Pinnacle West Capital (PNW) 10-K risk factor changes: FY2022 vs FY2021

Additionally, given that APS is subject to oversight by several regulatory agencies, a resolution by one may not foreclose potential actions by others for similar or related [removed: matters, such as the resolution of an Arizona Attorney General matter.][added: matters.]

See Note [removed: 11.][added: 10.]

The ACC must also approve APS’s issuance of equity and debt securities and any significant transfer or encumbrance of APS property used to provide retail electric service and must approve or receive prior notification of certain transactions between us, APS, and our respective affiliates, including [added: the infusion of equity into APS.]

Decisions made by the ACC or FERC could have a material adverse impact on our financial condition, results of [removed: operations] [added: operations,] or cash flows.

To the extent the rule requires the closure or modification of these CCR units, [removed: modification,] [added: modification] or changes to the manner of closure of such units, or the construction of new CCR units beyond what we currently anticipate, APS would incur significant additional costs for CCR disposal.

Revised or additional regulations that result in increased compliance costs or additional operating restrictions, particularly if those costs incurred by APS are not fully recoverable from APS’s customers, could have a material adverse effect on its financial condition, results of [removed: operations] [added: operations,] or cash flows.

*Potential Financial Risks — Greenhouse Gas Regulation, the Clean Power Plan and Potential Litigation.* In 2015, EPA finalized a rule to limit CO2 emissions from existing power plants, the [added: Clean Power Plan, or] CPP.

[removed: That decision endorsed an expansive view of the federal Clean Air Act consistent with EPA’s 2015 CPP, and] [added: While] the current administration has expressed its intent to [removed: assert such authority through] [added: develop] new carbon emission regulations governing existing power [removed: plants.][added: plants in 2023, such action will be constrained by the U.S. Supreme Court’s decision that the CPP violated the Clean Air Act.]

[removed: To the extent that these regulations focus] [added: Depending] on [removed: generation shifting as a] [added: the] means of compliance with federal emission performance standards, the electric utility industry may be forced to incur substantial costs necessary to achieve compliance.

Co-owners of our jointly owned generation [added: and transmission] facilities may have unaligned goals and positions due to the effects of legislation, regulations, economic conditions, or changes in our industry, which could have a significant impact on our ability to continue operations of such facilities.

APS owns certain of its power plants [added: and transmission facilities] jointly with other owners, with varying ownership interests in such facilities.

Changes in the nature of our industry and the economic viability of certain [removed: plants,] [added: plants and facilities,] including impacts resulting from types and availability of other resources, fuel costs, legislation, and regulation, together with timing considerations related to expiration of leases or other agreements for such facilities, could result in unaligned positions among co-owners.

See Note [removed: 4] [added: 3] for a discussion of the Navajo Plant and Cholla retirement and the related risks associated with APS’s continued recovery of its remaining investment in the plant.

[removed: At the same time,] [added: In April 2022,] the Arizona [removed: legislature is considering] [added: Legislature passed and the Governor signed] a bill that [removed: would nullify, if approved, a 20-year-old] [added: repealed the] electric deregulation law that [removed: has] [added: had] been in place [added: in Arizona] since 1998.

As a result, unusually mild weather could diminish APS’s financial condition, results of [removed: operations] [added: operations,] or cash flows.

These operational risks related to rising temperatures and extreme heat events could affect APS’s financial condition, results of [removed: operations] [added: operations,] or cash flows.

Any damage caused as a result of forest fires could negatively impact APS’s financial condition, results of [removed: operations] [added: operations,] or cash flows.

Reductions in the availability of water for power plant cooling could negatively impact APS’s financial condition, results of [removed: operations] [added: operations,] or cash flows.

[removed: This will likely increase participation by] [added: *Effects of Energy Conservation Measures and Distributed Energy Resources.*] APS customers in energy efficiency and conservation programs and other demand-side management efforts, which in turn [removed: will] impact the demand for electricity.

APS must also meet certain distributed [added: renewable] energy requirements.

