Item 2. PROPERTIES

Generation Facilities

APS’s portfolio of owned generating facilities as of December 31, 2021 is provided in the table below:

(a)100% unless otherwise noted.

(b)APS’s 29.1% ownership in Palo Verde includes leased interests and is the largest capacity interest of all the participants. See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Nuclear” in Item 1 for details regarding leased interests in Palo Verde. The other participants are Salt River Project, SCE, El Paso, Public Service Company of New Mexico, Southern California Public Power Authority, and Los Angeles Department of Water & Power.

(c)The other participants are Salt River Project (10%), Public Service Company of New Mexico (13%), Tucson Electric Power Company (7%) and NTEC (7%). The plant is operated by APS.

(d)Ocotillo Steam Units 1 and 2 were retired on January 10, 2019. Units 3 through 7 all went into service on or prior to May 30, 2019, which increased generation capacity by 510 MW.

(e)Redhawk generation capacity increased by 104 MW following the Advanced Gas Path upgrade installed on both units.

(f)APS is under contract and currently plans to add battery storage at these AZ Sun sites. See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Energy Storage” above for details related to these and other energy storage agreements.

See “Business of Arizona Public Service Company — Environmental Matters” in Item 1 with respect to matters having a possible impact on the operation of certain of APS’s generating facilities.

See “Business of Arizona Public Service Company” in Item 1 for a map detailing the location of APS’s major power plants and principal transmission lines.

4CA

4CA, a wholly-owned subsidiary of Pinnacle West, purchased El Paso’s 7% interest in Units 4 and 5 of Four Corners on July 6, 2016, and subsequently sold the interest to NTEC on July 3, 2018. See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Coal-Fueled Generating Facilities — Four Corners” in Item 1 and “Four Corners — 4CA Matter” in Note 11 for additional information about 4CA’s interest in Four Corners.

Transmission and Distribution Facilities

Current Facilities**.** APS’s transmission facilities consist of approximately 5,814 pole miles of overhead lines and approximately 74 miles of underground lines, 5,743 miles of which are located in Arizona. APS’s distribution facilities consist of approximately 11,258 miles of overhead lines and approximately 22,821 miles of underground primary cable (19,778 when excluding abandoned conductor), all of which are located in Arizona. APS also owns and maintains 475 substations, including both transmission and distribution yards. APS shares ownership of some of its transmission facilities with other companies.

The following table shows APS’s jointly-owned interests in those transmission facilities recorded on the Consolidated Balance Sheets at December 31, 2021:

Expansion. Each year APS prepares and files with the ACC a Ten-Year Transmission Plan. In APS’s 2022 plan, APS projects it will develop 81 miles of new transmission lines over the next 10 years. The 2022 Ten-Year Plan includes a new 35-mile 500kV line from the Jojoba substation to the Rudd substation. The purpose of this project is to bring in a new source to the west and southwest parts of the Phoenix metropolitan area which is experiencing rapid economic development. In addition, this new source will provide customers in the area greater access to a diverse mix of resources from around the region.

APS continues to work with regulators to identify transmission projects necessary to support renewable energy facilities.

Plant and Transmission Line Leases and Rights-of-Way on Indian Lands

The Navajo Plant and Four Corners are located on land held under leases from the Navajo Nation and also under rights-of-way from the federal government. The Navajo Plant ceased operations in November 2019. The co-owners and the Navajo Nation executed a lease extension on November 29, 2017, that allows for decommissioning activities to begin after the plant ceased operations.

APS, on behalf of the Four Corners participants, negotiated amendments to the Four Corners facility lease with the Navajo Nation, which extends the Four Corners leasehold interest from 2016 to 2041. See “Business of Arizona Public Service Company — Energy Sources and Resource Planning — Generation Facilities — Coal-Fueled Generating Facilities — Four Corners” in Item 1 for additional information about the Four Corners right-of-way and lease matters.

Certain portions of our transmission lines are located on Indian lands pursuant to rights-of-way that are effective for specified periods. Some of these rights-of-way have expired and our renewal applications have not yet been acted upon by the appropriate Indian tribes or federal agencies. Other rights expire at various times in the future and renewal action by the applicable tribe or federal agencies will be required at that time. In recent negotiations, certain of the affected Indian tribes have required payments substantially in excess of amounts that we have paid in the past for such rights-of-way. The ultimate cost of renewal of certain of the rights-of-way for our transmission lines is therefore uncertain.