What changed in this filing

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Item 1. Business

2025-02-25 compared with 2024-02-27 · 292 added, 280 removed, 466 unchanged (55% of the section changed)

Pinnacle West

Pinnacle West is a holding company that conducts business through its subsidiaries.

Pinnacle West is a holding company incorporated in Arizona that conducts business through its subsidiaries.

We derive essentially all of our revenues and earnings from our wholly-owned subsidiary, APS.

APS is a vertically-integrated electric utility that provides either retail or wholesale electric service to most of Arizona, with the major exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

Pinnacle West’s other subsidiaries are El Dorado, PNW Power, and 4CA.

APS is incorporated in Arizona and is a vertically-integrated electric utility that provides either retail or wholesale electric service to most of Arizona, with the major exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

Pinnacle West’s other active subsidiaries are El Dorado, an Arizona corporation, and PNW Power, a Delaware limited liability company.

BCE was a subsidiary of Pinnacle West, but was sold in January 2024.

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Our reportable business segment is our regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses (primarily electric service to Native Load customers) and related activities, and includes electricity generation, transmission, and distribution.

Our reportable business segment activities are conducted primarily through our wholly-owned subsidiary, APS.

BUSINESS OF ARIZONA PUBLIC SERVICE COMPANY

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Resource planning is an important function necessary to meet Arizona’s future energy needs.

APS’s sources of energy by type used to supply energy to Native Load customers during 2023 were as follows:

*Renewables include energy from wind, solar, geothermal, biogas, biomass, and DG.

APS’s sources of energy by type used to supply energy to Native Load customers during 2024 were approximately as follows:

*Utility Scale Renewables include energy from biogas, biomass, geothermal, solar, and wind.

The share of APS’s energy supply being derived from clean resources was approximately 54% in 2024, which includes energy from nuclear, renewables and DSM.

Clean Energy Focus Initiatives

In response to climate change, the entire electric utility industry, as well as the global economy, is in the midst of a profound transition to clean energy and a new low-carbon economy.

APS has undertaken a number of initiatives to reduce carbon, including renewable energy procurement and development, and promotion of programs and rates that promote energy conservation, renewable energy use, and energy efficiency.

In response to climate change, APS has undertaken a number of initiatives to reduce carbon, including renewable energy procurement and development, and promotion of programs and rates that promote energy conservation, renewable energy use, and energy efficiency.

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

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

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

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.

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• A 2030 target to achieve a resource mix that is 65% clean energy, with 45% of the generation portfolio coming from renewable energy;

• A commitment to exit from coal-fired generation by 2031.

• A plan to exit from coal-fired generation by 2031.

Among other strategies, APS intends to achieve these goals through various methods such as relying on Palo Verde, one of the nation’s largest producers of carbon-free energy;

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Among other resiliency strategies, APS anticipates increasing investments in a modern and more flexible electricity grid with advanced distribution technologies.

APS plans to continue its comprehensive forest management programs aimed at reducing wildfires, as those risks become compounded by shorter, drier winters and longer, hotter summers as a result of climate change.

APS plans to continue its forest management programs aimed at reducing wildfires, as those risks become compounded by shorter, drier winters and longer, hotter summers as a result of climate change.

APS prepares an annual inventory of GHG emissions from its operations.

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• Utilization of fuel assemblies in reactors;

• Storage and disposal of spent nuclear fuel.

• Storage and preparation for disposal of spent nuclear fuel.

The Palo Verde participants have contracted for 100% of Palo Verde’s requirements for uranium concentrates through 2028 and 52% through 2029;

100% of Palo Verde’s requirements for conversion services through 2030 and 32% through 2031;

100% of Palo Verde’s requirements for enrichment services through 2026 and 28% for 2027;

100% of Palo Verde’s requirements for enrichment services through 2028;

and 100% of Palo Verde’s requirements for fuel fabrication through 2027 for Unit 2 and Unit 1 and 2028 for Unit 3.

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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.

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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In addition, the settlement agreement provided APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2016, which was extended to December 31, 2025.

APS has submitted nine claims pursuant to the terms of the August 18, 2014 settlement agreement, for nine separate time periods during July 1, 2011 through October 31, 2022.

The DOE has approved and paid $138.2 million for these claims (APS’s share is $40.2 million).

APS has recovered costs for ten claims pursuant to the terms of the August 15, 2014 settlement agreement, for ten separate time periods during July 1, 2011 through October 31, 2023.

The DOE has approved and paid approximately $156.7 million for these claims (APS’s share is approximately $45.6 million).

The amounts recovered were primarily recorded as adjustments to a regulatory liability and had no impact on reported net income.

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

On October 31, 2023, APS filed its tenth claim pursuant to the terms of the August 18, 2014, settlement agreement in the amount of $18.46 million (APS’s share is $5.4 million).

In February 2024, the DOE approved $18.39 million of this claim.

On October 31, 2024, APS filed its eleventh claim pursuant to the terms of the August 15, 2014, settlement agreement in the amount of approximately $18 million (APS’s share is approximately $5.3 million).

In February 2025, the DOE approved approximately $17.6 million of this claim.

Waste Confidence and Continued Storage — On June 8, 2012, the D.C.

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As a result, those generic impacts do not need to be re-analyzed in the environmental reviews for individual licenses.

The final Continued Storage Rule was

subject to continuing legal challenges before the NRC and the Court of Appeals.

The final Continued Storage Rule was subject to continuing legal challenges before the NRC and the Court of Appeals.

In June 2016, the D.C.

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APS has six natural gas power plants located throughout Arizona, consisting of Redhawk, located near Palo Verde;

Ocotillo, located in Tempe (discussed below);

Ocotillo, located in Tempe;

Sundance, located in Coolidge;

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Fuel oil is acquired under short-term purchases delivered by truck directly to the power plants.

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.

In 2024, APS contracted for the addition of two combustion turbines (approximately 90 MW in total) at Sundance, which are expected to be in service in 2026, and the addition of eight combustion turbines (approximately 397 MW total) at Redhawk, which are expected to be in service in 2028.

Coal Fueled Generating Facilities

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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.

APS plans 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”).

The Four Corners co-owners executed a long-term agreement for the supply of coal to Four Corners from July 2016 through 2031, which was amended and restated on July 1, 2024.

APS, on behalf of the Four Corners participants, negotiated amendments to an existing facility lease with the Navajo Nation, which extends the Four Corners leasehold interest from 2016 to 2041.

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A federal environmental review was undertaken as part of the DOI review process and culminated in the issuance by DOI of a record of decision on July 17, 2015, justifying the agency action to extend the life of the plant and the adjacent mine.

In June 2021, APS and the owners of Four Corners entered into an agreement that would allow Four Corners to operate seasonally at the election of the owners as early as fall 2023, subject to the necessary governmental approvals and conditions associated with changes in plant ownership.

In June 2021, APS and the owners of Four Corners entered into an agreement that would allow Four Corners to operate seasonally at the election of the owners as early as fall 2023.

In July 2024, APS and the owners amended the agreement to retain the option for seasonal operation.

Under seasonal operation, one generating unit would be shut down during seasons where electricity demand is reduced, such as the winter and spring.

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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.

APS purchased all of Cholla coal requirements from a coal supplier that mines the coal under long-term leases of coal reserves with the federal and state governments and private landholders.

APS elected not to extend the coal and transportation agreements that expired on December 31, 2024, as Cholla operations are expected to conclude in 2025.

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.

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.

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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 our large customers purchase renewable energy credits from APS that are equivalent to the amount of renewable energy that Red Rock is projected to generate.

