APS anticipates a capital investment of $5.32 billion including almost $1.3 billion in clean generation over the next three years to support customer growth, reliability and a clean energy transition. Our investments in infrastructure for 2023 are projected to be $1.67 billion, up from $1.53 billion. In 2022. In 2022, $794 million was budgeted for projects related to transmission and distribution, the avenues by which we deliver our power into the communities and neighborhoods we serve. 

Three Year Capital Forecast

*2023-2025 as disclosed in the 2022 Form 10-K.

As of the end of 2022, we had almost 74,000 dispatchable connected devices including thermostats, solar inverters, heat pump water heaters, and residential batteries. In addition, APS interconnected more than 154,500 residential rooftops and more than 2,000 commercial photovoltaic systems by the end of 2022. APS customers have also installed more than 2,200 solar-plus-storage systems.

Distributed technologies require new utility side monitoring, and control technologies that can accommodate the operational changes these resources bring. Challenges of aligning solar production with system peak, managing weather-dependent intermittency, and related power-quality issues must be addressed via technology solutions and intelligent grid operations. Our grid modernization efforts facilitate the integration of these resources while simultaneously ensuring high reliability and power quality by providing system operators with greater visibility, intelligence, and control options in the future.

Learn more about our customer technologies and programs.

Energy Storage. APS deploys several advanced technologies on its system, including energy storage. Storage can provide capacity, improve power quality, be utilized for system regulation, integrate renewable generation, and, in certain circumstances, be used to defer certain traditional infrastructure investments. Energy storage can also aid in integrating higher levels of renewables by storing excess energy when system demand is low and renewable production is high, and then releasing the stored energy during peak demand hours later in the day and after sunset. APS is utilizing grid-scale energy storage projects to benefit customers, to increase renewable utilization and to further our understanding of how storage works with other advanced technologies and the grid.  

In addition to aligning solar production and customer energy consumption, batteries work to improve grid resiliency. In the event of a grid outage, a utility or a customer with a battery-only installation can keep critical loads energized in the unlikely event of a grid outage.

Learn more about our clean generating technologies.

Microgrids. Microgrids are generating facilities installed on the customers' premises that provide backup power in case of a grid outage and also provide grid support. APS microgrids play an increased role in how we support customers with critical loads, increase economic development opportunities, and strengthen the grid. Microgrids are beneficial for our system and our customers as they increase reliability and resilience. All APS customers realize benefits from microgrids as they can run in parallel with the APS system, providing frequency response and peak capacity relief.  

APS Microgrids were awarded for two patents for the systems developed in-house to provide autonomous frequency response. By sharing this technology and microgrid development costs with customers with utmost resiliency needs, cost-effective economic deployment of new microgrid resources may be achieved.

Further, the potential for adding renewable resources and energy storage to these microgrids can improve their responsiveness, increase flexibility, and reduce emissions. Microgrids are an important tool in the acceleration of economic development while efficiently using resources to meet customer resiliency needs and the overall reliability needs of all APS customers.

The microgrid at Marine Corps Air Station Yuma can supply complete backup power to the base in case of a grid outage.

Drone and Robotic Technology and Predictive Maintenance. Our unmanned aircraft system (UAS) program continues to grow and provide benefits to our customers. UAS technology, commonly referred to as “drones,” allows field personnel and engineers to work safer in hazardous terrain, collect hard-to-reach imagery, and evolve engineering practice at lower costs than traditional methods for power line patrols and inspections.

We currently operate an innovative fleet of drones with a continued dedication to strategy, training and program development that promises to improve reliability and safety performance. We have ensured that our UAS program meets all Federal Aviation Administration requirements. UAS-mounted thermal imaging cameras and high-resolution sensors are used to inspect distribution, transmission, generation and communications equipment to determine the overall health of systems. In addition to providing improved inspection data, UAS helps us respond more quickly to outages and issues affecting the grid, such as storm damage.

