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What changed in Pinnacle West Capital's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Pinnacle West Capital's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+519 added−605 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-25)

Top changes in Pinnacle West Capital's 2025 10-K

519 paragraphs added · 605 removed · 372 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

131 edited+65 added−92 removed90 unchanged
Biggest changeLocation Actual/ Target Commercial Operation Date Term (Years) Net Capacity In Operation (MW AC) Net Capacity Planned/Under Development (MW AC) APS Owned Solar: AZ Sun Program: Paloma Gila Bend, AZ 2011 17 12 Table of Contents Cotton Center Gila Bend, AZ 2011 17 Hyder Phase 1 Hyder, AZ 2011 11 Hyder Phase 2 Hyder, AZ 2012 6 Chino Valley Chino Valley, AZ 2012 20 Hyder II Hyder, AZ 2013 14 Foothills Yuma, AZ 2013 38 Gila Bend Gila Bend, AZ 2014 36 Luke AFB Glendale, AZ 2015 11 Desert Star Buckeye, AZ 2015 10 Subtotal AZ Sun Program 180 — Multiple Facilities AZ Various 4 Red Rock Red Rock, AZ 2016 44 Agave Solar Arlington, AZ 2023 150 Ironwood Solar Dateland, AZ 2026 168 Distributed Energy: APS Owned (a) AZ Various 38 Total APS Owned 416 168 PPAs Solar: Solana Gila Bend, AZ 2013 30 250 RE Ajo Ajo, AZ 2011 25 5 Sun E AZ 1 Prescott, AZ 2011 30 10 Saddle Mountain Tonopah, AZ 2012 30 15 Badger Tonopah, AZ 2013 30 15 Gillespie Maricopa County, AZ 2013 30 15 Mesquite Solar 5 Tonopah, AZ 2023 20 60 Sunstreams 3 Arlington, AZ 2024 20 215 Yuma Solar Energy Yuma County, AZ 2025 20 70 Harquahala Sun 2 Tonopah, AZ 2025 20 300 Sunstreams 4 Arlington, AZ 2025 20 300 Serrano Solar Pima and Pinal County, AZ 2025 20 170 CO Bar Solar C Coconino County, AZ 2027 20 206 Hashknife 1 Navajo County, AZ 2026 20 275 Catclaw Buckeye, AZ 2026 20 225 Papago Solar Maricopa County, AZ 2026 20 150 Hashknife 2 Navajo County, AZ 2027 20 200 Kitt Eloy, AZ 2026 20 100 Pioneer Yuma, AZ 2027 20 300 Maricopa Energy Center Phase 1 Maricopa County, AZ 2026 20 183 Maricopa Energy Center Phase 2 Maricopa County, AZ 2027 20 367 Snowflake Solar Snowflake, AZ 2027 20 475 Wind: Aragonne Mesa Santa Rosa, NM 2022 20 200 High Lonesome Mountainair, NM 2009 30 100 Perrin Ranch Wind Williams, AZ 2012 25 99 Chevelon Butte Winslow, AZ 2023 20 238 Chevelon Butte II Winslow, AZ 2024 20 216 West Camp Wind Farm Navajo County, AZ 2026 20 500 13 Table of Contents Geothermal: Salton Sea Imperial County, CA 2006 23 10 Biomass: Snowflake Snowflake, AZ 2008 25 14 Biogas: NW Regional Landfill Surprise, AZ 2012 20 3 Total PPAs 1,465 3,821 Distributed Energy Solar (b) Third-party Owned AZ Various 1,694 63 Agreement 1 Bagdad, AZ 2011 25 15 Agreement 2 AZ 2011-2012 20-21 18 Total Distributed Energy 1,727 63 Total Renewable Portfolio 3,608 4,052 (a) Includes Flagstaff Community Power Project, APS School and Government Program, APS Solar Partner Program, and APS Solar Communities Program.
Biggest changeCapacity amounts are approximate. 13 Table of Contents Location Actual/ Target Commercial Operation Date Term (Years) Net Capacity (MW) In Operation Net Capacity (MW) Planned/Under Development PPAs Solar: Solana Gila Bend, AZ 2013 30 250 RE Ajo Ajo, AZ 2011 25 5 Sun E AZ 1 Prescott, AZ 2011 30 10 Saddle Mountain Tonopah, AZ 2012 30 15 Badger Tonopah, AZ 2013 30 15 Gillespie Maricopa County, AZ 2013 30 15 Mesquite Solar 5 Tonopah, AZ 2023 20 60 Sunstreams 3 Arlington, AZ 2024 20 215 Yuma Solar Energy Yuma County, AZ 2025 20 70 Harquahala Sun 2 Tonopah, AZ 2025 20 300 Sunstreams 4 Arlington, AZ 2025 20 300 Serrano Solar Pima & Pinal County, AZ 2025 20 170 CO Bar Solar C Coconino County, AZ 2027 20 206 Hashknife 1 Navajo County, AZ 2026 20 275 Catclaw Buckeye, AZ 2026 20 225 Papago Solar Maricopa County, AZ 2026 20 150 Hashknife 2 Navajo County, AZ 2027 20 200 Kitt Eloy, AZ 2026 20 100 Pioneer Yuma, AZ 2027 20 300 Maricopa Energy Center Phase 1 Maricopa County, AZ 2026 20 183 Maricopa Energy Center Phase 2 Maricopa County, AZ 2027 20 367 Snowflake Solar Snowflake, AZ 2027 20 475 Wind: Aragonne Mesa Santa Rosa, NM 2022 20 200 High Lonesome Mountainair, NM 2009 30 100 Perrin Ranch Wind Williams, AZ 2012 25 99 Chevelon Butte Winslow, AZ 2023 20 238 Chevelon Butte II Winslow, AZ 2024 20 216 West Camp Wind Farm Navajo County, AZ 2026 20 500 Geothermal: Salton Sea Imperial County, CA 2006 23 10 Biomass: Snowflake Snowflake, AZ 2008 25 14 Biogas: NW Regional Landfill Surprise, AZ 2012 20 3 Total PPAs 2,305 2,981 Distributed Energy (a) Solar Third-party Owned AZ Various 1,773 82 Agreement 1 Bagdad, AZ 2011 25 15 Agreement 2 AZ 2011-2012 20-21 18 Total Distributed Energy 1,806 82 Total 4,111 3,063 (a) DG is produced in direct current and is converted to alternating current for reporting purposes. 14 Table of Contents Non-APS owned energy storage resources currently in operation and planned/under development as of the date of this report are summarized in the table below.
The following lists the pending regulatory changes that, if finalized, could have a material impact as to how APS manages CCR at its coal-fired power plants: • Following the passage of the Water Infrastructure Improvements for the Nation (“WIIN”) Act in 2016, EPA possesses authority to either authorize states to develop their own permit programs for CCR management or issue federal permits governing CCR disposal both in states without their own permit programs and on tribal lands.
The following lists the pending regulatory changes that, if finalized, could have a material impact as to how APS manages CCR at its coal-fired power plants: • Following the passage of the Water Infrastructure Improvements for the Nation Act in 2016, EPA possesses authority to either authorize states to develop their own permit programs for CCR management or issue federal permits governing CCR disposal both in states without their own permit programs and on tribal lands.
This holistic approach aims to (1) attract and retain top talent by offering a competitive and attractive compensation and benefits package, (2) support employee well-being by promoting a healthy work-life balance and providing resources to support employee physical, mental, and financial well-being, (3) foster employee engagement and motivation through recognition programs, professional development opportunities, and a strong emphasis on career growth, and (4) enhance employee satisfaction by creating a rewarding and fulfilling work experience for all employees.
This holistic approach aims to (1) attract and retain top talent by offering a competitive and attractive compensation and benefits package, (2) support employee well-being by promoting a healthy lifestyle, work-life balance and providing resources to support employee physical, mental, and financial well-being, (3) foster employee engagement and motivation through recognition programs, professional development opportunities, and a strong emphasis on career growth, and (4) enhance employee satisfaction by creating a rewarding and fulfilling work experience for all employees.
In connection with APS’s status as a PRP for OU3, since 2013 APS and at least two dozen other parties have been defendants in various CERCLA lawsuits stemming from allegations that contamination from OU3 and elsewhere has impacted groundwater wells operated by the Roosevelt Irrigation District (“RID”). At this time, only one active lawsuit remains pending in the U.S.
In connection with APS’s status as a PRP for OU3, since 2013 APS and at least two dozen other parties have been defendants in various CERCLA lawsuits stemming from allegations that contamination from OU3 and elsewhere has impacted groundwater wells operated by the Roosevelt Irrigation District. At this time, only one active lawsuit remains pending in the U.S.
However, on April 25, 2024, EPA finalized new ELG regulations that once again require “zero discharge” standards for flows of bottom ash transport water at power plants like Four Corners. Nonetheless, for power plants that permanently cease operations by December 31, 2034, such facilities can continue to comply with the 2020 ELG standards.
However, on April 25, 2024, EPA finalized new ELG regulations that once again require “zero discharge” standards for flows of bottom ash transport water at power plants like Four Corners. For power plants that permanently cease operations by December 31, 2034, such facilities can continue to comply with the 2020 ELG standards.
In the final regulations governing power plant carbon dioxide emissions released April 25, 2024, EPA issued emission standards and guidelines for various subcategories of new and existing power plants.
In the latest final regulations governing power plant carbon dioxide emissions, released April 25, 2024, EPA issued emission standards and guidelines for various subcategories of new and existing power plants.
Further proceedings have been initiated to determine the specific hydro-geologic testing protocols for subflow depletion determinations. The determinations made in this final stage of the proceedings may ultimately govern the adjudication of rights for parties, such as APS, that rely on groundwater extraction to support their industrial operations. APS cannot predict the outcome of these proceedings. Little Colorado River Adjudication.
Further proceedings have been initiated to determine the specific hydro-geologic testing protocols for subflow depletion determinations. The determinations made in this final stage of the proceedings may ultimately govern the adjudication of rights for parties, such as APS, which rely on groundwater extraction to support their industrial operations. APS cannot predict the outcome of these proceedings. Little Colorado River Adjudication.
The capital expenditures table presented in the “Liquidity and Capital Resources” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this report includes new APS transmission projects, along with other transmission costs for upgrades and replacements, including those for data center and semi-conductor manufacturing development.
The capital expenditures table presented in the “Liquidity and Capital Resources” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of this report includes new APS transmission projects, along with other transmission costs for upgrades and replacements, including those for data center and semi-conductor manufacturing development.
The ACC must also approve any significant transfer or encumbrance of APS’s property used to provide retail electric service and approve or receive prior notification of certain transactions between Pinnacle West, APS, and their respective affiliates. See Note 3 for information regarding ACC’s regulation of APS’s retail electric rates.
The ACC must also approve any significant transfer or encumbrance of APS’s property used to provide retail electric service and approve or receive prior notification of certain transactions between Pinnacle West, APS, and their respective affiliates. See Note 8 for information regarding ACC’s regulation of APS’s retail electric rates.
These factors include, without limitation, the terms of the legislation with regard to allowed GHG emissions; the cost to reduce emissions; in the event a cap-and-trade program is established, whether any permitted emissions allowances will be allocated to source operators free of cost or auctioned (and, if so, the cost of those allowances in the marketplace) and whether offsets and other measures to moderate the costs of compliance will be available; 19 Table of Contents and, in the event of a carbon tax, the amount of the tax per pound of carbon dioxide (“CO 2 ”) equivalent emitted.
These factors include, without limitation, the terms of the legislation with regard to allowed GHG emissions; the cost to reduce emissions; in the event a cap-and-trade program is established, whether any permitted emissions allowances will be allocated to source operators free of cost or auctioned (and, if so, the cost of those allowances in the marketplace) and whether offsets and other measures to moderate the costs of compliance will be available; and, in the event of a carbon tax, the amount of the tax per pound of carbon dioxide (“CO 2 ”) equivalent emitted.
The remainder of these investment commitments will be contributed by El Dorado as each investment fund selects and makes investments. 32 Table of Contents WHERE TO FIND MORE INFORMATION We use our website ( www.pinnaclewest.com ) as a channel of distribution for material Company information.
The remainder of these investment commitments will be contributed by El Dorado as each investment fund selects and makes investments. 31 Table of Contents WHERE TO FIND MORE INFORMATION We use our website ( www.pinnaclewest.com ) as a channel of distribution for material Company information.
AZ-VC is a fund focused on analyzing, investing, managing, and otherwise dealing with investments in privately-held early stage and emerging growth technology companies and businesses primarily based in Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in Arizona. • $7.5 million investment in Westly Seed Fund, of which approximately $1.2 million has been funded as of December 31, 2024.
AZ-VC is a fund focused on analyzing, investing, managing, and otherwise dealing with investments in privately-held early stage and emerging growth technology companies and businesses primarily based in Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in Arizona. • $7.5 million investment in Westly Seed Fund, of which approximately $2 million has been funded as of December 31, 2025.
On April 14, 2015, the ACC approved APS’s plan to retire Unit 2, without expressing any view on the future recoverability of APS’s remaining investment in the Unit. APS closed Unit 2 on October 1, 2015. Following the closure of Unit 2, APS has a total entitlement from Cholla of 380 MW.
On April 14, 2015, the ACC approved APS’s plan to retire Unit 2, without expressing any view on the future recoverability of APS’s remaining investment in the Unit. APS closed Unit 2 on October 1, 2015. Following the closure of Unit 2, APS had a total entitlement from Cholla of 380 MW.
An agreement reached with the Navajo Nation in 1985, however, provides that if Four Corners loses a portion of its rights in the adjudication, the Navajo Nation will provide, for an agreed upon cost, sufficient water from its allocation to offset the loss.
An agreement reached with the Navajo Nation in 1985, however, provides that if Four Corners loses a portion of its rights in the adjudication, the Navajo Nation will provide, for an agreed upon cost, sufficient water from its allocation to offset the loss. Gila River Adjudication.
While on January 22, 2021, the environmental groups filed a petition for review of the EAB’s decision with the U.S. Court of Appeals for the Ninth Circuit, the parties to the litigation (including APS) finalized a settlement on May 2, 2022.
While on January 22, 2021, the environmental groups filed a petition for review of the Environmental Appeals Board’s decision with the U.S. Court of Appeals for the Ninth Circuit, the parties to the litigation (including APS) finalized a settlement on May 2, 2022.
This means that facilities retiring before 2032 are effectively exempt from regulation, those that retire between 2032 and 2038 must co-fire with natural gas starting in 2030, and those that retire in 2039 or later must install CCS controls by 2032.
Facilities retiring before 2032 are effectively exempt from regulation; those that retire between 2032 and 2038 must co-fire with natural gas starting in 2030; and those that retire in 2039 or later must install CCS controls by 2032.
No trial date concerning APS’s water rights claims has been set in this matter. 26 Table of Contents At this time, the lower court proceedings in the Gila River adjudication are in the process of determining the specific hydro-geologic testing protocols for determining which groundwater wells located outside of the subflow zone of the Gila River should be subject to the adjudication court’s jurisdiction.
No trial date concerning APS’s water rights claims has been set in this matter. At this time, the lower court proceedings in the Gila River adjudication are in the process of determining the specific hydro-geologic testing protocols for determining which groundwater wells located outside of the subflow zone of the Gila River should be subject to the adjudication court’s jurisdiction.
The Palo Verde participants have contracted for 100% of Palo Verde’s requirements for uranium concentrates through 2028 and 52% through 2029; 100% of Palo Verde’s requirements for conversion services through 2030 and 32% through 2031; 100% of Palo Verde’s requirements for enrichment services through 2028; and 100% of Palo Verde’s requirements for fuel fabrication through 2027 for Unit 2 and Unit 1 and 2028 for Unit 3.
The Palo Verde participants have contracted for 100% of Palo Verde’s requirements for uranium concentrates through 2028 and 70% through 2029; 100% of Palo Verde’s requirements for conversion services through 2030 and 32% through 2031; 100% of Palo Verde’s requirements for enrichment services through 2028; and 100% of Palo Verde’s requirements for fuel fabrication through 2027 for Unit 2 and Unit 1 and 2028 for Unit 3.
In addition, on September 23, 2009, APS agreed with EPA and one other PRP to voluntarily assist with the funding and management of the site-wide groundwater remedial investigation and feasibility study (“RI/FS”). The RI/FS for OU3 was finalized and submitted to EPA at the end of 2022. EPA notified APS that the RI/FS was approved on September 11, 2024.
In addition, on September 23, 2009, APS agreed with EPA and one other PRP to voluntarily assist with the funding and man agement of the site-wide groundwater remedial investigation and feasibility study (“RI/FS”). The RI/FS for OU3 was finalized and submitted to EPA at the end of 2022. EPA notified APS that the RI/FS was approved on September 11, 2024.
Approximately 1,180 APS employees are union employees represented by International Brotherhood of Electrical Workers (“IBEW”). On September 25, 2023, the IBEW membership ratified a new collective bargaining agreement (“CBA”) with APS.
Approximately 1,120 APS employees are union employees represented by International Brotherhood of Electrical Workers (“IBEW”). On September 25, 2023, the IBEW membership ratified a new collective bargaining agreement (“CBA”) with APS.
As of the date of this report, APS has elected not to begin seasonal operation due to market conditions. Cholla — Cholla was originally a 4-unit coal-fired power plant, which is located in northeastern Arizona. APS operates the plant and owns 100% of Cholla Units 1, 2 and 3.
As of the date of this report, APS has elected not to begin seasonal operation due to market conditions. 9 Table of Contents Cholla — Cholla was originally a 4-unit coal-fired power plant, which is located in northeastern Arizona. APS operates the plant and owns 100% of Cholla Units 1, 2 and 3.
In addition, some customers, particularly industrial and large commercial customers, may own and operate generation facilities to meet some or all of their own energy requirements. This practice is becoming more popular with customers installing or having installed products such as rooftop solar panels to meet or supplement their energy needs.
In addition, some customers, particularly industrial and large commercial customers, may own and operate generation facilities to meet 16 Table of Contents some or all of their own energy requirements. This practice is becoming more popular with customers installing or having installed products such as rooftop solar panels to meet or supplement their energy needs.
Several legal proceedings followed challenging DOE’s withdrawal of its Yucca Mountain construction authorization application and the NRC’s cessation of its review of the Yucca 7 Table of Contents Mountain construction authorization application, which were consolidated into one matter at the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”). Following the D.C.
Several legal proceedings followed challenging DOE’s withdrawal of its Yucca Mountain construction authorization application and the NRC’s cessation of its review of the Yucca Mountain construction authorization application, which were consolidated into one matter at the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”). Following the D.C.
In the event climate change legislation ultimately passes, the actual economic and operational impact of such legislation on APS depends on a variety of factors, none of which can be fully known until a law is written, enacted, and the specifics of the resulting program are established.
