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60 Years: A Decade of Innovation

At Arizona G&T Cooperatives (AzGT), we are energized by innovation.

Since we first began generating and transmitting energy under the Arizona Electric Power Cooperative (AEPCO) banner in 1961, the pursuit of innovation has driven our progress.

This has been especially true over the past decade as we’ve embraced groundbreaking solutions to:

Build a smarter grid

Strengthen our security

Solidify our financial strength

Build a smarter grid

Strengthen our security

Solidify our financial strength

It was a decade in which we transformed our company and laid the foundation for sustainable success.

Our commitment to finding new and better ways to deliver reliable, affordable energy to our Members and the customers at the end of the line will continue to light our way to progress—year after year and decade after decade.

AzGT’s Decade of Innovation by the Numbers

547

Megawatts of Market Access Capacity in 2021 (228 MW in 2012)

34

Substations in 2021 (26 in 2012)

$8 million

In Patronage Refunds Returned to Members from 2012 to 2021

866

Miles of Transmission Line 2021 (620 miles in 2012)

41.6%

AEPCO Combined Equity in 2021 (21.9% in 2010)

$356020

In Donations to Charities and Community Organizations from 2012 to 2021

2012: Saving on Fuel Costs

  • Years of litigation with 2 major railroads that deliver coal to Apache Generating Station come to a successful conclusion, leading to millions of dollars in fuel cost savings for AEPCO and our Members.
  • The rail settlement and resulting lower shipping costs allow us to purchase coal from lower-cost sources in Wyoming and other locations.
  • Additional fuel cost savings are realized when natural gas becomes less expensive than coal, prompting us to burn natural gas in Apache Station’s steam units for the first time.
  • Patrick Ledger, who led the battle with the railroads as our general counsel, completes his first full year as CEO of AzGT and implements further cost-saving measures across the organization.

Additional 2012 Highlights

  • We continue installing the Smart Grid by adding fiber optic communications over power lines and further automating substations, increasing electric reliability by remotely monitoring and controlling the network.
  • Our Benson control room enhances security by replacing electronic relay technology with computer-controlled digital equipment through a $4.2 million project incorporating U.S. Department of Energy (DOE) guidelines.
  • We expand power-marketing services to Valley Electric Association.
  • We begin the annual retirement of patronage to our Members. Over the next decade, more than $8 million is returned to Members.
  • We rebuild and upgrade 13 miles of transmission line at Marana.

2013: Merging to Save Costs

  • The process of consolidating AEPCO and Southwest Transmission Cooperative (SWTC) into a single company begins. AEPCO began operating in 1961.
  • 40 years later, to prepare for possible opportunities presented by proposed electric industry deregulation: We began operating as 3 separate cooperatives:
    • AEPCO
    • SWTC
    • Sierra Southwest Cooperative Services (Sierra)
  • By 2013, the marketplace is changing again and we begin consolidating AEPCO and SWTC to position us to attract more reliable, affordable and flexible financing.

Additional 2013 Highlights

  • Scheduling and trading services expand through our partnership with ACES Power Marketing, re-establishing service with:
  • We assist Valley Electric Association with its transition into the California Independent System Operator market
  • We embark upon a $4.8 million project to enhance cybersecurity and meet new North American Electric Reliability Corporation (NERC) standards that take effect in 2016.
  • The Arizona Corporation Commission unanimously approves rate reductions that reduce wholesale rates for AEPCO and SWTC by a combined 5.85%.
  • We reduce financing costs and improve liquidity by establishing committed revolving credit facilities with CFC and CoBank.
  • Working with the Grand Canyon State Electric Cooperative Association, we educate government leaders and the public about a proposal to deregulate Arizona’s electric industry that would have increased rates and reduced reliability for people in rural Arizona.

2014: Increasing Reliability Via the Smart Grid

  • System reliability improves significantly through technology and equipment upgrades funded in part by a federal Smart Grid Grant awarded by the U.S. Department of Energy (DOE).
  • Of the $32 million in federal funds managed by AEPCO in partnership with Member cooperatives SSVEC and Mohave EC, our $12 million share is used to:
    • Convert to a new Energy Management System (EMS)
    • Add fiber optic communications over power lines
    • Modernize several substations, increasing our ability to remotely monitor and control our network.

