What changed in this filing

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Item 1. Business

2023-02-27 compared with 2022-02-25 · 246 added, 199 removed, 570 unchanged (44% of the section changed)

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See “Energy Sources and Resource Planning — Current and Future Resources” below for details of these plans and initiatives.

APS currently has a diverse portfolio of renewable resources, including solar, wind, geothermal, biogas, and biomass.

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.

APS currently has a diverse portfolio of renewable resources,

including solar, wind, geothermal, biogas, and biomass.

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.

APS’s clean energy goals consist of three parts:

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For APS’s operations involving fossil-fuel electricity generation and electricity transmission and distribution, APS’s annual GHG inventory is reported to EPA under the EPA GHG Reporting Program.

APS also voluntarily tracks the full scope of APS’s GHG emissions arising from all APS operations.

APS also voluntarily tracks APS’s GHG emissions arising from APS operations.

In addition to reporting to the EPA, we publicly report Scope 1, 2 and 3 GHG emissions.

This data is then communicated to the public in Pinnacle West’s annual Corporate Responsibility Report, which is available on our website ( www.pinnaclewest.com/corporate-responsibility ).

The report provides information related to the Company and its approach to sustainability and its workplace and environmental performance.

The information on Pinnacle West’s website, including the Corporate Responsibility Report, is not incorporated by reference into or otherwise a part of this report.

This data is then communicated to the public in Pinnacle West’s annual Corporate Responsibility Report as performance data and in CDP Reports, which are available on our website ( www.pinnaclewest.com/corporate-responsibility ).

The reports provide information related to the Company and its approach to sustainability and its workplace and environmental performance.

The information on Pinnacle West’s website, including Corporate Responsibility Reports and CDP Reports, is not incorporated by reference into or otherwise a part of this report.

Generation Facilities

APS has ownership interests in or leases the coal, nuclear, gas, oil and solar generating facilities described below.

APS has ownership interests in or leases the nuclear, gas, oil, coal, and solar generating facilities as well as energy storage facilities described below.

For additional information regarding these facilities, see Item 2.

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 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.

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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 accept, transport, and dispose of spent nuclear fuel and high-level waste generated by the nation’s nuclear power plants by 1998.

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.

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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.

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.

authorization application.

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.

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On August 18, 2014, APS and the DOE entered into a settlement agreement, stipulating to a dismissal of the lawsuit and payment by the DOE to 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 provides APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2016, which was extended to December 31, 2022.

APS has submitted seven claims pursuant to the terms of the August 18, 2014, settlement agreement, for seven separate time periods during July 1, 2011, through June 30, 2020.

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, 2022.

An additional extension is currently pending.

APS has submitted eight claims pursuant to the terms of the August 18, 2014 settlement agreement for eight separate time periods during July 1, 2011 through June 30, 2021.

The DOE has approved and paid $123.9 million for these claims (APS’s share is $36 million).

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In accordance with the 2017 Rate Case Decision, this regulatory liability is being refunded to customers.

On November 1, 2021, APS filed its eighth claim pursuant to the terms of the August 18, 2014, settlement agreement in the amount of $12.2 million (APS’s share is $3.6 million).

On October 31, 2022, APS filed its ninth claim pursuant to the terms of the August 18, 2014, settlement agreement in the amount of $14.3 million (APS’s share is $4.2 million).

In February 2023, the DOE approved this claim.

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In total, this increased the capacity of the site by 290 MW to 620 MW.

See Note 4 for rate recovery as part of the ACC final written Opinion and Order issued reflecting its decision in APS’s general retail rate case (the

“2017 Rate Case Decision”) and the 2019 Retail Rate Case Filing.

The Ocotillo modernization project was completed in 2019.

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The sale transaction closed on July 3, 2018.

NTEC purchased the 7% interest at 4CA’s book value, approximately $70 million, and is paying 4CA the purchase price over a period of four years pursuant to a secured interest-bearing promissory note.

NTEC purchased the 7% interest at 4CA’s book value, approximately $70 million and paid the purchase price over four years pursuant to a secured interest-bearing promissory note, which was paid in full as of June 30, 2022.

In connection with the sale, Pinnacle West guaranteed certain obligations that NTEC will have to the other owners of Four Corners, such as NTEC’s 7% share of capital expenditures and operating and maintenance expenses.

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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 extending the life of the plant and the adjacent mine.

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 beginning in 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 when 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.

APS anticipates that it will elect not to begin seasonal operation in November 2023, unless market conditions change.

Cholla — Cholla was originally a 4-unit coal-fired power plant, which is located in northeastern Arizona.

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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.

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.

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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 distributed energy 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 distributed energy systems located within a certain test area in Flagstaff, Arizona.

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

APS has also developed solar photovoltaic distributed renewable energy 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 distributed renewable energy 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 described below.

Additionally, APS owns

13 MW of solar photovoltaic systems installed across Arizona through the ACC-approved Schools and Government Program.

Additionally, APS owns 13 MW of solar photovoltaic systems installed across Arizona through the ACC-approved Schools and Government Program.

In December 2014, the ACC voted that it had no objection to APS implementing an APS-owned rooftop solar research and development program aimed at learning how to efficiently enable the integration of rooftop solar and battery storage with the grid.

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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 to further our understanding of how storage works with other advanced technologies and the grid.

APS is utilizing grid-scale energy storage projects to meet customer reliability requirements, increase renewable utilization, and further our understanding of how storage works with other advanced technologies and the grid.

In 2018, APS issued a request for proposal (“RFP”) for approximately 106 MW of energy storage to be located at up to five of its AZ Sun sites.

Based upon its evaluation of the RFP responses, APS decided to expand the initial phase of battery deployment to 141 MW by adding a sixth AZ Sun site.

These battery storage facilities are expected to be in service during the summer of 2022.

These battery storage facilities are currently expected to be in service during the first quarter of 2023.

On August 2, 2021, APS executed a contract for an additional 60 MW of utility-owned energy storage to be located on APS’s AZ Sun sites.

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These PPAs were subject to ACC approval in order to allow for cost recovery through the PSA.

APS received the requested ACC approval on January 12, 2021, and service under the agreements is expected to begin in 2022 with respect to 100 MW and in 2023 with respect to 50 MW.