In the event climate change legislation ultimately passes, the actual economic and operational impact of such 17 Table of Contents legislation on APS depends on a variety of factors, none of which can be fully known until a law is written, enacted, and the specifics of the resulting program are established.
Four Corners National Pollutant Discharge Elimination System Permit The latest NPDES permit for Four Corners was issued on September 30, 2019. Based upon a November 1, 2019 filing by several environmental groups, the Environmental Appeals Board (“EAB”) took up review of the Four Corners NPDES Permit. The EAB denied the environmental group petition on September 30, 2020.
Four Corners National Pollutant Discharge Elimination System Permit The latest NPDES permit for Four Corners was issued on September 30, 2019. Based upon a November 1, 2019 filing by several environmental groups, the Environmental Appeals Board up review of the Four Corners NPDES Permit. The Environmental Appeals Board denied the environmental group petition on September 30, 2020.
APS’s estimates for its share of corrective action and monitoring costs at Four Corners and Cholla are captured within the Asset Retirement Obligations. As APS continues to implement the CCR rule’s corrective action assessment process, the current cost estimates may change.
APS’s estimates for its share of corrective action and monitoring costs at Four Corners and Cholla are captured within the Asset Retirement Obligations, and Removal Costs within Regulatory Liabilities. As APS continues to implement the CCR rule’s corrective action assessment process, the current cost estimates may change.
The rule generally requires any existing unlined CCR surface impoundment to stop receiving CCR and either retrofit or close, and further requires the closure of any CCR landfill or surface impoundment that cannot meet the applicable performance criteria for location restrictions or structural integrity.
The rule generally requires any existing unlined CCR surface impoundment to stop receiving CCR and either retrofit or close, and further requires the closure of any CCR landfill or surface impoundment that cannot meet the applicable performance criteria for location restrictions or structural 20 Table of Contents integrity.
We actively seek feedback from new hires to further refine the employee onboarding experience. Our cross-functional Employee Engagement Council plays a key role in driving improvements, particularly in employee engagement and recognition. 29 Table of Contents We believe that belonging matters. We recognize that differences of identities, perspectives, and experiences is a key driver for our success.
We actively seek feedback from new hires to further refine the employee onboarding experience. Our cross-functional Employee Engagement Council plays a key role in driving improvements, particularly in employee engagement and recognition. 28 Table of Contents We believe that belonging matters. We recognize that differences of identities, perspectives, and experiences are a key driver for our success.
The fuel cycle for Palo Verde is comprised of the following stages: • Mining and milling of uranium ore to produce uranium concentrates; • Conversion of uranium concentrates to uranium hexafluoride; • Enrichment of uranium hexafluoride; • Fabrication of fuel assemblies; • Utilization of fuel assemblies in reactors; and • Storage and preparation for disposal of spent nuclear fuel.
The fuel cycle for Palo Verde is comprised of the following stages: • Mining and milling of uranium ore to produce uranium concentrates; • Conversion of uranium concentrates to uranium hexafluoride; • Enrichment of uranium hexafluoride; 6 Table of Contents • Fabrication of fuel assemblies; • Utilization of fuel assemblies in reactors; and • Storage and preparation for disposal of spent nuclear fuel.
Such closure requirements are deemed “forced closure” or “closure for cause” of unlined surface impoundments and are the subject of recent regulatory and judicial activities described below. 21 Table of Contents Since these regulations were finalized, EPA has taken steps to substantially modify the federal rules governing CCR disposal.
Such closure requirements are deemed “forced closure” or “closure for cause” of unlined surface impoundments and are the subject of the regulatory and judicial activities described below. Since these regulations were finalized, EPA has taken steps to substantially modify the federal rules governing CCR disposal.
Should the Good Neighbor Plan ultimately be imposed on APS and its operations in Arizona and New Mexico, it would have material impact on both the costs to operate current APS power plants and APS’s ability to develop new thermal generation to serve load.
Should a federal program like the Good Neighbor Plan ultimately be imposed on APS and its operations in Arizona and New Mexico, it would have material impact on both the costs to operate current APS power plants and APS’s ability to develop new thermal generation to serve load.
The General Stream Adjudication allows the state to issue a final priority determination on claims to surface water rights. There are three General Stream Adjudications near APS generating stations that may impact surface water or groundwater supplies that are adjacent to surface water streams. San Juan River Adjudication.
The General Stream Adjudication allows the state to issue a final priority determination on claims to surface water rights. There are three General Stream Adjudications near APS generating stations that may impact surface water or groundwater supplies that are adjacent to surface water streams. 25 Table of Contents San Juan River Adjudication.
In addition, the adjudication court has established a schedule for consideration of separate federal reserved water right claims asserted by the Navajo Nation and by the United States as trustee for the Nation.
In addition, the adjudication court has established a schedule for consideration of separate federal reserved water right claims asserted by the 26 Table of Contents Navajo Nation and by the United States as trustee for the Nation.
Bureau of Reclamation, as of January 1, 2025, Arizona’s supply of Colorado River water will remain subject to a Tier 1 shortage. This is the third year since 2022 that a Tier 1 shortage has been declared. The most severe shortage to have been declared was a Tier 2a shortage in 2023.
Bureau of Reclamation, as of January 1, 2026, Arizona’s supply of Colorado River water will remain subject to a Tier 1 shortage. This is the fourth year since 2022 that a Tier 1 shortage has been declared. The most severe shortage to have been declared was a Tier 2a shortage in 2023.
The following filings are available free of charge on our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”): Annual Reports on Form 10-K, definitive proxy statements for our annual shareholder meetings, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports.
The following filings are available free of charge on our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC: Annual Reports on Form 10-K, definitive proxy statements for our annual shareholder meetings, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports.
TransCanyon is pursuing independent electric transmission opportunities within the 11 U.S. states that comprise the Western Interconnection, excluding opportunities related to transmission service that would otherwise be 31 Table of Contents provided under the tariffs of the retail service territories of the venture partners’ utility affiliates. The U.S.
TransCanyon is pursuing independent electric transmission opportunities within the 11 U.S. states that comprise the Western Interconnection, excluding opportunities related to transmission service that would otherwise be provided under the tariffs of the retail service territories of the TransCanyon partners’ utility affiliates.
On January 17, 2023, EPA contacted APS to inform APS that it would be commencing on-site investigations within the SIBW site, including the Ocotillo power plant, and performing a remedial investigation and feasibility study related to potential PFAS impacts to groundwater over the next two to three years.
On January 17, 2023, EPA contacted APS to inform APS that it would be commencing on-site investigations within the South Indian Bend Wash site, including the Ocotillo power plant, and performing a remedial investigation and feasibility study related to potential PFAS impacts to groundwater over the next two to three years.
Box 53999 Phoenix, AZ 85072-3999 1920 6,315 (a) El Dorado 400 North Fifth Street Phoenix, AZ 85004 1983 — PNW Power 400 North Fifth Street Phoenix, AZ 85004 2023 — Total 6,403 (a) Includes employees at jointly-owned generating facilities (approximately 2,300 employees) for which APS serves as the generating facility manager.
Box 53999 Phoenix, AZ 85072-3999 1920 6,516 (a) El Dorado 400 North Fifth Street Phoenix, AZ 85004 1983 — PNW Power 400 North Fifth Street Phoenix, AZ 85004 2023 — Total 6,610 (a) Includes employees at jointly-owned generating facilities (approximately 2,400 employees) for which APS serves as the generating facility manager.
To prioritize reliability and meet substantial growth in residential and commercial energy needs, APS has developed a future-focused, strategic transmission plan (the “Ten-Year Transmission Plan”). The Ten-Year Transmission Plan includes five critical transmission projects that comprise the APS strategic transmission portfolio, which represents a significant upgrade to APS’s transmission system.
To prioritize reliability and meet substantial growth in residential and commercial energy needs, APS has developed a future-focused, strategic transmission plan (the “Ten-Year Transmission Plan”). The Ten-Year Transmission Plan includes critical transmission projects and represents a significant upgrade to APS’s transmission system.
Based on the information available to APS at this time, APS cannot reasonably estimate the fair value of the entire CCRMU asset retirement obligation.
Based on the information available to APS at this time, APS cannot reasonably estimate the cost of the entire CCRMU asset retirement obligation.
Court of Appeals for the D.C. Circuit subsequently vacated the ACE regulations on January 19, 2021, and ordered a remand for EPA to develop replacement regulations consistent with the original 2015 Clean Power Plan, the U.S. Supreme Court subsequently reversed that decision on June 30, 2022, holding that the Clean Power Plan exceeded EPA’s authority under the Clean Air Act.
Circuit subsequently vacated the Affordable Clean Energy regulations on January 19, 2021, and ordered a remand for EPA to develop replacement regulations consistent with the original 2015 Clean Power Plan, the U.S. Supreme Court subsequently reversed that decision on June 30, 2022, holding that the Clean Power Plan exceeded EPA’s authority under the Clean Air Act.
Other environmental rules that could involve material compliance costs include those related to effluent limitations, the ozone national ambient air quality standards (“NAAQS”) and other rules or matters involving the Clean Air Act, Clean Water Act, Endangered Species Act, RCRA, Superfund, the Navajo Nation, and water supplies for our power plants.
Other environmental rules that could involve material compliance costs include those related to effluent limitations, the ozone NAAQS and other rules or matters involving the Clean Air Act, Clean Water Act, Endangered Species Act, RCRA, Superfund, the Navajo Nation, and water supplies for our power plants.
APS is currently evaluating its compliance options for Four Corners based on the ELG regulations finalized in April 2024 and is assessing what impacts the new standards will have on our financial condition, results of operations, or cash flows. Ozone National Ambient Air Quality Standards.
APS is currently evaluating its compliance options for Four Corners based on the ELG regulations finalized in April 2024 and is assessing what impacts the new standards will have on our financial condition, results of operations, and cash flows.
We evaluate our success in building this culture in part through annual and quarterly employee engagement surveys, including our Employee Experience Index, which measures key aspects of engagement such as recognition, career development, and organizational pride. In 2024, we had 80% participation in these surveys, and our Employee Experience Index was 87%.
We evaluate our success in building this culture in part through annual and quarterly employee engagement surveys, including our Employee Experience Index, which measures key aspects of engagement such as recognition, career development, and organizational pride. In 2025, we had 83% participation in these surveys, and our Employee Experience Index was 86%.
In particular, EPA seeks information from APS regarding APS’s use, storage, and disposal of substances containing per-and polyfluoroalkyl (“PFAS”) compounds at the Ocotillo power plant site in order to aid EPA’s investigation into actual or threatened releases of PFAS into groundwater within the South Indian Bend Wash (“SIBW”) Superfund site.
In particular, EPA seeks information from 24 Table of Contents APS regarding APS’s use, storage, and disposal of substances containing PFAS at the Ocotillo power plant site in order to aid EPA’s investigation into actual or threatened releases of PFAS into groundwater within the South Indian Bend Wash Superfund site.
Effluent Limitation Guidelines . EPA published effluent limitation guidelines (“ELG”) on October 13, 2020, and based off those guidelines, APS completed a National Pollutant Discharge Elimination System (“NPDES”) permit modification for Four Corners on December 1, 2023. The ELG standards finalized in October 2020 relaxed the “zero discharge” standard for bottom ash transport waters EPA finalized in September 2015.
Effluent Limitation Guidelines . EPA published ELGs on October 13, 2020, and, based off those guidelines, APS completed a NPDES permit modification for Four Corners on December 1, 2023. The ELG standards finalized in October 2020 relaxed the “zero discharge” standard for bottom ash transport waters EPA finalized in September 2015.
Our reportable business segment is our regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses (primarily electric service to Native Load customers) and related activities, and includes electricity generation, transmission, and distribution. Our reportable business segment activities are conducted primarily through our wholly-owned subsidiary, APS.
Our reportable business segment is our regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses (primarily electric service to Native Load customers) and related activities, and includes electricity generation, transmission, and distribution.
Energy Impact Partners is an organization that focuses on fostering innovation and supporting the transformation of the utility industry. • $25 million investment in AZ-VC (formerly invisionAZ Fund), of which approximately $11.8 million has been funded as of December 31, 2024.
Energy Impact Partners is an organization that focuses on fostering innovation and supporting the transformation of the utility industry. • $25 million investment in AZ-VC Fund I, LLC (formerly invisionAZ Fund) (“AZ-VC”), of which approximately $16 million has been funded as of December 31, 2025.
At this time, APS cannot predict the impact on the Company’s financial condition, results of operations, or cash flows. Revised Mercury and Air Toxics Standard (“MATS”) Proposal. On April 25, 2024, EPA finalized revisions to the existing MATS regulations governing emissions of toxic air pollution from existing coal-fired power plants.
At this time, APS cannot predict the impact on the Company’s financial condition, results of operations, or cash flows. Revised Mercury and Air Toxics Standard (“MATS”) Proposal. On February 20, 2026, EPA issued a final rule repealing the 2024 revisions to MATS regulations governing emissions of toxic air pollution from existing coal-fired power plants.
These five projects, along with other projects included in the Ten-Year Transmission Plan, are intended to support growing energy needs, strengthen reliability, and allow for the connection of new resources. APS is also working to establish and expand advanced grid technologies throughout its service territory to provide long-term benefits both to APS and its customers.
These projects are intended to support growing energy needs, strengthen reliability, and allow for the connection of new resources. APS is also working to establish and expand advanced grid technologies throughout its service territory to provide long-term benefits both to APS and its customers.
The SIBW Superfund site includes the APS Ocotillo power plant site. APS filed its response to this information request on April 29, 2022.
The South Indian Bend Wash Superfund site includes the APS Ocotillo power plant site. APS filed its response to this information request on April 29, 2022.
Those who released, generated, transported to or disposed of hazardous substances at a contaminated site are among the parties who are potentially responsible (each a “PRP”). PRPs may be strictly, jointly, and severally liable for clean-up.
CERCLA establishes liability for the cleanup of hazardous substances found contaminating the soil, water or air. Those who released, generated, transported to, or disposed of hazardous substances at a contaminated site are among the parties who are potentially responsible (each a “PRP”). PRPs may be strictly, jointly, and severally liable for clean-up.
These initiatives contribute to a high-performing and engaged workforce that supports the long-term success of our Company. Succession Planning Succession planning is critical to ensuring the long-term success of our Company. We have a robust process for identifying and developing high-potential leaders to fill key executive and other critical roles.
Succession Planning Succession planning is critical to ensuring the long-term success of our Company. We have a robust process for identifying and developing high-potential leaders to fill key executive and other critical roles.
As a result, those generic impacts do not need to be re-analyzed in the environmental reviews for individual licenses. The final Continued Storage Rule was subject to continuing legal challenges before the NRC and the Court of Appeals.
As a result, those generic impacts do not need to be re-analyzed in the environmental reviews for individual licenses. The final Continued Storage Rule was subject to continuing legal challenges before the NRC and the Court of Appeals. In June 2016, the D.C. Circuit issued its final decision, rejecting all remaining legal challenges to the Continued Storage Rule.
The Navajo Plant disposed of CCR only in a dry landfill storage area. Additionally, the CCR rule requires ongoing, phased groundwater monitoring. As of October 2018, APS has completed the statistical analyses for its CCR disposal units that triggered assessment monitoring.
The Navajo Plant disposed of CCR only in a dry landfill storage area. The Cholla Plant disposed of CCR in ash ponds and dry storage areas prior to ceasing coal-fired operations. Additionally, the CCR rule requires ongoing, phased groundwater monitoring. As of October 2018, APS has completed the statistical analyses for its CCR disposal units that triggered assessment monitoring.
Depending on the outcome of those evaluations and site 22 Table of Contents investigations, the costs associated with APS’s management of CCR could materially increase, which could affect our financial condition, results of operations, or cash flows. APS currently disposes of CCR in ash ponds and dry storage areas at Cholla and Four Corners.
Depending on the outcome of the pending legacy 2024 CCRMU rule amendments and APS’s evaluations, the costs associated with APS’s management of CCR could materially increase, which could affect our financial condition, results of operations, or cash flows. APS currently disposes of CCR in ash ponds and dry storage areas at Four Corners.
On October 31, 2024, APS filed its eleventh claim pursuant to the terms of the August 15, 2014, settlement agreement in the amount of approximately $18 million (APS’s share is approximately $5.3 million). In February 2025, the DOE approved approximately $17.6 million of this claim. Waste Confidence and Continued Storage — On June 8, 2012, the D.C.
On October 31, 2025, APS submitted its twelfth claim pursuant to the terms of the settlement agreement in the amount of approximately $15.4 million (APS’s share is approximately $4.5 million). In February 2026, the DOE approved approximately $15.4 million of this claim. Waste Confidence and Continued Storage — On June 8, 2012, the D.C.
The proposed Cross-Tie project includes a 214-mile transmission line connecting Utah and Nevada that is intended to help improve grid reliability and relieve congestion on other transmission lines.
These opportunities include the proposed 500-kV Cross-Tie 30 Table of Contents transmission project, which includes a 214-mile transmission line connecting Utah and Nevada that is intended to help improve grid reliability and relieve congestion on other transmission lines.
APS operates the plant and owns 29.1% of Palo Verde Units 1 and 3 and approximately 17% of Unit 2. In addition, APS leases approximately 12.1% of Unit 2, resulting in a 29.1% combined ownership and leasehold interest in that unit.
APS operates the plant and owns 29.1% of Palo Verde Units 1 and 3 and approximately 23.9% of Unit 2. In addition, APS leases approximately 5.2% of Unit 2, resulting in a 29.1% combined ownership and leasehold interest in that unit. APS has a total entitlement from Palo Verde of 1,146 MW.
Westly Seed Fund is focused on supporting entrepreneurs involved in the energy, mobility, building, and industrial sectors. • Equity investment in SAI Advanced Power Solutions (“SAI”), a private corporation that manufactures electrical switchgear equipment used by data centers. El Dorado accounts for this investment under the equity method, with a December 31, 2024 investment carrying value of zero.
Westly Seed Fund is focused on supporting entrepreneurs involved in the energy, mobility, building, and industrial sectors. • Equity investment in SAI Advanced Power Solutions, Inc. (“SAI”), a private corporation that manufactures electrical switchgear equipment used by data centers.
Among other strategies, APS intends to achieve these goals through various methods such as relying on Palo Verde, one of the nation’s largest producers of carbon-free energy; increasing clean energy resources, including renewables; developing energy storage; exiting from coal-generated electricity; managing demand with a modern interactive grid; promoting customer technology and energy efficiency; and optimizing regional resources.