In addition to the AZ Sun Program, APS developed the 44 MW Red Rock Solar Plant and the 150 MW Agave Solar Plant, each of which it owns and operates, and has contracted for the construction of the 168 MW Ironwood Solar Plant.

APS owns and operates more than thirty small solar systems around the state.

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In the 2017 Rate Case Decision, the ACC also approved the “APS Solar Communities” program.

APS Solar Communities (formerly AZ Sun II) is a three-year program authorizing APS to spend $10 million to $15 million in capital costs each year to install utility-owned DG systems on low to moderate income residential homes, non-profit entities, Title I schools, and rural government facilities.

APS Solar Communities (formerly AZ Sun II) is a three-year program authorizing APS to spend $10

million to $15 million in capital costs each year to install utility-owned DG systems on low to moderate income residential homes, non-profit entities, Title I schools, and rural government facilities.

The 2017 Rate Case Decision provided that all operations and maintenance expenses, property taxes, marketing and advertising expenses, and the capital carrying costs for this program will be recovered through the RES.

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In the 2019 Rate Case decision, the ACC authorized APS to spend $20 million to $30 million in capital costs for the APS Solar Communities program each year for a period of three years from the effective date of the decision.

Subsequently, on March 5, 2024, the ACC ordered APS not to expand or extend the APS Solar Communities program.

Consistent with that decision, the Solar Communities program has been discontinued and APS stopped enrolling new customers.

APS will continue work on projects that were enrolled prior to that decision.

Renewable Energy Portfolio

To date, APS has a diverse portfolio of existing and planned renewable resources totaling 5,010 MW, including solar, wind, geothermal, biomass and biogas.

To date, APS has a diverse portfolio of existing and planned renewable resources totaling 7,660 MW, including biogas, biomass, geothermal, solar, and wind.

Of this portfolio, 3,608 MW are currently in operation and 4,052 MW are under contract for development or are under construction.

Renewable resources in operation include 416 MW of facilities owned by APS, 1,465 MW of long-term purchased power agreements, and an estimated 1,727 MW of customer-sited, third-party owned distributed energy resources.

On June 30, 2023, APS issued an 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.

On June 30, 2023, APS issued an ASRFP (the “2023 ASRFP”) pursuant to which APS procured nearly 7,300 MW of new resources to be in service from 2026 to 2028.

On November 20, 2024, APS issued an ASRFP (the “2024 ASRFP”) seeking 2,000 MW of resources.

APS is seeking projects that can reach commercial operation beginning June 1, 2028 through June 1, 2030 but will consider projects that may achieve commercial operation as early as 2026.

Additionally, APS is interested in projects that require longer planning, permitting, and construction and can be commercially operational after June 1, 2030.

Bids for the 2024 ASRFP were due on February 5, 2025.

APS’s strategy to achieve its RES requirements includes executing purchased power contracts for new facilities, ongoing development of distributed energy resources and procurement of new facilities to be owned by APS.

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” below 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, 2023.

The following table summarizes APS’s renewable energy sources currently in operation and under development as of the date of this report.

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.

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Agave Solar Arlington, AZ 2023 150

Ironwood Solar Dateland, AZ 2026 168

Distributed Energy:

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Gillespie Maricopa County, AZ 2013 30 15

CO Bar Solar C Coconino County, AZ 2025 20 206

Mesquite Solar 5 Tonopah, AZ 2023 20 60

Sunstreams 3 Arlington, AZ 2024 20 215

Sunstreams 4 Arlington, AZ 2025 20 300

Yuma Solar Energy Yuma County, AZ 2025 20 70

Harquahala Sun 2 Tonopah, AZ 2025 20 300

Sunstreams 4 Arlington, AZ 2025 20 300

Serrano Solar Pima and Pinal County, AZ 2025 20 170

Yuma Solar Energy Yuma County, AZ 2024 20 70

CO Bar Solar C Coconino County, AZ 2027 20 206

Hashknife 1 Navajo County, AZ 2026 20 275

Catclaw Buckeye, AZ 2026 20 225

Papago Solar Maricopa County, AZ 2026 20 150

Hashknife 2 Navajo County, AZ 2027 20 200

Kitt Eloy, AZ 2026 20 100

Pioneer Yuma, AZ 2027 20 300

Maricopa Energy Center Phase 1 Maricopa County, AZ 2026 20 183

Maricopa Energy Center Phase 2 Maricopa County, AZ 2027 20 367

Snowflake Solar Snowflake, AZ 2027 20 475

Aragonne Mesa Santa Rosa, NM 2022 20 200

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

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

DG is produced in direct current and is converted to alternating current for reporting purposes.

Energy Storage

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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.

As noted above, on June 30, 2023, APS issued the 2023 RFP seeking approximately 1,000 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 currently 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 current and future RFPs.

The following table summarizes the resources in APS’s energy storage portfolio that are in operation and under development as of December 31, 2023.

See “Item 7 — Management’s Discussion and Analysis of Financial Condition — Clean Energy Commitment — Energy Storage” for a table summarizing the resources in APS’s energy storage portfolio that are in operation and under development as of the date of this report.

Agreements for the development and completion of future resources are subject to various conditions.

Net Capacity in

Operation (MW) Net Capacity Planned /

Under Development (MW)

APS Owned Energy Storage 182 (a) 19 (b)

PPAs Energy Storage 60 2,182

Customer-Sited Energy Storage 30 20

Total Energy Storage Portfolio 272 2,221

(a) Includes 0.3 MW of APS-owned customer-sited batteries.

(b) Includes 19 MW of capacity that entered commercial operation in January 2024.

Purchased Power Contracts

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See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Energy Storage” above for details on our energy storage PPAs.

Purchased Power Capacity — APS’s purchased power capacity under long-term contracts as of December 31, 2023, is summarized in the table below.

Purchased Power Capacity — APS’s purchased power capacity under long-term contracts as of the date of this report is summarized in the table below.

All capacity values are based on net capacity unless otherwise noted.

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(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.”

See “Energy Sources and Resource Planning — Generation Facilities — Renewable Energy Portfolio” for more details on renewable energy power purchase agreements.

Current and Future Resources

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

APS’s 2023 peak one-hour demand on its electric system was recorded on July 15, 2023, at 8,162 MW, compared to the 2022 peak of 7,587 MW recorded on July 11, 2022.

APS’s 2024 peak one-hour demand on its electric system was recorded on August 4, 2024, at 8,210 MW, compared to the 2023 peak of 8,162 MW recorded on July 15, 2023.

APS’s reserve margin at the time of the 2024 peak demand, calculated using system load serving capacity, was 15%.

For 2024, due to expiring purchased power contracts, APS is procuring market resources to maintain its minimum 16% planning reserve criteria.

For 2025, APS is procuring market resources to maintain its minimum 16% planning reserve criteria.

Future Resources and Resource Plan

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The ACC reviews each utility’s IRP to determine if it meets the necessary rule requirements and whether it should be acknowledged.

APS was originally required to file its IRP by August 1, 2023.

However, on May 1, 2023, APS, Tucson Electric Company, and UNS Electric, Inc., filed a joint request to extend the IRP filing due date to November 1, 2023, which the ACC granted on June 21, 2023.

APS filed its 2023 IRP on November 1, 2023.

On January 31, 2024, stakeholders filed comments regarding the IRP.

APS cannot predict the outcome of this matter.

On October 4, 2023, the ACC updated the IRP processing timeline with a due date of August 30, 2024 for the ACC Staff Assessment and Proposed Order and an open meeting decision due date yet to be determined.

On May 1, 2023, APS, Tucson Electric Power Company, and UNS Electric, Inc.

filed a joint request for an extension to file the IRPs from August 1 to November 1.