Additional 2014 Highlights

  • We launch a plan to convert Steam Unit 2 (ST2) from firing coal to natural gas, and upgrade emissions reduction systems on both ST2 and Steam Unit 3 (ST3). The Environmental Protection Agency (EPA) approves the plan in 2015; the fuel switch and upgrades are completed in 2017 and 2018.
  • We implement the Geographic Information System, a new mapping system developed by AzGT engineers. This new business information management system maps the location of every asset in our system, from poles to substation switches to parts.

2015: Reducing Emissions

  • We begin implementing our plan to comply with new regional haze regulations mandated by the EPA. The plan:
    • Achieves greater sulfur dioxide (SO2) and particulate matter reductions than the plan originally proposed by the EPA
    • Results in nearly $170 million in savings
  • Apache Station measures that substantially reduce Apache Station’s emissions and carbon footprint:
    • We begin converting Apache Station’s coal-fired ST2 to burn natural gas
    • We begin upgrading Apache Station’s other coal-fired unit, ST3, with selective non-catalytic reduction technology and improved scrubbers
    • A new emission control system is launched to meet EPA mercury compliance requirements

Additional 2015 Highlights

  • We implement State Estimator, a new high-tech application that syncs with our EMS to enhance transmission system reliability.
  • The reliability and security of our substation operations are improved by installing new, standardized Remote Terminal Units and a new cyber secure substation automation platform.
  • AEPCO joins WestConnect as a regional and inter-regional transmission planning entity mandated by the Federal Energy Regulatory Commission (FERC).
  • Southwest Public Power Agency, Inc. joins AzGT as a Class D member.
  • Our Information Technology team implements a new business disaster recovery and continuity system that enables the restoration of critical operations in the event of a major hardware and equipment loss. The project involves 200 servers and 300 networking devices.
  • Processes, procedures and technology are upgraded to enhance the physical security of AEPCO operations and comply with new NERC guidelines. This includes installing new security cameras and access card readers at our Benson campus.
  • We migrate from a legacy Supervisory Control and Data Acquisition (SCADA) operation to an updated system with improved features and security. This increases reliability and decreases the time required to implement changes to the transmission network.
  • We receive the Visionary Award from the Beacon Group for our commitment to providing custodial service jobs to people with disabilities.

2016: Responding to Market Changes

  • The merger of SWTC into AEPCO is completed. Together, AEPCO and Sierra comprise AzGT. The merger allows us to convert AEPCO’s Rural Utilities Service mortgage to an indenture, improving our ability to attract capital and build financial strength.
  • For the first time in our history, AEPCO seeks and obtains investment-grade credit ratings. The merger also increases administrative efficiencies and provides cost savings as we no longer need to file costly and time-consuming separate generation and transmission rate cases.
  • Through this consolidation, Sierra is established as a vehicle for serving the renewable energy needs of our Member cooperatives and customers.

Additional 2016 Highlights

  • The Central Arizona Water Conservation District (CAWCD), the financial arm of the Central Arizona Project, becomes an AzGT Class D Member.
  • Our Resource Planning team develops a preview for a 10-year horizon of expected changes to NERC compliance standards for reliability.
  • Construction begins on nitrogen oxide (NOx) reduction technologies that allow ST3 at Apache Generating Station to meet an EPA regional haze requirement.
  • For the first time in history, we seek and obtain investment-grade credit ratings. We receive ratings of “A-” from Fitch and “A” from S&P Global Ratings, both with a stable ratings outlook. The ratings provide a public benchmark of our financial strength. We secure our first Committed Line of Credit through a $100 million bilateral agreement with CFC and CoBank.
  • Our board of directors approves a $100,000 Rural Economic Development Loans & Grants (REDLG) low-interest loan to Benson Hospital. The critically needed funds are used to build a clinic and office that house 2 primary care doctors and a nurse practitioner.
  • The 2-MW, $5.8 million SunAnza project goes live. Built by AEPCO for Anza Electric Cooperative in southeastern California, the fixed-axis solar array helps the cooperative meet California’s renewable energy standards.
  • We enter into a joint operating agreement with ATC Development Co., a branch of Wisconsin-based American Transmission Co., to form a transmission company called ATC Southwest. The new company develops transmission projects in Arizona and the southwestern United States.
  • For the fifth straight year, the Society for Human Resource Management recognizes AzGT for innovative human resources best practices.