A portion of APS’s total renewable energy requirement must be met with an increasing percentage of distributed [added: renewable] energy resources (generally, small scale renewable technologies located on customers’ properties).

The distributed [added: renewable] energy requirement is 30% of the applicable RES requirement for 2012 and subsequent [removed: years.][added: years (this requirement has been waived by the ACC for 2023).]

Customer participation in distributed [added: renewable] energy programs would result in lower demand since customers would be meeting some of their own energy needs.

*Actual and Projected Customer and Sales Growth.* Retail customers in APS’s service territory increased [removed: 2.2%] [added: 2.1%] for the year ended December 31, [removed: 2021,] [added: 2022,] compared with the prior-year period.

For the three years through [removed: 2021,] [added: 2022,] APS’s customer growth averaged 2.2% per year.

We currently project annual customer growth to be 1.5% to 2.5% for [removed: 2022,] [added: 2023] and the average annual growth [removed: will] [added: to] be in the range of 1.5% to 2.5% through [removed: 2024] [added: 2025] based on anticipated steady population growth in Arizona during that period.

Retail electricity sales in kWh, adjusted to exclude the effects of weather variations, [added: increased 2.4%] for the year ended December 31, [removed: 2021,] [added: 2022,] compared with the prior-year [removed: period increased 4.2%, which reflects a correction to 2020 commercial and industrial sales volumes of 111 GWh.][added: period.]

While steady customer growth was offset by energy savings driven by customer conservation, energy efficiency, and distributed renewable generation initiatives, the main drivers of positive sales for this period were [removed: residential sales being stronger than anticipated due to continued work-from-home policies,] a strong improvement in sales to commercial [added: and industrial customers and the ramp-up of new data center customers.]

For the three years through [removed: 2021,] [added: 2022,] annual retail electricity sales growth averaged [removed: 1.7%,] [added: 2.5%,] adjusted to exclude the effects of weather variations.

[removed: We] [added: Due to the expected rapid growth of several large data centers and new large manufacturing facilities, we] currently project that annual retail electricity sales in kWh will increase in the range of [removed: 1.5%] [added: 3.5%] to [removed: 2.5%] [added: 5.5%] for [removed: 2022] [added: 2023] and [added: that] average annual growth will be in the range of [removed: 3.5% to] 4.5% [added: to 6.5%] through [removed: 2024,] [added: 2025,] including the effects of customer conservation, energy [removed: efficiency] [added: efficiency,] and distributed renewable generation initiatives, but excluding the effects of weather variations.

This projected sales growth range includes the impacts of [removed: new,] [added: several] large [added: data centers and new large] manufacturing facilities, which are expected to contribute to average annual growth in the range of [removed: 1.0%] [added: 3.5%] to [removed: 2.0%] [added: 5.5%] through [removed: 2024.][added: 2025.]

Actual sales growth, excluding weather-related variations, may differ from our projections as a result of numerous factors, such as economic conditions, customer growth, usage patterns and energy conservation, [added: slower] ramp-up of [added: and/or fewer] data [removed: centers,] [added: centers and large manufacturing facilities, slower than expected commercial and industrial expansions,] impacts of energy efficiency [removed: programs] [added: programs,] and growth in DG, [removed: and responses to retail price changes.]

The potential likelihood of wildfires has increased due to many of the same weather [added: and climate change] impacts existing in Arizona as those that led to the catastrophic wildfires in [removed: Northern] California.

[added: APS could be] held liable for damages incurred as a result of wildfires if it was determined that they were caused by or enhanced due to APS’s negligence.

Any damage caused to our assets, loss of service to our customers, or liability imposed as a result of wildfires could negatively impact APS’s financial condition, results of [removed: operations] [added: operations,] or cash flows.

The inability to successfully develop, acquire or operate generation resources to meet [added: future resource needs and load forecasts in accordance with] reliability requirements and other new or evolving standards [removed: or] [added: and] regulations could adversely impact our business.