As a result of its December 2020 RFPs, as of February 2022, APS has executed four 20-year PPAs for resources that include energy storage:

APS received the requested ACC approval on January 12, 2021, and service under the agreements is expected to begin in 2023.

In December 2020, APS issued two RFPs (collectively, the “December 2020 RFPs”).

As a result of the December 2020 RFPs, APS executed four 20-year PPAs for resources that include energy storage:

(a) two PPAs for standalone energy storage resources totaling 300 MW;

and (b) two PPAs totaling 275 MW solar plus storage resource.

and (b) two PPAs for solar plus storage resources totaling 275 MW.

The PPAs are also subject to ACC approval to enable cost recovery through the PSA.

APS received the requested ACC approval for three out of four of the projects on December 16, 2021.

The remaining project was filed in February 2022 for ACC approval and is pending ACC review.

APS received the requested ACC approval for three out of four of the projects on December 16, 2021 and on April 13, 2022 for the remaining project.

Service under the agreements is expected to begin in 2023 and 2024.

In May 2022, APS issued an RFP to address resource needs for 2025 and beyond (the “2022 RFP”).

As a result of the 2022 RFP, as of January 2023, APS has executed a 20-year PPA for solar plus storage resources totaling 300 MW.

The PPA is subject to ACC approval to enable cost recovery through the PSA, which was requested in December 2022 and approved in February 2023.

Service under this agreement is expected to begin in 2025.

APS currently plans to install more than 1,200 MW of energy storage by 2025, including the energy storage projects under PPAs and AZ Sun retrofits described above.

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Development (MW)

Energy Storage

APS Owned Energy Storage

PPAs Energy Storage —

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(a) This includes 18.5 MW of APS customer-owned batteries and 0.2 MW of APS-owned residential batteries.

Renewable Energy Portfolio

To date, APS has a diverse portfolio of existing and planned renewable resources totaling 3,894 MW, including solar, wind, geothermal, biomass and biogas.

Of this portfolio, 2,418 MW are currently in operation and 1,476 MW are under contract for development or are under construction.

Renewable resources in operation include 264 MW of facilities owned by APS, 736 MW of long-term purchased power agreements, and an estimated 1,418 MW of customer-sited, third-party owned distributed energy resources.

As previously discussed, in May 2022, APS issued an RFP to address resource needs for 2025 and beyond.

The 2022 RFP solicits competitive proposals for approximately 1,000 MW to 1,500 MW of resources, including up to 600 MW to 800 MW of renewable resources to meet the needs of 2025 and 2026 while also considering resources that can be online as late as 2027.

The 2022 RFP stopped accepting bids on July 15, 2022, and APS sent notifications to shortlisted bidders on September 23, 2022.

As a result of the 2022 RFP, and as of December 31, 2022, APS has signed a PPA for 300 MW of solar plus energy storage resources and a PPA for 216 MW of wind resources.

Once APS secures those important resources and closes out the 2022 RFP, APS intends to issue APS’s next RFP to address future resource needs.

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.

See “Energy Sources and Resource Planning — Generation Facilities — Solar Facilities” above for information regarding APS-owned solar facilities and “Energy Sources and Resource Planning — Generation Facilities — Energy Storage” above for more information regarding APS-owned energy storage facilities.

The following table summarizes APS’s renewable energy sources currently in operation and under development as of December 31, 2022.

Agreements for the development and completion of future resources are subject to various conditions, including successful siting, permitting and interconnection of the projects to the electric grid.

Location Actual/

Planned/Under

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

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 36

Total APS Owned 264 150

Purchased Power Agreements

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 A Coconino County, AZ 2023 18 80

CO Bar Solar B Coconino County, AZ 2023 18 80

Mesquite Solar 5 Tonopah, AZ 2023 20 60

Sunstreams 3 Arlington, AZ 2024 20 215

Sunstreams 4 Arlington, AZ 2025 20 300

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

Salton Sea Imperial County, CA 2006 23 10

Snowflake Snowflake, AZ 2008 25 14

NW Regional Landfill Surprise, AZ 2012 20 3

Total Purchased Power Agreements 736 1,189

Distributed Energy

Third-party Owned AZ Various 1,385 137

Agreement 1 Bagdad, AZ 2011 25 15

Agreement 2 AZ 2011-2012 20-21 18

Total Distributed Energy 1,418 137

Total Renewable Portfolio 2,418 1,476

(a) Includes Flagstaff Community Power Project, APS School and Government Program, APS Solar Partner Program, and APS Solar Communities Program.

(b) Includes rooftop solar facilities owned by third parties.

DG is produced in DC and is converted to AC for reporting purposes.

Purchased Power Contracts

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Purchase Agreement (a) Year-round through June 14, 2023 45

Demand Response Agreement (b) Summer seasons through 2025 75

Demand Response Agreement Summer seasons through 2025 75

Tolling Agreement May 1 through October 31, 2021-2027 463

Tolling Agreement Summer seasons from Summer 2020 through Summer 2025 565

Tolling Agreement June 1 through September 30, 2020-2026 570

Renewable Energy (c) Various 736

Tolling Agreement May 1 through October 31, 2021-2027 463

Energy Storage Various 510

Renewable Energy (b) Various 736

(a) Up to 45 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.

(b) The capacity under this agreement is 75 MW for years 2022 through 2025.

(c) Renewable energy purchased power agreements are described in detail below under “Current and Future Resources — Renewable Energy Standard — Renewable Energy Portfolio.”

(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 — Renewable Energy Portfolio.”

Current and Future Resources

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In Arizona, demand for power peaks during the hot summer months.

APS’s 2021 peak one-hour demand on its electric system was recorded on June 18, 2021, at 7,580 MW, compared to the 2020 peak of 7,660 MW recorded on July 30, 2020.

APS’s 2022 peak one-hour demand on its electric system was recorded on July 11, 2022, at 7,587 MW, compared to the 2021 peak of 7,580 MW recorded on June 18, 2021.

APS’s reserve margin at the time of the 2022 peak demand, calculated using system load serving capacity, was 13%.

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In February 2022, the ACC acknowledged APS’s IRP.

The ACC also approved certain amendments to the IRP process, including, setting an EES of 1.3% of retail sales annually (averaged over a three-year period) and a demand-side resource capacity of 35% of 2020 peak demand by 2030 and authorizing future rate base treatment of qualifying demand-side resources as proposed in future rate cases.