On June 21, 2023, the ACC granted the extension.

As a result, APS filed its 2023 IRP on November 1, 2023.

On January 31, 2024, stakeholders filed comments regarding the IRP, and APS filed its response to stakeholder comments on May 31, 2024.

On July 31, 2024, the ACC held an IRP workshop where utilities and stakeholders presented on the 2023 IRPs.

On October 8, 2024, the ACC acknowledged APS’s 2023 IRP and approved certain amendments to the IRP process, including requirements for APS to demonstrate resource adequacy prior to exiting Four Corners as well as analysis of impacts from western market participation and planned resource requirements in the next IRP.

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.

Western Energy Imbalance Market & Wholesale Market

Western Energy Imbalance Market and Wholesale Market

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

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APS continues to expect that its participation in WEIM will lower its fuel and purchased-power costs, improve situational awareness for system operations in the Western Interconnection power grid, and improve integration of APS’s renewable resources.

APS is participating in market design and tariff development of Markets+, a day-ahead and real-time market offering from Southwest Power Pool.

APS also participated in the design and drafting of the tariff for the CAISO’s Extended Day-Ahead Market, which was approved by FERC in December 2023.

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

APS participated in market design and tariff development of Markets+, a day-ahead and real-time market offering from Southwest Power Pool (“SPP”).

The Markets+ tariff was filed with FERC on March 29, 2024 and was approved on January 16, 2025.

APS announced a market decision to pursue participation in SPP Markets+.

In addition, APS is participating in the Western Resource Adequacy Program administered by Western Power Pool and is transitioning to full binding participation as early as summer 2027.

These regional efforts are driven by the objectives of reducing customer cost and improving reliability.

Energy Modernization Plan

On July 30, 2020, the ACC Staff issued final draft energy rules, which proposed 100% of retail kWh sales from clean energy resources by the end of 2050.

Nuclear power was defined as a clean energy resource.

The proposed rules also required 50% of retail energy served be renewable by the end of 2035.

On November 13, 2020, the ACC approved a final draft energy rules package which required additional procedural steps in the rulemaking process.

In June 2021, the ACC adopted clean energy rules based on a series of ACC amendments to the final energy rules.

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80% reduction by December 31, 2050, and 95% reduction by December 31, 2060.

Since the adopted clean energy rules differed substantially from the original Recommended Order and Opinion, supplemental rulemaking procedures were required before the rules could become effective.

Since the adopted clean energy rules differed substantially from the original Recommended Opinion and Order (“ROO”), supplemental rulemaking procedures were required before the rules could become effective.

On January 26, 2022, the ACC reversed its prior decision and declined to send the final draft energy rules through the rulemaking process.

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

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

Instead, the ACC opened a new docket to consider all-source request for proposals (“ASRFP”) requirements and the IRP process.

During the August 2022 ACC Open Meeting, the ACC voted to postpone a decision on the ASRFP and IRP rulemaking package until 2023.

On May 26, 2023, the ACC opened a new docket to review articles within the Arizona Administrative Code related to Resource Planning, the Renewable Energy Standard and Tariff, and Electric Energy Efficiency Standards.

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During the ACC Open Meeting on February 6, 2024, the ACC approved motions to direct ACC Staff to include recommendations to repeal the current Electric Energy Efficiency and Renewable Energy Standard rules during the rulemaking process.

On August 21, 2024, ACC Staff proposed amendments striking the rules and filed preliminary economic, small business, and consumer impact statements, consistent with the formal rulemaking process.

APS cannot predict the outcome of this matter.

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Renewable Energy Standard

In 2006, the ACC adopted the RES.

Under the RES, electric utilities that are regulated by the ACC must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including solar, wind, biomass, biogas, and geothermal technologies.

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 DG systems.

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

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.

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

In 2006, the ACC approved the RES.

Under the RES, electric utilities that are regulated by the ACC must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including, for example, solar, wind, biomass, biogas and geothermal technologies.

In order to achieve these requirements, the ACC allows APS to include a RES surcharge as part of customer bills to recover the approved amounts for use on renewable energy projects.

Each year, APS is required to file a five-year implementation plan with the ACC and seek approval for funding the upcoming year’s RES budget.

In June 2021, the ACC adopted a clean energy rules package which would require APS to meet certain clean energy standards and technology procurement mandates, obtain approval for its action plan included in its IRP, and seek cost recovery in a rate process.

Since the adopted clean energy rules differed substantially from the original ROO, supplemental rulemaking procedures were required before the rules could become effective.

On January 26, 2022, the ACC reversed its prior decision and declined to send the final draft energy rules through the rulemaking process.

Instead, the ACC opened a new docket to consider ASRFP requirements and the IRP process.

See “Energy Modernization Plan” above for more information.

On July 1, 2021, APS filed its 2022 RES Implementation Plan and proposed a budget of approximately $93.1 million.

APS filed an amended 2022 RES Implementation Plan on December 9, 2021, with a proposed budget of $100.5 million.

This budget included funding for programs to comply with the decision in the 2019 Rate Case, including the ACC authorizing spending $20 million to $30 million in capital costs for the continuation of the APS Solar Communities program each year for a period of three years from the effective date of the 2019 Rate Case decision.

APS’s budget proposal supported existing approved projects and commitments and requested a waiver of the RES residential and non-residential distributed energy requirements for 2022.

On May 18, 2022, the ACC approved the 2022 RES Implementation Plan, including an amendment requiring a stakeholder working group convene to develop a community solar program for the ACC’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 proposed 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.

On March 23, 2023, the ACC approved a policy statement that included information on how statewide community solar and storage programs should be structured, their location, and inclusion in RFPs.

The remainder of the community solar program policy components were 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 proposed a budget of approximately $86.2 million, excluding any funding offsets.

This budget contained funding for programs to comply with ACC-approved initiatives, including the 2019 Rate Case decision.

APS’s budget proposal supported existing approved projects and commitments and requested a waiver of the RES residential and non-residential distributed energy requirements for 2022.

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

On June 30, 2023, APS filed its 2024 RES Implementation Plan and proposed a budget of approximately $95.1 million.

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The ACC has not yet ruled on the 2024 RES Implementation Plan.

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

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.

APS cannot predict the outcome of this proceeding.

On July 1, 2024, APS filed its 2025 RES Implementation Plan and proposed a budget of approximately $92.7 million.

APS’s budget proposal supports existing approved projects and commitments and requests a waiver of the RES renewable energy credit requirements to demonstrate compliance with the Annual Renewable Energy Requirement for 2024.

The ACC has not yet ruled on the 2025 RES Implementation Plan.

APS cannot predict the outcome of this proceeding.

On June 14, 2021, APS filed an application for approval of its Green Power Partners Program (“GPP”).

On September 1, 2021, the ACC approved the application.

On June 28, 2024, APS filed an application for approval of modifications to the GPP and requested a renewable generation renewable energy credits waiver.

The ACC has not yet ruled on the GPP application.

APS cannot predict the outcome of this proceeding.

Demand Side Management

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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.

On May 9, 2013, the ACC voted to re-examine the facilitation of a deregulated retail electric market in Arizona.

The ACC subsequently opened a docket for this matter and received comments from a number of interested parties on the considerations involved in establishing retail electric deregulation in the state.

One of these considerations was whether various aspects of a deregulated market, including setting utility rates on a “market” basis, would be consistent with the requirements of the Arizona Constitution.

On September 11, 2013, after receiving legal advice from the ACC Staff, the ACC voted 4-1 to close the current docket and await full Arizona Constitutional authority before any further examination of this matter.

