a low-level waste facility; however APS is currently shipping low-level waste to off-site disposal facilities which are permitted to accept these types of wastes. Examples of low-level waste include used protective clothing, resins and filters.
PVNGS Low-Level Solid Radioactive Wastes
The increase in low-level wastes in 2007 was due primarily to waste materials associated with a one-time removal project of a retention basin, and wastes associated with the steam generator replacement project. Further information on spent nuclear fuel and low-level wastes can be found in the PNW annual report and 10K report.
Nuclear Performance and Safety
In 2006, the performance at the Palo Verde Nuclear Generating Station dropped to disappointing levels, well below its previous world-class standards. Working closely with the Nuclear Regulatory Commission, last year we implemented a performance improvement program to restore the plant’s operations to previous levels of excellence. As part of its improvement effort, Palo Verde completed the Improved Performance And Cultural Transformation project, or ImPACT. The ImPACT project staff — which numbered as many as 100 APS employees and external experts — were tasked with identifying issues and corrective actions aimed at improving Palo Verde’s safety culture and overall performance for the long term. The actions identified through ImPACT are being implemented and tracked through the site integrated improvement plan.
The plan is designed to restore the plant’s operation to historical levels of excellence by realigning the organization where needed, identifying and permanently fixing problems, and giving employees the tools they need to perform their jobs.
Emergency planning for Palo Verde is a cooperative effort involving Pinnacle West Capital Corporation/Arizona Public Service Company (Operating Manager for Palo Verde), the State of Arizona, Maricopa County and the Town of Buckeye. All planning activities represent a comprehensive response to federal regulations and guidelines. The Arizona Division of Emergency Management's Radiological Emergency Preparedness Program has detailed information on emergency planning for Palo Verde.
Discussion on key issues associated with nuclear safety and recent NRC activity and inspections at PVNGS can also be found in our PNW 10K Report.
Our purchased power agreements are summarized below (in capacity of MW):
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