Among other strategies, APS intends to achieve this goal through various methods such as relying on Palo Verde, one of the nation’s largest producers of carbon-free energy; seeking a balanced energy mix; managing demand with a modern interactive grid; promoting customer technology and energy efficiency; and optimizing regional resources.
Over this same period of time, APS also intends to harden its infrastructure in order to improve climate resiliency, which involves system and operational improvements aimed at reducing the impact of extreme weather events and other climate-related disruptions upon APS’s operations.
APS also intends to harden its infrastructure in order to improve resiliency, which involves system and operational improvements aimed at reducing the impact of extreme weather events and other disruptions upon APS’s operations. Wildfire safety remains a critical focus for APS and other utilities.
With ozone standards becoming more stringent, our fossil generation units will come under increasing pressure to reduce emissions of NOx and volatile organic compounds, and to generate emission offsets for new projects or facility expansions located in ozone nonattainment areas. EPA was expected to designate attainment and nonattainment areas relative to the new 70 ppb standard by October 1, 2017.
With ozone standards becoming more stringent, our fossil generation units will come under increasing pressure to reduce emissions of nitrogen oxide (“NOx”) and volatile organic compounds, and to generate emission offsets for new projects or facility expansions located in ozone nonattainment areas.
The amounts recovered were primarily recorded as adjustments to a regulatory liability and had no impact on reported net income. In accordance with the 2017 Rate Case Decision, this regulatory liability is being refunded to customers. See Note 3.
The DOE has approved and paid approximately $174.3 million for these claims (APS’s share is approximately $50.7 million). The amounts recovered were primarily recorded as adjustments to a regulatory liability and had no impact on reported net income. In accordance with the ACC’s decision from APS’s 2017 rate case, this regulatory liability is being refunded to customers.
(b) Includes rooftop solar facilities owned by third parties. DG is produced in direct current and is converted to alternating current for reporting purposes. Energy Storage APS deploys a number of advanced technologies on its system, including energy storage.
(b) DG is produced in direct current and is converted to alternating current for reporting purposes. (c) Includes Flagstaff Community Power Project, APS School and Government Program, APS Solar Partner Program, and APS Solar Communities Program. APS deploys a number of advanced technologies on its system, including energy storage.
On December 19, 2019, EPA proposed its own set of regulations governing the issuance of CCR management permits, which would impact facilities like Four Corners located on the Navajo Nation.
It remains unclear when EPA would approve that permitting program pursuant to the Water Infrastructure Improvements for the Nation Act. On December 19, 2019, EPA proposed its own set of regulations governing the issuance of CCR management permits, which would impact facilities like Four Corners located on the Navajo Nation.
Future resource plans and procurement efforts implicating the development of such new generation remains pending and, as such, at this time APS is not able to quantify the financial impact associated with EPA’s GHG regulations for power plants.
Future resource plans and procurement efforts implicating the development of such new generation remain pending and, as such, at this time APS is not able to quantify the financial impact associated with EPA’s existing GHG regulations for power plants. On June 11, 2025, EPA put forth a proposed rule with two scenarios for repealing the GHG regulations finalized in 2024.
Unlike EPA’s Clean Power Plan regulations from 2015, which took a broad, system-wide approach to regulating carbon emissions from electric utility fossil-fuel burning power plants, these new federal regulations are limited to measures that can be installed at individual power plants to limit planet-warming carbon-dioxide emissions.
Unlike EPA’s Clean Power Plan regulations from 2015, which took a broad, system-wide approach to regulating carbon emissions from electric utility fossil-fuel burning power plants, these new federal regulations are limited to measures that can be installed at individual power plants to limit planet-warming carbon-dioxide emissions. 18 Table of Contents Under current rules, carbon emission performance standards apply based on the annual capacity factors for new natural gas-fired combustion turbine power plants.
APS has two oil-only power plants: Douglas, located in the town of Douglas, Arizona and Yucca GT-4 in Yuma, Arizona. APS owns and operates each of these plants with the exception of one oil-only combustion turbine unit and one oil and gas steam unit at Yucca that are operated by APS and owned by the Imperial Irrigation District.
APS owns and operates each of these plants with the exception of one oil-only combustion turbine unit and one oil and gas steam unit at Yucca that are operated by APS and owned by the Imperial Irrigation District. APS has a total entitlement from these plants of 3,722 MW.
APS would seek recovery in rates for the book value of any remaining investments in the plants as well as other costs related to early retirement but cannot predict whether it would obtain such recovery. EPA Environmental Regulation Coal Combustion Waste.
APS would seek recovery in rates for the book value of any remaining investments in the plants as well as other costs related to early retirement but cannot predict whether it would obtain such recovery. Sustainability Reporting APS prepares an annual inventory of GHG emissions from its operations.
BUSINESS OF ARIZONA PUBLIC SERVICE COMPANY APS currently provides electric service to approximately 1.4 million customers. We own or lease 6,540 MW of regulated generation capacity and we hold a mix of both long-term and short-term purchased power agreements for additional capacity.
Our reportable business segment activities are conducted primarily through our wholly-owned subsidiary, APS. 3 Table of Contents BUSINESS OF ARIZONA PUBLIC SERVICE COMPANY APS currently provides electric service to approximately 1.4 million customers. We own or lease 6,257 MW of regulated generation capacity, and we hold a mix of both long-term and short-term PPAs for additional capacity.
APS is utilizing grid-scale energy storage projects to meet customer reliability requirements, increase renewable utilization, and further our understanding of how storage works with other advanced technologies and the grid.
APS is utilizing grid-scale energy storage projects to meet customer reliability requirements, increase renewable utilization, and further our understanding of how storage works with other advanced technologies and the grid. 11 Table of Contents The following table summarizes APS’s owned energy storage currently in operation and under development as of the date of this report.
On December 19, 2014, EPA issued its final regulations governing the handling and disposal of CCR, such as fly ash and bottom ash. The rule regulates CCR as a non-hazardous waste under Subtitle D of the RCRA and establishes national minimum criteria for existing and new CCR landfills and surface impoundments and all lateral expansions.
The rule regulates CCR as a non-hazardous waste under Subtitle D of the RCRA and establishes national minimum criteria for existing and new CCR landfills and surface impoundments and all lateral expansions.
The vast majority of APS’s natural gas-fired EGUs are located in these jurisdictions. Areas of Arizona and the Navajo Nation where the remainder of APS’s fossil-fuel fired EGU fleet is located were designated as in attainment.
Areas of Arizona and the Navajo Nation where the remainder of APS’s fossil-fuel fired electric generating unit fleet is located were designated as in attainment.
APS prepares an annual inventory of GHG emissions from its operations. For APS’s operations involving fossil-fuel electricity generation and electricity transmission and distribution, APS’s annual GHG inventory is reported to the EPA under the EPA GHG Reporting Program.
For APS’s operations involving fossil-fuel electricity generation and electricity transmission and distribution, APS’s annual GHG inventory is reported to EPA under the EPA GHG Reporting Program. In addition to reporting to EPA, we publicly report Scope 1 and 2 GHG emissions.
To this end, our talent strategy prioritizes the following: • Commitment to Growth and Development: We provide a wide range of professional development opportunities, including leadership academies, rotational programs, mentoring, industry certifications, and loaned executive programs. In 2024, we ran dedicated programs for individual contributors, new leaders, and high potential managers.
To this end, our talent strategy prioritizes the following: • Commitment to Growth and Development : We provide a wide range of professional development opportunities to support a modern learning culture, including on-demand learning, learning events, leadership academies, rotational programs, mentoring, industry certifications, and loaned executive programs.
APS has a total entitlement from these plants of 3,573 MW. A portion of the gas for these plants is financially hedged up to three years in advance of purchasing and that position is converted to a physical gas purchase one month prior to delivery.
A portion of the gas for these plants is financially hedged up to three years in advance of purchasing and that position is converted to a physical gas purchase one month prior to delivery. APS has long-term gas transportation agreements with three different companies, some of which are effective through 2052.
El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures. In particular, El Dorado has committed to and holds the following: • $25 million investment in the Energy Impact Partners fund, of which approximately $18.8 million has been funded as of December 31, 2024.
In particular, El Dorado has committed to and/or holds the following: • $25 million investment in the Energy Impact Partners fund, of which approximately $20 million has been funded as of December 31, 2025.
For intermediate or low-load natural gas fired combustion turbines, those with 40% or less capacity factors, EPA’s regulations would not require add-on pollution controls.
The highest utilization combustion turbines must be retrofitted for CCS by 2032. Intermediate or low-load natural gas fired combustion turbines with 40% or less capacity factors do not require add-on pollution controls.
APS will continue to monitor these standards as they are implemented within the jurisdictions affecting APS. 23 Table of Contents EPA Good Neighbor Proposal for Arizona .
If finalized, this proposal is also subject to judicial review. APS will continue to monitor these standards as they are implemented within the jurisdictions affecting the Company’s operations. EPA Good Neighbor Proposal for Arizona .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeModification of the ACC’s retail electric competition rules or other efforts of deregulation could result in increased competition, which could have a significant adverse impact on APS’s business and results of operations. OPERATIONAL RISKS APS’s results of operations can be adversely affected by various factors impacting demand for electricity. Weather Conditions.
Biggest changeOPERATIONAL RISKS APS’s results of operations can be adversely affected by various factors impacting demand for electricity. Weather Conditions. Weather conditions directly influence the demand for electricity and affect the price of energy commodities. Electric power demand is generally a seasonal business.
Additionally, as APS’s transmission infrastructure ages and its transmission system needs grow to support growth in our territory and in the Southwest, it will need to replace and expand certain portions of its transmission infrastructure, which requires significant investment of capital.
Additionally, as APS’s transmission infrastructure ages and its transmission system needs to grow to support growth in our territory and in the Southwest, it will need to replace and expand certain portions of its transmission infrastructure, which requires significant investment of capital.
In addition, APS is required by the ACC to meet certain energy resource portfolio requirements, including those related to renewables development and energy efficiency measures, in addition to specific competitive resource procurement requirements.
APS is required by the ACC to meet certain energy resource portfolio requirements, including those related to renewables development and energy efficiency measures, in addition to specific competitive resource procurement requirements.
Additionally, supply chains have been impacted and could be further impacted by inflation, tariffs, and other sociopolitical factors, resulting in equipment delays and increased costs. A failure to recover these potential increased costs through our rates could have a material adverse impact on our financial condition, results of operations, or cash flows.
Additionally, supply chains have been impacted and could be further impacted by inflation, tariffs, and other sociopolitical factors, resulting in equipment delays and increased costs. Any failure to recover these potential increased costs through our rates could have a material adverse impact on our financial condition, results of operations, or cash flows.
Decisions made by the ACC or FERC could have a material adverse impact on our financial condition, results of operations, or cash flows. 33 Table of Contents APS’s ability to conduct its business operations and avoid negative operational and financial impacts depends in part upon compliance with federal, state and local laws, judicial decisions, statutes, regulations and ACC requirements, which may be revised from time to time by legislative or other action, and obtaining and maintaining certain regulatory permits, approvals, and certificates.
Decisions made by the ACC or FERC could have a material adverse impact on our financial condition, results of operations, or cash flows. 32 Table of Contents APS’s ability to conduct its business operations and avoid negative operational and financial impacts depends in part upon compliance with federal, state and local laws, judicial decisions, statutes, regulations and ACC requirements, which may be revised from time to time by legislative or other action, and obtaining and maintaining certain regulatory permits, approvals, and certificates.
APS must comply in good faith with all applicable statutes, regulations, rules, tariffs, and orders of agencies that regulate APS’s business, including FERC, NRC, EPA, the ACC, and state and local governmental agencies.
APS must comply in good faith with all applicable statutes, regulations, rules, tariffs, executive orders and orders of agencies that regulate APS’s business, including FERC, NRC, EPA, the ACC, and state and local governmental agencies.
Arizona, like certain other states, has a statute that allows the ACC to reopen prior decisions and modify otherwise final orders under certain circumstances. Additionally, given that APS is subject to oversight by several regulatory agencies, a resolution by one may not foreclose potential actions by others for similar or related matters. See Note 10.
Arizona, like certain other states, has a statute that allows the ACC to reopen prior decisions and modify otherwise final orders under certain circumstances. Additionally, given that APS is subject to oversight by several regulatory agencies, a resolution by one may not foreclose potential actions by others for similar or related matters. See Note 14.
Certain replacements and expansions of the transmission infrastructure will also require the acquisition or renewal of land leases, easements, or other rights-of-way that may require approvals from landowners, including individuals, governmental agencies, and, at times, tribal nations. APS is unable to predict the outcomes of any pending or future required approvals, including any related costs, which could be significant.
Certain replacements and expansions of the transmission infrastructure will also require the acquisition or renewal of land leases, easements, or other rights-of-way that may require approvals from landowners, including individuals, government agencies, and, at times, tribal nations. APS is unable to predict the outcomes of any pending or future required approvals, including any related costs, which could be significant.
APS’s ability to successfully execute its clean energy commitment is dependent upon a number of external factors, some of which include supportive national and state energy policies, a supportive regulatory environment, sales and customer growth, the development, deployment and advancement of clean energy technologies, adequate supply chain for generation resources, and continued access to capital markets.
APS’s ability to successfully execute its clean energy goal is dependent upon a number of external factors, some of which include supportive national and state energy policies, a supportive regulatory environment, sales and customer growth, the development, deployment and advancement of clean energy technologies, adequate supply chain for generation resources, and continued access to capital markets.
These agencies regulate many aspects of APS’s utility operations, including safety and performance, emissions, siting and construction of facilities, labor and employment, customer service and the rates that APS can charge retail and wholesale customers. Failure to comply can subject APS to, among other things, fines and penalties.
These laws, regulations, and agencies regulate many aspects of APS’s utility operations, including safety and performance, emissions, siting and construction of facilities, labor and employment, customer service and the rates that APS can charge retail and wholesale customers. Failure to comply can subject APS to, among other things, fines and penalties.
The passage of certain initiatives or referenda could result in laws and regulations that impact our business plans and have a material adverse impact on our financial condition, results of operations, or cash flows. 45 Table of Contents General economic conditions could materially affect our business, financial condition, and results of operations.
The passage of certain initiatives or referenda could result in laws and regulations that impact our business plans and have a material adverse impact on our financial condition, results of operations, or cash flows. 44 Table of Contents General economic conditions could materially affect our business, financial condition, and results of operations.
If there is a delay or failure to obtain any required environmental regulatory approval, or if APS fails to obtain, 34 Table of Contents maintain, or comply with any such approval, operations at affected facilities could be suspended or subject to additional expenses.
If there is a delay or failure to obtain any required environmental regulatory approval, or if APS fails to obtain, 33 Table of Contents maintain, or comply with any such approval, operations at affected facilities could be suspended or subject to additional expenses.
While these provisions may have the effect of encouraging persons seeking to acquire control of us to negotiate with our Board of Directors, they could enable the Board of Directors to hinder or frustrate a 47 Table of Contents transaction that some, or a majority, of our shareholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors.
While these provisions may have the effect of encouraging persons seeking to acquire control of us to negotiate with our Board of Directors, they could enable the Board of Directors to hinder or frustrate a transaction that some, or a majority, of our shareholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors.
A major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any domestic nuclear unit and to promulgate new regulations that could require significant capital expenditures and/or increase operating costs. Changes in technology could create challenges for APS’s existing business.
A major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any domestic nuclear unit and to promulgate new regulations that could require significant capital expenditures and/or increase operating costs. 40 Table of Contents Changes in technology could create challenges for APS’s existing business.
Despite the fact that the majority of APS’s trading counterparties are rated as investment grade by the rating agencies, there is still a possibility that one or more of these companies could default, which could result in a material adverse impact on our earnings for a given period.
Despite the fact that the majority of APS’s trading counterparties are rated as investment grade by the rating 43 Table of Contents agencies, there is still a possibility that one or more of these companies could default, which could result in a material adverse impact on our earnings for a given period.
Some of these systems are managed, hosted, provided, or used by third parties to assist in conducting our business. 40 Table of Contents Malicious actors may attack vendors to disrupt the services these vendors provide to us or to use those vendors as a cyber conduit to attack us.
Some of these systems are managed, hosted, provided, or used by third parties to assist in conducting our business. Malicious actors may attack vendors to disrupt the services these vendors provide to us or to use those vendors as a cyber conduit to attack us.
Widespread installation and 42 Table of Contents acceptance of new technologies could also enable the entry of new market participants, such as technology companies, into the interface between APS and its customers and could have other unpredictable effects on APS’s traditional business model.
Widespread installation and acceptance of new technologies could also enable the entry of new market participants, such as technology companies, into the interface between APS and its customers and could have other unpredictable effects on APS’s traditional business model.
Our ability to have the benefit of their cash flows, particularly in the case of any 44 Table of Contents insolvency or financial distress affecting our subsidiaries, would arise only through our equity ownership interests in our subsidiaries and only after their creditors have been satisfied.
Our ability to have the benefit of their cash flows, particularly in the case of any insolvency or financial distress affecting our subsidiaries, would arise only through our equity ownership interests in our subsidiaries and only after their creditors have been satisfied.
The inability to successfully develop, acquire or operate generation resources to meet future resource needs and load forecasts in accordance with reliability requirements and other new or evolving standards and regulations could adversely impact our business.
The inability to successfully develop, acquire or operate generation and transmission facilities to meet future resource needs and load forecasts in accordance with reliability requirements and other new or evolving standards and regulations could adversely impact our business.
Concerns over the physical security of these assets could include damage to certain of our 38 Table of Contents facilities due to vandalism or other deliberate acts that could lead to outages or other adverse effects. If APS’s facilities operate below expectations, especially during its peak seasons, it may lose revenue or incur additional expenses, including increased purchased power expenses.
Concerns over the physical security of these assets could include damage to certain of our facilities due to vandalism or other deliberate acts that could lead to outages or other adverse effects. If APS’s facilities operate below expectations, especially during its peak season, it may lose revenue or incur additional expenses, including increased purchased power expenses.
APS’s inability to access sufficient supplies of water, along with that of its customers, could have a material adverse impact on our business and results of operations. We are subject to cybersecurity risks and risks of unauthorized access to our systems that could adversely affect our business and financial condition.
APS’s inability to access sufficient supplies of water, along with that of its customers, could have a material adverse impact on our business and results of operations. We are subject to risk related to cybersecurity, IT systems, and unauthorized access to our systems that could adversely affect our business and financial condition.
Based on past experience, a 1% variation in our annual residential and small commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $24 million, and a 1% variation in our annual large commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $6 million.
Based on past experience, a 1% variation in our annual residential and small commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $25 million, and a 1% variation in our annual large commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $7 million.
We are subject to employee workforce factors that could adversely affect our business and financial condition. Like many companies in the electric utility industry, our workforce is maturing, with approximately 27.4% of employees eligible to retire by the end of 2029. Although we have undertaken efforts to recruit, train and develop new employees, we face increased competition for talent.