The motion approved by the ACC also included opening one or more new dockets in the future to explore options to offer more rate choices to customers and innovative changes within the existing cost-of-service regulatory model that could include elements of competition.

On November 17, 2018, the ACC voted to re-examine the facilitation of a deregulated retail electric market in Arizona.

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During a July 15, 2020, ACC Staff meeting, the ACC Commissioners discussed the possible development of a retail competition pilot program, but no action was taken.

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

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.

Green Mountain Energy has requested that the ACC grant it the ability to provide competitive service in APS’s and Tucson Electric Power Company’s certificated service territories and proposes to deliver a 100% renewable energy product to residential and general service customers in those service territories.

APS opposes Green Mountain Energy’s application.

On November 3, 2021, the ACC submitted questions to 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 insights on the applicable law.

As the ACC’s questions pertained to the retail competition law subsequently repealed in April 2022, the Attorney General has not responded to the ACC’s request and the questions are now moot.

No action has been taken by the ACC regarding this application since that time.

However, on May 17, 2023, the Retail Energy Supply Association filed a motion with the ACC requesting it to re-open the generic docket to re-examine the ACC’s electric competition rules.

No action has been taken by the ACC regarding this motion.

APS cannot predict the outcome of these matters.

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

The letter also states that similar programs should be designed for other Arizona regulated electric utilities.

APS cannot predict the outcome of these future activities.

On August 27, 2024, the ACC administratively closed this docket due to inactivity and obsolescence.

FERC regulates rates for wholesale power sales and transmission services.

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The capital expenditures table presented in the “Liquidity and Capital Resources” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this report includes new APS transmission projects, along with other transmission costs for upgrades and replacements, including those for data center and semi-conductor manufacturing development.

To prioritize reliability and meet substantial growth in residential and commercial energy needs, APS has developed a future-focused, strategic transmission plan.

This Ten-Year Plan includes five critical transmission projects that comprise the APS strategic transmission portfolio, which represents a significant upgrade to APS’s transmission system.

These five projects, along with other projects included in the Ten-Year Plan, are intended to support growing energy needs, strengthen reliability, and allow for the connection of new resources.

To prioritize reliability and meet substantial growth in residential and commercial energy needs, APS has developed a future-focused, strategic transmission plan (the “Ten-Year Transmission Plan”).

The Ten-Year Transmission Plan includes five critical transmission projects that comprise the APS strategic transmission portfolio, which represents a significant upgrade to APS’s transmission system.

These five projects, along with other projects included in the Ten-Year Transmission Plan, are intended to support growing energy needs, strengthen reliability, and allow for the connection of new resources.

APS is also working to establish and expand advanced grid technologies throughout its service territory to provide long-term benefits both to APS and its customers.

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Legislative Initiatives.

There have been no recent successful attempts by Congress to pass legislation that would regulate GHG emissions, and it is unclear at this time whether legislation regulating or limiting utility-sector GHG emissions under consideration in the 118th Congress will become law.

There have been no recent successful attempts by Congress to pass legislation that would regulate GHG emissions, and it is unclear at this time whether legislation regulating or limiting utility-sector GHG emissions introduced during prior sessions of Congress will become law.

In the event climate change legislation ultimately passes, the actual economic and operational impact of such legislation on APS depends on a variety of factors, none of which can be fully known until a law is written, enacted, and the specifics of the resulting program are established.

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In addition to federal legislative initiatives, state-specific initiatives may also impact our business.

While Arizona has no pending legislation regulating GHGs, the California legislature enacted AB 32 and SB 1368 in 2006 to address GHG emissions.

While Arizona has no pending legislation regulating GHGs, the California legislature enacted AB 32 and Senate Bill (“SB”) 1368 in 2006 to address GHG emissions.

In October 2011, the California Air Resources Board (“CARB”) approved final regulations that established a state-wide cap on GHG emissions beginning on January 1, 2013, and established a GHG allowance trading program under that cap.

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APS is authorized to recover the cost of these carbon allowances through the PSA.

The California legislature also enacted SB 219, SB 253, and SB 261, which mandate climate-related disclosures for certain companies doing business in California.

CARB is expected to issue regulations for these bills in 2025.

Pinnacle West and APS are currently reviewing whether they would be required to make disclosures pursuant to these bills.

Regulatory Initiatives.

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Supreme Court subsequently reversed that decision on June 30, 2022, holding that the Clean Power Plan exceeded EPA’s authority under the Clean Air Act.

In the latest set of proposed rules, released on May 23, 2023, EPA contemplates emission standards and guidelines for various subcategories of new and existing power plants.

Unlike EPA’s Clean Power Plan regulations from 2015, which took a broad, system-wide approach to regulating carbon emissions from electric utility fossil-fuel burning power plants, the most recent proposal is limited to measures that can be installed at individual power plants to limit planet-warming emissions.

For new natural gas-fired combustion turbine power plants, EPA is proposing that carbon emission performance standards apply based on the annual capacity factors.

For the highest utilization combustion turbines, EPA is therefore proposing that such facilities be retrofitted for carbon capture and sequestration or utilization controls (“CCS”) or varying levels of hydrogen gas (“H2”) co-firing.

As for existing natural gas-fired combustion turbines, EPA is imposing similar control requirements at large, high utilization generating units, but is otherwise not proceeding at this time with further regulation.

Under EPA’s proposal, this means that both new and existing peaking gas-fired combustion turbines (i.e., those with a 20% or less annual capacity factor) are effectively unregulated under the proposed regulations.

For coal-fired power plants, instead of imposing regulations based on capacity and utilization, EPA has developed subcategories based on planned retirement dates.

This means that facilities retiring between 2030 and before 2040 must meet increasingly stringent emission limits up to natural-gas co-firing starting in 2030.

However, for those facilities with no planned retirement date prior to 2040, EPA is requiring those plants to be retrofitted with CCS controls by 2030.

At this time, APS cannot predict the outcome of this rulemaking or when EPA will take final action.

In addition, APS is continuing to evaluate this proposal and its potential impact on APS’s operations.

Depending on the eventual outcome, the costs associated with APS’s operation of its current and future thermal power plants could materially increase, which could affect our financial condition, results of operations, or cash flows.

In the final regulations governing power plant carbon dioxide emissions released April 25, 2024, EPA issued emission standards and guidelines for various subcategories of new and existing power plants.

Unlike EPA’s Clean Power Plan regulations from 2015, which took a broad, system-wide approach to regulating carbon emissions from electric utility fossil-fuel burning power plants, these new federal regulations are limited to measures that can be installed at individual power plants to limit planet-warming carbon-dioxide emissions.

As such, for new natural gas-fired combustion turbine power plants, EPA is proposing that carbon emission performance standards apply based on the annual capacity factors.

For the highest utilization combustion turbines, EPA is therefore proposing that such facilities be retrofitted for carbon capture and sequestration or utilization controls (“CCS”) by 2032.

For intermediate or low-load natural gas fired combustion turbines, those with 40% or less capacity factors, EPA’s regulations would not require add-on pollution controls.

Instead, natural gas-fired combustion turbines with capacity factors of up to 20% would be effectively unregulated, while such turbines with capacity factors over 20% and up to 40% would be subject to carbon dioxide emission rate limitations.

EPA did not finalize standards for existing natural gas-

fired combustion turbines but has indicated that it will propose a new set of standards, initiating a separate rulemaking, for these existing gas-fired power plants within the next year.

For coal-fired power plants, instead of imposing regulations based on capacity and utilization, EPA has finalized subcategories based on planned retirement dates.

This means that facilities retiring before 2032 are effectively exempt from regulation, those that retire between 2032 and 2038 must co-fire with natural gas starting in 2030, and those that retire in 2039 or later must install CCS controls by 2032.

