Pinnacle West Capital Corporation (‘Pinnacle West’), through its subsidiaries, operates as a vertically-integrated electric utility.
Arizona Public Service Company (APS), a subsidiary of Pinnacle West, 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 active subsidiaries are El Dorado, an Arizona corpo...
Pinnacle West Capital Corporation (‘Pinnacle West’), through its subsidiaries, operates as a vertically-integrated electric utility.
Arizona Public Service Company (APS), a subsidiary of Pinnacle West, 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 active subsidiaries are El Dorado, an Arizona corporation, and Pinnacle West Power, LLC (PNW Power), a Delaware limited liability company. Bright Canyon Energy Corporation (BCE) was a subsidiary of Pinnacle West, but was sold in January 2024.
The company's reportable business segment is its 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. The company's reportable business segment activities are conducted primarily through its wholly-owned subsidiary, APS.
Arizona Public Service Company
APS currently provides electric service to approximately 1.4 million customers. The company owns or leases 6,540 MW of regulated generation capacity and holds a mix of both long-term and short-term purchased power agreements for additional capacity.
Energy Sources and Resource Planning
To serve its customers, APS obtains power through its various generation stations and through purchased power agreements.
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.
APS prepares an annual inventory of Greenhouse gas (GHG) emissions from its operations. For APS’s operations involving fossil-fuel electricity generation and electricity transmission and distribution, APS’s annual GHG inventory is reported to the United States Environmental Protection Agency (EPA) under the EPA GHG Reporting Program. In addition to reporting to the EPA, the company publicly reports Scope 1 and 2, as well as a limited number of Scope 3, GHG emissions.
Generation Facilities
APS has ownership interests in or leases nuclear, gas, oil, coal, and solar generating facilities, as well as energy storage facilities.
Nuclear
Palo Verde Generating Station — Palo Verde is a 3-unit nuclear power plant located approximately 50 miles west of Phoenix, Arizona. APS operates the plant and owns 29.1% of Palo Verde Units 1 and 3 and approximately 17% of Unit 2. In addition, APS leases approximately 12.1% of Unit 2, resulting in a 29.1% combined ownership and leasehold interest in that unit. APS has a total entitlement from Palo Verde of 1,146 MW.
Palo Verde Leases — In 1986, APS entered into agreements with three separate lessor trust entities to sell and lease back approximately 42% of its share of Palo Verde Unit 2 and certain common facilities. The leaseback was originally scheduled to expire at the end of 2015 and contained options to renew the leases or to purchase the leased property for fair market value at the end of the lease terms. On July 7, 2014, APS exercised the fixed rate lease renewal options. The exercise of the renewal options originally resulted in APS retaining the assets through 2023 under one lease and 2033 under the other two leases. On April 1, 2021, APS executed an amendment relating to the lease agreement with the term ending in 2023. The amendment extends the lease term for this lease through 2033 and changes the lease payment.
Palo Verde Operating Licenses — Operation of each of the three Palo Verde Units requires an operating license from the NRC. The NRC issued full power operating licenses for Unit 1 in June 1985, Unit 2 in April 1986, and Unit 3 in November 1987, and issued renewed operating licenses for each of the three units in April 2011, which extended the licenses for Units 1, 2, and 3 to June 2045, April 2046, and November 2047, respectively.
Palo Verde Fuel Cycle — The participant owners of Palo Verde are continually identifying their future nuclear fuel resource needs and negotiating arrangements to fill those needs.
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.
Spent Nuclear Fuel and Waste Disposal — The Nuclear Waste Policy Act of 1982 (NWPA) required the United States Department of Energy (DOE) to begin to accept, transport, and dispose of spent nuclear fuel and high-level waste generated by the nation’s nuclear power plants by 1998. The DOE’s obligations are reflected in a contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste (the Standard Contract) with each nuclear power plant. The DOE failed to begin accepting spent nuclear fuel by 1998. The DOE had planned to meet its NWPA and Standard Contract disposal obligations by designing, licensing, constructing, and operating a permanent geologic repository at Yucca Mountain, Nevada. 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. APS is directly involved in legal proceedings related to the DOE’s failure to meet its statutory and contractual obligations regarding acceptance of spent nuclear fuel and high-level waste.