Due to current projected future resource needs and load forecasts, APS continues to need to develop or acquire additional capacity.

APS intends to file its next IRP later in 2023.

See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Clean Energy Focus Initiatives” and “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Energy Storage” above for information regarding future plans for energy storage.

See “Business of Arizona Public Service Company — Energy Sources and Resource Planning —

Generation Facilities — Coal-Fueled Generating Facilities” above for information regarding plans for Cholla, Four Corners and the Navajo Plant.

Energy Imbalance Market

In 2016, APS began to participate in the Western Energy Imbalance Market (“EIM”), a voluntary, real-time optimization market operated by the CAISO.

See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Coal-Fueled Generating Facilities” above for information regarding plans for Cholla, Four Corners and the Navajo Plant.

Energy Imbalance Market & Wholesale Market

In 2016, APS began to participate in the Energy Imbalance Market (“EIM”), a voluntary, real-time optimization market operated by the CAISO.

The EIM allows for rebalancing supply and demand in 15-minute blocks and dispatching generation every five minutes, instead of the traditional one-hour blocks.

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APS is in discussions with the EIM operator, CAISO, and other EIM participants about the feasibility of creating a voluntary day-ahead market to achieve more cost savings and use the region’s renewable resources more efficiently.

APS also is in discussions with Southwest Power Pool, a market operator developing a day-ahead and real-time market for the Western Interconnection.

In addition, APS is participating in the Western Resource Adequacy Program administered by the Western Power Pool.

These efforts are driven by three objectives of reducing customer cost, improving reliability, and incorporating more clean energy on APS’s system.

Energy Modernization Plan

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Instead, the ACC opened a new docket to consider All-Source RFP requirements and the IRP process.

During the August 2022 ACC Open Meeting, Commissioners voted to postpone a decision on the All-Source RFP and IRP rulemaking package until 2023.

APS cannot predict the outcome of this matter.

See Note 3 for additional information related to these energy rules.

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The renewable energy requirement is 13% of retail electric sales in 2023 and increases annually until it reaches 15% in 2025.

A component of the RES is focused on stimulating development of distributed energy systems.

A component of the RES is focused on stimulating development of distributed renewable energy systems.

Accordingly, under the RES, an increasing percentage of that requirement must be supplied from distributed energy resources.

This distributed energy requirement is 30% of the overall RES requirement of 12% in 2022.

This distributed renewable energy requirement, which was waived by the ACC as a part of APS’s 2023 RES Implementation Plan, would have been 30% of the overall RES requirement of 13% in 2023.

On June 7, 2021, the ACC approved the 2021 RES Implementation Plan.

2021, APS filed its 2022 RES Implementation Plan and amended it on December 9, 2021.

On July 1, 2021, APS filed its 2022 RES Implementation Plan, which was subsequently amended on December 9, 2021.

On May 18, 2022, the ACC approved the 2022 RES Implementation Plan, including an

amendment requiring a stakeholder working group to convene and develop a community solar program for the Commission’s consideration at a future date.

On September 23, 2022, APS filed a community solar proposal in compliance with the ACC order that was informed by a stakeholder working group.

APS is proposing a small, pilot scale program size of up to 140 MW that would be selected through a competitive RFP.

The ACC has not yet ruled on the proposal.

However, on November 10, 2022, the ACC approved a bifurcated community solar process, directing ACC Staff to develop a statewide policy through additional stakeholder involvement and establishing a separate evidentiary hearing to define other policy components.

The community solar program was deferred to the ACC’s Hearing Division so that a formal evidentiary hearing could be held to consider issues of substance related to community solar.

APS cannot predict the outcomes of these future activities.

On July 1, 2022, APS filed its 2023 RES Implementation Plan, and on November 10, 2022, the ACC approved the 2023 RES Implementation Plan, including APS’s requested waiver of the distributed energy requirement for 2023.

The following table summarizes the RES requirement standard and its timing:

RES (inclusive of distributed energy) as a % of retail electric sales 12% 15%

Percent of RES to be supplied from distributed energy resources 30% 30%

RES (inclusive of distributed energy) as a percent of retail electric sales 13% 15%

Percent of RES to be supplied from distributed renewable energy resources (a) 30% 30%

(a) The distributed renewable energy requirement has been waived for 2023.

On April 21, 2015, the RES rules were amended to require utilities to report on all eligible renewable resources in their service territory, irrespective of whether the utility owns renewable energy credits associated with such renewable energy.

The rules allow the ACC to consider such information in determining whether APS has satisfied the requirements of the RES.

Renewable Energy Portfolio.

To date, APS has a diverse portfolio of existing and planned renewable resources totaling 2,758 MW, including solar, wind, geothermal, biomass and biogas.

Of this portfolio, 2,218 MW are currently in operation and 540 MW are under contract for development or are under construction.

Renewable resources in operation include 247 MW of facilities owned by APS, 736 MW of long-term purchased power agreements, and an estimated 1,235 MW of customer-sited, third-party owned distributed energy resources.

See “Energy Sources and Resource Planning — Generation Facilities — Solar Facilities” above for information regarding APS-owned solar facilities.

The following table summarizes APS’s renewable energy sources currently in operation and under development as of December 31, 2021.

Agreements for the development and completion of future resources are subject to various conditions, including successful siting, permitting and interconnection of the projects to the electric grid.

Location Actual/

Planned/Under

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 5

Chino Valley Chino Valley, AZ 2012 19

Hyder II Hyder, AZ 2013 14

Foothills Yuma, AZ 2013 35

Gila Bend Gila Bend, AZ 2014 32

Luke AFB Glendale, AZ 2015 10

Desert Star Buckeye, AZ 2015 10

Subtotal AZ Sun Program 170 —

Multiple Facilities AZ Various 4

Red Rock Red Rock, AZ 2016 40

Distributed Energy:

APS Owned (a) AZ Various 33

Total APS Owned 247 —

Purchased Power Agreements

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 A Coconino County, AZ 2023 18 80

CO Bar Solar B Coconino County, AZ 2023 18 80

Mesquite Solar 5 Tonopah, AZ 2023 20 60

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

Salton Sea Imperial County, CA 2006 23 10

Snowflake Snowflake, AZ 2008 15 14

NW Regional Landfill Surprise, AZ 2012 20 3

Total Purchased Power Agreements 736 458

Distributed Energy

Third-party Owned AZ Various 1,202 82

Agreement 1 Bagdad, AZ 2011 25 15

Agreement 2 AZ 2011-2012 20-21 18

Total Distributed Energy 1,235 82

Total Renewable Portfolio 2,218 540

(a) Includes Flagstaff Community Power Project, APS School and Government Program, APS Solar Partner Program, and APS Solar Communities Program.