APS is also implementing state-of-the-art robotic automated inspection systems. We recently added Spot the Dog to our robotic fleet. Robotics are autonomous devices that allow the team to perform inspections in areas that are unsafe for people to enter. The use of robotics provides consistent results, improved efficiency and safety and allows us to perform inspections that were just not practical prior to this advancement.

In the future, both drones and robotics may be using machine learning and artificial intelligence to detect anomalies, reducing the cost to perform annual inspections for proactive maintenance.

The use of reporting technology and automation has streamlined the process of identifying risk, prioritizing, and reporting the risk to effectively make better decisions to assist in maintenance that delivers reliability and improved public safety.

These changes in weather patterns pose a fire risk to the communities we serve. In response, we collaborate with key stakeholders to reduce wildland fire risk and create defensible space throughout Arizona. We have finalized, and are creating visibility for, the APS Comprehensive Fire Mitigation Plan with internal and external stakeholders.

We work year-round to minimize the risk of wildfires. Public safety and coordination with first response and forest management agencies are our highest priorities in helping to prevent and respond to wildfires.

Through proactive fire mitigation measures, we work to reduce the likelihood of fire in proximity of our equipment and facilities including substation overhead power lines and poles. Mitigation initiatives include the deployment of infrastructure systems technology as well as mobile technology to track and report fires. These innovations allow us to be more proactive and responsive in our efforts to keep first responders and our customers safe. Fire mitigation efforts, including pre-season patrols and grid hardening have benefits beyond fire mitigation. Reliability and customer service are also improved as a result of our investment.

We use a three-pronged approach to mitigate fire risk. First, we assess site-specific fire risk and develop a model to prioritize resources. Second, we educate the communities we serve about fire mitigation. Third, we create defensible space around poles (DSAP). The goal of the DSAP program is to remove combustible material within a minimum 10-foot radius of equipment poles on a three-year cycle. Fire mitigation also consists of a dedicated hazard vegetation mitigation program aimed at addressing the increased tree mortality near electric facilities across the state. In addition, our rights-of-way, which are managed for compatible vegetation, are used by firefighters to suppress wildfires across Arizona.

The effectiveness of our fire mitigation efforts was evident during the Pipeline Fire in Flagstaff, Arizona, and the Crooks Fire in the Prescott National Forest in 2022. During these events, our crews collaborated with federal, state, and local officials to de-energize power lines and ensure the safety of residents and homes in the affected areas. As a result of the defensible space created in our utility corridor, there were instances where the fires were prevented from reaching many of our poles and damaging our lines. This greatly improved our ability to quickly restore service after the fires were contained.

Awareness.  All employees and contractors are required to take annual cybersecurity training and learn techniques to identify suspicious cyber activity and safeguard sensitive customer information. Quarterly security bulletins and other outreach activities help raise employee awareness about emerging threats and risks to the company. Regular awareness testing and training assesses our employees’ susceptibility to certain cyber threats, such as phishing. We also hold workshops and other training sessions to educate employees on critical issues such as creating secure passwords, recognizing potential attacks and suspicious activity, securing personally identifiable information of customers and employees and secure file storage.

Defensive Posture.  We utilize a multilayer defensive technology model including firewalls, unified threat management devices, anti-malware technologies, data encryption technologies, and data loss prevention. These systems have alerting capabilities to notify cybersecurity personnel when critical events are detected. Additional processes, such as vulnerability scanning, identifying cybersecurity or technology risk to prioritize for remediation, and enterprise monitoring systems detect and alert potentially malicious behavior. Access to systems and data is provided based on business need with additional reviews and/or approvals required for certain specific roles. In addition, the company does maintain a cybersecurity risk insurance policy.

Resiliency.  We monitor emerging cybersecurity threats 24 hours a day, seven days a week. Our Cyber Defense Center detects, alerts, contains and mitigates attacks in real time. To enhance our capabilities and provide improved threat intelligence, we maintain relationships and coordinate with federal, state, and local government partners, utility associations, regulatory bodies, and private sector information-sharing organizations. Additionally, we retain third-party incident response professionals to assist in response investigations, if needed. 