APS Lawsuit for Breach of Standard Contract — In December 2003, APS, acting on behalf of itself and the Palo Verde participants, filed a lawsuit against the DOE in the United States Court of Federal Claims (Court of Federal Claims) for damages incurred due to the DOE’s breach of the Standard Contract. On August 18, 2014, APS and DOE entered into a settlement agreement, which required DOE to pay the Palo Verde owners for certain specified costs incurred by Palo Verde during the period January 1, 2007, through June 30, 2011. 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 recovered costs for ten claims pursuant to the terms of the August 15, 2014, settlement agreement, for ten separate time periods during July 1, 2011, through October 31, 2023.
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. APS has two oil-only power plants: Douglas, located in the town of Douglas, Arizona, and Yucca GT-4 in Yuma, Arizona. APS owns and operates each of these plants with the exception of one oil-only combustion turbine unit and one oil and gas steam unit at Yucca that are operated by APS and owned by the Imperial Irrigation District. APS 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. APS has long-term gas transportation agreements with three different companies, some of which are effective through 2052. Fuel oil is acquired under short-term purchases delivered by truck directly to the power plants.
In 2024, APS contracted for the addition of two combustion turbines (approximately 90 MW in total) at Sundance.
Coal Fueled Generating Facilities
Four Corners — Four Corners is located in the northwestern corner of New Mexico and was originally a 5-unit coal-fired power plant. APS owns 100% of Units 1, 2, and 3, which were retired as of December 30, 2013. APS operates the plant and owns 63% of Four Corners Units 4 and 5. APS has a total entitlement from Four Corners of 970 MW. APS plans to exit coal-fired generation as part of its portfolio of electricity generating resources, including Four Corners, by 2031.
Navajo Transitional Energy Company, LLC (NTEC), a company formed by the Navajo Nation to own the mine that serves Four Corners and develop other energy projects, is the coal supplier for Four Corners. The Four Corners co-owners executed a long-term agreement for the supply of coal to Four Corners from July 2016 through 2031, which was amended and restated on July 1, 2024.
APS, on behalf of the Four Corners participants, negotiated amendments to an existing facility lease with the Navajo Nation, which extends the Four Corners leasehold interest from 2016 to 2041. The Navajo Nation approved these amendments in March 2011. The effectiveness of the amendments also required the approval of the DOI, as did a related federal rights-of-way grant. A federal environmental review was undertaken as part of the DOI review process and culminated in the issuance by DOI of a record of decision on July 17, 2015, justifying the agency action to extend the life of the plant and the adjacent mine.
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. In July 2024, APS and the owners amended the agreement to retain the option for seasonal operation. 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.
Cholla — Cholla was originally a 4-unit coal-fired power plant, which is located in northeastern Arizona. APS operates the plant and owns 100% of Cholla Units 1, 2, and 3. PacifiCorp owns Cholla Unit 4, and APS operated that unit for PacifiCorp. On September 11, 2014, APS announced that it would close Cholla Unit 2 and cease burning coal at the other APS-owned units (Units 1 and 3) at the plant by the mid-2020s, if EPA approved a compromise proposal offered by APS to meet required environmental and emissions standards and rules. 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. In early 2017, EPA approved a final rule incorporating APS’s compromise proposal, which took effect for Cholla on April 26, 2017. In December 2019, PacifiCorp notified APS that it planned to retire Cholla Unit 4 by the end of 2020, and the unit ceased operation in December 2020. APS has committed to end the use of coal at its remaining Cholla units during 2025.
APS purchased all of Cholla's 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.
Navajo Plant — The Navajo Plant was a 3-unit coal-fired power plant located in northern Arizona. Salt River Project operated the plant and APS owned a 14% interest in Units 1, 2, and 3. APS had a total entitlement from the Navajo Plant of 315 MW. The Navajo Plant site is leased from the Navajo Nation and is also subject to an easement from the federal government.
The co-owners of the Navajo Plant and the Navajo Nation agreed that the Navajo Plant would remain in operation until December 2019 under the existing plant lease. The co-owners and the Navajo Nation executed a lease extension on November 29, 2017, which allowed for decommissioning activities to begin after the plant ceased operations in November 2019.
APS is recovering depreciation and a return on the net book value of its interest in the Navajo Plant over its previously estimated life through 2026.
Solar Facilities
APS developed utility-scale solar resources through the 180 MW ACC-approved AZ Sun Program, investing in this program. These facilities are owned by APS and are located in multiple locations throughout Arizona. In addition to the AZ Sun Program, APS developed the 44 MW Red Rock Solar Plant and the 150 MW Agave Solar Plant, each of which it owns and operates, and has contracted for the construction of the 168 MW Ironwood Solar Plant.