As of May 10, 2024, several states, electric utility companies, affiliated trade associations, and other entities filed petitions for review of these regulations in the D.C.

Circuit Court of Appeals.

APS is participating in that litigation as part of an ad hoc coalition of electric utility companies, independent power producers, and trade groups, called Electric Generators for a Sensible Transition.

We cannot predict the outcome of the litigation challenging EPA’s latest carbon emission standards for power plants.

In addition, the Trump administration has stated that it intends to reverse or substantially revise these standards.

We cannot predict the outcome of future rulemaking or other regulatory proceedings aimed at changing or eliminating the current EPA emission standards for power plants.

If this regulation remains in effect, it will likely lead to a material increase in APS’s costs to build, operate, and maintain new, frequently operated gas-fired power plants.

The regulatory deadlines in 2032 by which new, frequently operated gas-fired power plants must install carbon capture and sequestration and achieve 90% capture efficiency may not be feasible.

Future resource plans and procurement efforts implicating the development of such new generation remains pending and, as such, at this time APS is not able to quantify the financial impact associated with EPA’s GHG regulations for power plants.

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.

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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, and new state legislation has been adopted 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.

• Following the passage of the Water Infrastructure Improvements for the Nation (“WIIN”) Act in 2016, EPA possesses authority to either authorize states to develop their own permit programs for CCR management or issue federal permits governing CCR disposal both in states without their own permit programs and on tribal lands.

At this time, the Arizona Department of Environmental Quality (“ADEQ”) has taken steps to develop a CCR permitting program.

It remains unclear when the EPA would approve the permitting program pursuant to the WIIN Act.

On December 19, 2019, EPA proposed its own set of regulations governing the issuance of CCR management permits, which would impact facilities like Four Corners located on the Navajo Nation.

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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 APS anticipates receiving a proposed decision with respect to the Cholla facility in 2024.

• On May 18, 2023, EPA published a proposal that expands the scope of federal CCR regulations to address the impacts from historical CCR disposal activities that would have ceased prior to 2015.

EPA proposes to defi ne a new class of CCR management units (“CCRMUs”) that broadly encompass any location at an operating coal-fired power plant where CCR would have been placed on land.

As proposed, this would include not only historically closed landfills and surface impoundments but also prior applications of CCR beneficial use.

EPA expects to finalize this proposal by spring of 2024.

We expect to have a proposed decision from EPA regarding Cholla in 2025 .

We cannot at this time predict the outcome of these regulatory proceedings or when the EPA will take final action on those matters that are still pending.

Depending on the eventual outcome, the costs associated with APS’s management of CCR could materially increase, which could affect our financial condition, results of operations, or cash flows.

On April 25, 2024, EPA took final action on a proposal to expand the scope of federal CCR regulations to address the impacts from historical CCR disposal activities that would have ceased prior to 2015.

This new class of CCR management units (“CCRMUs”), which contain at least 1,000 tons of CCR, broadly encompass any location at an operating coal-fired power plant where CCR would have been placed on land.

As proposed, this would include not only historically closed landfills and surface impoundments but also prior applications of CCR beneficial use (with exceptions for historical roadbed and embankment applications).

Existing CCR regulatory requirements for groundwater monitoring, corrective action, closure, post-closure care, and other requirements will be imposed on such CCRMUs.

At this time, APS is still evaluating the impacts of this final regulation on its business, with initial CCRMU site surveys due to be completed by February 2026 and final site investigation reports to be finalized by February 2027.

Based on the information available to APS at this time, APS cannot reasonably estimate the fair value of the entire CCRMU asset retirement obligation.

Depending on the outcome of those evaluations and site

investigations, the costs associated with APS’s management of CCR could materially increase, which could affect our financial condition, results of operations, or cash flows.

APS currently disposes of CCR in ash ponds and dry storage areas at Cholla and Four Corners.

The Navajo Plant disposed of CCR only in a dry landfill storage area.

To comply with the CCR rule for the Navajo Plant, APS’s share of incremental costs was approximately $1 million, which has been incurred.

Additionally, the CCR rule requires ongoing, phased groundwater monitoring.

As of October 2018, APS has completed the statistical analyses for its CCR disposal units that triggered assessment

As of October 2018, APS has completed the statistical analyses for its CCR disposal units that triggered assessment monitoring.

APS determined that several of its CCR disposal units at Cholla and Four Corners will need to undergo corrective action.

In addition, under the current regulations, all such disposal units must have ceased operating and initiated closure by April 11, 2021, at the latest (except for those disposal units subject to alternative closure).

In addition, under the current regulations, all such disposal units must have ceased operating and initiated closure as of April 11, 2021 (except for those disposal units subject to alternative closure).

APS completed the assessments of corrective measures on June 14, 2019;

however, additional investigations and engineering analyses that will support the remedy selection are still underway.

In addition, APS will also solicit input from the public and host public hearings as part of this process.

APS’s estimates for its share of corrective action and monitoring costs at Four Corners and Cholla are captured within the Asset Retirement Obligations in Note 11.

In addition, APS has also solicited input from the public and hosted public hearings as part of this process.

APS’s estimates for its share of corrective action and monitoring costs at Four Corners and Cholla are captured within the Asset Retirement Obligations.

As APS continues to implement the CCR rule’s corrective action assessment process, the current cost estimates may change.

Given uncertainties that may exist until we have fully completed the corrective action assessment and final remedy selection process, APS cannot predict any ultimate impacts to the APS;

however, at this time, APS does not believe that any potential changes to the cost estimate for Four Corners or Cholla would have a material impact on our financial condition, results of operations, or cash flows.

Given uncertainties that may exist until we have fully completed the corrective action assessment and final remedy selection process, we cannot predict any ultimate impacts to APS;

however, at this time APS does not believe that any potential changes to the cost estimate from the CCR rule’s corrective action assessment process for Four Corners or Cholla would have a material impact on its financial condition, results of operations, or cash flows.

Effluent Limitation Guidelines .

Based on the most recently finalized effluent limitation guidelines (“ELG”), published by EPA on October 13, 2020, APS completed an NPDES permit modification for Four Corners on December 1, 2 023.

The ELG standards finalized in October of 2020 relaxed the “zero discharge” standard for bottom ash transport waters EPA finalized in September of 2015.

Nonetheless, on March 29, 2023, EPA proposed again for the bottom ash transport water ELG to shift back to a “zero discharge” standard.

EPA anticipates finalizing these standards by spring or summer of 2024.

In the event these standards are finalized as proposed, a further modification to the Four Corners NPDES permit would be required.

We cannot at this time predict the outcome of this rulemaking nor whether future regulatory action by EPA would have impact s on our financial condition, results of operations, or cash flows.

EPA published effluent limitation guidelines (“ELG”) on October 13, 2020, and based off those guidelines, APS completed a National Pollutant Discharge Elimination System (“NPDES”) permit modification for Four Corners on December 1, 2023.

The ELG standards finalized in October 2020 relaxed the “zero discharge” standard for bottom ash transport waters EPA finalized in September 2015.

However, on April 25, 2024, EPA finalized new ELG regulations that once again require “zero discharge” standards for flows of bottom ash transport water at power plants like Four Corners.

Nonetheless, for power plants that permanently cease operations by December 31, 2034, such facilities can continue to comply with the 2020 ELG standards.

APS is currently evaluating its compliance options for Four Corners based on the ELG regulations finalized in April 2024 and is assessing what impacts the new standards will have on our financial condition, results of operations, or cash flows.

Ozone National Ambient Air Quality Standards.

