About Pinnacle West Capital
Pinnacle West Capital Corporation, through its wholly owned subsidiary, Arizona Public Service Company (APS), operates as a vertically-integrated electric utility. The company provides either retail or wholesale electric service to most of the state 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. The company's other subsidiaries are El Dorado Investment Company (El Dorado); Pinnacle West Power, LLC (PNW Power), and 4C Acquisition, LLC (4CA). BCE was a subsidiary of Pinnacle West, but was sold in January 2024. The company engages in 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. Arizona Public Service Company APS provides electric service to approximately 1.4 million customers. The company owns or leases 6,491 MW of regulated generation capacity and it 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 commitment to exit from coal-fired generation by 2031. APS prepares an annual inventory of GHG emissions from its operations. For APS's operations involving fossil-fuel electricity generation and electricity transmission and distribution, APS's annual GHG inventory is reported to the EPA under the EPA GHG Reporting Program. 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 the 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 - APS has agreements with three separate lessor trust entities in order 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. As a result of this amendment, APS will retain the assets through 2033 under all three lease agreements. At the end of the lease renewal periods, APS will have the option to purchase the leased assets at their fair market value, extend the leases for up to two years, or return the assets to the lessors. 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, Unit 2, and Unit 3 and issued renewed operating licenses for each of the three units in 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 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. Spent Nuclear Fuel and Waste Disposal - The Nuclear Waste Policy Act of 1982 (NWPA) required the 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 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 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 December 19, 2012, APS, acting on behalf of itself and the participant owners of Palo Verde, filed a second breach of contract lawsuit against the DOE in the United States Court of Federal Claims. The lawsuit sought to recover damages incurred due to DOE's breach of the Standard Contract for failing to accept Palo Verde's spent nuclear fuel and high-level waste from January 1, 2007 through June 30, 2011, pursuant to the terms of the Standard Contract and the NWPA. 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. 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. Ocotillo was originally a 330 MW 4-unit gas plant located in Tempe. In early 2014, APS announced a project to modernize the plant, which involved retiring two older 110 MW steam units, adding five 102 MW combustion turbines, and maintaining two existing 55 MW combustion turbines. In total, this increased the capacity of the site by 290 MW to 620 MW. The Ocotillo modernization project was completed in 2019. 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. As part of APS's Clean Energy Commitment, APS has committed to exit coal-fired generation as part of its portfolio of electricity generating resources, including Four Corners, by 2031. 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 (the 2016 Coal Supply Agreement). 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. 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. Under seasonal operation, one generating unit would be shut down during seasons where electricity demand is reduced, such as the winter and spring. 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 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. In 2017, EPA approved a final rule incorporating APS's compromise proposal, which took effect for Cholla on April 26, 2017. In 2019, PacifiCorp notified APS that it planned to retire Cholla Unit 4 by the end of 2020 and the unit ceased operation in 2020. 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. In addition, APS has a coal transportation contract that runs through 2024. 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. Solar Facilities APS developed utility scale solar resources through the 180 MW ACC-approved AZ Sun 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. Two of the company's large customers purchase renewable energy credits from APS that are equivalent to the amount of renewable energy that Red Rock is projected to generate. 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 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. 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 d December 31, 2023, APS had a diverse portfolio of existing and planned renewable resources totaling 5,010 MW, including solar, wind, geothermal, biomass and biogas. Of this portfolio, 3,072 MW are in operation and 1,938 MW are under contract for development or are under construction. Renewable resources in operation include 415 MW of facilities owned by APS, 1,034 MW of long-term purchased power agreements, and an estimated 1,623 MW of customer-sited, third-party owned distributed energy resources. On June 30, 2023, APS issued an All-Source Request for Proposal (RFP) seeking approximately 1,000 MW of reliable capacity, including at least 700 MW of renewable resources with a focus on in-service dates between 2026 and 2028 (the 2023 RFP). Bids from the 2023 RFP were received on September 6, 2023, and APS has started negotiations on multiple projects, including a 400 MW wind facility PPA that was signed in December 2023. Energy Storage APS deploys a number of advanced technologies on its system, including energy storage. Energy storage provides capacity, improves power quality, can be utilized for system regulation and, in certain circumstances, be used to defer certain traditional infrastructure investments. On June 30, 2023, APS issued the 2023 RFP seeking approximately 1,000 megawatt (MW) of reliable capacity, including at least 700 MW of renewable resources, including energy storage, with a focus on in-service dates between 2026 and 2028. APS plans to install more than 2,700 MW of utility scale energy storage by 2026, including through energy storage projects under PPAs and AZ Sun retrofits, as well as through resources solicited through RFPs. 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). PNW Power's investments include TransCanyon, a 50/50 joint venture that was formed 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 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. Transmission and Distribution Facilities Facilities: As of February 1, 2024, APS's transmission facilities consisted 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. 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 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. 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. 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. 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 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. 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 2019. The co-owners and the Navajo Nation executed a lease extension on November 29, 2017, which 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. History Pinnacle West Capital Corporation was founded in 1985. The company was incorporated in the state of Arizona in 1985.