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. APS has also developed solar photovoltaic DG systems installed as part of the Community Power Project in Flagstaff, Arizona. The Community Power Project, approved by the Arizona Corporation Commission (ACC) on April 1, 2010, was a pilot program through which APS owns, operates, and receives energy from approximately 1 MW of solar photovoltaic DG systems located within a certain test area in Flagstaff, Arizona. The pilot program is now complete and as part of the 2017 Rate Case Decision, the participants have been transferred to the Solar Partner Program. Additionally, APS owns 13 MW of solar photovoltaic systems installed across Arizona through the ACC-approved Schools and Government Program.
Renewable Energy Portfolio
As of December 31, 2024, APS has a diverse portfolio of existing and planned renewable resources totaling 7,660 MW, including biogas, biomass, geothermal, solar, and wind. Of this portfolio, 3,608 MW are currently in operation and 4,052 MW are under contract for development or are under construction. Renewable resources in operation include 416 MW of facilities owned by APS, 1,465 MW of long-term purchased power agreements, and an estimated 1,727 MW of customer-sited, third-party-owned distributed energy resources.
On June 30, 2023, APS issued an ASRFP (the 2023 ASRFP) pursuant to which APS procured nearly 7,300 MW of new resources to be in service from 2026 to 2028.
On November 20, 2024, APS issued an ASRFP (the 2024 ASRFP) seeking 2,000 MW of resources. Bids for the 2024 ASRFP were due on February 5, 2025.
Energy Storage
APS deploys a number of advanced technologies on its system, including energy storage. Energy storage also aids in integrating renewable generation by storing excess energy when system demand is low and renewable production is high, and then releasing the stored energy during peak demand hours later in the day and after sunset. APS is utilizing grid-scale energy storage projects to meet customer reliability requirements, increase renewable utilization, and further its understanding of how storage works with other advanced technologies and the grid.
Purchased Power Contracts
In addition to its own available generating capacity, APS purchases electricity under various arrangements, including long-term contracts and purchases through short-term markets to supplement its owned or leased generation and hedge its energy requirements.
PNW Power
On August 4, 2023, Pinnacle West entered into a purchase and sale agreement pursuant to which the company agreed to sell all of its equity interest in its 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. The final closing of the BCE Sale was completed on January 12, 2024.
PNW Power’s investments include TransCanyon, a 50/50 joint venture that was formed in 2014 with BHE U.S. 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.
PNW Power’s investments also include minority ownership positions in two wind farms operated by Tenaska Energy, Inc. and Tenaska Energy Holdings, LLC, the 242 MW Clear Creek and the 250 MW Nobles 2 wind farms. Clear Creek achieved commercial operation in May 2020; however, in the fourth quarter of 2022, PNW Power’s equity method investment was fully impaired. 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. El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures.
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. 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.
Expansion: Each year, APS prepares and files with the ACC a Ten-Year Transmission Plan. Additionally, APS plans to upgrade 687 miles of existing transmission lines over the same horizon. 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. Additionally, the 2025 Ten-Year Plan includes the rebuild of both Four Corners to Pinnacle Peak 345kV lines, which span 289 miles each. The 2025 Ten-Year Plan includes numerous projects with the purpose to interconnect new renewable energy resources to the transmission system.
Plant and Transmission Line Leases and Rights-of-Way on Indian Lands
The Navajo Plant and Four Corners are located on land held under leases from the Navajo Nation and also under rights-of-way from the federal government. The Navajo Plant ceased operations in November 2019. The co-owners and the Navajo Nation executed a lease extension on November 29, 2017, that allows for decommissioning activities to begin after the plant ceased operations.
APS, on behalf of the Four Corners participants, negotiated amendments to the Four Corners facility lease with the Navajo Nation, which extends the Four Corners leasehold interest from 2016 to 2041.
Competitive Environment and Regulatory Oversight
The ACC regulates APS’s retail electric rates and its issuance of securities. The ACC must also approve any significant transfer or encumbrance of APS’s property used to provide retail electric service and approve or receive prior notification of certain transactions between Pinnacle West, APS, and their respective affiliates.
APS is subject to varying degrees of competition from other investor-owned electric and gas utilities in Arizona (such as Southwest Gas Corporation), as well as cooperatives, municipalities, electrical districts, and similar types of governmental or non-profit organizations.
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 Power Supply Adjustor (PSA).
The EPA published effluent limitation guidelines (ELG) on October 13, 2020, and based on 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 that the EPA finalized in September 2015.
History
Pinnacle West Capital Corporation was founded in 1985. The company was incorporated in the state of Arizona in 1985.