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Areas of Arizona and the Navajo Nation where the remainder of APS’s fossil-fuel fired EGU fleet is located were designated as in attainment.

We anticipate that revisions to the SIPs and FIPs implementing required controls to achieve the new 70 ppb standard will be in place between 2023 and 2024.

At this time, because proposed SIPs and FIPs implementing the revised ozone NAAQSs have yet to be released, APS is unable to predict what impact the adoption of these standards may have on APS.

APS will continue to monitor these standards as they are implemented within the jurisdictions affecting APS.

On March 15, 2023, EPA issued its final Good Neighbor Plan for 23 states in order to ensure that the cross-state transport of ozone forming emissions does not interfere with downwind state compliance with the NAAQS.

Power plant emission limitations are a key aspect of these regulations, which involve emission allowance trading for nitrogen oxide emissions.

While Arizona was not among the 23 states subject to EPA’s March 2023 final action, EPA announced at this time that it was considering the inclusion of Arizona within a future regulatory action under the “good neighbor” provisions of the Clean Air Act.

APS cannot at this time predict the outcome of future “good neighbor” rulemakings by EPA or the extent to which such regulations, if they are finalized, may impact our financial condition, results of operations, or cash flows.

EPA Good Neighbor Proposal for Arizona .

Thermal power plant emission limitations are a key aspect of these regulations, which involve emission allowance trading for nitrogen oxide (“NOx”) emissions.

While Arizona was not among the 23 states subject to EPA’s March 2023 final action, EPA announced on January 23, 2024 that it was proposing to add Arizona and New Mexico (along with two other additional states) to EPA’s NOx emission allowance trading program finalized last year.

That proposal involves adding these states to the Good Neighbor Plan and disapproving the corresponding provisions of each state’s State Implementation Plan.

Because APS operates thermal power plants within Arizona and those portions of the Navajo Nation within New Mexico, APS’s power plants would be subject to EPA’s Good Neighbor Plan upon finalization of this proposal.

EPA’s final Good Neighbor Plan is subject to ongoing judicial review in the D.C.

Circuit Court of Appeals.

On June 27, 2024, the U.S.

Supreme Court granted a motion to stay the effectiveness of EPA’s final Good Neighbor Plan pending the resolution of the litigation.

As such, APS will not be impacted by the Good Neighbor Plan until the outcome of this litigation is finalized.

In addition, on December 19, 2024, EPA announced that it was withdrawing its proposal to add Arizona (along with other western states) to the federal Good Neighbor Plan.

As such, while EPA may elect to resume work on and finalize this proposal in the future, it is unlikely to do so over a near-term horizon.

APS cannot predict the outcome of any future EPA efforts to add Arizona to the federal Good Neighbor Plan (which depends on action disapproving the Arizona State Implementation Plan) or whether the Good Neighbor Plan itself will remain in effect pending the outcome of judicial review in the D.C.

Circuit Court of Appeals.

Should the Good Neighbor Plan ultimately be imposed on APS and its operations in Arizona and New Mexico, it would have material impact on both the costs to operate current APS power plants and APS’s ability to develop new thermal generation to serve load.

At this time, APS cannot predict the impact on the Company’s financial condition, results of operations, or cash flows.

Revised Mercury and Air Toxics Standard (“MATS”) Proposal.

On April 25, 2024, EPA finalized revisions to the existing MATS regulations governing emissions of toxic air pollution from existing coal-fired power plants.

The final regulations increase the stringency of filterable particulate matter limits used to demonstrate compliance with MATS and require the use of continuous emissions monitoring systems to ensure compliance (as opposed to periodic performance testing).

These final regulations will take effect for existing coal-fired power plants, such as Four Corners, within three years of publication in the Federal Register.

Based on APS’s assessment of the revised MATS regulations, this final rule is unlikely to have a material impact on plant operations or require significant capital expenditures to ensure compliance.

Superfund-Related Matters.

The Comprehensive Environmental Response Compensation and Liability Act (“CERCLA” or “Superfund”) establishes liability for the cleanup of hazardous substances found contaminating the soil, water, or air.

The Comprehensive Environmental Response Compensation and Liability Act (“Superfund” or “CERCLA”) establishes liability for the cleanup of hazardous substances found contaminating the soil, water or air.

Those who released, generated, transported to or disposed of hazardous substances at a contaminated site are among the parties who are potentially responsible (each a “PRP”).

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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 ultimate remediation requirements are not yet finalized by EPA, at the present time, expenditures related to this matter cannot be reasonably estimated.

EPA notified APS that the RI/FS was approved on September 11, 2024.

APS’s estimated costs related to this investigation and study is approximately $3 million .

APS anticipates incurring additional expenditures in the future, but

because the final costs associated with remediation requirements set forth in the RI/FS are not yet finalized, at the present time expenditures related to this matter cannot be reasonably estimated.

In connection with APS’s status as a PRP for OU3, since 2013 APS and at least two dozen other parties have been defendants in various CERCLA lawsuits stemming from allegations that contamination from OU3 and elsewhere has impacted groundwater wells operated by the Roosevelt Irrigation District (“RID”).

At this time, only one active lawsuit remains pending, which is on appeal to the U.S.

Court of Appeals for the Ninth Circuit based on a U.S.

District Court order dismissing cost recovery claims of approximately $20.7 million by a service provider for RID.

At this time, only one active lawsuit remains pending in the U.S.

District Court for Arizona, which concerns $8.3 million in remediation legal expenses.

APS is unable to predict the outcome of any further litigation related to this claim or APS’s share of liability related to that claim;

however, APS does not expect the outcome to have a material impact on our financial condition, results of operations, or cash flows.

In addition, as part of a state governmental investigation into groundwater contamination in this area, on January 25, 2015, the 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.

Since that time, ADEQ has taken no action based on the information provided by APS.

however, APS does not expect the outcome to have a material impact on its 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.

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APS estimates that its costs to oversee and participate in the remedial investigation work will be approximately $1.7 million.

At the present time, we are unable to predict the

outcome of this matter and any further expenditures related to necessary remediation, if any, or further investigations cannot be reasonably estimated.

At the present time, we are unable to predict the outcome of this matter, and any further expenditures related to necessary remediation, if any, or further investigations cannot be reasonably estimated.

Four Corners National Pollutant Discharge Elimination System Permit

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Court of Appeals for the Ninth Circuit, the parties to the 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 APS does not expect the outcome to have a material impact on our financial condition, results of operations, or cash flows.

This settlement requires investigation of thermal wastewater discharges from Four Corners, administratively closes the litigation filed in January of 2021, and APS does not expect the outcome to have a material impact on its financial condition, results of operations, or cash flows.

Based on a declaration from the U.S.

Bureau of Reclamation, as of January 1, 2024, Arizona’s supply of Colorado River water will be subject to a Tier 1 shortage.

This shortage will result in a reduction to Arizona’s share of the Colorado River water by 28 percent or 792,000-acre feet.

This reduction 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 1 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.

Bureau of Reclamation, as of January 1, 2025, Arizona’s supply of Colorado River water will remain subject to a Tier 1 shortage.

This is the third year since 2022 that a Tier 1 shortage has been declared.

The most severe shortage to have been declared was a Tier 2a shortage in 2023.

A Tier 1 shortage reduces Arizona’s share of the Colorado River water by 18 percent or 512,000-acre feet;

however, due to in-state conservation measures, Arizona has kept more Colorado River water in Lake Mead than is required by the shortage.

Tier 1 reductions are largely felt by central Arizona’s agricultural users, mainly in Pinal County.

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

At this time, a Tier 1 shortage does not 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.

At the present time, APS has adequate water to meet its operating needs.