(b) Includes rooftop solar facilities owned by third parties.

DG is produced in DC and is converted to AC for reporting purposes.

In September 2019, APS issued an RFP that requested up to 250 MW of wind resources to be in service as soon as possible, but no later than 2022.

As a result of this RFP, APS executed a 200 MW PPA for a wind resource that went into service in January 2022.

In December 2020, APS issued two additional RFPs:

(i) a battery storage RFP for projects to be located at two AZ Sun sites;

and (ii) an all source RFP that solicited resources to meet our clean energy needs and capacity to maintain system reliability, and that was later amended to include a request for 150 MW of solar resources to be developed on APS property and owned by APS (collectively, the “December 2020 RFPs”).

As a result of the all source RFP, APS executed a PPA in October 2021 for a 238 MW wind resource to be in service by June 2023, and also executed an engineering, procurement, and construction contract in November 2021 for a 150 MW solar resource to be owned by APS and in service in early 2023.

APS continues to negotiate contracts for additional resources to be in service in 2024 in connection with the all source RFP.

Once it secures those

important resources and closes out the December 2020 RFPs, APS intends to issue its next all source RFP to address resource needs for 2025 and beyond.

Demand Side Management

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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.

In addition, some customers, particularly industrial and large commercial customers, may own and operate generation facilities to meet some or all of their own energy requirements.

In addition, some customers, particularly industrial and large commercial customers, may own and operate generation facilities to meet

some or all of their own energy requirements.

This practice is becoming more popular with customers installing or having installed products such as rooftop solar panels to meet or supplement their energy needs.

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The ACC continues to discuss matters related to retail electric competition, including the potential for additional buy-through programs or other pilot programs.

At the same time, the Arizona legislature is considering a bill that would nullify, if approved, a 20-year-old electric deregulation law that has been in place since

The bill has several procedural steps in the legislative process before becoming law.

APS cannot predict whether these efforts will result in any changes and, if changes to the rules results, what impact these rules would have on APS.

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.

APS cannot predict what impact, if any, this change will have on APS.

On August 4, 2021, Green Mountain Energy filed an application seeking a certificate of convenience and necessity to allow it to provide competitive electric generation service in Arizona.

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On November 3, 2021, the ACC submitted questions to the Office of the Arizona Attorney General, Civil Litigation Division, Consumer Protection & Advocacy Section (“Attorney General”) requesting legal opinions related to a number of issues surrounding retail electric competition and the ACC’s ability to issue competitive certificates convenience and necessity.

On November 26, 2021, the Administrative Law Judge issued a procedural order indicating it would not be appropriate to set a schedule until the Attorney General has provided his insights on the applicable law.

On November 26, 2021, the Administrative Law Judge issued a procedural order indicating it would not be appropriate to set a schedule until the Attorney General has provided insights on the applicable law.

On October 28, 2021, an ACC Commissioner docketed a letter directing ACC Staff and interested stakeholders to design a 200-300 MW pilot program that would allow residential and small commercial customers of APS to elect a competitive electricity supplier.

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The first phase of the program, which applies to, among other entities, importers of electricity, commenced on January 1, 2013.

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.

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.

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Circuit vacated the ACE regulations and remanded them back to EPA to develop new existing power plant carbon regulations consistent with the court’s ruling.

That ruling endorsed an expansive view of the federal Clean Air Act consistent with EPA’s 2015 CPP.

On October 29, 2021, the U.S.

Supreme Court announced that it was accepting judicial review of the January D.C.

Circuit decision vacating the ACE regulations.

While the Biden administration has expressed an intent to regulate carbon emissions in this sector more aggressively under the Clean Air Act, we cannot at this time predict the outcome of pending EPA rulemaking proceedings or ongoing litigation related to the scope of EPA’s authority under the Clean Air Act to regulate carbon emissions from existing power plants.

Other environmental rules that could involve material compliance costs include those related to effluent limitations, the ozone national ambient air quality standards (“NAAQS”) and other rules or matters involving the Clean Air Act, Clean Water Act, Endangered Species Act, RCRA, Superfund, the Navajo

Nation, and water supplies for our power plants.

That decision, which endorsed an expansive view of the federal Clean Air Act consistent with EPA’s 2015 CPP, was subsequently reversed by the U.S.

Supreme Court on June 30, 2022.

While the current administration has expressed its intent to develop new carbon emission regulations governing existing power plants sometime in 2023, such action will be constrained by the U.S.

Supreme Court’s decision that the CPP violated the Clean Air Act.

Nonetheless, we cannot at this time predict the outcome of pending EPA rulemaking proceedings related to carbon emissions from existing power plants.

The financial impact of complying with current and future environmental rules could jeopardize the economic viability of our coal plants or the willingness or ability of power plant participants to fund any required equipment upgrades or continue their participation in these plants.

The economics of continuing to own certain resources, particularly our coal plants, may deteriorate, warranting early retirement of those plants, which may result in asset impairments.

The economics of continuing to own certain resources, particularly our fossil-fuel powered plants, may deteriorate, warranting early retirement of those plants, which may result in asset impairments.

APS would seek recovery in rates for the book value of any remaining investments in the plants as well as other costs related to early retirement but cannot predict whether it would obtain such recovery.

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In 1999, EPA announced regional haze rules to reduce visibility impairment in national parks and wilderness areas.

The rules require states (or, for sources located on tribal land, EPA) to determine what pollution control technologies constitute the BART for certain older major stationary sources, including fossil-fired power plants.

EPA subsequently issued the Clean Air Visibility Rule, which provides guidelines on how to perform a BART analysis.

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In early 2017, EPA approved a final rule containing a revision to Arizona’s State Implementation Plan (“SIP”) for Cholla that implemented BART requirements for this facility, which did not require the installation of any new pollution control capital improvements.

