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What changed in Pinnacle West Capital's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Pinnacle West Capital's 2023 and 2024 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 2024 report.

+546 added−532 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-27)

Top changes in Pinnacle West Capital's 2024 10-K

546 paragraphs added · 532 removed · 378 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

132 edited+74 added−72 removed107 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 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 12 Table of Contents 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 Distributed Energy: APS Owned (a) AZ Various 37 Total APS Owned 415 — 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 CO Bar Solar C Coconino County, AZ 2025 20 206 Mesquite Solar 5 Tonopah, AZ 2023 20 60 Sunstreams 3 Arlington, AZ 2024 20 215 Sunstreams 4 Arlington, AZ 2025 20 300 Harquahala Sun Tonopah, AZ 2025 20 300 Serrano Solar Pima and Pinal County, AZ 2025 20 170 Yuma Solar Energy Yuma County, AZ 2024 20 70 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 2025 20 400 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 1,034 1,877 Distributed Energy Solar (b) Third-party Owned AZ Various 1,590 61 Agreement 1 Bagdad, AZ 2011 25 15 Agreement 2 AZ 2011-2012 20-21 18 Total Distributed Energy 1,623 61 Total Renewable Portfolio 3,072 1,938 (a) Includes Flagstaff Community Power Project, APS School and Government Program, APS Solar Partner Program, and APS Solar Communities Program. 13 Table of Contents (b) Includes rooftop solar facilities owned by third parties.
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.
APS currently has a diverse portfolio of renewable resources, including solar, wind, geothermal, biogas, and biomass.
APS currently has a diverse portfolio of renewable resources, including biogas, biomass, geothermal, solar, and wind.
Western Energy Imbalance Market & Wholesale Market In 2016, APS began to participate in the Western Energy Imbalance Market (“WEIM”), a voluntary, real-time optimization market operated by the CAISO. The WEIM allows for rebalancing supply and demand in 15-minute blocks and dispatching generation every five minutes, instead of the traditional one-hour blocks.
Western Energy Imbalance Market and Wholesale Market In 2016, APS began to participate in the Western Energy Imbalance Market (“WEIM”), a voluntary, real-time optimization market operated by the CAISO. The WEIM allows for rebalancing supply and demand in 15-minute blocks and dispatching generation every five minutes, instead of the traditional one-hour blocks.
Employee Safety Our work and our decisions are anchored in safety – safety is the foundation of everything we do, and employee safety is our paramount responsibility as an employer. We develop safety practices and programs that ensure employees have safe and secure workplaces that allow them to perform at the highest levels.
Employee Safety Our work and our decisions are anchored in safety – safety is the foundation of everything we do, and employee safety is our paramount responsibility as an employer. We develop practices and programs that ensure employees have safe and secure workplaces that allow them to perform at the highest levels.
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.
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.
In addition, in January 2020, APS announced its Clean Energy Commitment, a three-pronged approach aimed at ultimately eliminating carbon-emitting resources from its electric generation resource portfolio. 5 Table of Contents APS’s Clean Energy Commitment consists of three parts: • A 2050 goal to provide 100% clean, carbon-free electricity; • A 2030 target to achieve a resource mix that is 65% clean energy, with 45% of the generation portfolio coming from renewable energy; and • A commitment to exit from coal-fired generation by 2031.
In addition, in January 2020, APS announced its Clean Energy Commitment, a three-pronged approach aimed at ultimately eliminating carbon-emitting resources from its electric generation resource portfolio. 5 Table of Contents APS’s Clean Energy Commitment consists of three parts: • A 2050 goal to provide 100% clean, carbon-free electricity; • A 2030 target to achieve a resource mix that is 65% clean energy, with 45% of the generation portfolio coming from renewable energy; and • A plan to exit from coal-fired generation by 2031.
Among other resiliency strategies, APS anticipates increasing investments in a modern and more flexible electricity grid with advanced distribution technologies. APS plans to continue its comprehensive forest management programs aimed at reducing wildfires, as those risks become compounded by shorter, drier winters and longer, hotter summers as a result of climate change.
Among other resiliency strategies, APS anticipates increasing investments in a modern and more flexible electricity grid with advanced distribution technologies. APS plans to continue its forest management programs aimed at reducing wildfires, as those risks become compounded by shorter, drier winters and longer, hotter summers as a result of climate change.
These five projects, along with other projects included in the Ten-Year 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 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.
Since the adopted clean energy rules differed substantially from the original Recommended Order and Opinion, supplemental rulemaking procedures were required before the rules could become effective. On January 26, 2022, the ACC reversed its prior decision and declined to send the final draft energy rules through the rulemaking process.
Since the adopted clean energy rules differed substantially from the original Recommended Opinion and Order (“ROO”), supplemental rulemaking procedures were required before the rules could become effective. On January 26, 2022, the ACC reversed its prior decision and declined to send the final draft energy rules through the rulemaking process.
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 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; • Fabrication of fuel assemblies; • Utilization of fuel assemblies in reactors; and • Storage and preparation for disposal of spent nuclear fuel.
Type Dates Available Capacity (MW) Purchase Agreement (a) Year-round through June 14, 2025 46 Demand Response Agreement Summer seasons through 2025 75 Tolling Agreement May 1 through April 30, 2021-2025 463 Extension Term May 1 through October 31, 2025-2032 525 Tolling Agreement June 1 through September 30, 2020-2026 565 Extension Term May 1 through October 31, 2026-2031 565 Tolling Agreement June 1 through September 30, 2020-2026 570 Extension Term May 1 through October 31, 2027-2034 570 Renewable Energy (b) Various 1,063 (a) Up to 46 MW of capacity is available; however, the amount of electricity available to APS under this agreement is based in large part on customer demand and is adjusted annually.
Type Dates Available Capacity (MW) Purchase Agreement (a) Year-round through June 14, 2025 46 Demand Response Agreement Summer seasons through 2025 75 Tolling Agreement May 1 through April 30, 2021-2025 463 Extension Term May 1 through October 31, 2025-2032 525 Tolling Agreement June 1 through September 30, 2020-2026 565 Extension Term May 1 through October 31, 2026-2031 565 Tolling Agreement June 1 through September 30, 2020-2026 570 Extension Term May 1 through October 31, 2027-2034 600 Renewable Energy (b) Various 1,465 (a) Up to 46 MW of capacity is available; however, the amount of electricity available to APS under this agreement is based in large part on customer demand and is adjusted annually.
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.
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.
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 381 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 has a total entitlement from Cholla of 380 MW.
During 2023, no single purchaser or user of energy accounted for more than 2.1% of our electric revenues. 3 Table of Contents The following map shows APS’s retail service territory, including the locations of its generating facilities and principal transmission lines. 4 Table of Contents Energy Sources and Resource Planning To serve its customers, APS obtains power through its various generation stations and through purchased power agreements.
During 2024, no single purchaser or user of energy accounted for more than 1.4% of our electric revenues. 3 Table of Contents The following map shows APS’s retail service territory, including the locations of its generating facilities and principal transmission lines. 4 Table of Contents Energy Sources and Resource Planning To serve its customers, APS obtains power through its various generation stations and through purchased power agreements.
APS is strategically deploying a variety of technologies that are intended to allow customers to better manage their energy usage, minimize system outage durations and frequency, enable customer choice for new customer sited technologies, and facilitate greater cost savings to APS through improved reliability and the automation of certain delivery functions. 19 Table of Contents Environmental Matters Climate Change Legislative Initiatives.
APS is strategically deploying a variety of technologies that are intended to allow customers to better manage their energy usage, minimize system outage durations and frequency, enable customer choice for new customer sited technologies, and facilitate greater cost savings to APS through improved reliability and the automation of certain delivery functions. Environmental Matters Climate Change Legislative Initiatives.
APS is one of a number of parties in a proceeding, filed March 13, 1975, before the Eleventh Judicial District Court in New Mexico to adjudicate rights to a stream system from which water for Four Corners is derived.
APS is one of numerous parties in a proceeding, filed March 13, 1975, before the Eleventh Judicial District Court in New Mexico to adjudicate rights to a stream system from which water for Four Corners is derived.
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.
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.
APS estimates that its costs to oversee and participate in the remedial investigation work will be approximately $1.7 million. At the present time, we are unable to predict the 24 Table of Contents outcome of this matter and any further expenditures related to necessary remediation, if any, or further investigations cannot be reasonably estimated.
APS estimates that its costs to oversee and participate in the remedial investigation work will be approximately $1.7 million. At the present time, we are unable to predict the outcome of this matter, and any further expenditures related to necessary remediation, if any, or further investigations cannot be reasonably estimated.
APS determined that several of its CCR disposal units at Cholla and Four Corners will need to undergo corrective action. In addition, under the current regulations, all such disposal units must have ceased operating and initiated closure by April 11, 2021, at the latest (except for those disposal units subject to alternative closure).
APS determined that several of its CCR disposal units at Cholla and Four Corners will need to undergo corrective action. In addition, under the current regulations, all such disposal units must have ceased operating and initiated closure as of April 11, 2021 (except for those disposal units subject to alternative closure).
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. 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 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.
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.
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.
You can request a copy of these documents, excluding exhibits, by contacting Pinnacle West at the following address: Pinnacle West Capital Corporation, Office of the Corporate Secretary, Mail Station 8602, P.O. Box 53999, Phoenix, Arizona 85072-3999 (telephone 602-250-3011). 32 Table of Contents
You can request a copy of these documents, excluding exhibits, by contacting Pinnacle West at the following address: Pinnacle West Capital Corporation, Office of the Corporate Secretary, Mail Station 8602, P.O. Box 53999, Phoenix, Arizona 85072-3999 (telephone 602-250-3011).
To prioritize reliability and meet substantial growth in residential and commercial energy needs, APS has developed a future-focused, strategic transmission plan. This Ten-Year 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 five critical transmission projects that comprise the APS strategic transmission portfolio, which represents a significant upgrade to APS’s transmission system.
APS’s estimates for its share of corrective action and monitoring costs at Four Corners and Cholla are captured within the Asset Retirement Obligations in Note 11. 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. As APS continues to implement the CCR rule’s corrective action assessment process, the current cost estimates may change.
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.
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.
APS continues to expect that its participation in WEIM will lower its fuel and purchased-power costs, improve situational awareness for system operations in the Western Interconnection power grid, and improve integration of APS’s renewable resources. APS is participating in market design and tariff development of Markets+, a day-ahead and real-time market offering from Southwest Power Pool.
APS continues to expect that its participation in WEIM will lower its fuel and purchased-power costs, improve situational awareness for system operations in the Western Interconnection power grid, and improve integration of APS’s renewable resources. APS participated in market design and tariff development of Markets+, a day-ahead and real-time market offering from Southwest Power Pool (“SPP”).
Given uncertainties that may exist until we have fully completed the corrective action assessment and final remedy selection process, APS cannot predict any ultimate impacts to the APS; however, at this time, APS does not believe that any potential changes to the cost estimate for Four Corners or Cholla would have a material impact on our financial condition, results of operations, or cash flows.