We are subject to employee workforce factors that could adversely affect our business and financial condition. Like many companies in the electric utility industry, our workforce is maturing, with approximately 26.1% of employees eligible to retire by the end of 2030. Although we have undertaken efforts to recruit, train and develop new employees, we face increased competition for talent.
See Note 3 for a discussion of the Navajo Plant and Cholla retirement and the related risks associated with APS’s continued recovery of its remaining investment in the plant. Deregulation or restructuring of the electric industry may result in increased competition, which could have a significant adverse impact on APS’s business and its results of operations.
See Note 8 for a discussion of the Navajo Plant and Cholla retirements and the related risks associated with APS’s continued recovery of its remaining investment in the plant. Deregulation or restructuring of the electric industry and other factors may result in increased competition, which could have a significant adverse impact on APS’s business and its results of operations.
APS’s actual sales growth, excluding weather-related variations, may differ from its projections as a result of numerous factors, such as economic conditions, customer growth, the legal, regulatory, and business environment in Arizona, usage patterns and energy conservation, slower than expected ramp-up of and/or fewer than expected data centers and large manufacturing facilities, slower than expected commercial and industrial expansions, impacts of energy efficiency programs and growth in DG, responses to retail price changes, changes in regulatory standards, and impacts of new and existing laws and regulations, including environmental laws and regulations.
Actual sales growth, excluding weather-related variations, may differ from our projections as a result of numerous factors, such as macroeconomic conditions, current and future economic, regulatory, business, and other conditions, such as the Arizona housing market, customer growth, usage patterns and energy conservation, slower ramp-up of and/or fewer large data centers and manufacturing facilities, slower than expected commercial and industrial expansions, impacts of energy efficiency programs and growth in DG, responses to retail price changes, changes in regulatory standards, and impacts of new and existing laws and regulations, including environmental laws and regulations.
In addition, APS is subject to retrospective premium adjustments under its nuclear property insurance policies with Nuclear Electric Insurance Limited (“NEIL”) for approximately $23.1 million if NEIL’s losses in any policy year exceed accumulated funds and if the retrospective premium assessment is declared by NEIL’s Board of Directors.
In addition, APS is subject to retrospective premium adjustments under its nuclear property insurance policies with NEIL for approximately $24.2 million if NEIL’s losses in any policy year exceed accumulated funds and if the retrospective premium assessment is declared by NEIL’s Board of Directors.
Potential changes in regulatory standards, impacts of new and existing laws and regulations, including environmental laws and regulations, and the need to obtain various regulatory approvals create uncertainty surrounding our current and future generation portfolio. The current regulatory standards, laws, and regulations create strategic challenges as to the appropriate generation portfolio and fuel diversification mix.
Potential changes in regulatory standards, impacts of new and existing laws and regulations, including environmental laws and regulations, and the need to obtain various regulatory approvals create uncertainty surrounding our current and future generation portfolio.
In particular, in recent years the United States’ economy experienced a substantial rise in the inflation rate and more recently in 2025, the Trump administration has implemented tariffs and discussed additional tariffs, which would further increase costs.
In particular, in recent years the United States’ economy experienced a substantial rise in the inflation rate and more recently in 2025 the Trump administration has implemented tariffs and discussed additional tariffs, which would further increase costs. The Company is currently evaluating the impact of the recent U.S.
However, certain market disruptions or revisions to rules or regulations may cause our cost of borrowing to increase generally, and/or otherwise adversely affect our ability to access these financial markets. 46 Table of Contents In addition, the credit commitments of our lenders under our bank facilities may not be satisfied or continued beyond current commitment periods for a variety of reasons, including new rules and regulations, changes to the internal policies of our lenders, periods of financial distress or liquidity issues affecting our lenders or financial markets, which could materially adversely affect the adequacy of our liquidity sources and/or the cost of maintaining these sources.
In addition, the credit commitments of our lenders under our bank facilities may not be satisfied or continued beyond current commitment periods for a variety of reasons, including new rules and regulations, changes to the internal policies of our lenders, periods of financial distress or liquidity issues affecting our lenders or financial markets, which could materially adversely affect the adequacy of our liquidity sources and/or the cost of maintaining these sources.
We derive essentially all of our revenues and earnings from our wholly-owned subsidiary, APS. Accordingly, our cash flow and our ability to pay dividends on our common stock is dependent upon the earnings and cash flows of APS and its distributions to us. APS is a separate and distinct legal entity and has no obligation to make distributions to us.
Our cash flow depends on the performance of APS and its ability to make distributions. We derive essentially all of our revenues and earnings from our wholly-owned subsidiary, APS. Accordingly, our cash flow and our ability to pay dividends on our common stock is dependent upon the earnings and cash flows of APS and its distributions to us.
If APS is unable to successfully manage the replacement and expansion of its transmission infrastructure, it could face increased equipment failures, power quality challenges, reputational impact, and financial loss. The impact of wildfires could negatively affect APS’s results of operations.
If APS is unable to successfully manage the 37 Table of Contents replacement and expansion of its transmission infrastructure, it could face increased equipment failures, power quality challenges, reputational impact, and financial loss.
These types of events would also require significant management attention and resources and could have a material adverse impact on our financial condition, results of operations, or cash flows.
These types of events as well as the impacts of integrating new IT systems could also require significant management attention and resources and could have a material adverse impact on our financial condition, results of operations, or cash flows.
In addition, APS has historically sold less power, and consequently earned less income, when weather conditions are milder. As a result, unusually mild weather could diminish APS’s financial condition, results of operations, or cash flows. Apart from the impact on electricity demand, weather conditions related to prolonged high temperatures or extreme heat events present operational challenges.
As a result, unusually mild weather could diminish APS’s financial condition, results of operations, or cash flows. Apart from the impact on electricity demand, weather conditions related to prolonged high temperatures or extreme heat events present operational challenges.
We are subject to other employee workforce factors, such as the availability and retention of qualified personnel and the need to negotiate collective bargaining agreements with union employees. These or other employee workforce factors could negatively impact our business, financial condition, or results of operations.
We are subject to other employee workforce factors, such as the availability and retention of qualified personnel and the need to negotiate collective bargaining agreements with union employees.
In addition, the stock market in general has experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the market price of our common stock.
In addition, the stock market in general has experienced volatility that has often been unrelated to the operating performance of a particular company.
APS’s financing agreements may restrict its ability to pay dividends, make distributions or otherwise transfer funds to us. In addition, an ACC financing order requires APS to maintain a common equity ratio of at least 40% and does not allow APS to pay common dividends if the payment would reduce its common equity below that threshold.
In addition, an ACC financing order requires APS to maintain a common equity ratio of at least 40% and does not allow APS to pay common dividends if the payment would reduce 42 Table of Contents its common equity below that threshold.
APS is implementing strategies to attempt to reduce this risk; however, the difficulty in forecasting these demands and the additional risk of these arrangements could lead to stranded costs and other effects that could have material adverse impacts on APS’s financial condition, results of operations, and cash flows.
The difficulty in forecasting these demands and the 36 Table of Contents additional risk of these arrangements could lead to stranded costs and other effects that could have material adverse impacts on APS’s financial condition, results of operations, and cash flows. The impact of wildfires could negatively affect APS’s results of operations.
One of these agencies, NERC, has issued comprehensive regulations and standards surrounding the security of bulk power systems and is continually in the process of developing updated and additional requirements with which the utility industry must comply. The NRC also has issued regulations and standards related to the protection of critical digital assets at commercial nuclear power plants.
One of these agencies, NERC, has issued comprehensive regulations and standards surrounding the security of bulk power systems and is continually in the process of developing updated and additional requirements 39 Table of Contents with which the utility industry must comply.
Certain provisions of our articles of incorporation and bylaws and of Arizona law make it difficult for shareholders to change the composition of our board and may discourage takeover attempts.
These broad market fluctuations may adversely affect the market price of our common stock. 45 Table of Contents Certain provisions of our articles of incorporation and bylaws and of Arizona law make it difficult for shareholders to change the composition of our board and may discourage takeover attempts.
The development and operation of any generation facility is also subject to many risks, including those related to financing, siting, permitting, new and evolving technology, extreme weather events, workforce issues, cybersecurity attacks, supply 39 Table of Contents chain constraints for critical spare parts, and the construction of sufficient transmission capacity to support these facilities among others.
The development and operation of these facilities is subject to other risks, including those related to financing, siting, permitting, new and evolving technology, extreme weather events, workforce issues, cybersecurity attacks, supply chain constraints for key equipment and critical spare parts, overreliance on or the existence of a small number of suppliers, access to fuel, and the construction of sufficient transmission capacity to support these facilities among others.
Alternative GHG emission limitations may arise from litigation under either federal or state common laws or citizen suit provisions of federal environmental statutes that attempt to force federal agency rulemaking or impose direct facility emission limitations. Such lawsuits may also seek damages from harm alleged to have resulted from power plant GHG emissions. Physical and Operational Risks.
Alternative GHG emission limitations may arise from litigation under either federal or state common laws or citizen suit provisions of federal environmental statutes that attempt to force federal agency rulemaking or impose direct facility emission limitations.
APS must also meet certain distributed renewable energy requirements. A portion of APS’s total renewable energy requirement must be met with an increasing percentage of distributed renewable energy resources (generally, small-scale renewable technologies located on customers’ properties).
APS customers participate in energy efficiency and conservation programs and other DSM efforts, which in turn impact the demand for electricity. APS must also meet certain distributed renewable energy requirements. A portion of APS’s total renewable energy requirement must be met with an increasing percentage of distributed renewable energy resources (generally, small-scale renewable technologies located on customers’ properties).
Higher temperatures may decrease the snowpack, which might result in lowered soil moisture and an increased threat of wildfires. Wildfires could threaten APS’s communities and electric transmission lines and facilities. Any damage caused as a result of wildfires could negatively impact APS’s financial condition, results of operations, or cash flows.
These operational risks related to rising temperatures and extreme heat events could affect APS’s financial condition, results of operations, or cash flows. 35 Table of Contents Higher temperatures may decrease the snowpack, which might result in lowered soil moisture and an increased threat of wildfires. Wildfires could threaten APS’s communities and electric transmission lines and facilities.
Climate change is also projected to exacerbate such drought conditions. In addition, Colorado River water supplies for Arizona are subject to a Tier 1 shortage declaration, which substantially limits the quantity of water available for the state.
Climate change is projected to exacerbate such 38 Table of Contents drought conditions. Colorado River water supplies for Arizona are subject to shortage declarations that substantially limit the quantity of water available to the state.
Extreme heat events and rising temperatures are projected to reduce the generation capacity of thermal-power plants and decrease the efficiency of the transmission grid. These operational risks related to rising temperatures and extreme heat events could affect APS’s financial condition, results of operations, or cash flows.
Extreme heat events and rising temperatures are projected to reduce the generation capacity of thermal-power plants and decrease the efficiency of the transmission grid.
The new regulations are currently being challenged in federal court. Additionally, the Trump administration has stated that it intends to reverse or substantially revise these standards. See Item 1 - Environmental Matters - Climate Change for more information.
Additionally, the Trump administration has stated that it intends to reverse or substantially revise these standards. See “Business of Arizona Public Service Company — Environmental Matters — Climate Change” in Part I, Item 1 for more information.
Additionally, the valuation of liabilities related to our pension plan and other postretirement benefit plans are impacted by a discount rate, which is the interest rate used to discount future pension and other postretirement 43 Table of Contents benefit obligations.
Declines in market values of the fixed income and equity securities held in these trusts may increase our funding requirements for the related trusts. Additionally, the valuation of liabilities related to our pension plan and other postretirement benefit plans are impacted by a discount rate, which is the interest rate used to discount future pension and other postretirement benefit obligations.
Weather conditions directly influence the demand for electricity and affect the price of energy commodities. Electric power demand is generally a seasonal business. In Arizona, demand for power peaks during the hot summer months, with market prices also peaking at that time. As a result, APS’s overall operating results fluctuate substantially on a seasonal basis.
In Arizona, demand for power peaks during the hot summer months, with market prices also peaking at that time. As a result, APS’s overall operating results fluctuate substantially on a seasonal basis. In addition, APS has historically sold less power, and consequently earned less income, when weather conditions are milder.
The increasing promulgation of NERC and NRC rules and standards will increase our compliance costs and our exposure to the potential risk of violations of the standards.
The NRC also has issued regulations and standards related to the protection of critical digital assets at commercial nuclear power plants. The increasing promulgation of NERC and NRC rules and standards will increase our compliance costs and our exposure to the potential risk of violations of the standards.
Customer participation 37 Table of Contents in distributed renewable energy programs would result in lower demand since customers would be meeting some of their own energy needs. In addition to these rules and requirements, energy efficiency technologies and distributed energy resources continue to evolve, which may have similar impacts on the demand for electricity.
In addition to these rules and requirements, energy efficiency technologies and distributed energy resources continue to evolve, which may have similar impacts on the demand for electricity.
In the future, adequate insurance may not be available at rates that we believe are reasonable, and the costs of responding to and recovering from a cyber incident may not be covered by insurance or recoverable in rates. 41 Table of Contents There are inherent risks in the ownership and operation of nuclear facilities, such as environmental, health, fuel supply, spent fuel disposal, regulatory and financial risks and the risk of terrorist attack that could adversely affect our business and financial condition.
There are inherent risks in the ownership and operation of nuclear facilities, such as environmental, health, fuel supply, spent fuel disposal, regulatory and financial risks and the risk of terrorist attack that could adversely affect our business and financial condition.
APS faces potential financial risks resulting from climate change litigation and legislative and regulatory efforts to limit GHG emissions, as well as physical and operational risks related to climate effects. 35 Table of Contents Concern over climate change has led to significant legislative and regulatory efforts to limit CO 2 , which is a major byproduct of the combustion of fossil fuel, and other GHG emissions.
APS faces potential financial risks resulting from climate change litigation and legislative and regulatory efforts to limit GHG emissions, as well as physical and operational risks related to climate effects.
Reductions in the availability of water for power plant cooling could negatively impact APS’s financial condition, results of operations, or cash flows. Effects of Energy Conservation Measures and Distributed Energy Resources. APS customers in energy efficiency and conservation programs and other demand-side management efforts, which in turn impact the demand for electricity.
Prolonged and extreme drought conditions can also affect APS’s long-term ability to access the water resources necessary for thermal electricity generation operations. Reductions in the availability of water for power plant cooling could negatively impact APS’s financial condition, results of operations, or cash flows. Effects of Energy Conservation Measures and Distributed Energy Resources.
In addition, the decrease in snowpack can also lead to reduced water supplies in the areas where APS relies upon non-renewable water resources to supply cooling and process water for electricity generation. Prolonged and extreme drought conditions can also affect APS’s long-term ability to access the water resources necessary for thermal electricity generation operations.
Any damage caused as a result of wildfires could negatively impact APS’s financial condition, results of operations, or cash flows. In addition, the decrease in snowpack can also lead to reduced water supplies in the areas where APS relies upon non-renewable water resources to supply cooling and process water for electricity generation.
FINANCIAL RISKS A downgrade of our credit ratings could materially and adversely affect our business, financial condition, and results of operations. Our current ratings are set forth in “Liquidity and Capital Resources — Credit Ratings” in Item 7.
Our current ratings are set forth in “Liquidity and Capital Resources — Credit Ratings” in Part II, Item 7.
APS needs to develop or acquire new generation facilities, potentially modernize existing facilities, and/or contract for additional capacity in order to meet future resource needs and load forecasts. APS’s inability to do so could have a material adverse impact on our business and results of operations.
Macroeconomic and geopolitical factors may also impact our ability to procure the generation and other equipment we need to meet customer demand. APS needs to develop or acquire new generation and other facilities, potentially modernize existing facilities, and/or contract for additional capacity in order to meet future resource needs and load forecasts.
Potential Financial Risks — Greenhouse Gas Regulation, the Clean Power Plan and Potential Litigation. On April 25, 2024, the EPA issued new GHG emission standards for power plants. These new standards are focused on limiting power plant GHG emissions through control mechanisms that can be implemented at individual power plant facilities.
These new standards are focused on limiting power plant GHG emissions through control mechanisms that can be implemented at individual power plant facilities. The new regulations are currently being challenged in federal court and, in 2025, EPA proposed a rule to repeal these GHG emission standards.
The distributed renewable energy requirement is 30% of the applicable RES requirement for 2012 and subsequent years (APS requested a waiver of this requirement in the 2024 and 2025 RES Implementation Plans, which have not yet been approved by the ACC).
The distributed renewable energy requirement is 30% of the applicable RES requirement for 2012 and subsequent years (APS was granted a waiver of this requirement in its 2026 RES Implementation Plan). Customer participation in distributed renewable energy programs would result in lower demand since customers would be meeting some of their own energy needs.
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Environmental Clean Up. APS has been named as a PRP for Superfund sites in Phoenix, Arizona, and it could be named a PRP in the future for other environmental clean-up at sites identified by a regulatory body.
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See “Business of Arizona Public Service Company — Environmental Matters” in Part I, Item 1 as well as Note 14 for examples of environmental laws and regulations and matters that could affect APS’s financial condition, results of operations and cash flows.
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APS cannot predict with certainty the amount and timing of all future expenditures related to environmental matters because of the difficulty of estimating clean-up costs. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on all PRPs. Coal Ash.
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Concern over climate change has led to significant legislative and regulatory efforts to limit carbon dioxide, which is a major byproduct of the combustion of fossil fuel, and other GHG emissions. Potential Financial Risks — GHG Regulation, the Clean Power Plan and Potential Litigation. On April 25, 2024, EPA issued new GHG emission standards for power plants.
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In December 2014, the EPA issued final regulations governing the handling and disposal of CCR, which are generated as a result of burning coal and consist of, among other things, fly ash and bottom ash. The rule regulates CCR as a non-hazardous waste. APS disposes of CCR in ash ponds and dry storage areas.
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Such lawsuits may also seek damages from harm alleged to have resulted from power plant GHG emissions. 34 Table of Contents Physical and Operational Risks.
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To the extent the rule requires the closure or modification of these CCR units, modification or changes to the manner of closure of such units, or the construction of new CCR units beyond what we currently anticipate, APS would incur significant additional costs for CCR disposal.
Added
Modification of the ACC’s retail electric competition rules or other efforts of deregulation and other factors, such as customers installing behind the meter technologies or large customers developing large, utility scale generation projects to serve their energy needs, may result increased competition, which could have a significant adverse impact on APS’s business and results of operations.
Removed
In addition, the rule may also require corrective action to address releases from CCR disposal units or the presence of CCR constituents within groundwater near CCR disposal units above certain regulatory thresholds. Ozone National Ambient Air Quality Standards.