In conjunction with the closure of Cholla Unit 2 in 2015, APS has committed to ceasing coal combustion within Units 1 and 3 by April 2025.

In conjunction with the closure of Cholla Unit 2 in 2015, APS has committed to ceasing coal combustion within Units 1 and 3 by

PacifiCorp retired Cholla Unit 4 at the end of 2020.

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NTEC purchased the interest from 4CA on July 3, 2018.

See “Four Corners — 4CA Matter” in Note 11 for a discussion of the NTEC purchase.

The cost of the pollution controls related to the 7% interest is approximately $45 million, which was assumed by NTEC through its purchase of the 7% interest.

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Since these regulations were finalized, EPA has taken steps to substantially modify the federal rules governing CCR disposal.

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.

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.

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.

Although ADEQ has taken steps to develop a CCR permitting program, it is not clear when that program will be put into effect.

Although ADEQ has taken steps to develop a CCR permitting program, including supporting the passage of new state legislation providing ADEQ with appropriate permitting authority for CCR under the state solid waste management program, it is not clear when that program will be put into effect.

On December 19, 2019, EPA proposed its own set of regulations governing the issuance of CCR management permits.

The proposal remains pending.

• On March 1, 2018, as a result of a settlement with certain environmental groups, EPA proposed adding boron to the list of constituents that trigger corrective action requirements to remediate groundwater impacted by CCR disposal activities.

Apart from a subsequent proposal issued on August 14, 2019, to add a specific, health-based groundwater protection standard for boron, EPA has yet to take action on this proposal.

• Based on an August 21, 2018, D.C.

Circuit decision, which vacated and remanded those provisions of the EPA CCR regulations that allow for the operation of unlined CCR surface impoundments, EPA recently proposed corresponding changes to federal CCR regulations.

On July 29, 2020, EPA took final action on new regulations establishing revised deadlines for initiating the closure of unlined CCR surface impoundments by April 11, 2021 at the latest.

All APS disposal units subject to these closure requirements were closed as of April 11, 2021.

• On November 4, 2019, EPA also proposed to change the manner by which facilities that have committed to cease burning coal in the near-term may qualify for alternative closure.

Such qualification would allow CCR disposal units at these plants to continue operating, even though they would otherwise be subject to forced closure under the federal CCR regulations.

EPA’s July 29, 2020 final regulation adopted this proposal and now requires explicit EPA approval for facilities to utilize an alternative closure deadline.

With respect to the Cholla facility, APS’s application for alternative closure (which would allow the continued disposal of CCR within the facility’s existing unlined CCR surface impoundments until the required date for ceasing coal-fired boiler operations in April 2025) was submitted to EPA on November 30, 2020, and is currently pending.

This application will be subject to public comment and, potentially, judicial review.

On January 11, 2022, EPA began issuing proposed decisions pursuant to this provision of the federal CCR regulations and we anticipate receiving a proposed decision with respect to the Cholla facility in 2022.

• With respect to APS’s Cholla facility, the Company’s application for alternative closure was submitted to EPA on November 30, 2020.

While EPA has deemed APS’s application administratively “complete,” the Agency’s approval remains pending.

If granted, this application would allow the continued disposal of CCR within Cholla’s existing unlined CCR surface impoundments until the required date for ceasing coal-fired boiler operations in April 2025.

application will be subject to public comment and, potentially, judicial review.

On January 11, 2022, EPA began issuing proposed decisions pursuant to this provision of the federal CCR regulations and APS anticipates receiving a proposed decision with respect to the Cholla facility in 2023.

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.

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On September 18, 2017, EPA finalized a regulation postponing the earliest date on which compliance with the ELGs for these waste-streams would be required from November 1, 2018, until November 1, 2020.

At this time, APS’s National Pollutant Discharge Elimination System (“NPDES”) discharge permit for Four Corners contains a December 31, 2023, compliance deadline for achieving “zero discharge” of bottom ash transport waters.

At this time, APS’s National Pollutant Discharge Elimination System (“NPDES”) discharge permit for Four Corners contains a December 31, 2023,

compliance deadline for achieving “zero discharge” of bottom ash transport waters.

Nonetheless, on October 13, 2020, EPA published a final rule relaxing these “zero discharge” limitations for bottom ash handling water and allowing for approximately 10% of such wastewater to be discharged (on a volumetric, 30-day rolling average basis) under limited power plant operating scenarios.

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While EPA took action designating attainment and unclassifiable areas on November 6, 2017, the Agency’s final action designating non-attainment areas was not issued until April 30, 2018.

At that time, EPA designated the geographic areas containing Yuma and

Phoenix, Arizona as in non-attainment with the 2015 70 ppb ozone NAAQS.

At that time, EPA designated the geographic areas containing Yuma and Phoenix, Arizona as in non-attainment with the 2015 70 ppb ozone NAAQS.

The vast majority of APS’s natural gas-fired EGUs are located in these jurisdictions.

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In addition, on September 23, 2009, APS agreed with EPA and one other PRP to voluntarily assist with the funding and management of the site-wide groundwater remedial investigation and feasibility study (“RI/FS”).

Based upon discussions between the OU3 working group parties and EPA, along with the results of recent technical analyses prepared by the OU3 working group to supplement the RI/FS for OU3, APS anticipates finalizing the RI/FS during the first or second quarter of 2022.

The RI/FS for OU3 was finalized and submitted to EPA at the end of 2022.

APS cannot predict the EPA ’ s timing with respect to this matter .

APS estimates that its cost related to this investigation and study is approximately $3 million.

APS anticipates incurring additional expenditures in the future, but because the overall investigation is not complete and ultimate remediation requirements are not yet finalized, at the present time, expenditures related to this matter cannot be reasonably estimated.

APS anticipates incurring additional expenditures in the future, but because the ultimate remediation requirements are not yet finalized by EPA, at the present time, expenditures related to this matter cannot be reasonably estimated.

On August 6, 2013, the Roosevelt Irrigation District (“RID”) filed a lawsuit in Arizona District Court against APS and 24 other defendants, alleging that RID’s groundwater wells were contaminated by the release of hazardous substances from facilities owned or operated by the defendants.

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The allegations against APS arise out of APS’s current and former ownership of facilities in and around OU3.