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.

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.

Conflicting claims to drought-impacted surface water in the southwestern United States have resulted in disputes and numerous court actions.

The General Stream Adjudication allows the state to issue a final priority determination on claims to surface water rights.

There are three General Stream Adjudications near APS generating stations that may impact surface water or groundwater supplies that are adjacent to surface water streams.

San Juan River Adjudication.

Both groundwater and surface water in areas important to APS’s operations have been the subject of inquiries, claims, and legal proceedings, which will require a number of years to resolve.

APS is one of a number of parties in a proceeding, filed March 13, 1975, before the Eleventh Judicial District Court in New Mexico to adjudicate rights to a stream system from which water for Four Corners is derived.

APS is one of numerous parties in a proceeding, filed March 13, 1975, before the Eleventh Judicial District Court in New Mexico to adjudicate rights to a stream system from which water for Four Corners is derived.

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 in the San Juan River Basin.

Gila River Adjudication.

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Human Capital

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 Company’s success depends on a strong human capital strategy including attracting, developing, and retaining a high-performing workforce.

We are committed to fostering a safe, inclusive, and engaging work environment that empowers all employees to reach their full potential.

Key human capital measures and objectives that drive our business strategy include employee safety, employee development, strong company culture based upon the APS Promise, strong talent pipelines, extensive learning and development focus, and succession planning.

The below table presents the employee count as of December 31, 2024:

Principal Executive Office

Address Year of

Formation Approximate

December 31, 2024

Pinnacle West 400 North Fifth Street

Phoenix, AZ 85004 1985 88

APS 400 North Fifth Street

Phoenix, AZ 85072-3999 1920 6,315 (a)

El Dorado 400 North Fifth Street

Phoenix, AZ 85004 1983 —

PNW Power 400 North Fifth Street

Phoenix, AZ 85004 2023 —

(a) Includes employees at jointly-owned generating facilities (approximately 2,300 employees) for which APS serves as the generating facility manager.

Approximately 1,180 APS employees are union employees represented by International Brotherhood of Electrical Workers (“IBEW”).

On September 25, 2023, the IBEW membership ratified a new collective bargaining agreement (“CBA”) with APS.

The new CBA became effective in October 2023 and has a duration of three years until April 1, 2026 and thereafter until either party gives notice of desire for change, amendment, or termination.

On August 23, 2024, 27 IT Communications Field Specialists joined the existing bargaining unit represented by IBEW.

Collective bargaining relating to these employees is ongoing.

Culture and Engagement

The APS Promise anchors our commitment to our customers, community, and each other.

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.

The APS Promise continues to be reinforced and integrated throughout our Company programs and messaging.

We evaluate our success in building this culture in part through annual and quarterly employee engagement surveys, including our Employee Experience Index, which measures key aspects of engagement such as recognition, career development, and organizational pride.

In 2024, we had 80% participation in these surveys, and our Employee Experience Index was 87%.

These surveys enable us to compare our performance to industry benchmarks and identify areas for improvement.

Based on the survey results, we encourage business units and managers to take action.

For example, past surveys have led to initiatives that we believe improved communication, removed job success obstacles, increased employee access to leadership, and enhanced meeting efficiency.

We actively seek feedback from new hires to further refine the employee onboarding experience.

Our cross-functional Employee Engagement Council plays a key role in driving improvements, particularly in employee engagement and recognition.

We believe that belonging matters.

We recognize that differences of identities, perspectives, and experiences is a key driver for our success.

Inclusion at the Company involves embracing the unique perspectives of each employee.

Examples of the Company’s efforts in this space include the following:

• Support for 11 employee networking groups to encourage employees to develop themselves, advance in their chosen field, and join a community;

• Executive listening sessions to provide employees with opportunities to be heard;

• An optional self-paced module available to all employees that explains how cultural competence drives inclusion.

Employee Safety

Our work and our decisions are anchored in safety – safety is the foundation of everything we do, and employee safety is our paramount responsibility as an employer.

We develop safety practices and programs that ensure employees have safe and secure workplaces that allow them to perform at the highest levels.

We use preventative programs such as the APS Moves program to help our workforce stay healthy and prepare them to perform tasks safely.

We develop practices and programs that ensure employees have safe and secure workplaces that allow them to perform at the highest levels.

We utilize preventative programs like APS Moves to help keep our workforce healthy and prepare them to perform tasks safely.

Our comprehensive safety programs and our focus on human and organizational performance and injury case management contribute significantly to our strong safety performance.

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

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.

We believe our employees are empowered to speak up when there are better or safer ways of doing business.

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

Inclusion and Belonging

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 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 eleven employee network groups that are intended to create a sense of inclusion and belonging for employees.

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

During 2023, 42% of external hires were ethnically or racially diverse, 35% were female and 8% were veterans.

Additionally, as of December 31, 2023, 35% of our employees are ethnically or racially diverse, 26% are female, and 14% are veterans.

Finally, as of December 31, 2023, 39% of the Company’s officers are female, and 18% are ethnically or racially diverse.

Additionally, the Company’s executive safety committee helps ensure strong safety governance and operational integration across the enterprise and employee-led learning teams help ensure that lessons learned from close calls and other safety incidents are shared for the benefit of employees across the enterprise.

Talent Strategy and Pipeline Development

Attracting and developing a highly skilled workforce is critical to our success.

To this end, our talent strategy prioritizes the following:

• Commitment to Growth and Development:

We provide a wide range of professional development opportunities, including leadership academies, rotational programs, mentoring, industry certifications, and loaned executive programs.

In 2024, we ran dedicated programs for individual contributors, new leaders, and high potential managers.

We also launched an enterprise-wide on-demand learning platform to support a modern learning culture, with over 2,220 active users, encompassing engagement from every business unit and 5,650 hours of learning in 2024.

• Robust Talent Pipelines:

Our pipeline strategy focuses on attracting and developing early- and mid-career talent for critical energy sector positions, including lineworkers, substation electricians, cybersecurity specialists, engineers, and nuclear power plant operators and technicians.

We achieve this through an array of programs, including craft apprenticeships, engineering and rotational programs, and internships.

We partner closely with educational institutions and organizations to build a talent-ready pool for these critical roles.

• Strategic Partnerships:

We leverage partnerships with colleges, universities, vocational schools, and the Department of Defense SkillBridge program to access a wide pool of qualified candidates, including transitioning military personnel.

• Innovation in Talent Acquisition:

Palo Verde expanded its internship programs in 2024 to include nuclear operations, further strengthening our talent pipeline for the critically important licensed and non-licensed operators.

These initiatives contribute to a high-performing and engaged workforce that supports the long-term success of our Company.

Succession Planning

Succession planning ensures that our Company is prepared to fill executive and other key leadership roles with capable, experienced employees who can lead us into the future with strong and sustainable performance.

We continually revisit and revise succession plans to make certain qualified individuals are in place to move into critical positions.

In addition, we provide each business unit of the Company with talent management strategies and development plans to meet its future leadership needs.

Effective succession planning helps us identify employees with leadership potential, evaluate any gaps in education, skills and experience, and support employees in preparation for their next leadership roles.

Officers and directors review succession plans, leadership opportunities, and retirement projections to ensure business continuity.

Talent Strategy and Development

We place significant focus on attracting and developing a skilled workforce.

To attract and retain top talent, we provide formal professional development programs through blended learning education and leadership training.

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 2023, we graduated 152 individuals from our three academies (Leadership Academy, Impact and Influence Academy, and Strategic Leadership Academy).

Talent pipelines help sustain our skilled workforce needs.

Our pipeline strategy is driven by a robust portfolio of programs aimed at attracting early and mid-career talent.