In addition, APS is required by the ACC to meet certain energy resource portfolio requirements, including those related to [removed: carbon emissions,] renewables development and energy efficiency [removed: measures.][added: measures, in addition to specific competitive resource procurement requirements.]

The development [added: and operation] of any generation facility is also subject to many risks, including those related to financing, siting, permitting, new and evolving technology, and the construction of sufficient transmission capacity to support these facilities.

APS’s inability to [removed: adequately develop or acquire the necessary generation resources] [added: do so] could have a material adverse impact on our business and results of operations.

In expressing concerns about the environmental and climate-related impacts from continued extraction, transportation, delivery and combustion of fossil fuels, environmental advocacy groups and other third parties have in recent years undertaken greater efforts to oppose the permitting, construction, [removed: and operation of fossil fuel infrastructure projects.]

APS sought review of the decision at the Arizona Supreme Court, which was denied; however, the Supreme Court depublished portions of the Court of Appeals’ decision.

APS is seeking revised tariff language to mitigate potential adverse impacts on APS’s future, potential litigation exposure which may result from this court decision.

That decision, which endorsed an expansive view of the federal Clean Air Act consistent with the CPP, was subsequently reversed by the U.S. Supreme Court on June 30, 2022.

Limitations on water supplies necessary to operate electric generation infrastructure could arise from prolonged drought and shortage declarations associated with key surface water resources.

and responses to retail price changes.

APS needs to develop or acquire new generation facilities, potentially modernize existing facilities, and/or contract for additional capacity in order to meet future resource needs and load forecasts.

and operation of fossil fuel infrastructure projects.

In addition, Colorado River water supplies for Arizona are subject to a Tier 2a shortage declaration, which substantially limits the quantity of water available for the state.

notification, and increased capital and operating costs to implement increased security measures; and (iii) be subject to increased regulation, litigation and reputational damage.

These trends, which

the extent that unhedged positions exist.

General economic conditions could materially affect our business, financial condition, and results of operations.

General economic factors that are beyond the Company’s control impact the Company’s forecasts and actual performance.

These factors include interest rates; recession; inflation; stagflation; deflation; supply chain constraints; unemployment trends; sanctions, trade restrictions, military interventions and the threat or possibility of war; terrorism or other global or national unrest; and political or financial instability.

In particular, during 2021 and 2022, the United States’ economy has experienced a substantial rise in the inflation rate.

There is increased uncertainty as to whether the rise in inflation will continue and for how long.

Increases in inflation raise the Company’s costs for commodities, labor, materials and services.

Additionally, COVID-19 severely impacted global supply chains, resulting in equipment delays and

increased costs.

A failure to recover the increased costs caused by increased inflation and supply chain constraints through our rates could have a material adverse impact on our financial condition, results of operations, or cash flows.

- change in our management;

the infusion of equity into APS.

While APS is currently seeking review of the decision at the Arizona Supreme Court, the Court of Appeals decision—if undisturbed—could have an adverse impact on APS’s future, potential litigation exposure.

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

Changes in tax legislation or regulation may affect our financial results.

We are subject to taxation by various taxing authorities at the federal, state, and local levels.

Legislation or regulations could be enacted by any of these governmental authorities, which could affect the Company’s tax positions.

The prospects for federal tax reform have increased due to the results of the 2020 Federal elections.

Any such reform may impact the Company’s effective tax rate, cash taxes paid and other financial results, such as earnings per share, gross revenues, and cash flows.

We cannot predict the timing or extent of such tax-related developments which, absent appropriate regulatory treatment, could have a negative impact on our financial results.

*Effects of Energy Conservation Measures and Distributed Energy Resources.* The ACC enacted rules regarding energy efficiency that mandated a 22% cumulative annual energy savings requirement by 2020.

The rules also include a requirement for the ACC to review and address financial disincentives, recovery of fixed costs and the recovery of net lost revenue that would result from lower sales due to increased energy efficiency requirements.

To that end, the LFCR is designed to address these matters.

and industrial customers, and the ramp-up of new data center customers.