Added
Recent industry trends and projections of load growth reflect significant demand from data centers to support AI as well as onshoring of manufacturing, such as advanced semiconductor manufacturing. These data centers and large manufacturers may locate their operations within service territories other than our own.
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In 2015, the EPA finalized revisions to the NAAQS for ozone, which set new, more stringent standards on emissions of nitrogen oxide, a precursor to ozone, in an effort to protect human health and human welfare.
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If they do choose to locate within our service territory, we may not be able to provide sufficient electric service within the time period they require due to capital or other constraints.
Removed
Depending on the final attainment designations for the new standards and the state implementation requirements, APS may be required to invest in new pollution control technologies and to generate emission offsets for new projects or facility expansions located in ozone nonattainment areas.
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APS may need to accelerate development plans of the related generation and transmission facilities to serve these potential customers, which may necessitate alternative financing structures, such as the novel subscription model we are pursuing in an effort to ensure growth pays for growth and reduce cross-subsidization of customer classes, as well as ACC approval.
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In addition, the EPA may in the future further increase the stringency of various NAAQS, including for ozone or other pollutants, such as particulate matter. With regard to even more stringent NAAQS requirements, additional control measures and compliance costs may become necessary for APS as well as its current and potential future customers.
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APS may not be able to secure facilities or regulatory approval to support these customers in a timely manner. Additionally, the future demand from these customers may not be realized to the extent currently projected and significant uncertainties exist regarding the future energy demand associated with data centers and AI.
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In November 2018, the ACC voted to re-examine the facilitation of a deregulated retail electric market in Arizona. On July 1 and July 2, 2019, ACC Staff issued a report and initial proposed draft rules regarding possible modifications to the ACC’s retail electric competition rules.
Added
Current laws and regulations as well as changes to those laws and regulations, including via judicial decisions and executive orders, create strategic challenges in acquiring an appropriate generation portfolio and fuel diversification mix.
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On February 10, 2020, two ACC Commissioners filed two sets of draft proposed retail electric competition rules. On February 12, 36 Table of Contents 2020, ACC Staff issued its second report regarding possible modifications to the ACC’s retail electric competition rules.
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Operating, maintaining, and developing our generation and other assets requires significant capital expenditures and operations and maintenance costs that may be difficult to maintain at adequate levels while maintaining reliability.
Removed
During a July 15, 2020, ACC Staff meeting, the ACC Commissioners discussed the possible development of a retail competition pilot program, but no action was taken. The ACC continues to discuss matters related to retail electric competition, including the potential for additional buy-through programs or other pilot programs.
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APS’s inability to do so could have a material adverse impact on our business and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIf a significant cybersecurity event or incident were to occur, our ability to fulfill our critical business functions and our business strategy, results of operations, and financial condition could all be materially impacted.
Biggest changeIf a significant cybersecurity event or incident were to occur, our ability to fulfill our critical business functions could be materially impacted, which could materially adversely affect our results of operations and financial conditions.
The Enterprise Risk Management Program is overseen by an executive committee (the “Executive Risk Committee”), which meets at least quarterly and is comprised of members holding executive leadership positions in the Company, including the Chairman and Chief Executive Officer, President, and other Executive and Senior Vice Presidents, and is chaired and sponsored by the Chief Financial Officer.
The Enterprise Risk Management Program is overseen by an executive committee (the “Executive Risk Committee”), which meets at least quarterly and is comprised of members holding executive leadership positions in the Company, including the Chairman, President, and Chief Executive Officer, and other Executive and Senior Vice Presidents, and is chaired and sponsored by the Chief Financial Officer.
APS’s cybersecurity group (the “Cybersecurity Group”) is comprised of cybersecurity analysts, engineers, architects, and others, led by the Director of Cybersecurity, who reports to APS’s Vice President, Operations Support. The Director of Cybersecurity has more than twenty years of experience in information technology and cybersecurity roles, with more than ten of those years at the Company.
APS’s cybersecurity group (the “Cybersecurity Group”) is comprised of cybersecurity analysts, engineers, architects, and others, led by the Director of Cybersecurity, who reports to APS’s Vice President, Operations Support. The Director of Cybersecurity has more than twenty years of experience in 46 Table of Contents information technology and cybersecurity roles, with more than ten of those years at the Company.
See the risk factor entitled, “We are subject to cybersecurity risks and risks of unauthorized access to our systems that could adversely affect our business and financial condition” in Item 1A—Risk Factors for more information. 49 Table of Contents
See the risk factor entitled, “We are subject to cybersecurity risks and risks of unauthorized access to our systems that could adversely affect our business and financial condition” in Part I, Item 1A—Risk Factors for more information. 48 Table of Contents
Finally, the Nuclear and Operating Committee of the Company’s Board of Directors provides ultimate oversight of cybersecurity risk and also receives briefings at least twice per year from the Cybersecurity Group, and notable audit findings relating to cybersecurity are aggregated and provided to the Board of Directors’ Audit Committee.
Finally, the Nuclear and Operating Committee of the Company’s Board of Directors provides ultimate oversight of cybersecurity risk and also receives briefings in-person or virtually at least twice per year from the Cybersecurity Group, and notable 47 Table of Contents audit findings relating to cybersecurity are aggregated and provided to the Board of Directors’ Audit Committee.
To that end, the Company implements a robust risk management, strategy, and governance regime aimed at ensuring effective controls are in place to identify, mitigate, remediate, and communicate cyber threats at appropriate levels within the organization.
To that end, the Company implements a robust risk management, strategy, and governance regime aimed at implementing controls to identify, mitigate, remediate, and communicate cyber threats at appropriate levels within the organization.
To date, we do not believe there have been risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect Pinnacle West or APS. However, there is no assurance that will continue to be the case.
To date, we do not believe there have been any previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect Pinnacle West or APS. However, there is no assurance that will continue to be the case.
Every year, as a part of the Enterprise Risk Management Program, risks affecting the Company are identified. For 2024, cybersecurity was identified as a risk. The applicable subject matter experts brief the Company’s Board of Directors on the status of all top enterprise risks at least once per year.
Every year, as a part of the Enterprise Risk Management Program, risks affecting the Company are identified. Cybersecurity is among the enterprise risks assessed annually and was identified as a top risk in 2025. The applicable subject matter experts brief the Company’s Board of Directors on the status of all top enterprise risks at least once per year.
Once an incident meets certain criteria, the Company’s Cybersecurity Incident Command or, in the most severe cases that 48 Table of Contents impact the entire Company, the Corporate Emergency Operations Center is activated and formal response procedures are followed to address the incident.
Once an incident meets certain criteria, the Company’s Cybersecurity Incident Command or, in the case of a potentially severe threat that could impact the entire Company, the Corporate Emergency Operations Center is activated and formal response procedures are followed to address the incident.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Generation Facilities APS’s portfolio of owned generating facilities as of December 31, 2024 is provided in the table below: Name No. of Units % Owned (a) Principal Fuels Used Primary Dispatch Type Owned Capacity (MW) Nuclear: Palo Verde (b) 3 29.1 % Uranium Base Load 1,146 Total Nuclear 1,146 Steam: Four Corners 4, 5 (c) 2 63 % Coal Base Load 970 Cholla 1,3 2 Coal Base Load 380 Total Steam 1,350 Combined Cycle: Redhawk 2 Gas Load Following 1,136 West Phoenix 5 Gas Load Following 874 Total Combined Cycle 2,010 Combustion Turbine: Ocotillo 7 Gas Peaking 630 Saguaro 3 Gas Peaking 189 Douglas 1 Oil Peaking 18 Sundance 10 Gas Peaking 430 West Phoenix 2 Gas Peaking 114 Yucca 1, 2, 3 3 Gas Peaking 93 Yucca 4 1 Oil Peaking 54 Yucca 5, 6 2 Gas Peaking 90 Total Combustion Turbine 1,618 Solar: (d) Cotton Center 1 Solar As Available 17 Hyder I 1 Solar As Available 17 Paloma 1 Solar As Available 17 Chino Valley 1 Solar As Available 20 Gila Bend 1 Solar As Available 36 Hyder II 1 Solar As Available 14 Foothills 1 Solar As Available 38 Luke AFB 1 Solar As Available 11 Desert Star 1 Solar As Available 10 Red Rock 1 Solar As Available 44 Agave Solar 1 Solar As Available 150 APS Owned Distributed Energy Solar As Available 38 Multiple facilities Solar As Available 4 Total Solar 416 Total Capacity 6,540 50 Table of Contents (a) 100% unless otherwise noted.
Biggest changePROPERTIES Generation Facilities APS’s portfolio of owned generating facilities in commercial operation as of the date of this report is provided in the table below: Name No. of Units % Owned (a) Principal Fuels Used Primary Dispatch Type Owned Capacity (MW) Nuclear: Palo Verde (b) 3 29.1 % Uranium Base Load 1,146 Total Nuclear 1,146 Steam: Four Corners 4, 5 (c) 2 63 % Coal Base Load 970 Total Steam 970 Combined Cycle: Redhawk 2 Gas Load Following 1,140 West Phoenix 5 Gas Load Following 874 Total Combined Cycle 2,014 Combustion Turbine: Ocotillo 7 Gas Peaking 630 Saguaro 3 Gas Peaking 189 Douglas 1 Oil Peaking 18 Sundance 12 Gas Peaking 520 West Phoenix 2 Gas Peaking 114 Yucca 1, 2, 3, 5, 6 5 Gas Peaking 183 Yucca 4 1 Oil Peaking 54 Total Combustion Turbine 1,708 Solar: Cotton Center Solar As Available 17 Hyder I Solar As Available 17 Paloma Solar As Available 17 Chino Valley Solar As Available 20 Gila Bend Solar As Available 36 Hyder II Solar As Available 14 Foothills Solar As Available 38 Luke AFB Solar As Available 11 Desert Star Solar As Available 10 Red Rock Solar As Available 44 Agave Solar Solar As Available 150 APS Owned Distributed Energy Solar As Available 41 Multiple facilities Solar As Available 4 Total Solar 419 Total Capacity 6,257 49 Table of Contents (a) 100% unless otherwise noted.
Some of these rights-of-way have expired and our renewal applications have not yet been acted upon by the appropriate Indian tribes or federal agencies. Other rights expire at various times in the future and renewal action by the applicable tribe or federal agencies will be required at that time.
Some of these rights-of-way have expired and renewal applications have not yet been acted upon by the appropriate Indian tribes or federal agencies. Other rights expire at various times in the future and renewal action by the applicable tribe or federal agencies will be required at that time.
The co-owners and the Navajo Nation executed a lease extension on November 29, 2017, that allows for decommissioning activities to begin after the plant ceased operations. APS, on behalf of the Four Corners participants, negotiated amendments to the Four Corners facility lease with the Navajo Nation, which extends the Four Corners leasehold interest from 2016 to 2041.
The co-owners and the Navajo Nation executed a lease extension on November 29, 2017, that allowed for decommissioning activities to begin after the plant ceased operations. APS, on behalf of the Four Corners participants, negotiated amendments to the Four Corners facility lease with the Navajo Nation, which extends the Four Corners leasehold interest from 2016 to 2041.
(b) APS’s 29.1% ownership in Palo Verde includes leased interests and is the largest capacity interest of all the participants. See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Nuclear” in Item 1 for details regarding leased interests in Palo Verde.
(b) APS’s 29.1% ownership in Palo Verde includes leased interests and is the largest capacity interest of all the participants. See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Nuclear” in Part I, Item 1 for details regarding leased interests in Palo Verde.
See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Coal-Fueled Generating Facilities — Four Corners” in Item 1 for additional information about the Four Corners right-of-way and lease matters. Certain portions of our transmission lines are located on Indian lands pursuant to rights-of-way that are effective for specified periods.
See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Coal-Fueled Generating Facilities — Four Corners” in Part I, Item 1 for additional information about the Four Corners right-of-way and lease matters. Certain portions of APS’s transmission lines are located on Indian lands pursuant to rights-of-way that are effective for specified periods.
In recent negotiations, certain of the affected Indian tribes have required payments substantially in excess of amounts that we have paid in the past for such rights-of-way. The ultimate cost of renewal of certain of the rights-of-way for our transmission lines is therefore uncertain.
In recent negotiations, certain of the affected Indian tribes have required payments substantially in excess of historical amounts paid in the past for such rights-of-way. The ultimate cost of renewal of certain of the rights-of-way for transmission lines is therefore uncertain. 51 Table of Contents
Each year, APS prepares and files with the ACC a Ten-Year Transmission Plan. In APS’s 2025 Ten-Year Plan, APS projects it will develop 184 miles of new transmission lines over the next 10 years. Additionally, APS plans to upgrade 687 miles of existing transmission lines over the same 51 Table of Contents horizon.
Each year, APS prepares and files with the ACC a Ten-Year Transmission Plan. In APS’s 2026 Ten-Year Transmission Plan, APS projects it will develop 263 miles of new transmission lines over the next 10 years. Additionally, APS plans to upgrade 725 miles of existing transmission lines over the same horizon.
The following table shows APS’s jointly-owned interests in those transmission facilities recorded on the Consolidated Balance Sheets at December 31, 2024: Percent Owned (Weighted-Average) Arizona Nuclear Power Project 500kV System 33.3 % Navajo Southern System 24.7 % Palo Verde — Yuma 500kV System 25.5 % Four Corners Switchyards 58.0 % Phoenix — Mead System 17.1 % Palo Verde — Rudd 500kV System 50.0 % Morgan — Pinnacle Peak System 63.2 % Round Valley System 50.0 % Palo Verde — Morgan System 87.5 % Hassayampa — North Gila System 80.0 % Cholla 500kV Switchyard 85.7 % Saguaro 500kV Switchyard 60.0 % Kyrene — Knox System 50.0 % Agua Fria Switchyard 10.0 % Expansion.
APS shares ownership of some of its transmission facilities with other companies. 50 Table of Contents The following table shows APS’s jointly-owned interests in those transmission facilities recorded on the Consolidated Balance Sheets at December 31, 2025: Percent Owned (Weighted-Average) Arizona Nuclear Power Project 500kV System 33.1 % Navajo Southern System 25.1 % Palo Verde — Yuma 500kV System 16.1 % Four Corners Switchyards 56.9 % Phoenix — Mead System 17.5 % Palo Verde — Rudd 500kV System 50.0 % Morgan — Pinnacle Peak System 63.2 % Round Valley System 50.0 % Palo Verde — Morgan System 87.5 % Hassayampa — North Gila System 80.0 % Cholla 500kV Switchyard 85.7 % Saguaro 500kV Switchyard 60.0 % Kyrene — Knox System 50.0 % Expansion.
Transmission and Distribution Facilities Current Facilities . As of January 24, 2025, APS’s transmission facilities consist of approximately 5,817 pole miles of overhead lines and approximately 86 miles of underground lines, 5,757 miles of which are located in Arizona.
As of January 22, 2026, APS’s transmission facilities consist of approximately 5,939 pole miles of overhead lines and approximately 86 miles of underground lines, 5,792 miles of which are located in Arizona.
APS’s distribution facilities consist of approximately 11,317 miles of overhead lines and approximately 24,031 miles of underground primary cable (20,893 when excluding abandoned conductor), all of which are located in Arizona. APS also owns and maintains 485 substations, including both transmission and distribution yards. APS shares ownership of some of its transmission facilities with other companies.
APS’s distribution facilities consist of approximately 11,321 miles of overhead lines and approximately 24,425 miles of underground primary cable (21,301 when excluding abandoned conductor), all of which are located in Arizona. APS also owns and maintains 477 substations, including both transmission and distribution yards.
See “Business of Arizona Public Service Company — Environmental Matters” in Item 1 with respect to matters having a possible impact on the operation of certain of APS’s generating facilities. See “Business of Arizona Public Service Company” in Item 1 for a map detailing the location of APS’s major power plants and principal transmission lines.
See “Business of Arizona Public Service Company” in Part I, Item 1 for a map detailing the location of APS’s major power plants and principal transmission lines. Transmission and Distribution Facilities Current Facilities .
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The plant is operated by APS. (d) See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Energy Storage” above for details related to APS’s energy storage facilities and agreements.
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The plant is operated by APS. Energy Storage Facilities APS’s portfolio of owned energy storage facilities in commercial operation as of the date of this report is provided in the table below. Capacity amounts are approximate and represent the maximum designed MW the site can provide for three hours, unless noted otherwise.
Removed
The 2025 Ten-Year Plan includes a 28-mile 500kV line from the Jojoba substation to the Rudd substation. The purpose of this 500kV line project is to bring in a new source to the west and southwest parts of the Phoenix metropolitan area which is experiencing rapid economic development.
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Location Owned Capacity BESS: Paloma Gila Bend, AZ 17 Cotton Center Gila Bend, AZ 17 Hyder I Hyder, AZ 16 Chino Valley (a) Chino Valley, AZ 19 Hyder II Hyder, AZ 14 Foothills Yuma, AZ 35 Gila Bend Gila Bend, AZ 32 Desert Star Buckeye, AZ 10 Red Rock (a) Red Rock, AZ 41 Total Energy Storage 201 (a) Capacity amounts represent the maximum designed MW the site can provide for four hours.
Removed
This new source will provide customers in the area greater access to a diverse mix of resources from around the region. Additionally, the 2025 Ten-Year Plan includes the rebuild of both Four Corners to Pinnacle Peak 345kV lines which span 289 miles each.
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The 2026 Ten-Year Plan includes critical transmission projects that represent significant upgrades to our transmission system. These upgrade projects, along with other projects included in the 2026 Ten Year Transmission Plan, are designed to support growing energy needs, strengthen reliability, and allow for the connection of new resources.
Removed
This rebuild will replace aging towers to ensure continued reliability and safety, increase important capability to the Metro Phoenix area, and improve access to a diverse mix of resources from the Four Corners region throughout the Southwest. The 2025 Ten-Year Plan includes numerous projects with the purpose to interconnect new renewable energy resources to the transmission system.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS See “Business of Arizona Public Service Company — Environmental Matters” in Item 1 with regard to pending or threatened litigation and other disputes. See Note 3 for ACC and FERC-related matters. See Note 10 for information regarding environmental matters, Superfund–related matters and other disputes.
Biggest changeITEM 3. LEGAL PROCEEDINGS See “Business of Arizona Public Service Company — Environmental Matters” in Part I, Item 1 with regard to pending or threatened litigation and other disputes. See Note 8 for ACC and FERC-related matters. See Note 14 for information regarding environmental matters, Superfund–related matters and other disputes.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeBlankenship 53 Vice President, Controller and Chief Accounting Officer of Pinnacle West and APS 2019-Present General Manager, Accounting Operations of APS 2019-2019 Director, Accounting Operations of APS 2014-2019 Andrew D.