2017: Growing Our Business

  • Through our partnership with ACES, we attract 2 new Class D Members:
  • Since 2011, the ACES West Regional Trading Center has operated out of AzGT’s Benson headquarters. Working hand-in-hand with ACES allows us to:
    • Execute an aggressive power-marketing strategy—buying and selling energy while managing market risk
    • Bring down our total energy cost to among the lowest of G&T cooperatives nationally

Additional 2017 Highlights

  • Our Members and customers begin receiving a new allocation of low-cost, federally generated power from the Hoover Dam. Over the 50-year life of a network service agreement with Western Area Power Administration (WAPA), our Members will save millions of dollars in transmission costs.
  • A new 50-MW transmission agreement creates a transmission path from the Palo Verde Substation to the Mead Substation, enhancing reliability and growth opportunities.
  • The Apache Solar Project goes online and begins producing competitively priced renewable energy for our Member distribution cooperatives and our customer, Electrical District No. 2. The 20-MW solar array is built on AEPCO land adjacent to Apache Station.
  • Apache Station’s Emergency Response team carries out our first joint safety exercise with neighboring fire rescue departments and training agencies.

2018: Upgrading Security & Reliability

  • Cybersecurity and physical security are strengthened throughout the organization. To improve efficiency and electric reliability, we:
    • Institute new security training
    • Institute technology and tracking mechanisms
    • Hire additional security personnel
  • By 2019, we add a wide range of best practices to make us more nimble in identifying and addressing risks related to compliance with standards mandated by Federal Emergency Regulatory Commission (FERC) and enforced by NERC.
  • We invest in compliance software and a compliance management system. Sophisticated tools are implemented to improve cybersecurity, and we participate in exercises that help us plan how to respond to and recover from simulated cyber and physical security incidents.
  • Security enhancements continue through 2021 as we upgrade our:
    • SCADA system
    • EMS
    • Telecommunications network

Additional 2018 Highlights

  • A reliable power supply is maintained through an all-time summer load peak for Class A Members of 690 MW. The all-system record is also broken with a peak load of 1,290 MW.
  • An economic impact study conducted by Cochise College finds that each job at AzGT creates an additional 1.3 jobs in the regional community. In addition, we generate $244.8 million in annual economic activity in rural southeastern Arizona, which includes:
    • $38.1 million in associated household earnings
    • Supporting 499 jobs region-wide.
  • We complete a planned major overhaul of Apache Station Gas Turbine 4, ensuring dependable operation of an important peaking resource to meet demand in an increasingly volatile Western market.
  • A new, 5-year contract is reached with the International Brotherhood of Electrical Workers, ensuring longer-term stability for AzGT as well as union employees.

2019: Expanding Transmission Capacity

  • The Bagdad Interconnect Project is energized. The project:
    • Was Implemented in cooperation with Arizona Public Service (APS)
    • Delivers backup power to a remote area in northwest Arizona served by Member Mohave Electric Cooperative
    • Benefits APS customers
  • An additional cooperative project creates an interconnect from our Valencia Substation to CAWCD. Cooperative ventures with other regional transmission owners allow us to:
    • Enhance our transmission capacity
    • Save costs
    • Improve reliability
    • Position AEPCO for future growth
  • This strategy continues in 2020 as we convert a portion of WAPA’s existing transmission system to network service and create an interconnect between the AEPCO and CAWCD transmission networks.
  • Agreements with APS and SSVEC outline plans to:
    • Build joint facilities
    • Increase reliability to the AEPCO and APS transmission systems
    • Provide mutual backup service to SSVEC