External Audits and Certifications. We perform regular cybersecurity assessments and engage external assessment firms to do the same. We are also subject to rigorous compliance obligations and are regularly audited by our regulators.

Governance. The Nuclear and Operating Committee of our Board of Directors periodically reviews, with management, principal risks related to or arising out of the company’s nuclear, fossil generation, transmission and distribution, environmental health and safety operations, and other matters. The Committee assesses the effectiveness of the company’s measures to address these risks, including oversight of security policies, programs, and controls for protection of cyber and physical assets. The Nuclear and Operating Committee receives a cybersecurity update twice a year and more frequently if the Committee or management requests it. The results of these reviews are reported to the full Board of Directors. The full Board of Directors exercises oversight in relation to the company’s enterprise risks, which often include risks related to cybersecurity and data privacy. 

Our cybersecurity program also protects the privacy of our customers, employees, and contractors. Controls to protect our stakeholders’ personally identifiable information are present across our awareness, defensive posture, and resiliency efforts. Further, we comply with all applicable privacy regulations and are transparent about our privacy practices in our privacy policy, available on the aps.com website.

The WEIM enables us to take advantage more quickly of favorable pricing opportunities in wholesale energy markets, operate clean generation resources more effectively and pass the savings on to our customers. APS joined the market in 2016 and the market continues to expand with utility participation. According to the most recent report released by CAISO, the WEIM has delivered more than $336 million in gross benefits (as of January 2023) to our customers since our participation began.

In addition to WEIM participation, we are actively evaluating the development of future wholesale markets that will strengthen our ability to provide clean, reliable power. As members of the Western Markets Exploratory Group, we are exploring the potential for a staged approach to new market services and solutions with other western utilities to enable market-based solutions that result in reliable and resilient energy systems. We also continue to actively engage and participate in the development of CAISO Extended Day-Ahead Market, and Southwest Power Pool Markets + as we look to unlock new pathways to deliver on the APS Promise. As part of our commitment to provide reliable service we also coordinate with our peer utilities through participation in the regional Western Resource Adequacy Program, which allows us to plan with other utilities in the region to ensure reliable energy service with an evolving mix of clean resources.

Learn more about the Western Markets Exploratory Group, Western Resource Adequacy Program, CAISO Extended Day Ahead Market, and Southwest Power Pool Markets +. 

Any organization associated with electrical generation, transmission, and interconnection of the bulk power system in the United States, Canada, and part of Mexico is subject to North American Electric Reliability Corporation (NERC) standards. Each of the more than 1,000 NERC reliability requirements has been developed to address a risk associated with planning and operating the North American bulk power system. For instance, these risks may be associated with sophisticated physical and cyberthreats, severe cold or hot temperatures, extreme natural events, challenging oil and natural gas interdependencies, and/or a changing resource mix.

While all such applicable responsible entities have the common goal to maintain compliance, APS has the mindset that compliance is a natural byproduct of careful and intentional reliability and security practices. Stated another way, compliance does not occur by accident.

At APS, overall reliability and security is a shared responsibility with clear roles defined for oversight and accountability throughout the organization. APS maintains a constant state of readiness including documented processes and tools to address each applicable requirement. Moreover, APS has processes in place for identifying, assessing and prioritizing risks to achieve reliability, security and compliance objectives. APS’s NERC internal control program is developed to address these risks. The result is a tailored and continually enhanced approach to identifying concerns before they impact providing safe, affordable electricity to our customers.

APS is constantly developing tools and awareness to achieve safe, reliable and secure energy generation and delivery. This includes staying on the forefront as new standards are developed, leveraging industry lessons learned, proactively implementing above–and-beyond practices and conducting stakeholder outreach building upon a long history of productive relationships in the industry.