Though the total expected impact of COVID-19 on future sales is currently unknown, APS experienced higher electric residential sales and lower electric commercial and industrial sales from the outset of the pandemic through April 2021.

Beginning in May 2021, electric sales to commercial and industrial customers increased to levels in line with pre-COVID sales.

This projected sales growth range also includes our estimated contributions of several large data centers, but not all, and we will continue to estimate contributions and evaluate sales guidance as these customers develop more usage history.

These estimates could be further impacted by slower than expected growth of the Arizona economy, slower than expected ramp-up of the new data centers, larger manufacturing facilities not coming to Arizona as expected, a shift away from remote work, slower than expected commercial and industrial expansions, or acceleration of the expected effects of customer conservation, energy efficiency and distributed renewable generation initiatives.

APS could be

The Arizona liability standard is different from that of California, which generally imposes liability for resulting damages without regard to fault.

technology systems and we could experience such threats and attempted intrusions to our operational control systems.

As such attacks continue to increase in sophistication and frequency, we may be unable to prevent all such attacks from being successful in the future.

Additionally, any regulatory changes requiring us to enforce a COVID-19 vaccine mandate could impact the availability of, and our ability to attract and retain, sufficient qualified employees.

maintenance activities, delay payments or increase uncollectable accounts, impact our ability to hire or retain qualified employees, or cause other unpredictable events, each of which could adversely affect our business, results of operations, cash flows or financial condition.

As a result of the COVID-19 pandemic, from March 2020 through April 2021, APS experienced higher electric residential sales and lower electric commercial and industrial sales and the cumulative impact on weather normalized retail electricity sales usage was a net increase as compared to 2019.

APS also experienced an increase in bad debt expense associated with the COVID-19 pandemic that resulted in a negative impact to its 2021 operating results.

In mid-March 2020, we drew on our revolving credit facilities as a result of the commercial paper markets failing to function normally due to COVID-19, but we were subsequently able to utilize the commercial paper market in April 2020 and we have paid down the revolving credit facilities completely.

We are also experiencing increased operations and maintenance expenses due to the need for personal protective equipment and other health and safety-related costs related to COVID-19.

Despite our efforts to manage the impacts, the degree to which the COVID-19 pandemic and related actions ultimately impact our business, financial position, results of operations and cash flows will depend on factors beyond our control including the duration, spread and severity of the outbreak, the actions taken to contain COVID-19 and mitigate its public health effects, including but not limited to a vaccine mandate, the impact on the U.S. and global economies and demand for energy, and how quickly and to what extent normal economic and operating conditions resume.

by a discount rate, which is the interest rate used to discount future pension and other postretirement benefit obligations.

To the extent that commodity markets are illiquid, we may not be able to execute our risk

This discussion provides a comparison of the [removed: 2021] [added: 2022] results with [removed: 2020] [added: 2021] results.

A comparison of the [removed: 2020] [added: 2021] results with [removed: 2019] [added: 2020] results can be found in the Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2020.][added: 2021.]

Pinnacle West is an investor-owned electric utility holding company based in Phoenix, Arizona with consolidated assets of about [removed: $22] [added: $23] billion.

[removed: COVID-19 Pandemic][added: COVID-19]

[removed: The] COVID-19 [removed: pandemic] continues to be an evolving situation.

Essential planned work and capital investments [removed: are continuing] [added: continued] during the pandemic with priority given to support fire mitigation and summer storm efforts, as well as [removed: heat related] [added: heat-related] outages.

Raw material shortages, rising inflation, COVID-19 related work force disruptions and natural disasters [removed: are putting] [added: continue to place] increased pressure on the global supply chain.

However, shortages are causing minor [removed: delays,] [added: delays] and shifting of work projects based on material availability.

See Note [removed: 4] [added: 3] for additional information on the PSA.