Biggest changeBauer 50 Vice President and Treasurer of Pinnacle West and APS 2024-Present Director, Corporate Finance and Assistant Treasurer of Duke Energy Corporation 2021-2024 Director, Credit and Capital Markets of Duke Energy Corporation 2017-2021 Elizabeth A. Blankenship 54 Vice President, Controller and Chief Accounting Officer of Pinnacle West and APS 2019-Present Andrew D.
The executive officers, their ages at February 25, 2025, current positions and principal occupations for the past five years are as follows: Name Age Position Period Jeffrey B.
The executive officers, their ages at February 25, 2026, current positions and principal occupations for the past five years are as follows: Name Age Position Period Theodore N.
Geisler (a) 46 President of APS, Director on the Pinnacle West and APS Boards of Directors 2024-Present President of APS 2022-Present Senior Vice President and Chief Financial Officer of Pinnacle West and APS 2020-2022 Vice President and Chief Information Officer of APS 2018-2020 Adam C.
Geisler 47 Chairman of the Board, Chief Executive Officer and President of Pinnacle West and APS 2025-Present President of APS; Director, Pinnacle West and APS Boards of Directors 2024-2025 President of APS 2022-2024 Senior Vice President and Chief Financial Officer of Pinnacle West and APS 2020-2022 Shirley A.
Esparza 50 Senior Vice President, Public Policy of APS 2022-Present Vice President, Regulatory of APS 2022 Officer and Senior Vice President, Customer Engagement and Information Technology of Southwest Gas 2019-2021 Vice President, Customer Engagement of Southwest Gas 2012-2019 Theodore N.
Cooper 47 Senior Vice President and Chief Financial Officer of Pinnacle West and APS 2022-Present Vice President and Treasurer of Pinnacle West and APS 2020-2022 Jose L. Esparza 51 Senior Vice President, Public Policy of APS 2022-Present Vice President, Regulatory of APS 2022 Officer and Senior Vice President, Customer Engagement and Information Technology of Southwest Gas 2019-2021 Adam C.
Heflin 61 Executive Vice President and Chief Nuclear Officer, PVGS, of APS 2022-Present Chief Executive Officer of Wolf Creek Nuclear Operating Corporation 2014-2019 Paul J.
Heflin 62 Executive Vice President and Chief Nuclear Officer, Palo Verde, of APS 2022-Present Chief Executive Officer of Wolf Creek Nuclear Operating Corporation 2014-2019 Jacob Tetlow 53 Executive Vice President and Chief Operating Officer of APS 2024-Present Executive Vice President, Operations of APS 2021-2024 Senior Vice President, Non-Nuclear Operations of APS 2020-2021 53 Table of Contents PART II
Removed
Guldner (a) 59 Chairman of the Board, Chief Executive Officer and President of Pinnacle West 2019-Present Chairman of the Board and Chief Executive Officer of APS 2022-Present Chairman of the Board, Chief Executive Officer and President of APS 2021-2022 Chairman of the Board and Chief Executive Officer of APS 2020-2021 President of APS 2018-2020 Executive Vice President, Public Policy of Pinnacle West 2017-2019 Elizabeth A.
Added
Baum 52 Senior Vice President, Corporate Secretary and General Counsel of Pinnacle West and APS 2026-Present Senior Vice President and General Counsel of Pinnacle West and APS 2025-2026 Vice President of Law of Pinnacle West and APS 2022-2025 Deputy General Counsel of Pinnacle West 2019-2022 Christopher R.
Removed
Cooper 46 Senior Vice President and Chief Financial Officer of Pinnacle West and APS 2022-Present Vice President and Treasurer of Pinnacle West and APS 2020-2022 Director, Corporate Finance of Consolidated Edison Company of New York, Inc. 2017-2020 Jose L.
Removed
Mountain 47 Vice President, Finance and Planning of Pinnacle West and APS 2024-Present Vice President, Finance and Treasurer of Pinnacle West and APS 2022-2024 Vice President, Finance and Planning of Pinnacle West and APS 2020-2022 General Manager, Finance of Pinnacle West 2017-2020 Robert E.
Removed
Smith 55 Executive Vice President, Chief Legal Officer and Chief Development Officer of Pinnacle West and APS 2025-Present Executive Vice President, General Counsel and Chief Development Officer of Pinnacle West and APS 2021-2025 Senior Vice President and General Counsel of Pinnacle West and APS 2018-2021 Jacob Tetlow 52 Executive Vice President and Chief Operating Officer of APS 2024-Present Executive Vice President, Operations of APS 2021-2024 Senior Vice President, Non-Nuclear Operations of APS 2020-2021 Vice President, Transmission and Distributions Operations of APS 2017-2020 53 Table of Contents (a) On December 12, 2024, Pinnacle West announced that Jeffrey B.
Removed
Guldner will retire from his position as Chairman of the Board, President, Chief Executive Officer and member of the Board of Directors of Pinnacle West and Chairman of the Board, Chief Executive Officer and member of the Board of Directors of APS, effective April 1, 2025. On April 1, 2025, Theodore N. Geisler will replace Mr.
Removed
Guldner as Chairman of the Board, President, and Chief Executive Officer of Pinnacle West and Chairman of the Board and Chief Executive Officer of APS. He will continue to serve as President of APS and as a director on the Pinnacle West and APS Boards of Directors. 54 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeYear Ended December 31, Company/Index 2019 2020 2021 2022 2023 2024 Pinnacle West Common Stock $100 $92 $85 $96 $95 $117 Edison Electric Institute Index $100 $99 $116 $117 $107 $127 S&P 500 Index $100 $118 $152 $125 $157 $197 ITEM 6. [RESERVED] 56 Table of Contents
Biggest changeYear Ended December 31, Company/Index 2020 2021 2022 2023 2024 2025 Pinnacle West Common Stock $100 $92 $104 $103 $127 $138 Edison Electric Institute Index $100 $117 $118 $108 $129 $144 S&P 500 Index $100 $129 $105 $133 $166 $195 54 Table of Contents ITEM 6. [RESERVED] 55 Table of Contents
The comparison assumes that $100 was invested on December 31, 2019, in Pinnacle West’s common stock and in each of the indices shown and that all of the dividends were reinvested.
The comparison assumes that $100 was invested on December 31, 2020, in Pinnacle West’s common stock and in each of the indices shown and that all of the dividends were reinvested.
ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Pinnacle West’s common stock is publicly held and is traded on the New York Stock Exchange under stock symbol PNW. At the close of business on February 20, 2025, Pinnacle West’s common stock was held of record by approximately 13,686 shareholders.
ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Pinnacle West’s common stock is publicly held and is traded on the New York Stock Exchange under stock symbol PNW. At the close of business on February 19, 2026, Pinnacle West’s common stock was held of record by approximately 12,926 shareholders.
APS’s common stock is wholly-owned by Pinnacle West and is not listed for trading on any stock exchange. The sole holder of APS’s common stock, Pinnacle West, is entitled to dividends when and as declared out of legally available funds.
APS’s common stock is wholly-owned by Pinnacle West and is not listed for trading on any stock exchange. The sole holder of APS’s common stock, Pinnacle West, is entitled to dividends when and as declared out of legally available funds. At December 31, 2025, APS did not have any outstanding preferred stock.
At December 31, 2024, APS did not have any outstanding preferred stock. 55 Table of Contents Stock Performance Chart This graph compares the cumulative total shareholder return on Pinnacle West’s common stock during the five years ended December 31, 2024, to the cumulative total returns on the S&P 500 Index and the Edison Electric Index.
Stock Performance Chart This graph compares the cumulative total shareholder return on Pinnacle West’s common stock during the five years ended December 31, 2025, to the cumulative total returns on the S&P 500 Index and the Edison Electric Institute Index.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 56 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 57 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 88 Item 8. Financial Statements and Supplementary Data 89 Pinnacle West Financial Statements 95 APS Financial Statements 106
Biggest changeItem 6. [Reserved] 55 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 56 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84 Item 8. Financial Statements and Supplementary Data 85 Pinnacle West Capital Corporation Financial Statements 91 A rizona P ublic S ervice Company Financial Statements 102

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table summarizes the major components of this change: Increase (Decrease) Operating revenues Fuel and purchased power expenses Net change (dollars in millions) Impact of new rates from the 2022 Rate Case, effective March 8, 2024 (Note 3) $ 260 $ — $ 260 Higher retail revenue due to changes in usage patterns and customer growth partially offset by the impacts of energy efficiency and related pricing 112 55 57 Effects of weather 76 23 53 CRS revenue (Note 3) 17 — 17 Higher renewable energy regulatory surcharges, partially offset by operations and maintenance costs 21 4 17 LFCR revenue (Note 3) 16 — 16 Changes in net fuel and purchased power costs, including off-system sales margins and related deferrals (61) (52) (9) Lower transmission revenues (Note 3) (12) — (12) Total $ 429 $ 30 $ 399 Operations and maintenance .
Biggest changeThe following table summarizes the major components of this change (dollars in millions): Increase (Decrease) Operating revenues Fuel and purchased power Net change Higher retail revenues due to changes in usage patterns, customer growth and related pricing, partially offset by the impacts of energy efficiency $ 155 $ 60 $ 95 Higher transmission revenues (Note 8) 51 — 51 Impact of new rates from the 2022 Rate Case, effective March 8, 2024 (Note 8) 46 — 46 LFCR revenue (Note 8) 10 — 10 Changes in net fuel and purchased power costs, including off-system sales margins and related deferrals 97 89 8 Higher renewable energy regulatory surcharges, partially offset by operations and maintenance costs 9 5 4 Effects of weather (157) (43) (114) Miscellaneous items, net 4 (1) 5 Total $ 215 $ 110 $ 105 Operations and maintenance .
All other applications for rehearing were denied. A limited rehearing was held October 28 through November 1. Following the limited rehearing, an Administrative Law Judge issued a ROO (the “Limited Rehearing ROO”) on December 3, 2024.
All other applications for rehearing were denied. A limited rehearing was held October 28 through November 1, 2024. Following the limited rehearing, an Administrative Law Judge issued a ROO (the “Limited Rehearing ROO”) on December 3, 2024.
An ACC order does not allow APS to pay common dividends if the payment would reduce its common equity below 40%. Per the related ACC order, the common equity ratio is defined as total shareholder equity divided by the sum of total shareholder equity and long-term debt, including current maturities of long-term debt.
An ACC order does not allow APS to pay common dividends if the payment would reduce its common equity ratio below 40%. Per the related ACC order, the common equity ratio is defined as total shareholder equity divided by the sum of total shareholder equity and long-term debt, including current maturities of long-term debt.
(b) In general, changes in the discount rate will not typically have symmetrical effects for increases and decreases of the rate. Further, a 1% change in a low discount rate environment will have a larger impact than a 1% change in a high discount rate environment. Therefore, the discount rate sensitivities above cannot necessarily be extrapolated.
(b) In general, changes in the discount rate will not typically have symmetrical effects for increases and decreases of the rate. Further, a 1% change in a low discount rate environment will have a larger impact than a 1% change in a high discount rate environment. Therefore, the discount rate sensitivities above cannot necessarily be extrapolated.
On February 22, 2024, the ACC approved a number of amendments to the 2022 Rate Case ROO that resulted in, among other things, (i) an approximately $491.7 million increase in the annual base revenue requirement, (ii) a 9.55% return on equity, (iii) a 0.25% return on the increment of fair value rate base greater than original cost, (iv) an effective fair value rate of return of 4.39%, (v) a return set at the Company’s weighted average cost of capital on the net prepaid pension asset and net other post-employment benefit liability in rate base, (vi) an adjustment to generation maintenance and outage expense to reflect a more reasonable level of test year costs, (vii) approval of the SRB mechanism with modifications to customer notifications, procedural timelines and the inclusion of any qualifying technology and fuel source bid received through an ASRFP, and (viii) recovery of all DSM costs through the DSM Adjustment Charge (“DSMAC”) rather than through base rates.
On February 22, 2024, the ACC approved the 2022 Rate Case ROO with certain amendments that resulted in, among other things, (i) an approximately $491.7 million increase in the annual base revenue requirement, (ii) a 9.55% return on equity, (iii) a 0.25% return on the increment of fair value rate base greater than original cost, (iv) an effective fair value rate of return of 4.39%, (v) a return set at the Company’s weighted average cost of capital on the net prepaid pension asset and net other post-employment benefit liability in rate base, (vi) an adjustment to generation maintenance and outage expense to reflect a more reasonable level of test year costs, (vii) approval of the SRB mechanism with modifications to customer notifications, procedural timelines and the inclusion of any qualifying technology and fuel source bid received through an ASRFP, and (viii) recovery of all DSM costs through the DSM Adjustment Charge (“DSMAC”) rather than through base rates.
Fuel and purchased power costs included on our Consolidated Statements of Income are impacted by our electricity sales volumes, existing contracts for purchased power and generation fuel, our power plant performance, transmission availability or constraints, prevailing market prices, new generating plants being placed in service in our market areas, changes in our generation resource allocation, our hedging program for managing such costs and PSA deferrals and the related amortization.
Fuel and purchased power expenses included on our Consolidated Statements of Income are impacted by our electricity sales volumes, existing contracts for purchased power and generation fuel, our power plant performance, transmission availability or constraints, prevailing market prices, new generating plants being placed in service in our market areas, changes in our generation resource allocation, our hedging program for managing such costs and PSA deferrals and the related amortization.
In November 2023, APS released its latest IRP, which identified forecasted customer demand and energy needs growing at an unprecedented rate. In developing the IRP, APS considered how factors such as forecasted economic growth, impacts from weather, and new resource technology availability impact the amount and type of resources required to reliably meet customer needs.
In November 2023, APS released its latest IRP, which identified forecasted customer demand and energy needs growing at an unprecedented rate. In developing the IRP, APS considered how factors such as forecasted economic growth, impacts from weather, and new resource technology availability impact the amount and type of resources required to reliably and affordably meet customer needs.
Income taxes are affected by the amount of pretax book income, income tax rates, certain deductions, and non-taxable items, such as AFUDC. In addition, income taxes may also be affected by the settlement of issues with taxing authorities. Interest Expense. Interest expense is affected by the amount of debt outstanding and the interest rates on that debt.
Income taxes are affected by the amount of pretax book income, income tax rates, certain deductions, certain credits and non-taxable items, such as AFUDC. In addition, income taxes may also be affected by the settlement of issues with taxing authorities. Interest Expense. Interest expense is affected by the amount of debt outstanding and the interest rates on that debt.
Dividends to Pinnacle West from APS are also dependent on a number of factors including, among others, APS’s financial condition and free cash flow, the sources of which vary from quarter-to-quarter due in part to the seasonal nature of electricity demand.
Dividends to Pinnacle West from APS are also dependent on a number of factors including, among others, APS’s financial condition and free cash flow, the sources of which vary from quarter-to-quarter due in part to the seasonal nature of electricity demand in Arizona.
For information on factors that may cause our actual future results to differ from those we currently seek or anticipate, see “Forward-Looking Statements” at the front of this report and “Risk Factors” in Item 1A. OVERVIEW Business Overview Pinnacle West is an investor-owned electric utility holding company based in Phoenix, Arizona with consolidated assets of approximately $26 billion.
For information on factors that may cause our actual future results to differ from those we currently seek or anticipate, see “Forward-Looking Statements” at the front of this report and “Risk Factors” in Item 1A. OVERVIEW Business Overview Pinnacle West is an investor-owned electric utility holding company based in Phoenix, Arizona with consolidated assets of approximately $30 billion.
We review these assumptions on an annual basis and adjust them as necessary. See Note 7. Property Taxes. Taxes other than income taxes consist primarily of property taxes, which are affected by changes in plant balances related to new investments and improvements to existing facilities, the value of property in service and under construction, assessment ratios, and tax rates.
We review these assumptions on an annual basis and adjust them, as necessary. See Note 9. Property Taxes. Taxes other than income taxes consist primarily of property taxes, which are affected by changes in plant balances related to new investments and improvements to existing facilities, the value of property in service and under construction, assessment ratios, and tax rates.
Moody’s Standard & Poor’s Fitch Pinnacle West Corporate credit rating Baa2 BBB+ BBB Senior unsecured Baa2 BBB BBB Commercial paper P-2 A-2 F3 Outlook Stable Stable Stable APS Corporate credit rating Baa1 BBB+ BBB+ Senior unsecured Baa1 BBB+ A- Commercial paper P-2 A-2 F2 Outlook Stable Stable Stable 80 Table of Contents Contractual Obligations Pinnacle West has contractual obligations and other commitments that will need to be funded in the future, in addition to its capital expenditure programs.
Moody’s Standard & Poor’s Fitch Pinnacle West Corporate credit rating Baa2 BBB+ BBB Senior unsecured Baa2 BBB BBB Commercial paper P-2 A-2 F3 Outlook Stable Stable Stable APS Corporate credit rating Baa1 BBB+ BBB+ Senior unsecured Baa1 BBB+ A- Commercial paper P-2 A-2 F2 Outlook Stable Stable Stable 75 Table of Contents Contractual Obligations Pinnacle West has contractual obligations and other commitments that will need to be funded in the future, in addition to its capital expenditure programs.
On April 15, 2024, the ACC granted, in part, the rehearing applications of the Attorney General, Arizona Solar Energy Industries Association, Solar Energy Industries Association, and Vote Solar specifically to review whether the GAC rate is just and reasonable, including whether it should be higher or lower, whether the GAC rate constitutes a discriminatory fee to solar customers, and whether omission of a GAC charge is discriminatory to non-solar customers.
On April 15, 2024, the ACC granted, in part, the rehearing applications of the Attorney General, Arizona Solar Energy Industries Association (“AriSEIA”), Solar Energy Industries Association (“SEIA”), and Vote Solar specifically to review whether the GAC rate is just and reasonable, including whether it should be higher or lower, whether the GAC rate constitutes a discriminatory fee to solar customers, and whether omission of a GAC charge is discriminatory to non-solar customers.
APS’s sources of cash include cash from operations and external sources of liquidity, including long- and short-term external debt financing such as commercial paper, term loan and its revolving credit facility. Cash from operations is dependent upon, among other things, the rates APS may charge and the timeliness of recovering costs incurred through its rates and adjustor recovery mechanisms.
APS’s sources of cash include cash from operations and external sources of liquidity, including long- and short-term external debt financing such as commercial paper, term loans and its revolving credit facility. Cash from operations is dependent upon, among other things, the rates APS may charge and the timeliness of recovering costs incurred through its rates and adjustor recovery mechanisms.
Currently, almost all existing fossil fuel generators do not control carbon emissions the way they control emissions of other air pollutants such as sulfur dioxide or oxides of nitrogen. CCUS technologies are still in the demonstration phase and while they show promise, they are still being tested in real-world conditions.