Additional 2019 Highlights

  • Gas Turbine 3 at Apache Station is overhauled to its original equipment manufacturer specifications, ensuring a source of reliable generation for years to come. The $4.25 million overhaul provides an alternative to replacing the unit at a cost of at least $50 million. The overhaul:
    • Considerably reduces the unit’s heat rate
    • Improves efficiency
    • Reduces emissions
    • Lowers its cost of producing energy
    • Provides a reliable, low-water-use resource that’s ready for the demands of a capacity shortfall market
  • Important 5-year gas unit contract extensions are achieved for gas-fired generation assets, assuring capacity and energy availability through 2025 for:
    • Steam Unit 1
    • Gas Turbine 1
    • Gas Turbine 2
    • Gas Turbine 3
  • Our Energy Services team begins developing a complex billing system that sets us apart from other G&T co-ops by equitably allocating cost among our Members based on a “cost-causation” basis.
  • For the first time, we participate in the national GridEx exercise, a biennial event coordinated by NERC. GridEx brings together utilities, law enforcement and government agencies to respond to and recover from simulated cyber and physical security incidents.
  • A sophisticated, proactive process is introduced to ensure our operations remain compliant with NERC physical security standards. We institute a wide range of best practices from across the industry, and upgrade security systems and processes at all of our facilities.
  • The credit rating agency Fitch Ratings upgrades us to an “A” rating, reflecting several years of sustained improvement in our operating costs and financial leverage.
  • For the 10th consecutive year, AEPCO’s controllable and fixed costs remain flat or decreased when adjusted for inflation.

2020: Diversifying Energy Resources

  • Financing closes for Anza Solar Phase II. The 2.0-MW SunAnza Electric photovoltaic generation facility new phase:
    • Adds 1.4 MW of solar panels
    • Adds our first battery energy storage system
    • Was built in cooperation with our Member Anza Electric Cooperative
  • The project is part of a push over the prior decade to diversify our energy resources and expand our ability to purchase power from new sources. This includes:
    • A 20-MW solar field that is installed at Apache Station
    • Upgrading and overhauling units to reduce emissions
  • We work with ACES to bring clean, low-cost hydropower from the Colorado River to our Members.
  • Sierra meets the renewable energy needs of AEPCO and our Members by maximizing solar and other renewable tax credits through cooperative lenders.

Additional 2020 Highlights

  • We successfully work to avoid declaring an Energy Emergency Alert as the Western Interconnect battles a power crisis throughout the summer of 2020. AzGT and ACES personnel work around-the-clock to keep the lights on throughout Arizona and California during the crisis triggered by:
    • Widespread extreme heat
    • Low capacity reserve margins
    • Wildfires
  • For the first time in history, a 2.7-mile transmission line project interconnects the transmission networks of AEPCO and CAWCD. This project improves reliability to our transmission system and services in AEPCO Member Trico Electric Cooperative’s service territory.
  • A comprehensive participation agreement between AEPCO, APS and SSVEC outlines plans to construct joint facilities. An additional 25-year agreement covering service in Cochise County increases reliability for AEPCO and APS transmission systems, as well as mutual backup service in the SSVEC service territory.
  • We successfully navigate the COVID-19 global pandemic with minimal impacts on our financial position. This, along with strong financial performance by us and our Members, results in AEPCO’s “A” credit ratings being affirmed by S&P Global and Fitch Ratings with stable outlooks.
  • Converting 122 MW of existing WAPA point-to-point transmission capacity to network service increases our market access and delivers cost savings.
  • A decade-long commitment to reduce the budget and control the costs of System Operations and Dispatch (SC&D) results in an SC&D cost that is lower than it was in 2010.
  • A detailed cost-of-service study and other financial modeling prepare us for a 2021 rate case, leading to improvements in our rate design.