Given uncertainties that may exist until we have fully completed the corrective action assessment and final remedy selection process, we cannot predict any ultimate impacts to APS; however, at this time APS does not believe that any potential changes to the cost estimate from the CCR rule’s corrective action assessment process for Four Corners or Cholla would have a material impact on its financial condition, results of operations, or cash flows.
APS Solar Communities (formerly AZ Sun II) is a three-year program authorizing APS to spend $10 million to $15 million in capital costs each year to install utility-owned DG systems on low to moderate income residential homes, non-profit entities, Title I schools, and rural government facilities.
APS Solar Communities (formerly AZ Sun II) is a three-year program authorizing APS to spend $10 11 Table of Contents million to $15 million in capital costs each year to install utility-owned DG systems on low to moderate income residential homes, non-profit entities, Title I schools, and rural government facilities.
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.
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.
See Note 3 for information regarding energy efficiency, other DSM obligations and the Energy Modernization Plan. 17 Table of Contents Competitive Environment and Regulatory Oversight Retail The ACC regulates APS’s retail electric rates and its issuance of securities.
See Note 3 for information regarding energy efficiency, other DSM obligations and the Energy Modernization Plan. Competitive Environment and Regulatory Oversight Retail The ACC regulates APS’s retail electric rates and its issuance of securities.
ITEM 1. BUSINESS Pinnacle West Pinnacle West is a holding company that conducts business through its subsidiaries. We derive essentially all of our revenues and earnings from our wholly-owned subsidiary, APS.
ITEM 1. BUSINESS Pinnacle West Pinnacle West is a holding company incorporated in Arizona that conducts business through its subsidiaries. We derive essentially all of our revenues and earnings from our wholly-owned subsidiary, APS.
This settlement requires investigation of thermal wastewater discharges from Four Corners, administratively closes the litigation filed in January of 2021, and APS does not expect the outcome to have a material impact on our financial condition, results of operations, or cash flows. Water Supply Based on a declaration from the U.S.
This settlement requires investigation of thermal wastewater discharges from Four Corners, administratively closes the litigation filed in January of 2021, and APS does not expect the outcome to have a material impact on its financial condition, results of operations, or cash flows. 25 Table of Contents Water Supply Based on a declaration from the U.S.
In addition to federal legislative initiatives, state-specific initiatives may also impact our business. While Arizona has no pending legislation regulating GHGs, the California legislature enacted AB 32 and SB 1368 in 2006 to address GHG emissions.
In addition to federal legislative initiatives, state-specific initiatives may also impact our business. While Arizona has no pending legislation regulating GHGs, the California legislature enacted AB 32 and Senate Bill (“SB”) 1368 in 2006 to address GHG emissions.
The costs for this program have been included in APS’s rate base as part of the 2017 Rate Case Decision. 11 Table of Contents In the 2017 Rate Case Decision, the ACC also approved the “APS Solar Communities” program.
The costs for this program have been included in APS’s rate base as part of the 2017 Rate Case Decision. In the 2017 Rate Case Decision, the ACC also approved the “APS Solar Communities” program.
APS completed the assessments of corrective measures on June 14, 2019; however, additional investigations and engineering analyses that will support the remedy selection are still underway. In addition, APS will also solicit input from the public and host public hearings as part of this process.
APS completed the assessments of corrective measures on June 14, 2019; however, additional investigations and engineering analyses that will support the remedy selection are still underway. In addition, APS has also solicited input from the public and hosted public hearings as part of this process.
While certain changes have been prompted by utility industry petitions, 21 Table of Contents others have resulted from judicial review, court-approved settlements with environmental groups, and statutory changes to RCRA.
While certain changes have been prompted by utility industry petitions, others have resulted from judicial review, court-approved settlements with environmental groups, and statutory changes to RCRA.
APS has undertaken a number of initiatives to reduce carbon, including renewable energy procurement and development, and promotion of programs and rates that promote energy conservation, renewable energy use, and energy efficiency. See “Energy Sources and Resource Planning — Current and Future Resources” below for details of these plans and initiatives.
Clean Energy Focus Initiatives In response to climate change, APS has undertaken a number of initiatives to reduce carbon, including renewable energy procurement and development, and promotion of programs and rates that promote energy conservation, renewable energy use, and energy efficiency. See “Energy Sources and Resource Planning — Current and Future Resources” below for details of these plans and initiatives.
See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Energy Storage” above for details on our energy storage PPAs. 14 Table of Contents Purchased Power Capacity — APS’s purchased power capacity under long-term contracts as of December 31, 2023, is summarized in the table below.
See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Energy Storage” above for details on our energy storage PPAs. 14 Table of Contents Purchased Power Capacity — APS’s purchased power capacity under long-term contracts as of the date of this report is summarized in the table below.
Resource planning is an important function necessary to meet Arizona’s future energy needs. APS’s sources of energy by type used to supply energy to Native Load customers during 2023 were as follows: *Renewables include energy from wind, solar, geothermal, biogas, biomass, and DG.
Resource planning is an important function necessary to meet Arizona’s future energy needs. APS’s sources of energy by type used to supply energy to Native Load customers during 2024 were approximately as follows: *Utility Scale Renewables include energy from biogas, biomass, geothermal, solar, and wind.
In June 2008, the DOE submitted its Yucca Mountain construction authorization application to the NRC, but in March 2010, the DOE filed a motion to dismiss with prejudice the Yucca Mountain construction 7 Table of Contents authorization application.
In June 2008, the DOE submitted its Yucca Mountain construction authorization application to the NRC, but in March 2010, the DOE filed a motion to dismiss with prejudice the Yucca Mountain construction authorization application.
For 2024, due to expiring purchased power contracts, APS is procuring market resources to maintain its minimum 16% planning reserve criteria. Future Resources and Resource Plan ACC rules require utilities to develop 15-year Integrated Resource Plans (“IRP”) which describe how the utility plans to serve customer load in the plan timeframe.
For 2025, APS is procuring market resources to maintain its minimum 16% planning reserve criteria. Future Resources and Resource Plan ACC rules require utilities to develop 15-year Integrated Resource Plans (“IRP”) which describe how the utility plans to serve customer load in the plan timeframe.
Renewable Energy Standard In 2006, the ACC adopted the RES. Under the RES, electric utilities that are regulated by the ACC must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including solar, wind, biomass, biogas, and geothermal technologies.
Under the RES, electric utilities that are regulated by the ACC must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including, for example, solar, wind, biomass, biogas and geothermal technologies.
Circuit issued its final decision, rejecting all remaining legal challenges to the Continued Storage Rule. On August 8, 2016, the D.C. Circuit denied a petition for rehearing.
In June 2016, the D.C. 8 Table of Contents Circuit issued its final decision, rejecting all remaining legal challenges to the Continued Storage Rule. On August 8, 2016, the D.C. Circuit denied a petition for rehearing.
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 8 Table of Contents subject to continuing legal challenges before the NRC and the Court of Appeals. In June 2016, the D.C.
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.
APS has committed to end the use of coal at its remaining Cholla units during 2025. APS purchases all of Cholla’s coal requirements from a coal supplier that mines all of the coal under long-term leases of coal reserves with the federal and state governments and private landholders. The Cholla coal contract runs through 2024.
APS has committed to end the use of coal at its remaining Cholla units during 2025. APS purchased all of Cholla coal requirements from a coal supplier that mines the coal under long-term leases of coal reserves with the federal and state governments and private landholders.
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 $6.3 million has been funded as of December 31, 2023.
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.
Instead, the ACC opened a new docket to consider All-Source RFP requirements and the IRP process. During the August 2022 ACC Open Meeting, the ACC voted to postpone a decision on the All-Source RFP and IRP rulemaking package until 2023.
Instead, the ACC opened a new docket to consider all-source request for proposals (“ASRFP”) requirements and the IRP process. During the August 2022 ACC Open Meeting, the ACC voted to postpone a decision on the ASRFP and IRP rulemaking package until 2023.
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”).
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.
The Palo Verde participants have contracted for 100% of Palo Verde’s requirements for uranium concentrates through 2028 and 48% through 2029; 100% of Palo Verde’s requirements for conversion services through 2029 and 75% through 2030; 100% of Palo Verde’s requirements for enrichment services through 2026 and 28% for 2027; 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 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.
Natural Gas and Oil Fueled Generating Facilities APS has six natural gas power plants located throughout Arizona, consisting of Redhawk, located near Palo Verde; Ocotillo, located in Tempe (discussed below); Sundance, located in Coolidge; West Phoenix, located in southwest Phoenix; Saguaro, located north of Tucson; and Yucca, located near Yuma.
Natural Gas and Oil Fueled Generating Facilities APS has six natural gas power plants located throughout Arizona, consisting of Redhawk, located near Palo Verde; Ocotillo, located in Tempe; Sundance, located in Coolidge; West Phoenix, located in southwest Phoenix; Saguaro, located north of Tucson; and Yucca, located near Yuma. Several of the units at Yucca run on either gas or oil.
Certain investments and assets that BCE previously held, including the TransCanyon joint venture and holdings in the two Tenaska wind farm investments, were not included in the BCE Sale and were instead transferred to Pinnacle West Power, LLC (“PNW Power”), a newly-formed, wholly-owned subsidiary of Pinnacle West.
Certain investments and assets that BCE previously held, including the TransCanyon joint venture and holdings in the two Tenaska wind farm investments, were not included in the BCE Sale and were instead transferred to PNW Power, a Delaware limited liability corporation and a wholly-owned subsidiary of Pinnacle West.
APS’s 2023 peak one-hour demand on its electric system was recorded on July 15, 2023, at 8,162 MW, compared to the 2022 peak of 7,587 MW recorded on July 11, 2022. APS’s reserve margin at the time of the 2023 peak demand, calculated using system load serving capacity, was 18%.
APS’s 2024 peak one-hour demand on its electric system was recorded on August 4, 2024, at 8,210 MW, compared to the 2023 peak of 8,162 MW recorded on July 15, 2023. APS’s reserve margin at the time of the 2024 peak demand, calculated using system load serving capacity, was 15%.
There have been no recent successful attempts by Congress to pass legislation that would regulate GHG emissions, and it is unclear at this time whether legislation regulating or limiting utility-sector GHG emissions under consideration in the 118th Congress will become law.
There have been no recent successful attempts by Congress to pass legislation that would regulate GHG emissions, and it is unclear at this time whether legislation regulating or limiting utility-sector GHG emissions introduced during prior sessions of Congress will become law.
On October 31, 2023, APS filed its tenth claim pursuant to the terms of the August 18, 2014, settlement agreement in the amount of $18.46 million (APS’s share is $5.4 million). In February 2024, the DOE approved $18.39 million of this claim. Waste Confidence and Continued Storage — On June 8, 2012, the D.C.
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.