Currently, almost all existing fossil fuel generators do not control carbon emissions the way they control emissions of other air pollutants such as sulfur dioxide or oxides of nitrogen. CCS technologies are still in the demonstration phase and while they show promise, they are still being tested in real-world conditions.
For the discussion of 2023 compared to 2022, see Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Pinnacle West Capital Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, which specific discussion is incorporated herein by reference.
For the discussion of 2024 compared to 2023, see Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Pinnacle West Capital Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024, which specific discussion is incorporated herein by reference.
We also increased spend on mitigating the risk associated with trees that could cause hazards, resulting in more of these trees being removed before they could cause outages or wildfires. These programs contribute to customer reliability, responsible forest management and safe communities.
APS also increased spend on mitigating the risk associated with trees that could cause hazards, resulting in more of these trees being removed before they could cause outages or wildfires. These programs contribute to customer reliability, responsible forest management and safe communities.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The following discussion should be read in conjunction with Pinnacle West’s Consolidated Financial Statements and APS’s Consolidated Financial Statements and the related Notes that appear in Item 8 of this report. This discussion provides a comparison of the 2024 results with 2023 results.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The following discussion should be read in conjunction with Pinnacle West’s Consolidated Financial Statements and APS’s Consolidated Financial Statements and the related Notes that appear in Item 8 of this report. This discussion provides a comparison of the 2025 results with 2024 results.
Property taxes increased in 2024 due to higher plant balances related to expansion and improvements on our existing generation, transmission, and distribution facilities, partially offset by legislative changes reducing both property tax assessment ratios and rates in Arizona. Income Taxes .
Property tax increased in 2025 due to higher plant balances related to expansion and improvements on our existing generation, transmission, and distribution facilities, partially offset by legislative changes reducing both tax assessment ratios and rates in Arizona. Income Taxes .
Operations and maintenance expenses are impacted by customer and sales growth, power plant operations, maintenance of utility plant (including generation, transmission, and distribution facilities), inflation, unplanned outages, planned outages (typically scheduled in the spring and fall), renewable energy and DSM related expenses (which are mostly offset by the same amount of operating revenues) and other factors. 71 Table of Contents Depreciation and Amortization Expenses.
Operations and maintenance expenses are impacted by customer and sales growth, power plant operations, maintenance of utility plant (including generation, transmission, and distribution facilities), inflation, unplanned outages, planned outages (typically scheduled in the spring and fall), renewable energy and DSM related expenses (which are mostly offset by the same amount of operating revenues) and other factors. Depreciation and Amortization Expenses.
If variable interest rates were to increase by 10% from the December 31, 2024, levels, it would not have a material effect on Pinnacle West Consolidated or APS Consolidated annual interest expense.
If variable interest rates were to increase by 10% from the December 31, 2025, levels, it would not have a material effect on Pinnacle West Consolidated or APS Consolidated annual interest expense.
On December 17, 2024, the ACC approved the Limited Rehearing ROO with an amendment that requires 66 Table of Contents APS in its next rate case to propose a revenue allocation based on a site-load cost of service study in order to bring further parity in revenue collection between solar and non-solar customers.
On December 17, 2024, the ACC approved the Limited Rehearing ROO with an amendment that requires APS in its next rate case to propose a revenue allocation based on a site-load cost of service study in order to bring further parity in revenue collection between solar and non-solar customers.
This process also yields a single equivalent discount rate that produces the same present value for the projection of estimated benefit payments that is generated by discounting each year’s benefit payments by a spot rate to that year. The spot rates are derived from a yield curve composed of domestic AA rated corporate bonds. EROA .
This process also yields a single equivalent discount rate that produces the same present value for the projection of estimated benefit payments that is generated by discounting each year’s benefit payments by a spot rate to that year. The spot rates are derived from a yield curve composed of domestic AA rated corporate bonds. 77 Table of Contents EROA .
The tables below present contractual balances of our consolidated long-term and short-term debt at the expected maturity dates, as well as the fair value of those instruments on December 31, 2024, and 2023.
The tables below present contractual balances of our consolidated long-term and short-term debt at the expected maturity dates, as well as the fair value of those instruments on December 31, 2025 and 2024.
APS’s customer affordability initiative includes internal opportunities, such as training and mentoring employees on identifying efficiency opportunities; maintaining an inventory to take advantage of lower pricing and avoid expediting fees; entering into long-term contracts to hedge against price volatility, which has allowed APS to mitigate against procurement spend areas such as transformers; and implementing automation technologies to enhance efficiencies and increase data-oriented decision making.
APS’s customer affordability initiative includes internal opportunities, such as training and mentoring employees on identifying efficiency opportunities; maintaining inventory to take advantage of lower pricing and avoid expediting fees; entering into long-term contracts to hedge against price volatility, which has allowed APS to mitigate against procurement spend on critical items such as transformers; and implementing automation technologies to enhance efficiencies and increase data-oriented decision making.
(c) This assumes a 1% change in the initial and ultimate healthcare cost trend rate. See Note 7 for further details about our pension and other postretirement benefit plans.
(c) This assumes a 1% change in the initial and ultimate healthcare cost trend rate. See Note 9 for further details about our pension and other postretirement benefit plans.
Credit Risk We are exposed to losses in the event of non-performance or non-payment by counterparties. See Note 15 for a discussion of our credit valuation adjustment policy.
Credit Risk We are exposed to losses in the event of non-performance or non-payment by counterparties. See Note 13 for a discussion of our credit valuation adjustment policy.
Commitments related to purchased power lease contracts are also considered fuel and purchased power commitments. See Note 8. • APS holds certain contracts to purchase renewable energy credits in compliance with the RES. See Notes 3 and 10. • APS is required to make payments to the noncontrolling interests related to the Palo Verde sale leaseback through 2033.
Commitments related to purchased power lease contracts are also considered fuel and purchased power commitments. See Note 20. • APS holds certain contracts to purchase renewable energy credits in compliance with the RES. See Notes 8 and 14. • APS is required to make payments to the noncontrolling interests related to the Palo Verde sale leaseback through 2033.
This determination reflects the current political and regulatory climate in Arizona and is subject to change in the future. If future recovery of costs ceases to be probable, the assets would be written off as a charge in current period earnings, except for pension benefits, which would be charged to OCI and result in lower future earnings.
This determination reflects the current political and regulatory climate in Arizona and is subject to change in the future. If future recovery of costs ceases to be probable, the assets would be written off as a charge in current period earnings, except for pension benefits, which would be charged to other comprehensive income and result in lower future earnings.
SMRs are typically designed to generate 300 MW or less of energy per unit compared to, for example, the 1,400 MW per unit generated at Palo Verde. The utilities have applied for a grant from the DOE to begin preliminary exploration of a potential site for additional nuclear energy for Arizona.
Small modular nuclear reactors are typically designed to generate 300 MW or less of energy per unit compared to, for example, the 1,400 MW per unit generated at Palo Verde. The utilities have applied for a grant from DOE to begin preliminary exploration of a potential site for additional nuclear energy for Arizona.
Material contractual obligations and other commitments are as follows: • Pinnacle West and APS have material long-term debt obligations that mature at various dates through 2050 and bear interest principally at fixed rates. Interest on variable-rate long-term debt is determined by using average rates at December 31, 2024.
Material contractual obligations and other commitments are as follows: • Pinnacle West and APS have material long-term debt obligations that mature at various dates through 2055 and bear interest principally at fixed rates. Interest on variable-rate long-term debt is determined by using average rates at December 31, 2025.
AZ-VC is a fund focused on analyzing, investing, managing, and otherwise dealing with investments in privately-held early stage and emerging growth technology companies and businesses primarily based in Arizona, or based in 69 Table of Contents other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in Arizona. • $7.5 million investment in Westly Seed Fund, of which approximately $1.2 million has been funded as of December 31, 2024.
AZ-VC is a fund focused on analyzing, investing, managing, and otherwise dealing with investments in privately-held early stage and emerging growth technology companies and businesses primarily based in Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in Arizona. • $7.5 million investment in Westly Seed Fund, of which approximately $2 million has been funded as of December 31, 2025.
For the three years through 2024, APS’s customer growth averaged 2.1% per year. We currently project annual customer growth to be 1.5% to 2.5% for 2025 and the average annual growth to be in the range of 1.5% to 2.5% through 2027 based on anticipated steady population growth in Arizona during that period.
For the three years through 2025, APS’s customer growth averaged 2.2% per year. We currently project annual customer growth to be 1.5% to 2.5% for 2026 and the average annual growth to be in the range of 1.5% to 2.5% through 2030 based on anticipated steady population growth in Arizona during that period.
While steady customer growth was somewhat offset by weaker usage among residential customers, energy savings driven by customer conservation, energy efficiency, and distributed renewable generation initiatives, the main drivers of positive sales for this period were continued strong sales to commercial and industrial customers and the ramp-up of new data center and large manufacturing customers.
While steady customer growth was somewhat offset by lower usage among residential customers, energy savings driven by customer conservation, energy efficiency, and distributed renewable generation initiatives, the main drivers of increased revenues for this period were continued strong sales to commercial and industrial customers and the continued ramp-up of new data center and large manufacturing customers.
Based on past experience, a 1% variation in our annual residential and small commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $24 million, and a 1% variation in our annual large commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $6 million.
Based on past experience, a 1% variation in our annual residential and small commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $25 million, and a 1% variation in our annual large commercial and industrial kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $7 million.
The following table shows the net pretax changes in mark-to-market of our energy derivative positions (dollars in millions): December 31, 2024 December 31, 2023 Mark-to-market of net positions at beginning of year $ (120) $ 96 Decrease (increase) in regulatory asset 78 (216) Mark-to-market of net positions at end of year $ (42) $ (120) The table below shows the fair value of maturities of our energy derivative contracts (dollars in millions) at December 31, 2024, by maturities and by the type of valuation that is performed to calculate the fair values, classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The following table shows the net pretax changes in mark-to-market of our energy derivative positions (dollars in millions): December 31, 2025 December 31, 2024 Mark-to-market of net positions at beginning of year $ (42) $ (120) Decrease in regulatory asset 16 78 Mark-to-market of net positions at end of year $ (26) $ (42) The table below shows the fair value of maturities of our energy derivative contracts (dollars in millions) at December 31, 2025, by maturities and by the type of valuation that is performed to calculate the fair values, classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
See Note 17. • APS must reimburse certain coal providers for final and contemporaneous coal mine reclamation. See Note 10. • Pinnacle West’s equity forward sale agreements, which may be settled by Pinnacle West with common stock or cash. Pinnacle West has classified these agreements as equity transactions in accordance with GAAP. See Note 13.
See Note 12. • APS must reimburse certain coal providers for final and contemporaneous coal mine reclamation. See Note 14. • Pinnacle West’s equity forward sale agreements, which may be settled by Pinnacle West with common stock or cash. Pinnacle West has classified these agreements as equity transactions in accordance with GAAP.
Six intervenors and the Attorney General of Arizona requested rehearing on various issues included in the ACC’s decision, such as the grid access charge (“GAC”) for solar customers, the SRB, and CCT funding.
Six intervenors and the Attorney General of Arizona requested rehearing on various issues included in the ACC’s decision, such as the grid access charge (“GAC”) for solar customers, the SRB, and Coal Community Transition funding.
SEIA, AriSEIA, Vote Solar, the Arizona Attorney General, and two individual customers have filed requests for rehearing of the Commission’s December 17, 2024 decision on the rehearing. The Commission has taken no action on these requests.
SEIA, AriSEIA, Vote Solar, the Arizona Attorney General, and two individual customers have filed requests for rehearing of the ACC’s December 17, 2024 decision on the rehearing. The ACC has taken no action on these requests.
For the year ended December 31, 2024, Pinnacle West’s total dividends paid per share of common stock were $3.54 per share, which resulted in dividend payments of $395 million. Available Credit Facilities . Pinnacle West and APS maintain committed revolving credit facilities in order to enhance liquidity and provide credit support for their commercial paper.
For the year ended December 31, 2025, Pinnacle West’s total dividends paid per share of common stock were $3.60 per share, which resulted in dividend payments of $423 million. Available Credit Facilities . Pinnacle West and APS maintain committed revolving credit facilities in order to enhance liquidity and provide credit support for their commercial paper.
Actual sales growth, excluding weather-related variations, may differ from our projections as a result of numerous factors, such as economic conditions, customer growth, usage patterns and energy conservation, slower ramp-up of and/or fewer data centers and large manufacturing facilities, slower than expected commercial and industrial expansions, impacts of energy efficiency programs and growth in DG, responses to retail price changes, changes in regulatory standards, and impacts of new and existing laws and regulations, including environmental laws and regulations.
Actual sales growth, excluding weather-related variations, may differ from our projections as a result of numerous factors, such as macroeconomic conditions, current and future economic, regulatory, business, and other conditions, such as the Arizona housing market, customer growth, usage patterns and energy conservation, slower ramp-up of and/or fewer large data centers and manufacturing facilities, slower than expected commercial and industrial expansions, impacts of energy efficiency programs and growth in DG, responses to retail price changes, changes in regulatory standards, and impacts of new and existing laws and regulations, including environmental laws and regulations.
The average property tax rate in Arizona for APS, which owns essentially all of our property, was 9.7% of the assessed value for 2024, 10.0% for 2023, and 10.2% for 2022.
The average property tax rate in Arizona for APS, which owns essentially all of our property, was 9.6% of the assessed value for 2025, 9.7% for 2024, and 10.0% for 2023.
Retail electricity sales in kWh, adjusted to exclude the effects of weather variations, increased 5.7% for the year ended December 31, 2024, compared with the prior-year period.
Retail electricity sales in kWh, adjusted to exclude the effects of weather variations, increased 5.0% for the period ended December 31, 2025 compared with the prior-year period.
However, since 2020, extreme weather events, such as record-setting summer heat and decreased annual precipitation in our service territory, have resulted in increases in annual net income that are more than historically typical, on average. Fuel and Purchased Power Costs.
However, since 2020, extreme weather events, such as record-setting summer heat and decreased annual precipitation in our service territory, have resulted in increases in annual net income that are more than historically typical, on average. 66 Table of Contents Fuel and Purchased Power Expenses.
Nobles 2 achieved commercial operation in December 2020. Both wind farms deliver power under long-term PPAs. PNW Power indirectly owns 9.9% of Clear Creek and 5.1% of Nobles 2. El Dorado . El Dorado is a wholly-owned subsidiary of Pinnacle West. El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures.
Nobles 2 achieved commercial operation in December 2020. Both wind farms deliver power under long-term PPAs. PNW Power indirectly owns 9.9% of Clear Creek and 5.1% of Nobles 2. El Dorado El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing the financial statements in accordance with GAAP, management must often make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period.
See Note 16. 76 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing the financial statements in accordance with GAAP, management must often make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period.
See Note 5 for more information on available credit facilities. Equity Offerings . Pinnacle West has an ATM program under which Pinnacle West may offer and sell Pinnacle West common stock and enter into equity forward sale agreements from time to time, subject to market conditions and other factors.
See Note 6 for more information on available credit facilities. Equity Offerings . Pinnacle West entered into certain equity forward sale agreements in February 2024 and has an ATM Program under which Pinnacle West may offer and sell Pinnacle West common stock and enter into equity forward sale agreements from time to time, subject to market conditions and other factors.
See Note 6. • Pinnacle West and APS maintain committed revolving credit facilities. See Note 5 for short-term debt details. • Fuel and purchased power commitments include purchases of coal, electricity, natural gas, renewable energy, nuclear fuel, and natural gas transportation. See Notes 3 and 10. Purchase obligations include capital expenditures and other obligations. See Note 10.
See Note 7. • Pinnacle West and APS maintain committed revolving credit facilities. See Note 6 for short-term debt details. • Fuel and purchased power commitments include purchases of coal, electricity, natural gas, renewable energy, nuclear fuel, and natural gas transportation. See Notes 8 and 14. Purchase obligations may include commitments for capital expenditures and other obligations. See Note 14.
Operating revenues less fuel and purchased power expenses were $399 million higher for the year ended December 31, 2024, compared with the prior-year period.
Operating revenues less fuel and purchased power. Operating revenues less fuel and purchased power expenses were $105 million higher for the year ended December 31, 2025 compared with the prior-year period.
Key provisions that are relevant to APS’s clean energy commitment include (i) an extension of tax credits for solar and wind generation, including a new option for solar investments to claim a Production Tax Credit ( “ PTC ” ) in lieu of the Investment Tax Credit ( “ ITC ” ) beginning in 2022; (ii) expansion of the ITC to cover stand-alone energy storage technology beginning in 2023; (iii) introduction of technology neutral clean energy ITCs and PTCs beginning in 2025; and (iv) introduction of a new PTC for nuclear energy produced by existing nuclear energy plants, available from 2024 through 2032.
Key provisions included (i) an extension of tax credits for solar and wind generation, including a new option for solar investments to claim a PTC in lieu of the ITC beginning in 2022; (ii) expansion of the ITC to cover stand-alone energy storage technology beginning in 2023; (iii) introduction of technology neutral clean energy ITCs and PTCs beginning in 2025; and (iv) introduction of a new PTC for nuclear energy produced by existing nuclear energy plants, available from 2024 through 2032.
Due to the expected growth of several large data centers and new large manufacturing facilities, we currently project that annual retail electricity sales in kWh will increase in the range of 4.0% to 6.0% for 2025 and that average annual growth will be in the range of 4.0% to 6.0% through 2027, including the effects of customer conservation, energy efficiency, and distributed renewable 70 Table of Contents generation initiatives, but excluding the effects of weather variations.
Due to the expected growth of several data centers and large manufacturing facilities, we currently project that annual retail electricity sales in kWh will increase in the range of 4.0% to 6.0% for 2026 and that average annual growth will be in the range of 5.0% to 7.0% through 2030, including the effects of customer conservation, energy efficiency, and distributed renewable generation initiatives, but excluding the effects of weather variations.
These revenue transactions are affected by the availability of excess generation or other energy resources and wholesale market conditions, including competition, demand, and prices. Actual and Projected Customer and Sales Growth. Retail customers in APS’s service territory increased 2.1% for the year ended December 31, 2024, compared with the prior-year period.
Our revenues are affected by the availability of excess generation or other energy resources and wholesale market conditions, including competition, demand, and prices. Actual and Projected Customer and Sales Growth. Retail customers in APS’s service territory increased 2.4% for the period ended December 31, 2025 compared with the prior-year period.
We have increased investment in fire mitigation efforts to clear defensible space around our infrastructure, continue ongoing system upgrades, build partnerships with government entities and first responders and educate customers and communities.