2021: Serving Our Community

  • A study performed by an economic research firm shows that AzGT’s economic impact on our region continues to grow. Researchers find that AzGT generated $285.1 million in direct, indirect, and induced economic activity in 2020. This:
    • Was throughout a 4-county area of southeast Arizona
    • Was a 16% increase over the prior 2 years
    • Figure includes $45.3 million in associated household earnings, supporting 516 jobs region-wide
  • AzGT has a longstanding tradition of working to enrich our community by:
    • Providing jobs
    • Supporting the regional economy
    • Sponsoring economic development loans
    • Donating to worthwhile causes
    • Urging people to register and vote
  • This includes using U.S. Department of Agriculture grant funds to offer low-interest loans to business development projects—from local hospitals and clinics to a fuel farm at the Benson airport.

Additional 2021 Highlights

  • AzGT and its Member distribution cooperatives are members of Touchstone Energy®, a national cooperative that pools the resources of more than 750 electric utility co-ops around the nation to promote community involvement, education and outreach. We helped launch the national brand when it took off in the mid-1990s and continue to play a leadership role.
  • AzGT’s commitment to improving the wellbeing of the communities we serve is featured in a national webinar designed to train other rural electric cooperatives. The Community Wellness Through Community Partnership webinar is sponsored by:
    • Touchstone Energy
    • The National Rural Electric Cooperative Association
    • The National Rural Economic Development Association.
  • Our new, 24-ton state-of-the-art Versalift bucket truck features the most modern mechanical and technical features available as well as a 150-foot boom that allows our hotstick linemen to perform transmission line maintenance.
  • AzGT and ACES employees and their families begin receiving COVID-19 vaccine shots at a temporary vaccination clinic established at our Benson campus.
  • Upgrading and strengthening security remains a major focus as new 360-degree security cameras and additional electronic card readers are installed at our Benson campus.

Milestones

Attending the May 1965 dedication of AEPCO’s 85 MW combined cycle units (Left to Right) were Clayton E. Niles, representing Gov. Sam Goddard’s office; Norman M. Clapp, REA administrator; and AEPCO General Manager Dexter M. Smith.

1961

4 distribution co-ops in southeastern Arizona form Arizona Electric Power Cooperative (AEPCO):

  • Duncan Valley Electric Cooperative
  • Graham County Electric Cooperative
  • Sulphur Springs Valley Electric Cooperative (SSVEC)
  • Trico Electric Cooperative

The board elects J.A. Kartchner of SSVEC as president, and opens an office in Tucson

1962

The board appoints Dexter M. Smith as AEPCO’s first CEO.

The co-op moves its headquarters to Benson, Arizona, and purchases small diesel generating plants from Member co-ops.

The Salt River Project becomes a Member, and the relationship continues off and on over the years.

1963

AEPCO energizes a new 10 MW gas turbine south of Cochise, Arizona, and serves 14,419 consumers through its Member co-ops.

1964

The G&T energizes a new 75 MW steam unit and a 10 MW gas unit at what’s now known as Apache Generating Station in Cochise.

1965

Norman M. Clapp, administrator of the federal Rural Electrification Administration, speaks at dedication of the new units at Apache Generating Station.

The G&T builds 2 substations and 147 miles of transmission line, and breaks new ground for a headquarters in Benson

1971

Mohave Electric Cooperative of Kingman, Ariz., becomes AEPCO’s fifth Member distribution co-op.

1972

AEPCO completes construction of 2 new gas units at Apache Generating Station, which produce a total of 85 MW of power.

1974

The G&T purchases 70% of the Roadside Mine near Grand Junction, Colorado.

1977

Jerome B. Flanders becomes the cooperative’s second CEO.

AEPCO begins working with Carbon Coal to develop Mentmore Mine near Gallup, New Mexico, and sells its interest in Roadside Mine.

The G&T invests in a transmission line between Tucson and Phoenix to facilitate power sales to other utilities.

1978

AEPCO dedicates 2 new 175 MW coal-fired units at Apache Generating Station and completes major additions and upgrades to substations and transmission systems.

1979

Anza Electric Cooperative of Anza, California, joins as the sixth distribution co-op Member—all 6 are Class A Members.

AEPCO opens Mentmore Mine and begins operating its own unit train to ship coal to Apache Generating Station.

1980

AEPCO introduces new rates to reduce demand at peak times and offers special rates to irrigators.