APS is a vertically-integrated electric utility that provides either retail or wholesale electric service to most of Arizona, with the major exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona. Pinnacle West’s other subsidiaries are El Dorado, PNW Power, and 4CA.
APS is incorporated in Arizona and is a vertically-integrated electric utility that provides either retail or wholesale electric service to most of Arizona, with the major exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.
In the 2019 Rate Case decision, the ACC authorized APS to spend $20 million to $30 million in capital costs for the APS Solar Communities program each year for a period of three years from the effective date of the decision.
In the 2019 Rate Case decision, the ACC authorized APS to spend $20 million to $30 million in capital costs for the APS Solar Communities program each year for a period of three years from the effective date of the decision. Subsequently, on March 5, 2024, the ACC ordered APS not to expand or extend the APS Solar Communities program.
At this time, because proposed SIPs and FIPs implementing the revised ozone NAAQSs have yet to be released, APS is unable to predict what impact the adoption of these standards may have on APS. APS will continue to monitor these standards as they are implemented within the jurisdictions affecting APS.
At this time, because proposed SIPs and FIPs implementing the revised ozone NAAQSs have yet to be released, APS is unable to predict what impact the adoption of these standards may have on APS.
APS’s strategy to achieve its RES requirements includes executing purchased power contracts for new facilities, ongoing development of distributed energy resources and procurement of new facilities to be owned by APS.
Bids for the 2024 ASRFP were due on February 5, 2025. APS’s strategy to achieve its RES requirements includes executing purchased power contracts for new facilities, ongoing development of distributed energy resources and procurement of new facilities to be owned by APS.
The DOE has approved and paid $138.2 million for these claims (APS’s share is $40.2 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 2017 Rate Case Decision, this regulatory liability is being refunded to customers. See Note 3.
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.
Under the program, entities selling electricity into California, including APS, must hold carbon allowances to cover GHG emissions associated with electricity sales into California from outside the state. APS is authorized to recover the cost of these carbon allowances through the PSA. Regulatory Initiatives. In 2009, EPA determined that GHG emissions endanger public health and welfare.
Under the program, entities selling electricity into California, including APS, must hold carbon allowances to cover GHG emissions associated with electricity sales into California from outside the state. APS is authorized to recover the cost of these carbon allowances through the PSA.
In addition, APS is a party to a water contract that allows the Company to secure water for Four Corners in the event of a water shortage and is a party to a shortage sharing agreement, which provides for the apportionment of water supplies to Four Corners in the event of a water shortage in the San Juan River Basin. 25 Table of Contents Gila River Adjudication.
In addition, APS is a party to a water contract that allows the Company to secure water for Four Corners in the event of a water shortage in the San Juan River Basin. Gila River Adjudication.
Depending on the eventual outcome, 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. The Navajo Plant disposed of CCR only in a dry landfill storage area.
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 eventual outcome, the costs associated with APS’s operation of its current and future thermal power plants could materially increase, which could affect our financial condition, results of operations, or cash flows.
Depending on the eventual outcome, the costs associated with APS’s management of CCR could materially increase, which could affect our financial condition, results of operations, or cash flows.
Since that time, ADEQ has taken no action based on the information provided by APS. On February 28, 2022, EPA provided APS with a request for information under CERCLA related to APS’s Ocotillo power plant site located in Tempe, Arizona.
On February 28, 2022, EPA provided APS with a request for information under CERCLA related to APS’s Ocotillo power plant site located in Tempe, Arizona.
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 power purchase agreements (“PPAs”). PNW Power indirectly owns 9.9% of Clear Creek and 5.1% of Nobles 2. El Dorado El Dorado is an Arizona corporation and a wholly-owned subsidiary of Pinnacle West.
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.
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.
See Note 10 for information regarding APS’s coal mine reclamation obligations related to these coal-fired plants. Solar Facilities APS developed utility scale solar resources through the 180 MW ACC-approved AZ Sun Program, investing approximately $675 million in this program. These facilities are owned by APS and are located in multiple locations throughout Arizona.
Solar Facilities APS developed utility scale solar resources through the 180 MW ACC-approved AZ Sun Program, investing approximately $675 million in this program. These facilities are owned by APS and are located in multiple locations throughout Arizona.
We use preventative programs such as the APS Moves program to help our workforce stay healthy and prepare them to perform tasks safely. Our comprehensive safety programs and our focus on human and organizational performance and injury case management contribute significantly to our strong safety performance.
We utilize preventative programs like APS Moves to help keep our workforce healthy and prepare them to perform tasks safely. Our comprehensive safety programs and our focus on human and organizational performance and injury case management contribute significantly to our strong safety performance. As we continue to improve our safety performance, our ultimate goal remains serious injury reduction.
APS is unable to predict the outcome of any further litigation related to this claim or APS’s share of liability related to that claim; however, APS does not expect the outcome to have a material impact on our financial condition, results of operations, or cash flows.
District Court for Arizona, which concerns $8.3 million in remediation legal expenses. APS is unable to predict the outcome of any further litigation related to this claim or APS’s share of liability related to that claim; however, APS does not expect the outcome to have a material impact on its financial position, results of operations or cash flows.
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. BUSINESS OF ARIZONA PUBLIC SERVICE COMPANY APS currently provides electric service to approximately 1.4 million customers.
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.
Effluent Limitation Guidelines . Based on the most recently finalized effluent limitation guidelines (“ELG”), published by EPA on October 13, 2020, APS completed an NPDES permit modification for Four Corners on December 1, 2 023. The ELG standards finalized in October of 2020 relaxed the “zero discharge” standard for bottom ash transport waters EPA finalized in September of 2015.
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.
The APS Promise continues to be reinforced and integrated throughout our Company programs and messaging. 30 Table of Contents BUSINESS OF OTHER SUBSIDIARIES PNW Power On August 4, 2023, Pinnacle West entered into a purchase and sale agreement pursuant to which we agreed to sell all of our equity interest in our wholly-owned subsidiary, BCE, to Ameresco (the “BCE Sale”).
BUSINESS OF OTHER SUBSIDIARIES PNW Power On August 4, 2023, Pinnacle West entered into a purchase and sale agreement pursuant to which we agreed to sell all of our equity interest in our wholly-owned subsidiary BCE to Ameresco (the “BCE Sale”). The transaction was accounted for as the sale of a business and closed in multiple stages.
During the ACC Open Meeting on February 6, 2024, the ACC approved motions to direct ACC Staff to include recommendations to repeal the current Electric Energy Efficiency and Renewable Energy Standard rules during the rulemaking process. APS cannot predict the outcome of this matter. See Note 3 for additional information related to these energy rules.
During the ACC Open Meeting on February 6, 2024, the ACC approved motions to direct ACC Staff to include recommendations to repeal the current Electric Energy Efficiency and Renewable Energy Standard rules during the rulemaking process.
APS owns and operates more than thirty small solar systems around the state. Together they have the capacity to produce approximately 4 MW of renewable energy. This fleet of solar systems includes a 3 MW facility located at the Prescott Airport and 1 MW of small solar systems in various locations across Arizona.
Together they have the capacity to produce approximately 4 MW of renewable energy. This fleet of solar systems includes a 3 MW facility located at the Prescott Airport and 1 MW of small solar systems in various locations across Arizona. APS has also developed solar photovoltaic DG systems installed as part of the Community Power Project in Flagstaff, 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 has a total entitlement from these plants of 3,573 MW.
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.
(b) Does not include MW of capacity planned or under development. Renewable energy purchased power agreements are described in detail below under “Current and Future Resources — Renewable Energy Standard.” Current and Future Resources Current Demand and Reserve Margin Electric power demand is generally seasonal. In Arizona, demand for power peaks during the hot summer months.
(b) Does not include MW of capacity planned or under development. See “Energy Sources and Resource Planning — Generation Facilities — Renewable Energy Portfolio” for more details on renewable energy power purchase agreements. Current and Future Resources Current Demand and Reserve Margin Electric power demand is generally seasonal. In Arizona, demand for power peaks during the hot summer months.
The APS number includes employees at jointly-owned generating facilities (approximately 2,200 employees) for which APS serves as the generating facility manager. Approximately 1,150 APS employees are union employees, represented by the International Brotherhood of Electrical Workers (“IBEW”). On September 25, 2023, the IBEW membership ratified a new collective bargaining agreement (“CBA”) with APS.
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.
EPA expects to finalize this proposal by spring of 2024. We cannot at this time predict the outcome of these regulatory proceedings or when the EPA will take final action on those matters that are still pending.
We expect to have a proposed decision from EPA regarding Cholla in 2025 . We cannot at this time predict the outcome of these regulatory proceedings or when the EPA will take final action on those matters that are still pending.
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.
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.
In addition, the settlement agreement provided APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2016, which was extended to December 31, 2025. APS has submitted nine claims pursuant to the terms of the August 18, 2014 settlement agreement, for nine separate time periods during July 1, 2011 through October 31, 2022.
In addition, the settlement agreement provided APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2016, which was extended to December 31, 2025.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeChanges in economic conditions, monetary policy, fiscal policy, financial regulation, rating agency treatment and/or other factors could result in higher interest rates, which would increase interest expense on our existing variable rate debt and new debt we expect to issue in the future, and thus increase the cost and/or reduce the amount of funds available to us for our current plans. 46 Table of Contents Additionally, an increase in our leverage, whether as a result of these factors or otherwise, could adversely affect us by: • causing a downgrade of our credit ratings; • increasing the cost of future debt financing and refinancing; • increasing our vulnerability to adverse economic and industry conditions; and • requiring us to dedicate an increased portion of our cash flow from operations to payments on our debt, which would reduce funds available to us for operations, future investment in our business or other purposes.
Biggest changeAdditionally, an increase in our leverage, whether as a result of these factors or otherwise, could adversely affect us by: • causing a downgrade of our credit ratings; • increasing the cost of future debt financing and refinancing; • increasing our vulnerability to adverse economic and industry conditions; and • requiring us to dedicate an increased portion of our cash flow from operations to payments on our debt, which would reduce funds available to us for operations, future investment in our business or other purposes.
APS has an ownership interest in and operates on behalf of a group of participants, Palo Verde, which is the largest nuclear electric generating facility in the United States. Palo Verde constitutes approximately 18% of APS’s owned and leased generation capacity.
APS has an ownership interest in and operates on behalf of a group of participants, Palo Verde, which is the largest nuclear electric generating facility in the western United States. Palo Verde constitutes approximately 18% of APS’s owned and leased generation capacity.
These agencies regulate many aspects of APS’s utility operations, including safety and performance, emissions, siting and construction of facilities, 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 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.
There appears to be an increasing level of activity, sophistication, and maturity of threat actors, including from both nation-state and non-nation state actors, that seek to exploit potential vulnerabilities in the electric utility industry and wish to disrupt the U.S. bulk power system, our information technology systems, generation (including our Palo Verde nuclear facility), transmission and distribution facilities, and other infrastructure facilities and 40 Table of Contents systems and physical assets.