As part of a state governmental investigation into groundwater contamination in this area, on January 25, 2015, ADEQ sent a letter to APS seeking information concerning the degree to which, if any, APS’s current and former ownership of these facilities may have contributed to groundwater contamination in this area.

state governmental investigation into groundwater contamination in this area, on January 25, 2015, ADEQ sent a letter to APS seeking information concerning the degree to which, if any, APS’s current and former ownership of these facilities may have contributed to groundwater contamination in this area.

APS responded to ADEQ on May 4, 2015.

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With this disposition of the case, the vendors may file their lawsuit again in the future.

On August 16, 2019, Maricopa County, one of the three direct defendants

in the service provider lawsuit, filed a third-party complaint seeking contribution for its liability, if any, from APS and 28 other third-party defendants.

We are unable to predict the outcome of these matters;

On August 16, 2019, Maricopa County, one of the three direct defendants in the ancillary service provider lawsuit, filed a third-party complaint seeking contribution for its liability, if any, from APS and 28 other third-party defendants.

While this lawsuit remains pending, on September 30, 2022, the U.S.

District Court for the District of Arizona granted partial summary judgment to the direct defendants for $20.6 million of the $21 million in CERCLA response costs claimed by the service provider.

We are unable to predict the outcome of any further litigation related to the remaining response costs at issue in this litigation;

however, we do not expect the outcome to have a material impact on our financial position, results of operations, or cash flows.

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.

In particular, EPA seeks information from APS regarding APS’s use, storage, and disposal of substances containing per-and polyfluoroalkyl (“PFAS”) compounds at the Ocotillo power plant site in order to aid EPA’s investigation into actual or threatened releases of PFAS into groundwater within the South Indian Bend Wash (“SIBW”) Superfund site.

The SIBW Superfund site includes the APS Ocotillo power plant site.

APS filed its response to this information request on April 29, 2022.

On January 17, 2023, EPA contacted APS to inform APS that it would be commencing on-site investigations within the SIBW site, including the Ocotillo power plant, and performing a remedial investigation and feasibility study related to potential PFAS impacts to groundwater over the next two to three years.

At the present time, we are unable to predict the outcome of this matter and expenditures related to this matter cannot be reasonably estimated.

Manufactured Gas Plant Sites.

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On July 16, 2018, several environmental groups filed a petition for review before the EPA Environmental Appeals Board (“EAB”) concerning the NPDES wastewater discharge permit for Four Corners, which was reissued on June 12, 2018.

The environmental groups allege that the permit was reissued in contravention of several requirements under the Clean Water Act and did not contain required provisions concerning EPA’s 2015 revised ELGs for steam-electric EGUs, 2014 existing-source regulations governing cooling-water intake structures, and effluent limits for surface seepage and subsurface discharges from coal-ash disposal facilities.

regulations governing cooling-water intake structures, and effluent limits for surface seepage and subsurface discharges from coal-ash disposal facilities.

To address certain of these issues through a reconsidered permit, EPA took action on December 19, 2018, to withdraw the NPDES permit reissued in June 2018.

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Oral argument on this appeal was held on September 3, 2020, and the EAB denied the environmental group petition on September 30, 2020.

On January 22, 2021, the environmental groups filed a petition for review of the EAB’s decision with the U.S.

Court of Appeals for the Ninth Circuit.

As of November 11, 2021, the parties to this lawsuit, including APS, reached a tentative agreement to settle this matter.

Review of this agreement, including public commenting, is currently pending with the EPA.

Notwithstanding this tentative agreement, we cannot predict the outcome of these appeal proceedings, including further settlement discussions, and, if settlement efforts fail and the appeal is eventually successful, whether that outcome will have a material impact on our financial position, results of operations, or cash flows.

While on January 22, 2021, the environmental groups filed a petition for review of the EAB’s decision with the U.S.

Court of Appeals for the Ninth Circuit, the parties to this litigation (including APS) finalized a settlement on May 2, 2022.

This settlement requires investigation of thermal wastewater discharges from Four Corners, administratively closes the litigation filed in January of 2021, and is not expected to have a material impact on APS’s financial position, results of operations, or cash flows.

Based on a declaration from the U.S.

Bureau of Reclamation, as of January 1, 2023, Arizona’s supply of Colorado River water will be subject to a Tier 2a shortage.

This shortage will result in a reduction to Arizona’s share of the Colorado River water by 22 percent or 592,000-acre feet.

This reduction, similar to the 2022 tier 1 shortage, will largely be felt by central Arizona’s agricultural users, mainly in Pinal County.

In light of pre-existing mitigation measures at the state level, the Tier 2a shortage is not expected at this time to materially impact water supplies for customers in APS’s service territory, nor materially impact water supplies used by APS’s fleet of generation resources.

As drought conditions across the southwestern U.S.

region continue to worsen, APS will monitor water availability necessary for continued Company operations and, as necessary, implement measures to mitigate risks associated with future Colorado River shortage declarations.

Assured supplies of water are important for APS’s generating plants.

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The Four Corners region, in which Four Corners is located, has historically experienced drought conditions that may affect the water supply for the plants if adequate moisture is not received in the watershed that supplies the area.

Although the watershed and reservoirs are in a good condition at this time, APS is continuing to work with area stakeholders to implement agreements to minimize the effect, if any, on future drought conditions that could have an impact on operations of its plants.

APS is continuing to work with area stakeholders to implement agreements to minimize the effect, if any, on future drought conditions that could have an impact on operations of its plants.

Conflicting claims to limited amounts of water in the southwestern United States have resulted in numerous court actions, which, in addition to future supply conditions, have the potential to impact APS’s operations.

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An agreement reached with the Navajo Nation in 1985, however, provides that if Four Corners loses a portion of its rights in the adjudication, the Navajo Nation will provide, for an agreed upon cost, sufficient water from its allocation to offset the loss.

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.

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.

Gila River Adjudication.

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A hearing to determine this jurisdictional test question was held in March 2018 in front of a special master, and a draft decision based on the evidence heard during that hearing was issued on May 17, 2018.

The decision of the special master, which was finalized on November 14, 2018, but which is subject to further review by the trial court judge, accepts the proposed hydro-geologic testing protocols supported by APS and other industrial users of groundwater.

A final decision by the trial court judge in this matter remains pending.

The decision of the special master, which was finalized on November 14, 2018, accepts the proposed hydro-geologic testing protocols supported by APS and other industrial users of groundwater.