With over a dozen programs in effect, our talent pipelines include craft apprenticeships and engineering, rotational, and internship programs.

We partner closely with specific colleges and universities, vocational schools, and organizations serving local communities to attract a large pool of qualified, diverse talent.

Additionally, 2023 marked the launch of the Department of Defense SkillBridge program, which provides APS early access to transitioning military talent to fill open roles.

During 2023, we hosted 57 summer interns with an overall diversity rate of 67% and also comprised of 35% women.

In addition to our summer program, 14 participated as Maintenance Interns, Radiation Protection Interns, and Pre-Apprentice Interns (programs specifically offered at Palo Verde).

Succession planning is critical to ensuring the long-term success of our Company.

We have a robust process for identifying and developing high-potential leaders to fill key executive and other critical roles.

This involves regularly reviewing and updating succession plans for key positions, identifying and assessing potential successors, and providing targeted development opportunities such as mentoring, coaching, and challenging rotational assignments.

We also evaluate leadership potential through assessments, performance reviews, and 360-degree feedback.

We collaborate with senior leadership to build a pipeline of qualified internal and external candidates and continuously adapt our succession planning process to meet evolving business needs and industry trends.

Total Rewards Strategy

In addition to our talent strategy, we place significant focus on our Total Rewards strategy for attracting, developing, and rewarding our highly skilled workforce.

Our employees are important to the success and future of our organization and our customers’ experiences.

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.

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

Employee Engagement

An annual employee experience survey and focused quarterly pulse-surveys, enable us to gather employee feedback, identify opportunities for improvement, and compare our performance to other companies.

Through the surveys, we track our Employee Experience Index, a set of seven questions that encompass key elements of a positive employee experience, including recognition, career development possibilities, and pride in the organization.

Based on survey results, business units and individual managers are encouraged to take meaningful actions to improve the employee experience.

In response to past surveys, we have launched enterprise-wide initiatives focused on improving communication between employees and management as well as removing obstacles that prevent job success.

Other initiatives driven by the survey have given employees more access to leadership and improved meeting efficiency.

Our cross-functional Employee Engagement Council focuses on improving employee recognition across the organization.

We work to ensure that a positive work environment is maintained for all employees.

Through an outreach initiative, we obtain feedback from new hires regarding their employee experience.

Company Culture

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

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.

The APS Promise continues to be reinforced and integrated throughout our Company programs and messaging.

Recognizing that our employees are among our most valuable assets, we have developed a comprehensive Total Rewards strategy to attract, engage, and retain a high-performing workforce.

Our Total Rewards program encompasses a comprehensive suite of offerings, including competitive compensation, a robust benefits package, retirement savings plans, professional development opportunities, recognition programs, and a focus on employee well-being.

This holistic approach aims to (1) attract and retain top talent by offering a competitive and attractive compensation and benefits package, (2) support employee well-being by promoting a healthy work-life balance and providing resources to support employee physical, mental, and financial well-being, (3) foster employee engagement and motivation through recognition programs, professional development opportunities, and a strong emphasis on career growth, and (4) enhance employee satisfaction by creating a rewarding and fulfilling work experience for all employees.

We continuously evaluate and refine our Total Rewards program to ensure it remains competitive, relevant, and responsive to the evolving needs and expectations of our employees.

BUSINESS OF OTHER SUBSIDIARIES

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The transaction was accounted for as the sale of a business and closed in multiple stages.

Certain investments and assets that BCE previously held, including the TransCanyon joint venture and holdings in the two Tenaska wind farm investments, were not included in the BCE Sale and were instead transferred to Pinnacle West Power, LLC (“PNW Power”), a newly-formed, wholly-owned subsidiary of Pinnacle West.

T he final closing of the BCE Sale was completed on January 12, 2024.

See Note 20 for additional details.

Certain investments and assets that BCE previously held, including the TransCanyon joint venture and holdings in the two Tenaska wind farm investments, were not included in the BCE Sale and were instead transferred to PNW Power, a Delaware limited liability corporation and a wholly-owned subsidiary of Pinnacle West.

PNW Power’s investments include TransCanyon, a 50/50 joint venture that was formed in 2014 with BHE U.S.

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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.

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.

DOE’s Grid Deployment Office selected TransCanyon to enter into capacity contract negotiations for up to 25% of the Cross-Tie 500-kilovolt transmission line (“Cross-Tie”) as part of the Transmission Facilitation Program.

The agreement was executed on June 12, 2024.

The proposed Cross-Tie project includes a 214-mile transmission line connecting Utah and Nevada that is intended to help improve grid reliability and relieve congestion on other transmission lines.

PNW Power’s investments also include minority ownership positions in two wind farms operated by Tenaska Energy, Inc.

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Nobles 2 achieved commercial operation in December 2020.

Both wind farms deliver power under long-term PPAs.

Both wind farms deliver power under long-term power purchase agreements (“PPAs”).

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

El Dorado is a wholly-owned subsidiary of Pinnacle West.

El Dorado is an Arizona corporation and a wholly-owned subsidiary of Pinnacle West.

El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures.

In particular, El Dorado has committed to the following:

• $25 million investment in the Energy Impact Partners fund, of which $16.7 million has been funded as of December 31, 2023.

In particular, El Dorado has committed to and holds the following:

• $25 million investment in the Energy Impact Partners fund, of which approximately $18.8 million has been funded as of December 31, 2024.

Energy Impact Partners is an organization that focuses on fostering innovation and supporting the transformation of the utility industry.

• $25 million investment in AZ-VC (formerly invisionAZ Fund), of which $6.3 million has been funded as of December 31, 2023.

• $25 million investment in AZ-VC (formerly invisionAZ Fund), of which approximately $11.8 million has been funded as of December 31, 2024.

AZ-VC is a fund focused on analyzing, investing, managing, and otherwise dealing with investments in privately-held early stage and emerging growth technology companies and businesses primarily based in Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in Arizona.

• $7.5 million investment in Westly Seed Fund, of which approximately $1.2 million has been funded as of December 31, 2024.

Westly Seed Fund is focused on supporting entrepreneurs involved in the energy, mobility, building, and industrial sectors.

• Equity investment in SAI Advanced Power Solutions (“SAI”), a private corporation that manufactures electrical switchgear equipment used by data centers.

El Dorado accounts for this investment under the equity method, with a December 31, 2024 investment carrying value of zero.

SAI has seen an increased demand for their customized switchgear products.

El Dorado has no funding commitments to SAI.

The remainder of these investment commitments will be contributed by El Dorado as each investment fund selects and makes investments.

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

PNW Power is incorporated in Delaware.

Additional information for each of these companies is provided below:

Principal Executive Office

Address Year of

Incorporation Approximate

December 31, 2023

Pinnacle West 400 North Fifth Street

Phoenix, AZ 85004 1985 81

APS 400 North Fifth Street

Phoenix, AZ 85072-3999 1920 6,045

BCE 400 East Van Buren Street

Phoenix, AZ 85004 2014 7 (a)

El Dorado 400 East Van Buren Street

Phoenix, AZ 85004 1983 —

(a) See Note 20 for information related to the sale of Bright Canyon Energy.

The APS number includes employees at jointly-owned generating facilities (approximately 2,200 employees) for which APS serves as the generating facility manager.

Approximately 1,150 APS employees are union employees, represented by the International Brotherhood of Electrical Workers (“IBEW”).

On September 25, 2023, the IBEW membership ratified a new collective bargaining agreement (“CBA”) with APS.

The new CBA became effective in October 2023.

This new contract has a duration of three years and becomes amendable on April 1, 2026.

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