There appears to be an increasing level of activity, sophistication, and maturity of threat actors, including from both nation-state and non-nation state actors, that seek to exploit potential vulnerabilities in the electric utility industry and wish to disrupt the U.S. bulk power system, our information technology systems, generation (including our Palo Verde nuclear facility), transmission and distribution facilities, and other infrastructure facilities and systems and physical assets.
Physical and Operational Risks. Weather extremes such as drought and high temperature variations are common occurrences in the southwestern United States’ desert area, and these are risks that APS considers in the normal course of business in the engineering and construction of its electric system.
Weather extremes such as drought and high temperature variations are common occurrences in the southwestern United States’ desert area, and these are risks that APS considers in the normal course of business in the engineering and construction of its electric system.
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 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 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.
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.
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.
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 chain constraints for critical spare parts, and the construction of sufficient transmission capacity to support these facilities among others.
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.
In particular, new or revised laws or interpretations of existing laws or regulations may impact or call into question the ACC’s permissive regulatory authority, which may result in uncertainty as to jurisdictional authority within our state, and uncertainty as to whether 33 Table of Contents ACC decisions will be binding or challenged by other agencies or bodies asserting jurisdiction.
In particular, new or revised laws or interpretations of existing laws or regulations may impact or call into question the ACC’s permissive regulatory authority, which may result in uncertainty as to jurisdictional authority within our state, and uncertainty as to whether ACC decisions will be binding or challenged by other agencies or bodies asserting jurisdiction.
Higher temperatures may decrease the snowpack, which might result in lowered soil moisture and an increased threat of forest fires. Forest fires could threaten APS’s communities and electric transmission lines and facilities. Any damage caused as a result of forest fires could negatively impact APS’s financial condition, results of operations, or cash flows.
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.
Reduced demand due to these energy efficiency requirements, distributed energy requirements and other emerging technologies, unless substantially offset through ratemaking mechanisms, could have a material adverse impact on APS’s financial condition, results of operations and cash flows. 37 Table of Contents Actual and Projected Customer and Sales Growth.
Reduced demand due to these energy efficiency requirements, distributed energy requirements and other emerging technologies, unless substantially offset through ratemaking mechanisms, could have a material adverse impact on APS’s financial condition, results of operations and cash flows. Actual and Projected Customer and Sales Growth.
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.
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.
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. 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. 45 Table of Contents General economic conditions could materially affect our business, financial condition, and results of operations.
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.
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.
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 34 Table of Contents construction of new CCR units beyond what we currently anticipate, APS would incur significant additional costs for CCR disposal.
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.
In addition, APS is subject to retrospective premium adjustments under its nuclear property insurance policies with Nuclear Electric Insurance Limited (“NEIL”) for approximately $22.4 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 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.
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 28% of employees eligible to retire by the end of 2028. 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 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.
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 $20 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 $5 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 $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.
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 currently disposes of CCR in ash ponds and dry storage areas at Cholla and Four Corners.
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.
If there is a delay or failure to obtain any required environmental regulatory approval, or if APS fails to obtain, 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, 34 Table of Contents maintain, or comply with any such approval, operations at affected facilities could be suspended or subject to additional expenses.
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.
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.
In addition, APS is required by the ACC to meet certain energy resource portfolio 39 Table of Contents requirements, including those related to renewables development and energy efficiency measures, in addition to specific competitive resource procurement requirements.
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.
Alternative GHG emission limitations may arise from litigation under either federal or state 35 Table of Contents 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.
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.
APS could be held liable for damages incurred as a result of wildfires regardless of fault and may not be able to recover all or a substantial portion of any such damages or costs from insurance or through rates.
In addition, APS could be sued regardless of fault for damages incurred as a result of wildfires and may not be able to recover all or a substantial portion of any such damages or costs from insurance or through rates.
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.
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.
Increasing liabilities or otherwise increasing funding requirements under these plans, resulting from adverse changes in legislation or otherwise, could result in significant cash funding obligations that could have a material impact on our financial condition, results of operations, or cash flows.
The minimum contributions required under these plans are impacted by federal legislation and related regulations. Increasing liabilities or otherwise increasing funding requirements under these plans, resulting from adverse changes in legislation or otherwise, could result in significant cash funding obligations that could have a material impact on our financial condition, results of operations, or cash flows.
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. 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.
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.
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.
Events at nuclear facilities of other operators or impacting the industry generally may lead the NRC to impose additional requirements and regulations on all nuclear generating facilities, including Palo Verde.
The NRC has broad authority under federal law to impose safety-related, security-related and other licensing requirements for the operation of nuclear generating facilities. Events at nuclear facilities of other operators or impacting the industry generally may lead the NRC to impose additional requirements and regulations on all nuclear generating facilities, including Palo Verde.
Changes in interest rates impact the discount rate and valuation of the plan liabilities, and may result in increases in pension and other postretirement benefit costs, cash contributions, regulatory assets, and charges to OCI.
Changes in interest rates impact the discount rate and valuation of the plan liabilities, and may result in increases in pension and other postretirement benefit costs, cash contributions, regulatory assets, and charges to OCI. Changes in demographics, including increased number of retirements or changes in life expectancy and changes in other actuarial assumptions, may also result in similar impacts.
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. On February 10, 2020, two ACC Commissioners filed two sets of draft proposed retail electric competition rules.
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.
Depending on the outcome of such judicial review, the utility industry may face alternative efforts from private parties seeking to establish alternative GHG emission limitations from power plants.
In addition, we anticipate that such regulations will be challenged in federal court prior to their implementation. Depending on the outcome of such judicial review, the utility industry may face alternative efforts from private parties seeking to establish alternative GHG emission limitations from power plants.
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. 42 Table of Contents Deployment of renewable energy technologies is expected to continue across the western states and result in a larger portion of the overall energy production coming from these sources.
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.
To the extent that commodity markets are illiquid, we may not be able to execute our risk management strategies, which could result in greater unhedged positions than we would prefer at a given time and financial losses that negatively impact our results of operations. 44 Table of Contents The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) contains measures aimed at increasing the transparency and stability of the over-the-counter derivative markets and preventing excessive speculation.
To the extent that commodity markets are illiquid, we may not be able to execute our risk management strategies, which could result in greater unhedged positions than we would prefer at a given time and financial losses that negatively impact our results of operations.
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. Potential Financial Risks — Greenhouse Gas Regulation, the Clean Power Plan and Potential Litigation. Following a U.S.
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.
The implementation of new and additional technologies adds complexity to our information technology and operational technology systems, which could require additional infrastructure and resources.
The implementation of new and additional technologies adds complexity to our information technology and operational technology systems, which could require additional infrastructure and resources. APS’s strategy, including the timing of such strategy, in adopting new technologies, such as artificial intelligence, could also adversely impact APS’s business.
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.
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.
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.
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.
Wildfires have the potential to affect communities within APS’s service territory and the surrounding areas, as well as APS’s vast network of electric transmission and distribution lines and facilities. The potential likelihood of wildfires has increased due to many of the same weather and climate change impacts existing in Arizona as those that led to catastrophic wildfires in California.
Wildfires have the potential to affect communities within APS’s service territory and the surrounding areas, as well as APS’s vast network of electric transmission and distribution lines and facilities.
The common equity ratio, as defined in the ACC order, is total shareholder equity divided by the sum of total shareholder equity and long-term debt, including current maturities of long-term debt.
The common equity ratio, as defined in the ACC order, is total shareholder equity divided by the sum of total shareholder equity and long-term debt, including current maturities of long-term debt. We may not have adequate insurance coverage for liabilities. The operation of power generation, transmission and distribution facilities involves hazardous activities.
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.
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.
The Dodd-Frank Act could restrict, among other things, trading positions in the energy futures markets, require different collateral or settlement positions, or increase regulatory reporting over derivative positions.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) contains measures aimed at increasing the transparency and stability of the over-the-counter derivative markets and preventing excessive speculation. The Dodd-Frank Act could restrict, among other things, trading positions in the energy futures markets, require different collateral or settlement positions, or increase regulatory reporting over derivative positions.
The operation of power generation, transmission and distribution facilities involves certain risks, including the risk of breakdown or failure of equipment, fuel interruption, and performance below expected 38 Table of Contents levels of output or efficiency.
The operation of power generation, transmission and distribution facilities involves certain risks, including the risk of breakdown or failure of equipment, fuel interruption, and performance below expected levels of output or efficiency. Unscheduled outages, including extensions of scheduled outages due to mechanical failures or other complications, occur from time to time and are an inherent risk of APS’s business.
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.
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.
These laws and regulations can result in increased capital, operating, and other costs, particularly with regard to enforcement efforts focused on power plant emissions obligations. These laws and regulations generally require APS to obtain and comply with a wide variety of environmental licenses, permits, and other approvals.
Additionally, these laws and regulations generally require APS to obtain and comply with a wide variety of environmental licenses, permits, and other approvals.
EPA expects to take final action on this proposal in the spring or summer of 2024. Depending on the outcome of future carbon emission rulemaking under the Clean Air Act targeting new and existing power plants, the utility industry may become subject to more stringent and expansive regulations.
Depending on the outcome of carbon emission rulemaking under the Clean Air Act targeting new and existing power plants, the utility industry may become subject to more stringent and expansive regulations. Depending on the means of compliance with federal emission performance standards, the electric utility industry may be forced to incur substantial costs necessary to achieve compliance.
A failure to recover the increased costs caused by increased inflation and supply chain constraints through our rates could have a material adverse impact on our financial condition, results of operations, or cash flows. 45 Table of Contents The market price of our common stock may be volatile.
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.
These incremental requests for service by extra-large energy users far exceed available generation and transmission resource capacity in the Southwest region for the foreseeable future. In April 2023, APS notified prospective extra-large customers without existing commitments from APS that it is not able to commit at this time to their future extra-large projects (over 25 MW).
These incremental requests for service by extra-large energy users far exceed available generation and transmission resource capacity in the Southwest region for the foreseeable future.
While such technology is intended to mitigate fire risk, it also introduces additional risks to APS and its customers, such as claims for damages, and the timing and effectiveness of such fire mitigation efforts may be insufficient to prevent wildfires in APS’s expansive service territory and surrounding areas.
However, APS’s fire mitigation efforts may be insufficient to prevent wildfires in APS’s expansive service territory and surrounding areas and could result in claims alleging damages due to the use, non-use, timing, or effectiveness of such measures.
On February 12, 2020, ACC Staff issued its second report regarding possible modifications to the ACC’s retail electric 36 Table of Contents competition rules. 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.
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.
The ACC continues to discuss matters related to retail electric competition, including the potential for additional buy-through programs or other pilot programs. In April 2022, the Arizona Legislature passed and the Governor signed a bill that repealed the electric deregulation law that had been in place in Arizona since 1998.
In April 2022, the Arizona Legislature passed, and the Governor signed, a bill that repealed the electric deregulation law that had been in place in Arizona since 1998. On August 27, 2024, the ACC administratively closed this docket due to inactivity and obsolescence.