The Coronavirus Aid, Relief, and Economic Security [removed: (CARES)] [added: (“CARES”)] Act [removed: allows] [added: allowed] employers to defer payments of the employer share of Social Security payroll taxes that would have otherwise been owed from March 27, 2020, through December 31, 2020.

See Note [removed: 1.][added: 6.]

Due to COVID-19, APS voluntarily suspended disconnections of customers for nonpayment beginning March 13, [removed: 2020,] [added: 2020] until December 31, 2020.

APS voluntarily began waiving late payment fees of its customers on March 13, [removed: 2020, and is continuing to waive late payment fees.][added: 2020.]

See Note [removed: 4] [added: 3] for additional information regarding the Summer Disconnection Moratorium.

See Note [removed: 4.][added: 8.]

More detailed discussion of the impacts and future uncertainties related to [removed: the] COVID‑19 [removed: pandemic] can be found throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Combined Notes to Pinnacle West’s and APS’s financial statements that appear in Part II, Item 8 of this report and “Risk Factors” in Part I, Item 1A of this report.

“Clean” is measured as percent of energy mix which includes all carbon-free resources like [removed: nuclear] [added: nuclear, renewables,] and demand-side [removed: management, and “renewable” is expressed as a percent of retail sales.][added: management.]

We are committed to continuing our long-running partnership with the Navajo Nation in other areas as well, including expanding electrification and developing tribal renewable [added: energy] projects.

Our proposed CCT plan supported the Navajo Nation, where Four Corners is located, the communities surrounding the Cholla Power Plant and the Hopi Tribe, which [removed: is] [added: was] impacted by closure of the Navajo Plant.

On November 2, 2021, the ACC approved an amended 2019 Rate Case ROO that will require (i) equal payments over a three-year period that total $10 million to the Navajo Nation, (ii) a $1 million one-time payment to the Hopi Tribe within 60 days of the 2019 Rate Case decision, (iii) a $500,000 one-time payment to the Navajo County communities within 60 days of the 2019 Rate Case decision, (iv) up to $1.25 million for electrification of homes and businesses on the Hopi [removed: reservation] [added: reservation,] and (v) up to $1.25 million for the electrification of homes and businesses on the Navajo Nation reservation.

See Note [removed: 4] [added: 3] for a discussion of the CCT plan.

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

[removed: Under seasonal operation, a single] [added: The other] unit [removed: will] [added: would] remain online year-round, subject to market conditions as well as planned maintenance outages and unplanned outages.

*Renewables.* APS’s IRP (see Note [removed: 4] [added: 3] for additional information) establishes the path to meeting our clean energy commitment and maintaining reliable electric service for our customers.

Its near-term actions are focused on clean energy and positive customer outcomes and includes: (a) competitive solicitations to procure clean energy resources such as solar, wind, energy storage, and DSM resources, all of which lead to a cleaner grid; and (b) strategic, short-term wholesale market purchases from a combination of existing merchant natural gas units, neighboring utility [removed: systems] [added: systems,] and wholesale market participants that ensure operational reliability.

APS has a diverse portfolio of existing and planned renewable resources, including solar, wind, geothermal, [removed: biomass] [added: biomass,] and biogas that supports our commitment to clean energy, which is already strengthened by Palo Verde, the nation’s largest carbon-free, clean energy resource, that provides the foundation for reliable and affordable service for APS customers.

APS uses competitive [removed: “all source” requests for proposal (“RFPs”)] [added: “All-Source” RFPs] to pursue market resources that meet its system needs and offer the best value for customers.

In December 2020, APS issued two additional RFPs: (i) a battery storage RFP for projects to be located at two AZ Sun sites; and (ii) an all source RFP that solicited resources to meet our clean energy needs and capacity to maintain system reliability, and [added: that] was later amended to include a request for 150 MW of solar resources to be developed on APS property and owned by [removed: APS (collectively, the “December 2020 RFPs”).][added: APS.]

[removed: engineering,] procurement, and construction contract in November 2021 for a 150 MW solar resource to be owned by APS and in service in early 2023.