1983

Leaders help form Consumers United for Rail Equity to fight unfair tariffs paid by captive shippers, and AEPCO continues to take a leadership role in coming years.

1988

Donald W. Kimball is named AEPCO’s third CEO.

1991

AEPCO converts its 2 coal units at Apache Generating Station to dual fuel, allowing the burning of either coal or natural gas.

The Mentmore Mine ceases operation after 12 years, along with AEPCO’s train.

Working with the U.S. Fish and Wildlife Service, the cooperative develops a wildlife viewing area near Apache Generating Station.

AEPCO dedicates its expanded and remodeled Benson headquarters.

1998

AEPCO creates Southwest Transmission Cooperative (SWTC) and Sierra Southwest Cooperative Services (Sierra), both operating under AEPCO’s umbrella.

AEPCO joins Touchstone Energy, a national marketing organization for select rural electric co-ops across the nation.

2001

SWTC and Sierra begin operating independently. Until now, Member co-ops have purchased all their power from AEPCO.

This year, Mohave Electric becomes a partial-requirements Member.

AEPCO builds 2 gas-fired peaking units at Apache Generating Station with a total capacity of 38 MW, and adds a coal-blending facility.

The new SunWatts program offers customers incentives to use solar.

2002

AEPCO completes reclamation of Mentmore Mine 13 years after it closes, and receives state and national recognition for project quality.

2006

AEPCO leads the formation of Southwest Public Power Resources Group, where utilities work together to meet power needs.

The Arizona Corporation Commission approves a Renewable Energy Surcharge and Tariff for AEPCO as part of a new program requiring utilities to increase use of renewable fuel.

2007

Valley Electric Association of Pahrump, Nevada, becomes AEPCO’s first Class D Member and begins purchasing power on a short-term basis.

2008

Electric Light and Power Magazine reports that Apache Generating Station operates at a 96.3% capacity factor—fourth on a list of the top 20 plants in the U.S. SSVEC becomes a partial-requirements Member.

2010

Trico becomes a partial-requirements Member.

2011

Patrick Ledger is appointed AEPCO’s fourth CEO as the co-op celebrates its 50th anniversary.

After a 3-year court battle, AEPCO wins a significant rate case from railroads delivering coal to Apache Generating Station. Refunds and lower future rail rates allowed by the decision will reduce AEPCO’s costs and result in savings to Members.

AEPCO and SWTC transition to using ACES to market surplus power to non-members, resulting in cost savings and enhanced services.

ACES opens its West Regional Trading Center in our Benson headquarters, and over the years ACES expands to provide additional energy management services.

2012

Apache Generating Station’s steam units burn natural gas for the first time when natural gas becomes less expensive than coal.

The 2011 rail settlement and resulting lower shipping costs allow AEPCO to purchase coal from lower-cost sources in Wyoming and other locations.

2016

On March 1, Southwest Transmission Cooperative merges into AEPCO. Sierra Southwest Cooperative Services Inc. is now dedicated to serving as a vehicle to meet the renewable energy needs of Member cooperatives. AEPCO and Sierra operate under the banner of Arizona G&T Cooperatives (AzGT).

2017

Steam Unit 2 is converted from coal to natural gas as the primary fuel. ST3, the remaining coal unit, is upgraded. Both changes reduce emissions and allow us to meet Environmental Protection Agency regional haze regulations.

Our 20-megawatt Apache Solar Project is dedicated at Apache Generating Station.

2018

Working with ACES, our energy management partner, AzGT continues to add new customers.

This is the first full year of providing transmission operating, operational and compliance services to Metropolitan Water District of Southern California, a public power district with 19 million customers.

We now have 6 Class A Members, 5 Class D Members, and energy services and transmission customers.

2019

We continue to expand transmission interconnections to other power sources, which helps assure reliability and positions AzGT for growth.

2020

We persist in a decade-long effort to diversify energy resources.

We work with Member Anza Electric Cooperative to expand its SunAnza photovoltaic generation facility to 3.4 MW, and add a battery energy storage system.

We continue our partnership with ACES to bring clean, low-cost hydropower from the Colorado River to our Members.