OPERATIONAL 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.
Modification 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.
APS is seeking revised tariff language to mitigate potential adverse impacts on APS’s future, potential litigation exposure which may result from this court decision. We are unable to predict the impact on our business and operating results from any pending or future regulatory or legislative rulemaking.
We are unable to predict the impact on our business and operating results from any pending or future regulatory or legislative rulemaking. The operation of APS’s nuclear power plant exposes it to substantial regulatory oversight and potentially significant liabilities and capital expenditures.
The distributed renewable energy requirement is 30% of the applicable RES requirement for 2012 and subsequent years (this requirement has been waived by the ACC for 2023). Customer participation in distributed renewable energy programs would result in lower demand since customers would be meeting some of their own energy needs.
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).
On September 11, 2013, after receiving legal advice from the ACC staff, the ACC voted 4-1 to close the current docket and await full Arizona Constitutional authority before any further examination of this matter. In November 2018, the ACC voted to re-examine the facilitation of a deregulated retail electric market in Arizona.
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.
Because of the high growth in demand for such projects, APS has developed a prioritization queue that identifies and prioritizes projects while maintaining system reliability and affordability for existing APS customers. APS is exploring available options for securing sufficient electric generation and transmission to meet these projections of future customer needs.
APS is exploring available options for securing sufficient electric generation and transmission to meet these projections of future customer needs; however, there are difficulties in properly forecasting the demands of these extra-large customers due to factors such as the nascent nature of the industries (e.g., artificial intelligence) that these customers are supporting and the multiple variables that impact their usage ramp-up and ultimate level of demand.
Removed
Decisions made by the ACC or FERC could have a material adverse impact on our financial condition, results of operations, or cash flows.
Added
These laws and regulations can result in increased capital, operating, and other costs, particularly with regard to enforcement efforts focused on power plant emissions obligations. They could also impact the overall business environment in Arizona and affect APS’s customer and sales growth rates.
Removed
In November 2021, the Arizona Court of Appeals issued an opinion that called into question the ACC-approved limitation of liability provision found in the APS Service Schedules. APS sought review of the decision at the Arizona Supreme Court, which was denied; however, the Supreme Court depublished portions of the Court of Appeals’ decision.
Added
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.
Removed
The operation of APS’s nuclear power plant exposes it to substantial regulatory oversight and potentially significant liabilities and capital expenditures. The NRC has broad authority under federal law to impose safety-related, security-related and other licensing requirements for the operation of nuclear generating facilities.
Added
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.
Removed
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.
Added
As data center and other extra-large customer opportunities evolve and develop, we may also enter into arrangements with customers and potential customers that require us to invest capital and assume credit risk related to such developments and the related generation and transmission investments before we receive any potential return.
Removed
Supreme Court decision on June 30, 2022, which substantially narrowed EPA’s authority to regulate power plant GHG emissions under the Clean Air Act, on May 23, 2023, EPA proposed new GHG emission standards for power plants.
Added
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.
Removed
In contrast to measures finalized in 2015, EPA’s May 2023 proposal is focused on limiting power plant GHG emissions through control mechanisms that can be implemented at individual power plant facilities. These mechanisms would include carbon capture and sequestration, hydrogen co-firing, natural gas co-firing, and limits on facility output, among other measures.
Added
The potential likelihood and severity of wildfires has increased due to many of the same weather and climate change impacts existing in Arizona as those that led to catastrophic wildfires in other states. The continued expansion of the wildland urban interface has also increased wildfire risk to surrounding communities.
Removed
Depending on the means of compliance with federal emission performance standards, the electric utility industry may be forced to incur substantial costs necessary to achieve compliance. In addition, we anticipate that such regulations will be challenged in federal court prior to their implementation.
Added
Extreme weather events such as severe storms and strong wind gusts may also increase the likelihood of a wildfire in our service territory. APS has a Comprehensive Wildfire Mitigation Plan (“CWMP”) that employs various strategies designed to prevent, mitigate, and respond to wildfire risks.
Removed
In 1999, the ACC approved rules for the introduction of retail electric competition in Arizona. Retail competition could have a significant adverse financial impact on APS due to an impairment of assets, a loss of retail customers, lower profit margins or increased costs of capital.
Added
APS’s CWMP includes vegetation management and clearing protocols, operational measures and a public safety power shut off program (“PSPS”) on certain feeders, among other practices.
Removed
Although some very limited retail competition existed in APS’s service area in 1999 and 2000, there are currently no active retail competitors offering unbundled energy or other utility services to APS’s customers.
Added
Coverage for cybersecurity events continues to evolve as the industry matures.
Removed
This is in large part due to a 2004 Arizona Court of Appeals decision that found critical components of the ACC’s rules to be violative of the Arizona Constitution. The ruling also voided the operating authority of all the competitive providers previously authorized by the ACC.
Added
For example, if APS fails to strategically implement artificial intelligence, it could miss the opportunity for cost savings, face increasing costs on legacy systems, insufficiently integrate internal and external data sets, or invest in low data quality, risk misusing artificial intelligence, impact employee satisfaction with its implementation of or failure to implement artificial intelligence and other technologies.
Removed
On May 9, 2013, the ACC voted to re-examine the facilitation of a deregulated retail electric market in Arizona. The ACC subsequently opened a docket for this matter and received comments from a number of interested parties on the considerations involved in establishing retail electric deregulation in the state.
Added
Deployment of renewable energy technologies is expected to continue across the western states and result in a larger portion of the overall energy production coming from these sources.
Removed
One of these considerations is whether various aspects of a deregulated market, including setting utility rates on a “market” basis, would be consistent with the requirements of the Arizona Constitution.
Added
Declines in market values of the fixed income and equity securities held in these trusts may increase our funding requirements for the related trusts.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Cybersecurity Group has a formal incident response plan that details response and escalation procedures, including activation of a Cybersecurity Disclosure Committee, consisting of the Chief Financial Officer and the General Counsel, to assess an incident’s materiality with input as needed from the Director of Cybersecurity, Chief Accounting Officer, Chief Information Officer, and others, including outside advisors. 48 Table of Contents Cybersecurity risk management has been integrated into the Company’s overall enterprise risk management program (the “Enterprise Risk Management Program”) through policies and processes that implement a risk management framework designed to identify, manage, and monitor business unit risks throughout the organization.
Biggest changeThe Cybersecurity Group has a formal incident response plan that details response and escalation procedures, including activation of a Cybersecurity Disclosure Committee, consisting of the Chief Financial Officer and the General Counsel, to assess an incident’s materiality with input as needed from the Director of Cybersecurity, Chief Accounting Officer, Chief Information Officer, and others, including outside advisors.
Every year, as a part of the Enterprise Risk Management Program, the top risks affecting the Company are identified. For 2023, cybersecurity was identified as a top 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. 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.
Once an incident meets certain criteria, the Company’s Cybersecurity Incident Command or, in the most severe cases that 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 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.
A subset of vendors that meet a predetermined risk profile due to strategic relationships, technology risk, or other factors is continually monitored by a third-party risk management service, and the Company annually reviews independent assessments of these vendors. The Cybersecurity Group also has documented processes for identifying, responding to, and internally escalating cybersecurity incidents.
A subset of vendors that meet a predetermined risk profile due to strategic relationships, technology risk, or other factors is continually monitored by a third-party risk management service, and the Company annually reviews independent assessments of these vendors.
Added
The Cybersecurity Group also has documented processes for identifying, responding to, and internally escalating cybersecurity incidents to management and the Board of Directors.
Added
Cybersecurity risk management has been integrated into the Company’s overall enterprise risk management program (the “Enterprise Risk Management Program”) through policies and processes that implement a risk management framework designed to identify, manage, and monitor business unit risks throughout the organization.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAPS shares ownership of some of its transmission facilities with other companies. 51 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, 2023: Percent Owned (Weighted-Average) Morgan — Pinnacle Peak System 63.2 % Palo Verde — Rudd 500kV System 50.0 % Round Valley System 50.0 % ANPP 500kV System 33.4 % Navajo Southern System 25.2 % Four Corners Switchyards 57.5 % Palo Verde — Yuma 500kV System 25.3 % Phoenix — Mead System 17.1 % 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.
Biggest changeThe 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.
The other participants are Salt River Project, SCE, El Paso Electric Company, Public Service Company of New Mexico, Southern California Public Power Authority, and Los Angeles Department of Water & Power. (c) The other participants are Salt River Project (10%), Public Service Company of New Mexico (13%), Tucson Electric Power Company (7%) and NTEC (7%).
The other participants are Salt River Project, SCE, El Paso Electric Company, Public Service Company of New Mexico, Southern California Public Power Authority, and Los Angeles Department of Water and Power. (c) The other participants are Salt River Project (10%), Public Service Company of New Mexico (13%), Tucson Electric Power Company (7%) and NTEC (7%).
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 2024 Ten-Year Plan includes numerous projects with the purpose to interconnect new renewable energy resources to the transmission system.
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.
This new source will provide customers in the area greater access to a diverse mix of resources from around the region. Additionally, the 2024 Ten-Year Plan includes the rebuild of both Four Corners to Pinnacle Peak 345kV lines which span 289 miles each.
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.
The 2024 Ten-Year Plan includes a new 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.
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.
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. 52 Table of Contents 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 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.
Each year, APS prepares and files with the ACC a Ten-Year Transmission Plan. In APS’s 2024 Ten-Year Plan, APS projects it will develop 109 miles of new transmission lines over the next 10 years. Additionally, APS plans to upgrade 730 miles of existing transmission lines over the same horizon.
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.
PROPERTIES Generation Facilities APS’s portfolio of owned generating facilities as of December 31, 2023 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 387 Total Steam 1,357 Combined Cycle: Redhawk 2 Gas Load Following 1,088 West Phoenix 5 Gas Load Following 887 Total Combined Cycle 1,975 Combustion Turbine: Ocotillo (d) 7 Gas Peaking 620 Saguaro 3 Gas Peaking 189 Douglas 1 Oil Peaking 16 Sundance 10 Gas Peaking 420 West Phoenix 2 Gas Peaking 110 Yucca 1, 2, 3 3 Gas Peaking 93 Yucca 4 1 Oil Peaking 54 Yucca 5, 6 2 Gas Peaking 96 Total Combustion Turbine 1,598 Solar: Cotton Center (e) 1 Solar As Available 17 Hyder I (e) 1 Solar As Available 17 Paloma (e) 1 Solar As Available 17 Chino Valley 1 Solar As Available 20 Gila Bend (e) 1 Solar As Available 36 Hyder II (e) 1 Solar As Available 14 Foothills (e) 1 Solar As Available 38 Luke AFB 1 Solar As Available 11 Desert Star (e) 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 37 Multiple facilities Solar As Available 4 Total Solar 415 Total Capacity 6,491 50 Table of Contents (a) 100% unless otherwise noted.
