APS Develops New Climate Change Management Plan and Long-term Resource Plan Report
Climate change is one of the most significant sustainability issues facing our country. It is a long-term issue requiring long-term vision and steadfast effort. APS has responded to the challenges presented by climate change since 1995 when APS signed the Department of Energy Climate Challenge and committed to limiting emissions to 1990 levels by 2000. In 2006, the United States Environmental Protection Agency awarded APS with its Climate Protection Award, which recognized the many efforts the company made over the past decade in climate change response.

APS is a founding member of The Climate Registry

Our continuing commitment to addressing the issue of Climate Change is reflected in the recently published APS Resource Plan Report (“RPR”) filed with the Arizona Corporation Commission ("ACC") on January 29, 2009, in which we articulate a preferred plan that, if approved, will allow APS to satisfy an increase of more than 50 percent in customer energy consumption with effectively no increase in carbon dioxide emissions in 2025 over the baseline year of 2009. The APS RPR will allow Arizona to increase its commitment to non-fossil fuel resources and to prevent emissions of 30 million metric tons of carbon dioxide over the plan timeframe. More information on our RPR can also be found in the Integrated Resource Planning section of this report.

APS has also submitted a comprehensive APS Climate Change Management Plan to the ACC which details the related scientific, legislative and policy issues, potential physical and financial risks to APS, GHG emission inventory, APS technology innovation and GHG reduction efforts,  and our companies' strategic approach to climate change management.  As discussed in that Plan, our climate change strategy includes the following components:

• A  climate change governance structure that includes board and executive management engagement and oversight
• A written company position on climate change, which sets the foundation for APS legislative and regulatory intervention
• Establishment of a voluntary carbon emission intensity reduction goal
• Addition of non-carbon emitting renewable energy resources
• An aggressive demand side management/energy efficiency program to reduce electric demand both by our customers and our internal operations
• Voluntary inventory and reporting of greenhouse gas (GHG) emissions, including becoming a founding member of The Climate Registry
• Legislative and regulatory monitoring and involvement at the federal and state levels
• Voluntary participation in the EPA’s SF6 Emission Reduction Partnership for Electric Power Systems
• Inclusion of carbon issues as a major component of our integrated resource planning process for future energy sources
• Voluntary actions to reduce emissions at existing generating facilities through improved efficiencies and increased capacity
• Voluntary actions in carbon sequestration, capture and avoidance
• Technology innovation to identify low carbon energy sources, increase efficiencies, conserve energy, as well as innovative technologies to reduce emissions, or sequester, capture or avoid carbon emissions
• Engagement with concerned stakeholders through communications such as this report, stakeholder meetings as part of our integrated resource planning process, voluntary participation in the Carbon Disclosure Project, and through the Arizona Corporation Commission regulatory process
• Identification of potential physical, regulatory and financial risks to our company associated with climate change
• Fleet management activities, including measures to increase fleet miles per gallon and reduce miles traveled.
• Internal energy efficiency measures, includes building all new facilities in accordance with LEED standards

Climate Change Governance
Our climate change governance structure includes:

1. Board of directors and executive management engagement
   and oversight
2. Public disclosure
3. Emissions accounting
4. Strategic Planning, including incorporation into business operations, establishment of GHG reduction targets, and development and implementation of business strategies to reduce GHG emissions and to minimize exposure to regulatory, operational and other risks from climate change

APS Voluntary Climate Change Goal
The company has had a voluntary CO2 intensity reduction goal in our business plan since 2005. That goal was to reduce carbon intensity in APS owned power plant emissions and purchased renewable energy by 10 percent in target year 2010 from a baseline year 2000.  As of 2008, intensity had reduced from 1,324 lbs/MWh in 2000 to 1,254 lbs/MWh in 2008, which is a 5.3% reduction.

In 2008, the company developed a new 2009-2013 business plan which also includes a voluntary CO2 intensity reduction goal.  This goal has been revised in line with our new Integrated Resource Plan Report and Renewable Energy Standard plans, and calls for a 7 percent reduction in CO2 intensity by 2013 from 2008 levels (beyond the reductions previously achieved).

APS GHG Emissions Inventory
Based on an internal evaluation of APS direct emissions of greenhouse gases, more than 98 percent of GHG emissions at APS owned facilities is carbon dioxide coming from our fossil fuel power plants. About one percent of our overall GHG emissions are from sulfur hexafluoride (SF6) emissions from electrical equipment located across our system. The remaining small contribution is from activities such as our fleet transportation (line trucks, bucket trucks and other company vehicles). We have a number of programs in place to address each of these areas, which are discussed in the APS Climate Change Management Plan.

APS has participated since 1995 in the Department of Energy 1605(b) voluntary greenhouse gas emissions reporting program. In 2007, APS became a founding member of The Climate Registry, and will begin reporting to the Registry with our 2008 GHG inventory. APS also provides an annual report to the EPA (starting in 2005) regarding results in SF6 emission reduction through the EPA Utility SF6 Partnership program. Below is a six year history of our CO2 emissions from APS owned generation:

Note:  APS Ownership refers to generation sources that APS owns, including our percentage ownership in shared plants. APS Operations refers to the total emissions from generation sources that APS operates, including the percentage that many be owned by other companies.  It is common for a power plant to have several owners, with one company operating that plant for all of the owners.