A further ruling affirming this decision by the trial court judge overseeing the adjudication was issued on July 8, 2022.

Further proceedings have been initiated to determine the specific hydro-geologic testing protocols for subflow depletion determinations.

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APS’s claims dispute the court’s jurisdiction over its groundwater rights.

Alternatively, APS seeks confirmation of such

Alternatively, APS seeks confirmation of such rights.

No trial or pretrial proceedings have been scheduled for adjudication of APS’s water right claims.

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Human Capital

The Company seeks to attract the best employees, to retain those employees and to create a safe, inclusive, and productive work environment for all employees.

The Company seeks to attract the best employees, retain those employees, and create a safe, inclusive, and productive work environment for all employees.

We believe the strength of our employees is one of the significant contributors to our Company’s success.

Human capital measures and objectives that the Company focuses on in retaining its talent and managing its business include the safety of our employees, career development, diversity, equity and inclusion, succession planning, hiring, voluntary turnover, compensation, benefits, employee experience, and engagement.

The health, well-being and safety of our employees, customers and communities is our top priority.

In March 2020, we began operating under our long-standing pandemic and business continuity plans to address COVID-19.

We had regular COVID-19 planning sessions to address the safety, operational and business risks associated with the pandemic.

By the middle of March 2020, we successfully transitioned all of our employees to remote work unless they were essential workers that needed to remain onsite.

We identified business-critical positions in our operations and support organizations, with backup personnel ready to assist if an issue arose.

Additionally, efforts to ensure the health and safety of our employees resulted in bifurcated control rooms, thus reducing the number of employees in mission-critical locations.

We also established COVID-19 safety protocols, social distancing practices and offered virtual options whenever possible.

The Company also took rapid action to implement an all Company COVID-19 hotline, a focused COVID-19 team, and procured on-site COVID-19 testing at key facilities early in the pandemic.

Through this testing, case management and contact tracing, the Company has been able to significantly limit COVID-19 transmission in the workplace.

As a result of these efforts, we were able to maintain the continuity of the essential services that we provide to our customers, while also managing the spread of the virus and promoting the health, physical and mental well-being, and safety of our employees.

Employee Safety

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As we continue to improve our safety performance, our ultimate goal remains serious injury reduction.

Our employees are expected to do the right thing and are empowered to speak up when there are better or safer ways of doing

business, including stopping work to reassess or improve safety.

Our employees are expected to do the right thing and are empowered to speak up when there are better or safer ways of doing business, including stopping work to reassess or improve safety.

Safety committees operate in organizations throughout the Company, providing opportunities for employees to positively impact their local safety cultures and performance.

Diversity, Equity, and Inclusion

Diversity, equity, and inclusion are core cultural principles, and we recognize that diversity of demographics, backgrounds and cultural perspective is a key driver for our success.

Our Executive Diversity & Inclusion Council leads this commitment with an emphasis on diversity among employees, in the workplace and through our community involvement, as well as an increased focus on attracting and retaining diverse talent.

We believe that belonging matters.

When we feel seen, heard, and valued, we can more effectively unite behind the APS Promise.

Inclusion at the Company involves taking deliberate action to embrace the unique perspectives of each employee.

We recognize that diversity of demographics, backgrounds and cultural perspective is a key driver for our success.

Our internal diversity, equity, and inclusion team, supported by our Executive Diversity & Inclusion Council as well as other groups, leads this commitment with an emphasis on diversity among employees, in the workplace, and through our community involvement, as well as an increased focus on attracting and retaining diverse talent.

This focus extends to individual business units in the Company, which report on the diversity of their teams during management review meetings to build awareness and address gaps of workforce diversity.

Our efforts to support and empower employees include a commitment to full inclusion.

In 2019, we signed the UNITY Pledge in support of full inclusion and equality in employment, housing, and public accommodations for all Arizonans, including gay and transgender people.

Our efforts to support and empower employees include a commitment to full inclusion of all our people.

We have a robust, multi-year strategy for diversity, equity, and inclusion that focuses on eleven key areas, both internally- and externally-facing.

In 2021, APS received recognition as winner of the Inclusive Workplace Award from Diversity Leadership Alliance and Arizona Society of Human Resource Management.

The award recognizes APS as an Arizona corporation that leads by example, creating an inclusive environment in which employees can be their genuine, authentic selves, and partners on community outreach efforts and support.

Each year since 2020, we have conducted company-wide executive listening sessions to provide employees with opportunities to be heard on their experiences at the Company.

In 2019, we signed the UNITY Pledge in support of full inclusion and equality in employment, housing, and public

accommodations for all Arizonans, including gay and transgender people.

The UNITY Pledge reinforces our commitment to fostering an environment that recognizes our employees’ unique needs and celebrates the value of diverse perspectives.

The Company sponsors ten employee network groups that are intended to create a sense of inclusion and belonging for employees.

In 2020, we conducted company-wide executive listening sessions to provide our employees with the opportunity to share their inclusion experiences with our officers.

We continue to focus on hiring diverse employees as well as hiring employees from our veteran community.

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Additionally, as of December 31, 2022, 35% of our employees are ethnically or racially diverse, 26% are female, and 15% are veterans.

Also, as of December 31, 2021, 40% of the Company’s officers are female.

In 2021, APS received the 2021 Inclusive Workplace Award, a joint award presented by the Diversity Leadership Alliance and the Arizona Society of Human Resources Management.

The award recognizes APS as an Arizona corporation that leads by example, creating an inclusive environment in which employees can be their genuine, authentic selves and partners on community outreach efforts and support.

Finally , as of December 31, 2022, 39% of the Company’s officers are female, and 18% are ethnically or racially diverse.

Succession Planning

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Our employees have access to a wide variety of training and development opportunities, including leadership academies, rotational programs, mentoring programs, industry certifications, and loaned executive programs.

In 2021, we graduated 84 employees from our leadership academies.

In 2022, we graduated 138 individuals from our three academies (Leadership Academy, Impact and Influence Academy, and Strategic Leadership Academy).

Additionally, our Learning and Development organization was recognized as a top training organization, earnings an APEX Award from Training Magazine.

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At the Company, our pay and benefits, along with retirement, recognition, time off, career development and well-being, make up our Total Rewards program.