PROPERTIES 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.
APS’s distribution facilities consist of approximately 11,289 miles of overhead lines and approximately 23,604 miles of underground primary cable (20,508 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’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.
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. Transmission and Distribution Facilities Current Facilities .
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.
As of February 1, 2024, APS’s transmission facilities consist of approximately 5,832 pole miles of overhead lines and approximately 85 miles of underground lines, 5,772 miles of which are located in Arizona.
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.
See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Energy Storage” above for details related to these and other energy storage agreements. 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.
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.
Removed
The plant is operated by APS. (d) Ocotillo Steam Units 1 and 2 were retired on January 10, 2019. Units 3 through 7 all went into service on or prior to May 30, 2019, which increased generation capacity by 510 MW. (e) APS is under contract and currently plans to add battery storage at these AZ Sun sites.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeSmith 54 Executive Vice President, General Counsel and Chief Development Officer of Pinnacle West and APS 2021-Present Senior Vice President and General Counsel of Pinnacle West and APS 2018-2021 Jacob Tetlow 51 Executive Vice President, Operations of APS 2021-Present Senior Vice President, Non-Nuclear Operations of APS 2020-2021 Vice President, Transmission and Distributions Operations of APS 2017-2020 54 Table of Contents PART II
Biggest changeSmith 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.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 53 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Pinnacle West’s executive officers are elected no less often than annually and may be removed by the Board of Directors, or in certain cases also by the Human Resources Committee, at any time.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 52 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Pinnacle West’s executive officers are elected no less often than annually and may be removed by the Board of Directors, or in certain cases also by the Human Resources Committee, at any time.
Cooper 45 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.
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.
Guldner 58 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.
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.
Esparza 49 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.
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.
Blankenship 52 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.
Blankenship 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.
Mountain 46 Vice President and Treasurer of Pinnacle West and APS 2022-Present Vice President, Finance and Planning of Pinnacle West and APS 2020-2022 General Manager, Finance of Pinnacle West 2017-2020 Robert E.
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.
The executive officers, their ages at February 27, 2024, 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, 2025, current positions and principal occupations for the past five years are as follows: Name Age Position Period Jeffrey B.
Geisler 45 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. Heflin 60 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 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.
Added
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.
Added
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.
Added
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 2018 2019 2020 2021 2022 2023 Pinnacle West Common Stock $100 $109 $101 $93 $105 $104 Edison Electric Institute Index $100 $126 $124 $146 $147 $134 S&P 500 Index $100 $131 $156 $200 $164 $207 ITEM 6. [RESERVED] 56 Table of Contents
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
At December 31, 2023, 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, 2023, to the cumulative total returns on the S&P 500 Index and the Edison Electric Index.
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.
The comparison assumes that $100 was invested on December 31, 2018, 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, 2019, 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 21, 2024, Pinnacle West’s common stock was held of record by approximately 14,476 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 20, 2025, Pinnacle West’s common stock was held of record by approximately 13,686 shareholders.

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 87 Item 8. Financial Statements and Supplementary Data 88 Pinnacle West Financial Statements 94 APS Financial Statements 105
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

Item 7. Management's Discussion & Analysis

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

160 edited+71 added−55 removed58 unchanged
Biggest changeThe following table presents net income attributable to common shareholders compared with the prior year for Pinnacle West consolidated and for APS consolidated: APS Consolidated Pinnacle West Consolidated Year Ended December 31, Year Ended December 31, 2023 2022 Net Change 2023 2022 Net Change (dollars in millions) Operating revenues $ 4,696 $ 4,324 $ 372 $ 4,696 $ 4,324 $ 372 Fuel and purchased power expense (1,793) (1,629) (164) (1,793) (1,629) (164) Operating revenues less fuel and purchased power expenses 2,903 2,695 208 2,903 2,695 208 Operations and maintenance (1,044) (974) (70) (1,059) (987) (72) Depreciation and amortization (794) (753) (41) (794) (753) (41) Taxes other than income taxes (224) (220) (4) (224) (220) (4) Pension and other postretirement non-service credits, net 42 99 (57) 41 98 (57) Other income and expenses, net 60 22 38 60 (1) 61 Interest charges, net of allowance for borrowed funds used during construction (285) (236) (49) (331) (256) (75) Income taxes (94) (91) (3) (77) (75) (2) Less income related to noncontrolling interests (17) (17) — (17) (17) — Net Income Attributable to Common Shareholders $ 547 $ 525 $ 22 $ 502 $ 484 $ 18 73 Table of Contents Operating revenues less fuel and purchased power expenses .
Biggest changeThe following table presents net income attributable to common shareholders compared with the prior year for Pinnacle West consolidated and for APS consolidated: Pinnacle West Consolidated APS Consolidated Year Ended December 31, Year Ended December 31, 2024 2023 Net Change 2024 2023 Net Change (dollars in millions) Operating revenues $ 5,125 $ 4,696 $ 429 $ 5,125 $ 4,696 $ 429 Fuel and purchased power expense (1,823) (1,793) (30) (1,823) (1,793) (30) Operating revenues less fuel and purchased power expenses 3,302 2,903 399 3,302 2,903 399 Operations and maintenance (1,165) (1,059) (106) (1,159) (1,044) (115) Depreciation and amortization (895) (794) (101) (895) (794) (101) Taxes other than income taxes (227) (224) (3) (227) (224) (3) Allowance for equity funds used during construction 39 53 (14) 39 53 (14) Pension and other postretirement non-service credits, net 49 41 8 49 42 7 Other income and expenses, net 11 7 4 (11) 7 (18) Interest charges, net of allowance for borrowed funds used during construction (377) (331) (46) (312) (285) (27) Income taxes (111) (77) (34) (127) (94) (33) Less income related to noncontrolling interests (17) (17) — (17) (17) — Net Income Attributable to Common Shareholders $ 609 $ 502 $ 107 $ 642 $ 547 $ 95 73 Table of Contents Operating revenues less fuel and purchased power expenses.
(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.
Achieving this 2050 goal will require, among other things, innovative thinking, emergent clean energy and storage technologies, upgrades and expansions to the grid, and supportive public policy. 2030 Goal: 65% Clean Energy. APS has an energy mix that is already 50% clean and plans to continue to add more renewables and energy storage.
Achieving this 2050 goal will require, among other things, innovative thinking, emergent clean energy and storage technologies, upgrades and expansions to the grid, and supportive public policy. 2030 Goal: 65% Clean Energy. APS has an energy mix that is already more than 50% clean and plans to continue to add more renewables and energy storage.
APS’s clean energy commitment consists of three parts: • A 2050 goal to provide 100% clean, carbon-free electricity; • A 2030 target to achieve a resource mix that is 65% clean energy, with 45% of the generation portfolio coming from renewable energy; and • A commitment to exit from coal-fired generation by 2031.
APS’s clean energy commitment consists of three parts: • A 2050 goal to provide 100% clean, carbon-free electricity; • A 2030 target to achieve a resource mix that is 65% clean energy, with 45% of the generation portfolio coming from renewable energy; and • A plan to exit from coal-fired generation by 2031.
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 $25 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 $26 billion.
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 customers.
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.
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 all-source RFP, and (viii) recovery of all DSM costs through the DSMAC rather than through base rates.
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.
For the discussion of 2022 compared to 2021, 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, 2022, which specific discussion is incorporated herein by reference.
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.
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, 2023.
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.
APS is managing through significant growth in the Phoenix metropolitan area while experiencing supply chain issues similar to other industries. Planned investments will support operating and maintaining the grid, updating technology, accommodating customer growth, and enabling more renewable energy resources.
APS is managing through significant growth in the Phoenix metropolitan area while experiencing supply chain issues similar to those experienced in other industries. Planned investments will support operating and maintaining the grid, updating technology, accommodating customer growth, and enabling more renewable energy resources.
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 2023 results with 2022 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 2024 results with 2023 results.
Property taxes increased in 2023 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 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 .
The difference between APS’s and Pinnacle West’s net cash provided by operating activities primarily relates to APS’s lower income tax cash payments to Pinnacle West and other changes in working capital. Retirement plans and other postretirement benefits.
The difference between APS’s and Pinnacle West’s net cash provided by operating activities primarily relates to APS’s higher income tax cash payments to Pinnacle West and other changes in working capital. Retirement plans and other postretirement benefits.
If variable interest rates were to increase by 10% from the December 31, 2023, 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, 2024, levels, it would not have a material effect on Pinnacle West Consolidated or APS Consolidated annual interest expense.
See Note 6. • Pinnacle West and APS maintain committed revolving credit facilities. See Note 5 for short-term debt details. 80 Table of Contents • 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 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.
Depreciation and Amortization Expenses. Depreciation and amortization expenses are impacted by net additions to utility plant and other property (such as new generation, transmission, and distribution facilities), and changes in depreciation and amortization rates. See “Liquidity and Capital Resources” below for information regarding the planned additions to our facilities. Pension and Other Postretirement Non-Service Credits, Net .
Depreciation and amortization expenses are impacted by net additions to utility plant and other property (such as new generation, transmission, and distribution facilities), and increases in intangible assets and changes in depreciation and amortization rates. See “Liquidity and Capital Resources” below for information regarding the planned additions to our facilities. Pension and Other Postretirement Non-Service Credits, Net .
These five projects, along with other projects included in the Ten-Year Plan, are intended to support growing energy needs, strengthen reliability, and allow for the connection of new resources. Our advanced distribution management system allows operators to locate outages and control line devices remotely and helps them coordinate more closely with field crews to safely maintain an increasingly dynamic grid.
These five projects, along with other projects included in the Ten-Year Transmission Plan, will support growing energy needs, strengthen reliability, and allow for the connection of new resources. Our advanced distribution management system allows operators to locate outages and control line devices remotely and helps them coordinate more closely with field crews to safely maintain an increasingly dynamic grid.
Pinnacle West and APS maintain committed revolving credit facilities that enhance liquidity and provide credit support for accessing commercial paper markets. These credit facilities mature in 2028. See Note 5.
Pinnacle West and APS maintain committed revolving credit facilities that enhance liquidity and provide credit support for accessing commercial paper markets. These credit facilities mature in 2029. See Note 5.
The most relevant actuarial 81 Table of Contents assumptions are the discount rate, the expected long-term rate of return on plan assets (“EROA”), and the assumed healthcare cost trend rates. Differences between these actuarial assumptions and actual plan results may create volatility in pension and other postretirement benefit expense.
The most relevant actuarial assumptions are the discount rate, the expected long-term rate of return on plan assets (“EROA”), and the assumed healthcare cost trend rates. Differences between these actuarial assumptions and actual plan results may create volatility in pension and other postretirement benefit expense.
“Renewable” energy includes generation resources such as solar, wind, and biomass, and is measured in accordance with the ACC’s Renewable Energy Standard as a percentage of retail sales.
“Renewable” energy includes generation resources such as solar, wind, and biomass, and is measured in accordance with the ACC Renewable Energy Standard as a percentage of retail sales.