APS has increased investment in fire mitigation efforts to clear defensible space around its infrastructure, continue ongoing system upgrades, build partnerships with government entities and first responders, and educate customers and communities.
Source of Fair Value 2025 2026 2027 2028 2029 Total Fair Value Observable prices provided by other external sources $ (32) $ 2 $ 3 $ — $ — $ (27) Prices based on unobservable inputs (6) (9) — — — (15) Total by maturity $ (38) $ (7) $ 3 $ — $ — $ (42) 87 Table of Contents The table below shows the impact that hypothetical price movements of 10% would have on the market value of our risk management assets and liabilities included on Pinnacle West’s Consolidated Balance Sheets (dollars in millions): December 31, 2024 Gain (Loss) December 31, 2023 Gain (Loss) Price Up 10% Price Down 10% Price Up 10% Price Down 10% Mark-to-market changes reported in: Regulatory asset (liability) (a) Electricity $ 3 $ (3) $ 9 $ (9) Natural gas 75 (75) 55 (55) Total $ 78 $ (78) $ 64 $ (64) (a) These contracts are economic hedges of our forecasted purchases of natural gas and electricity.
Source of Fair Value 2026 2027 2028 2029 2030 Total Fair Value Observable prices provided by other external sources $ (6) $ 6 $ (2) $ — $ — $ (2) Prices based on unobservable inputs (24) — — — — (24) Total by maturity $ (30) $ 6 $ (2) $ — $ — $ (26) 83 Table of Contents The table below shows the impact that hypothetical price movements of 10% would have on the market value of our risk management assets and liabilities included on Pinnacle West’s Consolidated Balance Sheets (dollars in millions): December 31, 2025 Gain (Loss) December 31, 2024 Gain (Loss) Price Up 10% Price Down 10% Price Up 10% Price Down 10% Mark-to-market changes reported in: Regulatory asset (liability) (a) Electricity $ 3 $ (3) $ 3 $ (3) Natural gas 58 (58) 75 (75) Total $ 61 $ (61) $ 78 $ (78) (a) These contracts are economic hedges of our forecasted purchases of natural gas and electricity.
All of APS’s bank agreements contain “cross-default” provisions that would result in defaults and the potential acceleration of payment under these bank 79 Table of Contents agreements if APS were to default under certain other material agreements. Pinnacle West and APS do not have a material adverse change restriction for credit facility borrowings.
All of Pinnacle West’s and APS’s credit agreements contain “cross-default” provisions that would result in defaults and the potential acceleration of payment if Pinnacle West or APS were to default under certain other material agreements. Pinnacle West and APS do not have a material adverse change covenant for credit facility borrowings.
We continually monitor financial market volatility and its impact on our retirement plans and other postretirement benefits, but we believe our liability driven investment strategy helps to minimize the impact of market volatility on our plan’s funded status.
We continually monitor financial market volatility and its impact on our retirement plans and other postretirement benefits, but we believe our liability driven investment strategy helps to minimize the impact of market volatility on our plan’s funded status. Investing Cash Flows 2025 Compared with 2024.
Changing interest rates will affect interest paid on variable-rate debt and the market value of fixed income securities held by our nuclear decommissioning trust, other special use funds (see Notes 12 and 18), and benefit plan assets.
Interest Rate and Equity Risk We have exposure to changing interest rates. Changing interest rates will affect interest paid on variable-rate debt and the market value of fixed income securities held by our nuclear decommissioning trust, other special use funds (see Notes 17 and 18), and benefit plan assets.
Regarding contributions to our other postretirement benefit plan, we did not make any contributions in 2024 or 2023 and do not expect to make any contributions in 2025, 2026 or 2027.
Regarding contributions to our other postretirement benefit plan, we did not make a contribution in 2025 and do not expect to make any contributions in 2026, 2027 or 2028.
These projected sales growth ranges include the impacts of several large data centers and new large manufacturing facilities, which are expected to contribute to 2025 growth in the range of 3.0% to 5.0% and to average annual growth in the range of 3.0% to 5.0% through 2027.
These projected sales growth ranges include the impacts of several data centers and large manufacturing facilities, which are expected to contribute to 2026 growth in the range of 3.0% to 5.0% and to average annual growth in the range of 4.0% to 6.0% through 2030.
Transmission LLC, a subsidiary of Berkshire Hathaway Energy Company. TransCanyon is pursuing independent electric transmission opportunities within the 11 U.S. states that comprise the Western Interconnection, excluding opportunities related to transmission service that would otherwise be provided under the tariffs of the retail service territories of the venture partners’ utility affiliates. The U.S.
TransCanyon is pursuing independent electric transmission opportunities within the 11 U.S. states that comprise the Western Interconnection, excluding opportunities related to transmission service that would otherwise be provided under the tariffs of the retail service territories of the TransCanyon partners’ utility affiliates.
Management judgments also include assessing the impact of potential ACC- or FERC-ordered refunds to customers on regulatory liabilities. We had $1,810 million of regulatory assets and $2,062 million of regulatory liabilities on the Consolidated Balance Sheets at December 31, 2024. See Notes 1 and 3 for more information.
Management judgments also include assessing the impact of potential ACC- or FERC-ordered refunds to customers on regulatory liabilities. We had $1,749 million of regulatory assets and $1,947 million of regulatory liabilities on the Consolidated Balance Sheets at December 31, 2025. See Notes 1 and 8 for more information.
See Note 6 for further details. The primary factors affecting borrowing levels are expected to be our capital expenditures, long-term debt maturities, equity issuances and internally generated cash flow. An allowance for borrowed funds used during construction offsets a portion of interest expense while capital projects are under construction.
See Notes 6 and 7 for further details. The primary factors affecting borrowing levels are expected to be our capital expenditures, long-term debt maturities, equity issuances and internally generated cash flow. AFUDC offsets a portion of interest expense while capital projects are under construction.
Significant Financing Activities. On December 11, 2024, the Pinnacle West Board of Directors declared a dividend of $0.895 per share of common stock, payable on March 3, 2025, to shareholders of record on February 3, 2025. During 2024, Pinnacle West increased its indicated annual dividend from $3.52 per share to $3.58 per share.
Significant Financing Activities. On December 10, 2025, the Pinnacle West Board of Directors declared a dividend of $0.91 per share of common stock, payable on March 2, 2026, to shareholders of record on February 2, 2026. During 2025, Pinnacle West increased its indicated annual dividend from $3.58 per share to $3.64 per share.
The interest rates presented in the tables below represent the weighted-average interest rates as of December 31, 2024, and 2023 (dollars in millions): APS — Consolidated Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2024 Rates Amount Rates Amount Rates Amount 2025 4.62 % $ 340 — $ — 3.15 % $ 300 2026 — — — — 2.55 % 250 2027 — — — — 2.95 % 300 2028 — — — — — — 2029 — — 4.01 % 164 2.60 % 405 Years thereafter — — — — 4.31 % 6,125 Total $ 340 $ 164 $ 7,380 Fair value $ 340 $ 164 $ 6,361 86 Table of Contents Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2023 Rates Amount Rates Amount Rates Amount 2024 5.46 % $ 533 — $ — 3.35 % $ 250 2025 — — — — 3.15 % 300 2026 — — — — 2.55 % 250 2027 — — — — 2.95 % 300 2028 — — — — — — Years thereafter — — 4.11 % 164 4.22 % 6,080 Total $ 533 $ 164 $ 7,180 Fair value $ 533 $ 164 $ 6,296 Commodity Price Risk We are exposed to the impact of market fluctuations in the commodity price and transportation costs of electricity and natural gas.
The interest rates presented in the tables below represent the weighted-average interest rates as of December 31, 2025, and 2024 (dollars in millions): APS Consolidated Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2025 Rates Amount Rates Amount Rates Amount 2026 3.83 % $ 507 — $ — 2.55 % $ 250 2027 — — — — 2.95 % 300 2028 — — — — — — 2029 — — 3.52 % 164 2.60 % 405 2030 — — — — — — Years thereafter — — — — 4.62 % 7,075 Total $ 507 $ 164 $ 8,030 Fair value $ 507 $ 164 $ 7,269 82 Table of Contents Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2024 Rates Amount Rates Amount Rates Amount 2025 4.62 % $ 340 — $ — 3.15 % $ 300 2026 — — — — 2.55 % 250 2027 — — — — 2.95 % 300 2028 — — — — — — 2029 — — 4.01 % 164 2.60 % 405 Years thereafter — — — — 4.31 % 6,125 Total $ 340 $ 164 $ 7,380 Fair value $ 340 $ 164 $ 6,361 Commodity Price Risk We are exposed to the impact of market fluctuations in the commodity price and transportation costs of electricity and natural gas.
Operations and maintenance expenses increased $106 million for the year ended December 31, 2024, compared with the prior-year period primarily due to: • an increase of $27 million related to information technology costs; • an increase of $25 million related to transmission, distribution, and customer service costs; • an increase of $20 million related to non-nuclear generation costs, primarily due to increased planned outages; • an increase of $16 million related to employee benefit costs; • an increase of $14 million related to costs for renewable energy programs and similar regulatory programs, which are partially offset in operating revenues and purchased power; • an increase of $7 million related to corporate resource costs; and • a decrease of $3 million for other miscellaneous factors.
Operations and maintenance expenses increased $20 million for the year ended December 31, 2025 compared with the prior-year period, primarily due to: • an increase of $19 million related to information technology costs; • an increase of $16 million related to corporate resource costs; • an increase of $2 million related to nuclear generation costs; • an increase of $2 million related to costs for renewable energy programs and similar regulatory programs, which are partially offset in operating revenues and purchased power; • an increase of $1 million related to non-nuclear generation costs, primarily due to increased operating costs; • a decrease of $11 million related to transmission, distribution, and customer service costs; • a decrease of $13 million related to employee benefit costs; and • an increase of $4 million for other miscellaneous factors.
With recent wildfire events in Hawaii, California, and across North America, we have been devoting and will continue to devote substantial efforts to analyzing and developing enhancements to our systems and processes to mitigate fire risk within our service territory and communities, including by hardening our infrastructure, deploying new technologies where appropriate, increasing our awareness, implementing operational changes, and enhancing our wildfire response capabilities.
With wildfire events in Hawaii, California, and across North America over the last few years, APS has been devoting and intends to continue to devote substantial efforts to analyzing and developing enhancements to its systems and processes to mitigate fire risk within its service territory and communities, including by hardening our infrastructure, deploying new technologies where appropriate, increasing our awareness, implementing operational changes, and enhancing our wildfire response capabilities.
The proposed Cross-Tie project includes a 214-mile transmission line connecting Utah and Nevada that is intended to help improve grid reliability and relieve congestion on other transmission lines.
These opportunities include the proposed 500-kV Cross-Tie transmission project (the “Cross-Tie Project”), which includes a 214-mile transmission line connecting Utah and Nevada that is intended to help improve grid reliability and relieve congestion on other transmission lines.
Income taxes were $34 million higher for the year ended December 31, 2024, compared with the prior-year period, primarily due to higher pre-tax income, and lower tax benefits from AFUDC equity, partially offset by higher tax credits.
Income taxes were $4 million lower for the year ended December 31, 2025 compared with the prior-year period, primarily due to higher tax benefits related to employee benefits and AFUDC Equity, offset by lower tax credits and higher pre-tax income.
There is no assurance that these ratings will continue for any given period. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.
The ratings reflect the respective views of the rating agencies, from which an explanation of the significance of their ratings may be obtained. There is no assurance that these ratings will continue for any given period. The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.
Neither Pinnacle West’s nor APS’s financing agreements contain “rating triggers” that would result in an acceleration of the required interest and principal payments in the event of a rating downgrade. However, our bank credit agreements contain a pricing grid in which the interest rates we pay for borrowings thereunder are determined by our current credit ratings.
See further discussion of “cross-default” provisions below. Neither Pinnacle West’s nor APS’s financing agreements contain “rating triggers” that would result in an acceleration of payment in the event of a rating downgrade. However, our bank credit agreements contain a pricing grid in which the interest rates we pay for borrowings thereunder are determined by our current credit ratings.
Westly Seed Fund is focused on supporting entrepreneurs involved in the energy, mobility, building, and industrial sectors. • Equity investment in SAI Advanced Power Solutions (“SAI”), a private corporation that manufactures electrical switchgear equipment used by data centers. El Dorado accounts for this investment under the equity method, with a December 31, 2024 investment carrying value of zero.
Westly Seed Fund is focused on supporting entrepreneurs involved in the energy, mobility, building, and industrial sectors. • Equity investment in SAI, a private corporation that manufactures electrical switchgear equipment used by data centers. El Dorado accounts for this investment under the equity method and has an investment carrying value of approximately $21 million as of December 31, 2025.
Our assessment of the inputs and the significance of a particular input to fair value measurement may affect the valuation of the instruments and their placement within a fair value hierarchy. Actual results could differ from our estimates of fair value. See Note 1 for a discussion of accounting policies and Note 12 for fair value measurement disclosures.
Our assessment of the inputs and the significance of a particular input to fair value measurement may affect the valuation of the instruments and their placement within a fair value hierarchy. Actual results could differ from our estimates of fair value.
In particular, El Dorado has committed to the following: • $25 million investment in the Energy Impact Partners fund, of which approximately $18.8 million has been funded as of December 31, 2024.
In particular, El Dorado has committed to and/or holds the following: • $25 million investment in the Energy Impact Partners fund, of which approximately $20 million has been funded as of December 31, 2025.
Longer term, APS has been preparing for and can serve significant load growth from residential and business customers. On top of these existing growth trends, APS is also now receiving unprecedented incremental requests for service from extra-large commercial energy users (over 25 MW) with very high energy demands that persist virtually around-the-clock.
Longer term, APS has been preparing for and can serve significant load growth from residential and business customers. On top of these existing growth trends, APS is also receiving incremental requests for service from large load customers with very high energy demands that persist virtually around-the-clock, such as data centers for AI and large manufacturers.
Energy Impact Partners is an organization that focuses on fostering innovation and supporting the transformation of the utility industry. • $25 million investment in AZ-VC (formerly invisionAZ Fund), of which approximately $11.8 million has been funded as of December 31, 2024.
Energy Impact Partners is an organization that focuses on fostering innovation and supporting the transformation of the utility industry. 64 Table of Contents • $25 million investment in AZ-VC, of which approximately $16 million has been funded as of December 31, 2025.
The interest rates presented in the tables below represent the weighted-average interest rates as of December 31, 2024, and 2023 (dollars in millions): Pinnacle West – Consolidated Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2024 Rates Amount Rates Amount Rates Amount 2025 4.90 % $ 568 — $ — 1.99 % $ 800 2026 — — 5.88 % 350 2.55 % 250 2027 — — — — 4.10 % 825 2028 — — — — — — 2029 — — 4.01 % 164 2.60 % 405 Years thereafter — — — — 4.31 % 6,125 Total $ 568 $ 514 $ 8,405 Fair value $ 568 $ 514 $ 7,405 85 Table of Contents Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2023 Rates Amount Rates Amount Rates Amount 2024 5.46 % $ 610 6.20 % $ 625 3.35 % $ 250 2025 — — — — 1.99 % 800 2026 — — — — 2.55 % 250 2027 — — — — 2.95 % 300 2028 — — — — — — Years thereafter — — 4.11 % 164 4.22 % 6,080 Total $ 610 $ 789 $ 7,680 Fair value $ 610 $ 789 $ 6,767 The tables below present contractual balances of APS’s long-term and short-term debt at the expected maturity dates, as well as the fair value of those instruments on December 31, 2024, and 2023.
The interest rates presented in the tables below represent the weighted-average interest rates as of December 31, 2025 and 2024 (dollars in millions): Pinnacle West Consolidated Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2025 Rates Amount Rates Amount Rates Amount 2026 3.98 % $ 757 5.10 % $ 350 2.55 % $ 250 2027 — — — — 4.10 % 825 2028 — — — — 4.90 % 400 2029 — — 3.52 % 164 2.60 % 405 2030 — — — — 5.15 % 400 Years thereafter — — — — 4.62 % 7,075 Total $ 757 $ 514 $ 9,355 Fair value $ 757 $ 514 $ 8,651 81 Table of Contents Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2024 Rates Amount Rates Amount Rates Amount 2025 4.90 % $ 568 — $ — 1.99 % $ 800 2026 — — 5.88 % 350 2.55 % 250 2027 — — — — 4.10 % 825 2028 — — — — — — 2029 — — 4.01 % 164 2.60 % 405 Years thereafter — — — 4.31 % 6,125 Total $ 568 $ 514 $ 8,405 Fair value $ 568 $ 514 $ 7,405 The tables below present contractual balances of APS’s long-term and short-term debt at the expected maturity dates, as well as the fair value of those instruments on December 31, 2025, and 2024.
On December 17, 2024, the ACC issued a financing order approving a limit on yearly equity infusions equal to 2.5% of APS’s total ass ets each calendar year on a three-year rolling average basis, subject to APS’s equity ratio remaining below the most recently approved rate case capital structure plus 50 basis points. 75 Table of Contents On June 12, 2024, Pinnacle West contributed $450 million into APS in the form of an equity infusion.
On December 17, 2024, the ACC issued a financing order approving a limit on yearly equity infusions equal to 2.5% of APS’s total ass ets each calendar year on a three-year rolling average basis, subject to APS’s equity ratio remaining below the most recently approved rate case capital structure plus 50 basis points.
APS’s capital requirements consist primarily of capital expenditures and maturities of long-term debt. APS funds its capital requirements with cash from operations and, to the extent necessary, external debt financings and equity infusions from Pinnacle West.
Regulatory lag may delay recovery and affect operating cash flows. APS’s capital requirements consist primarily of capital expenditures and maturities of long-term 70 Table of Contents debt. APS funds its capital requirements with cash from operations and, to the extent necessary, external debt financings and equity infusions from Pinnacle West.
The requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) require us to contribute a minimum amount to the qualified plan. We contribute at least the minimum amount required under ERISA regulations, but no more than the maximum tax-deductible amount.
Pinnacle West also sponsors other postretirement benefit plans for the employees of Pinnacle West and its subsidiaries. The requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) require us to contribute a minimum amount to the qualified plan. We contribute at least the minimum amount required under ERISA regulations, but no more than the maximum tax-deductible amount.
At December 31, 2024, the ratio was approximately 59% for Pinnacle West and 49% for APS. Failure to comply with such covenant levels would result in an event of default which, generally speaking, would require the immediate repayment of the debt subject to the covenants and could “cross-default” other debt. See further discussion of “cross-default” provisions below.
As of December 31, 2025, the ratio was approximately 60% for Pinnacle West and 50% for APS. Failure to comply with such covenant levels would result in an event 74 Table of Contents of default which, generally speaking, would require the immediate repayment of the debt subject to the covenants and could “cross-default” other debt.

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