It is an important part of the employee experience at the Company and supports personal well-being and professional satisfaction.

It is an important part of the employee experience at the Company and supports

personal well-being and professional satisfaction.

We are committed to providing programs that matter to our employees throughout various life and career phases.

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In 2020, the Company launched the APS Promise, anchoring our commitment to our customers, community, and each other.

The Promise explains our purpose, our vision and mission and the principles and behaviors that will empower us to achieve our strategic goals.

The Promise explains our purpose, vision, and mission and the principles and behaviors that will empower us to achieve our strategic goals.

It represents the opportunity to build on our cultural strengths and develop new behaviors to enable our future success.

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BCE’s strategy is to develop, own, operate and acquire energy infrastructure in a manner that leverages the Company’s core expertise in the electric energy industry.

As of December 31, 2022, BCE had total assets of approximately $115.3 million.

In 2014, BCE formed a 50/50 joint venture with BHE U.S.

Transmission LLC, a subsidiary of Berkshire Hathaway Energy Company.

The joint venture, named TransCanyon, is pursuing independent electric transmission opportunities within the 11 states that comprise the Western Electricity Coordinating Council, 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.

As of December 31, 2021, BCE had total assets of approximately $27 million.

The joint venture, named 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.

On December 20, 2019, BCE acquired minority ownership positions in two wind farms under development by Tenaska Energy, Inc.

and Tenaska Energy Holdings, LLC, the 242 MW Clear Creek wind farm in Missouri (“Clear Creek”) and the 250 MW Nobles 2 wind farm in Minnesota (“Nobles 2”).

Creek achieved commercial operation in May 2020 and Nobles 2 achieved commercial operation in December 2020.

Clear Creek achieved commercial operation in May 2020 and Nobles 2 achieved commercial operation in December 2020.

Both wind farms deliver power under long-term PPAs.

BCE indirectly owns 9.9% of Clear Creek and 5.1% of Nobles 2.

Tenaska Clear Creek Wind, LLC, the developer, owner, and operator of the Clear Creek wind farm, has disputed the proposed cost allocation of system upgrades related to connecting the Clear Creek wind farm to the transmission system and filed a complaint with FERC on May 21, 2021, which was denied on September 9, 2022.

Subsequently, Tenaska Clear Creek Wind, LLC filed with FERC a request for rehearing and a motion for stay of the September 9, 2022 order.

On October 7, 2022, the request for rehearing was denied by FERC.

FERC has not ruled on the motion for stay.

Clear Creek has filed a Petition for Review with the U.S.

Court of Appeals and Motion for Stay Pending Appeal, both of which are still pending.

Tenaska Clear Creek Wind, LLC filed a second complaint with FERC on May 25, 2022, alleging that the wind farm was being curtailed in a discriminatory manner.

The May 25, 2022 Complaint was denied by FERC on December 15, 2022 and Tenaska Clear Creek Wind, LLC requested Rehearing of the denial on January 13, 2023.

Due to the disputed system upgrades and the related curtailment, the Clear Creek wind farm has experienced a significant reduction in power generation that has had a material adverse impact on the project’s ability to generate cash flow for investors.

These energy curtailments are expected to persist, unless and until system upgrades are implemented to alleviate the present transmission system congestion, or the disputes are determined in favor of, or settled in a manner favorable to, Tenaska Clear Creek Wind, LLC.

As such, during the fourth quarter of 2022, due to these on-going disputes, cost allocation uncertainties, and no probable favorable resolution, BCE determined its equity method investment was fully impaired.

Prior to the impairment, the investment had a carrying value of $17.1 million, which has been written-down to reflect the investment ’ s estimated fair value of zero as of December 31, 2022.

Pinnacle West ’ s Consolidated Statement of Income for the year ended December 31, 2022 includes an after-tax loss of $12.8 million relating to this impairment.

BCE has started construction on a microgrid facility in Los Alamitos, California (“Los Alamitos”) featuring 31 MW of solar, 20 MW of battery storage, and 3 MW of backup generators.

Supported by a long-term PPA with San Diego Gas and Electric Company, Los Alamitos will supply 20 MW of solar and battery storage capacity to the Southern California grid and provide resilient backup power in the event of a grid emergency to the Army and California National Guard at Joint Forces Training Base Los Alamitos.

The Los Alamitos project is scheduled to achieve commercial operation in third-quarter 2023.

See Note 6 regarding a credit agreement entered into by BCE to finance capital expenditures and related costs for this microgrid project.

BCE and Ameresco, Inc.

jointly own a special purpose entity that is sponsoring the Kūpono Solar project.

This project is a 42 MW solar and battery storage facility in Oʻahu, Hawaii that will supply clean renewable energy and capacity under a 20-year PPA with Hawaiian Electric Company, Inc.

The Kūpono Solar project is expected to be completed in 2024.

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.

El Dorado’s short-term goal is to prudently realize the value of its existing investments.

El Dorado committed to a $25 million investment in the Energy Impact Partners fund, which is an organization that focuses on fostering innovation and supporting the transformation of the utility industry.

El Dorado is actively seeking to prudently realize the value of these investments.

In particular, El Dorado committed to a $25 million investment in the Energy Impact Partners fund, which is an organization that focuses on fostering innovation and supporting the transformation of the utility industry.

The investment will be made by El Dorado as investments are selected by the Energy Impact Partners fund.

As of December 31, 2022, El Dorado has contributed approximately $12.5 million to the Energy Impact Partners fund.

Additionally, El Dorado committed to a $25 million investment in invisionAZ Fund, which 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 the State of Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in the State of Arizona.

The investment will be made by El Dorado as investments are selected by the invisionAZ Fund.

Additionally, El Dorado committed to a $25 million investment in AZ-VC (formerly invisionAZ Fund), which 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 the State of Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in the State of Arizona.

As of December 31, 2022, El Dorado has contributed approximately $2.6 million to the AZ-VC.

The remainder of the investments will be contributed by El Dorado as investments are selected by the AZ-VC.

Pinnacle West, APS and El Dorado are all incorporated in the State of Arizona.

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there were no other changes.

The current contract expires on April 1, 2023.

The current contract expires on April 1, 2023, and APS and the IBEW are currently engaged in negotiations to renew the contract.

WHERE TO FIND MORE INFORMATION

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business