In June 2021, APS and the owners of Four Corners entered into an agreement that would allow Four Corners to operate seasonally at the election of the owners as early as fall 2023, subject to the necessary governmental approvals and conditions associated with changes in plant ownership.
In June 2021, APS and the owners of Four Corners entered into an agreement that would allow Four Corners to operate seasonally at the election of the owners as early as fall 2023, subject to the 61 Table of Contents necessary governmental approvals and conditions associated with changes in plant ownership.
Distributed generation is produced in Direct Current and is converted to Alternating Current for reporting purposes. (b) Applications received by APS that are not yet installed and online. Energy Storage. APS deploys a number of advanced technologies on its system, including energy storage.
DG is produced in direct current and is converted to alternating current for reporting purposes. (b) Applications received by APS that are not yet installed and online. Energy Storage. APS deploys a number of advanced technologies on its system, including energy storage.
APS has permanently retired more than 1,000 MW of coal-fired electric generating capacity. These closures and other measures taken by APS have resulted in annual carbon emissions that were 24% lower in 2022 compared to 2005. In addition, APS has committed to end the use of coal at its remaining Cholla units during 2025.
APS has permanently retired more than 1,000 MW of coal-fired electric generating capacity. These closures and other measures taken by APS have resulted in annual carbon emissions that were 36% lower in 2023 compared to 2005. In addition, APS has committed to end the use of coal at its remaining Cholla units during 2025.
APS continues to expect that its participation in WEIM will lower its fuel and purchased-power costs, improve situational awareness for system operations in the Western Interconnection power grid, and improve integration of APS’s renewable resources. APS is participating in market design and tariff development of Markets+, a day-ahead and real-time market offering from Southwest Power Pool.
APS continues to expect that its participation in WEIM will lower its fuel and purchased-power costs, improve situational awareness for system operations in the Western Interconnection power grid, and improve integration of APS’s renewable resources. APS participated in market design and tariff development of Markets+, a day-ahead and real-time market offering from Southwest Power Pool (“SPP”).
The requirements of the Employee Retirement Income 76 Table of Contents 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.
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.
Regarding contributions to our other postretirement benefit plan, we did not make any contributions in 2023 or 2022 and do not expect to make any contributions in 2024, 2025 or 2026.
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.
Other Subsidiaries PNW Power and BCE . On August 4, 2023, Pinnacle West entered into a purchase and sale agreement pursuant to which we agreed to sell all of our equity interest in our wholly-owned subsidiary BCE to Ameresco (the “BCE Sale”). The transaction was accounted for as the sale of a business and closed in multiple stages.
On August 4, 2023, Pinnacle West entered into a purchase and sale agreement pursuant to which we agreed to sell all of our equity interest in our wholly-owned subsidiary BCE to Ameresco (the “BCE Sale”). The transaction was accounted for as the sale of a business and closed in multiple stages.
With recent wildfire events in Hawaii 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 58 Table of Contents changes, and enhancing our wildfire response capabilities.
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.
Under seasonal operation, one generating unit would be shut down during seasons where electricity demand is reduced, such as the winter and spring. The other unit would remain online year-round, subject to market 61 Table of Contents conditions as well as planned maintenance outages and unplanned outages.
Under seasonal operation, one generating unit would be shut down during seasons where electricity demand is reduced, such as the winter and spring. The other unit would remain online year-round, subject to market conditions as well as planned maintenance outages and unplanned outages.
Examples of the types of projects included in the forecast include power lines, substations, and line extensions to new residential and commercial developments. Capital expenditures will be funded with internally generated cash and external financings, which may include issuances of long-term debt and Pinnacle West common stock. 78 Table of Contents Financing Cash Flows and Liquidity 2023 Compared with 2022.
Examples of the types of projects included in the forecast include power lines, substations, and line extensions to new residential and commercial developments. Capital expenditures will be funded with internally generated cash and external financings, which may include issuances of long-term debt and Pinnacle West common stock. Financing Cash Flows and Liquidity 2024 Compared with 2023.
For the three years through 2023, APS’s customer growth averaged 2.1% per year. We currently project annual customer growth to be 1.5% to 2.5% for 2024 and the average annual growth to be in the range of 1.5% to 2.5% through 2026 based on anticipated steady population growth in Arizona during that period.
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.
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; and (iii) introduction of a new PTC for nuclear energy produced by existing nuclear energy plants (“Nuclear PTC”), available from 2024 through 2032.
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.
The 2022 Rate Case ROO also recommended a number of changes to existing adjustors, including (i) the approval of modified DSM performance incentives and the requested DSM transfer to base rates, (ii) the retention of $1.9 million of REAC in the adjustor rather than base rates, (iii) a partial transfer of $27.1 million of LFCR funds to base rates, and (iv) the adoption of an increase in the annual PSA cap to $0.006/kWh.
The 2022 Rate Case ROO also recommended a number of changes to existing adjustors, including (i) the approval of modified DSM performance incentives and the requested DSM transfer to base rates, (ii) the retention of $1.9 million of Renewable Energy Adjustment Charge (“REAC”) in the adjustor rather than base rates, (iii) a partial transfer of $27.1 million of LFCR funds to base rates, and (iv) the adoption of an increase in the annual PSA cap to $0.006/kWh.
The average property tax rate in Arizona for APS, which owns essentially all of our property, was 10.0% of the assessed value for 2023, 10.2% for 2022, and 10.7% for 2021.
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.
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 $20 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 $5 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 $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.
There are also external opportunities under APS’s customer affordability initiative, such as APS’s participation in the Western Energy Imbalance Market (“WEIM”). WEIM continues to be a tool for creating savings for APS’s customers from the real-time, voluntary market.
There are also external opportunities under APS’s customer affordability initiative, such as APS’s participation in the WEIM. WEIM continues to be a tool for creating savings for APS’s customers from the real-time, voluntary market.
On August 2, 2021, an Administrative Law Judge issued a Recommended Opinion and Order in the 2019 Rate Case (the “2019 Rate Case ROO”) and issued corrections on September 10 and September 20, 2021. Subsequently, the ACC approved an amended 2019 Rate Case ROO on November 2, 2021 (the “2019 Rate Case Decision”).
On August 2, 2021, an Administrative Law Judge issued a ROO in the 2019 Rate Case (the “2019 Rate Case ROO”) and issued corrections on September 10 and September 20, 2021. Subsequently, the ACC approved an amended 2019 Rate Case ROO on November 2, 2021.
For the year ended December 31, 2023, Pinnacle West’s total dividends paid per share of common stock were $3.48 per share, which resulted in dividend payments of $386 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, 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.
The following table shows the net pretax changes in mark-to-market of our energy derivative positions (dollars in millions): December 31, 2023 December 31, 2022 Mark-to-market of net positions at beginning of year $ 96 $ 107 Decrease (increase) in regulatory asset (216) (11) Mark-to-market of net positions at end of year $ (120) $ 96 86 Table of Contents The table below shows the fair value of maturities of our energy derivative contracts (dollars in millions) at December 31, 2023, 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, 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.
Operations and Maintenance 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 offset by the same amount of operating revenues) and other factors.
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.
APS completed implementation of best-in-class fire modelling software that we are utilizing to more surgically identify and calculate risk and target future system improvement investments such as fire-resistant pole wrapping, wood to steel pole conversions, and additional remote-controllable field devices like reclosers and switches.
APS completed implementation of fire modelling software that we are utilizing to more surgically identify and calculate risk and target future 58 Table of Contents system improvement investments such as fire-resistant pole wrapping, wood to steel pole conversions, and additional remote-controllable field devices like reclosers and switches.
These revenue transactions are affected by the availability of excess generation or other energy resources and wholesale market conditions, including competition, demand, and prices. 70 Table of Contents Actual and Projected Customer and Sales Growth. Retail customers in APS’s service territory increased 2.0% for the year ended December 31, 2023, compared with the prior-year period.
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.
Management judgments also include assessing the impact of potential ACC- or FERC-ordered refunds to customers on regulatory liabilities. We had $2,016 million of regulatory assets and $2,176 million of regulatory liabilities on the Consolidated Balance Sheets at December 31, 2023. 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 $1,810 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.
Under ERISA, the qualified pension plan was estimated to be 110% funded as of January 1, 2024, and was 112% as of January 1, 2023. Future year contribution amounts are dependent on plan asset performance and plan actuarial assumptions. In 2022 and 2023, we did not make any contributions to our pension plan.
Under ERISA, the qualified pension plan was estimated to be 100% funded as of January 1, 2025, and was 113% as of January 1, 2024. Future year contribution amounts are dependent on plan asset performance and plan actuarial assumptions. We did not make any contributions to our pension plan in 2024 and 2023.
On June 14, 2023, APS and the ACC Legal Division filed a joint resolution with the ACC to 68 Table of Contents allow recovery of $215.5 million in costs related to the installation of the Four Corners SCR project, a reversal of the 20-basis point reduction to APS’s return on equity from 8.9% to 8.7% as a result of the 2019 Rate Case Decision, and recovery of $59.6 million in revenue lost by APS between December of 2021 and June 20, 2023.
On June 14, 2023, APS and the ACC Legal Division filed a joint resolution with the ACC to allow recovery of $215.5 million in costs related to the installation of the Four Corners selective catalytic reduction (“SCR”) project, a reversal of the 20 basis points reduction to APS’s return on equity from 8.9% to 8.7% as a result of the 2019 Rate Case decision, and recovery of $59.6 million in revenue lost by APS between December 2021 and June 20, 2023.
Retail electricity sales in kWh, adjusted to exclude the effects of weather variations, increased 1.5% for the year ended December 31, 2023, compared with the prior-year period.
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.
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 2.0% to 4.0% for 2024 and that average annual growth will be in the range of 4.0% to 6.0% through 2026, including the effects of customer conservation, energy efficiency, and distributed renewable generation initiatives, but excluding the effects of weather variations.
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.
These projected sales growth ranges include the impacts of several large data centers and new large manufacturing facilities, which are expected to contribute to 2024 growth in the range of 2.5% to 3.5% and to average annual growth in the range of 3.0% to 5.0% through 2026.
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.
The Company was reimbursed $23 million in 2023, $26 million in 2022, and $24 million in 2021 for prior years retiree medical claims from the other postretirement benefit plan trust assets.
The Company was reimbursed $27 million in 2024, $23 million in 2023, and $26 million in 2022 for prior years retiree medical claims from the other postretirement benefit plan trust assets.
The 2022 Rate Case ROO recommended, among other things, (i) a $523.1 million increase in the annual base rate 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 4.36%, (v) 12 months of post-test year plant and the inclusion of the Four Corners ELG project, (vi) the approval of APS’s SRB proposal with certain procedural and other modifications, (vii) no additional CCT funding, (viii) a 5.0% return on the prepaid pension asset and a return of 5.35% on the OPEB liability, and (ix) no disallowances on APS’s coal contracts.
The 2022 Rate Case ROO recommended, among other things, (i) a $523.1 million increase in the annual base rate 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 4.36%, (v) 12 months of post-test year plant and the inclusion of the Four Corners Effluent Limitations Guideline (“ELG”) project, (vi) the approval of APS’s System Reliability Benefit (“SRB”) proposal with certain procedural and other modifications, (vii) no additional Coal Community Transition (“CCT”) funding, (viii) a 5.0% return on the prepaid pension asset and a return of 5.35% on the OPEB liability, and (ix) no disallowances on APS’s coal contracts.
The Internal Revenue Service and U.S. Treasury have issued preliminary guidance related to various provisions of the IRA that have enabled APS to claim credits related to its 2023 solar and battery investments.
The Internal Revenue Service and U.S. Treasury Department have issued preliminary guidance related to various provisions of the IRA that have enabled APS to claim credits related to its solar and energy storage investments.
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.
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.
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 $6.3 million has been funded as of December 31, 2023.
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.
See Note 3 for information regarding the 2019 Rate Case ROO. After the 2019 Rate Case Decision, APS filed an application for rehearing of the 2019 Rate Case and later filed a Notice of Direct Appeal by APS at the Arizona Court of Appeals, requesting review of certain matters from the 2019 Rate Case Decision.
After the 2019 Rate Case decision, APS filed an application for rehearing of the 2019 Rate Case and later filed a Notice of Direct Appeal by APS at the Arizona Court of Appeals, requesting review of certain matters from the 2019 Rate Case decision.
For the three years through 2023, annual retail electricity sales growth averaged 2.7%, adjusted to exclude the effects of weather variations.
For the three years through 2024, annual retail electricity sales growth averaged 3.2%, adjusted to exclude the effects of weather variations.
Moody’s Standard & Poor’s Fitch Pinnacle West Corporate credit rating Baa1 BBB+ BBB+ Senior unsecured Baa1 BBB BBB+ Commercial paper P-2 A-2 F2 Outlook Negative Negative Negative APS Corporate credit rating A3 BBB+ BBB+ Senior unsecured A3 BBB+ A- Commercial paper P-2 A-2 F2 Outlook Negative Negative Negative 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 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.
On January 25, 2024, an Administrative Law Judge issued a Recommended Opinion and Order in the 2022 Rate Case, as corrected on February 6, 2024 (the “2022 Rate Case ROO”).
On January 25, 2024, an Administrative Law Judge issued a ROO in the 2022 Rate Case, as corrected on February 6, 2024 (the “2022 Rate Case ROO”).
For over 130 years, Pinnacle West and our affiliates have provided energy and energy-related products to people and businesses throughout Arizona. Pinnacle West derives essentially all of our revenues and earnings from our principal subsidiary, APS.
Since 1886, Pinnacle West and our affiliates have provided energy and energy-related products to people and businesses throughout Arizona. Pinnacle West derives essentially all of our revenues and earnings from our principal subsidiary, APS.
Operating revenues less fuel and purchased power expenses were $208 million higher for the year ended December 31, 2023, compared with the prior year.
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.
Significant Financing Activities. On December 13, 2023, the Pinnacle West Board of Directors declared a dividend of $0.880 per share of common stock, payable on March 1, 2024, to shareholders of record on February 1, 2024. During 2023, Pinnacle West increased its indicated annual dividend from $3.46 per share to $3.52 per share.
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.
The interest rates presented in the tables below represent the weighted-average interest rates as of December 31, 2023, and 2022 (dollars in millions): 85 Table of Contents APS — Consolidated 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 Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2022 Rates Amount Rates Amount Rates Amount 2023 4.56 % $ 325 — $ — — $ — 2024 — — — — 3.35 % 250 2025 — — — — 3.15 % 300 2026 — — — — 2.55 % 250 2027 — — — — 2.95 % 300 Years thereafter — — 3.96 % 163 4.10 % 5,580 Total $ 325 $ 163 $ 6,680 Fair value $ 325 $ 163 $ 5,466 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, 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.
Weather. In forecasting the retail sales growth numbers provided above, we assume normal weather patterns based on historical data. Our experience indicates that typical variations from normal 71 Table of Contents weather can result in increases and decreases in annual net income of up to $15 million; however, extreme weather variations have resulted in larger annual variations in net income.
Weather. In forecasting the retail sales growth numbers provided above, we assume normal weather patterns based on historical data. Our experience indicates that typical variations from normal weather can result in increases and decreases in annual net income of up to $20 million.
For instance, our pension plan’s funded status, as measured for accounting principles generally accepted in the United States of America (“GAAP”) purposes, was 102% funded as of December 31, 2023, and our postretirement benefit plans were 162% funded, as measured for GAAP purposes at December 31, 2023. See Note 7 for additional details.
For instance, our pension plan’s funded status, as measured for accounting principles generally accepted in the United States of America (“GAAP”) purposes, was 99% funded as of December 31, 2024, and our postretirement benefit plans were 195% funded, as measured for GAAP purposes at December 31, 2024. See Note 7 for additional details. Investing Cash Flows 2024 Compared with 2023.
MARKET AND CREDIT RISKS Market Risks Our operations include managing market risks related to changes in interest rates, commodity prices, investments held by our nuclear decommissioning trusts, other special use funds and benefit plan assets. Interest Rate and Equity Risk We have exposure to changing interest rates.
See Note 21 for additional information relating to new accounting standards. MARKET AND CREDIT RISKS Market Risks Our operations include managing market risks related to changes in interest rates, commodity prices, investments held by our nuclear decommissioning trusts, other special use funds and benefit plan assets. Interest Rate and Equity Risk We have exposure to changing interest rates.
Source of Fair Value 2024 2025 2026 2027 2028 Total Fair Value Observable prices provided by other external sources $ (82) $ (41) $ (2) $ — $ — $ (125) Prices based on unobservable inputs 5 — — — — 5 Total by maturity $ (77) $ (41) $ (2) $ — $ — $ (120) 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, 2023 Gain (Loss) December 31, 2022 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 $ 9 $ (9) $ 12 $ (12) Natural gas 55 (55) 55 (55) Total $ 64 $ (64) $ 67 $ (67) (a) These contracts are economic hedges of our forecasted purchases of natural gas and electricity.
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.
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.
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.
To prioritize reliability and meet substantial growth in residential and commercial energy needs, APS has developed a future-focused, strategic transmission plan. This Ten-Year 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 customer 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 represent a significant upgrade to our transmission system.
In particular, El Dorado has committed to the following: • $25 million investment in the Energy Impact Partners fund, of which $16.7 million has been funded as of December 31, 2023.
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.
The Company continues to await regulations and other guidance, including with respect to the Nuclear PTC, which will provide additional details and clarifications regarding how the Company may be able to claim IRA tax credits in future years.
The Company continues to await regulations and other guidance, including with respect to the nuclear PTC, which will provide additional details and clarifications regarding how the Company may be able to claim IRA tax credits. See Note 4 for more information.
These technologies could offer the potential to keep in operation existing generators that otherwise would need to be retired. APS will continue to monitor this emerging technology, particularly in regard to EPA’s proposed Greenhouse Gas (GHG) rule.
These technologies could offer the potential to keep in operation existing generators that otherwise would need to be retired. APS will continue to monitor this emerging technology.
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.
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.
The nuclear decommissioning trust, other special use funds and benefit plan assets also have risks associated with the changing market value of their equity and other non-fixed income investments.
The nuclear decommissioning trust, other special use funds and benefit plan assets also have risks associated with the changing market value of their equity and other non-fixed income investments. Nuclear decommissioning, coal reclamation, and benefit plan costs are recovered in regulated electricity prices.
The interest rates presented in the tables below represent the weighted-average interest rates as of December 31, 2023, and 2022 (dollars in millions): Pinnacle West – Consolidated 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 Short-Term Debt Variable-Rate Long-Term Debt Fixed-Rate Long-Term Debt Interest Interest Interest 2022 Rates Amount Rates Amount Rates Amount 2023 4.56 % $ 341 5.42 % $ 51 — $ — 2024 — — 5.10 % 450 3.35 % 250 2025 — — — — 1.99 % 800 2026 — — — — 2.55 % 250 2027 — — — — 2.95 % 300 Years thereafter — — 3.96 % 163 4.10 % 5,580 Total $ 341 $ 664 $ 7,180 Fair value $ 341 $ 664 $ 5,922 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, 2023, and 2022.
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.
At December 31, 2023, APS’s common equity ratio, as defined, was 49%. Its total shareholder equity was approximately $7.2 billion, and total capitalization was approximately $14.7 billion. Under this order, APS would be prohibited from paying dividends if such payment would reduce its total shareholder equity below approximately $5.9 billion, assuming APS’s total capitalization remains the same.
At December 31, 2024, APS’s common equity ratio, as defined, was 52%. Its total shareholder equity was approximately $8.3 billion, and total capitalization was approximately $15.9 billion. Under this order, APS would be prohibited from paying dividends if such payment would reduce its total shareholder equity below approximately $6.4 billion, assuming APS’s total capitalization remains the same.
We review these assumptions on an annual basis and adjust them as necessary. Property Taxes. Taxes other than income taxes consist primarily of property taxes, which are affected by 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 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.
The difference between APS’s and Pinnacle West’s net cash used for investing activities primarily relates to the BCE Sale. 77 Table of Contents Capital Expenditures.
The difference between APS’s and Pinnacle West’s net cash used for investing activities primarily relates to the BCE Sale and investments into the Captive Insurance Cell VIE. See Note 17. 77 Table of Contents Capital Expenditures.
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.
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.
We stop accruing AFUDC on a project when it is placed into service. 72 Table of Contents RESULTS OF OPERATIONS Pinnacle West’s reportable business segment is our regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses (primarily sales supplied under traditional cost-based rate regulation) and related activities and includes electricity generation, transmission, and distribution.
We stop accruing AFUDC on a project when it is placed into service. RESULTS OF OPERATIONS Pinnacle West’s 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.
Certain investments and assets that BCE previously held, including the TransCanyon joint venture and holdings in the two Tenaska wind farm investments, were not included in the BCE Sale and were instead transferred to Pinnacle West Power, LLC (“PNW Power”), a newly-formed, wholly-owned subsidiary of Pinnacle West.
Certain investments and assets that BCE previously held, including the TransCanyon joint venture and holdings in the two Tenaska wind farm investments, were not included in the BCE Sale and were instead transferred to PNW Power, a wholly-owned subsidiary of Pinnacle West. PNW Power’s investments include TransCanyon, a 50/50 joint venture that was formed in 2014 with BHE U.S.
In 2021, we made contributions to our pension plan totaling $100 million. The minimum required contributions for the pension plan are zero for the next three years and we do not expect to make any voluntary contributions in 2024, 2025 or 2026.
The expected minimum required cash contributions for the pension plan are zero for the next three years and we do not expect to make any voluntary cash contributions in 2025, 2026 or 2027.

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