Once it secures those important resources and closes out the [removed: December 2020 RFPs,] [added: 2022 RFP,] APS intends to issue its next [removed: all source] RFP to address [added: future] resource [removed: needs for 2025 and beyond.][added: needs.]

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

In 2018, APS issued [removed: an] RFP for approximately 106 MW of energy storage to be located at up to five of its AZ Sun sites.

These battery storage facilities are [added: currently] expected to be in service during the [removed: summer] [added: first quarter] of [removed: 2022.][added: 2023.]

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

As a result of its December 2020 RFPs, [removed: as of February 2022,] APS [removed: has] executed four 20-year PPAs for resources that include energy storage: (a) two PPAs for standalone energy storage resources totaling 300 MW; and (b) two PPAs [removed: totaling 275 MW] [added: for] solar plus [added: energy] storage [removed: resource.][added: resources totaling 275 MW.]

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

APS currently plans to install more than [removed: 900] [added: 1,200] MW of energy storage by 2025, including the energy storage projects under PPAs and AZ Sun retrofits described above.

| APS [removed: Owned:] [added: Owned] Energy Storage | | | — | | | | | | | | | 201 | | | | | |

| PPAs [removed: -] Energy Storage | | | — | | | | | | | | | [removed: 510] [added: 1,025] | | | | | |

| Residential Energy Storage | | | [removed: 12(a)] [added: 19(a)] | | | | | | | | | [removed: 3] [added: 7] | | | | | |

Inflation

Overall inflation has grown by 9.5% in Phoenix in 2022, compared to 6.5% nationally; however, APS’s work with national and international companies has helped to partially reduce local cost escalation impacts on APS.

The impacts from inflation have varied across separate categories of APS’s spending.

Pricing increases across major categories have ranged from 8% to 10% for vendor services and up to 15% to 60% for equipment in 2022.

APS has seen specific inflationary impacts in individual spend categories, as well as general inflationary pricing impacts on a broader set of spend categories.

Some of the highest increases in 2022 as compared to 2021 have been in chemical costs and contract services.

Even prior to these increases, APS has focused on its customer affordability initiative, which has enabled APS to mitigate inflationary pressure.

This initiative includes identifying efficiency opportunities through APS’s LEAN Sigma approach as well as other corporate decisions.

For example, APS maintains its inventory to take advantage of lower pricing, when available, and to minimize supply chain delays that can increase the pricing due to expediting fees.

Additionally, APS has proactively entered into long-term contracts to hedge against price volatility, which has allowed it to mitigate several procurement spend areas such as transformers.

Inflation Reduction Act of 2022

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”).

The IRA significantly expands the availability of tax credits for investments in clean energy generation technologies and energy storage.

Key provisions that are relevant to the Company’s clean energy commitment include (i) an extension of tax credits for solar and wind generation, including a new option for solar investments to claim a Production Tax Credit (“PTC”) in lieu of the Investment Tax Credit (“ITC”) beginning in 2022; (ii) expansion of the ITC to cover stand-alone energy storage technology beginning in 2023; and (iii) introduction of a new PTC for nuclear energy produced by existing nuclear energy plants, available from 2024 through 2032.

The Internal Revenue Service and U.S. Treasury are expected to issue regulations and other guidance which will provide additional details and clarifications regarding how the Company may be able to claim each of these credits.

In addition, the IRA contains several provisions which could create additional tax liabilities for corporations, including a 15% corporate alternative minimum tax for corporations with net profits in excess of $1 billion and a 1% excise tax on stock buybacks.

We currently do not believe the Company will be subject to any material tax liabilities as a result of these legislative provisions.

As of December 31, 2022, we have paid this cash deferral in full.

Effective February 1, 2023, late payment fees for residential customers were reinstated, and late payment fees for commercial and industrial customers were reinstated effective May 1, 2022.

“Renewable” energy includes generation sources such as solar, wind, and biomass, and is measured in accordance with the ACC’s Renewable Energy

Standard as a percentage of retail sales.

Consistent with the 2019 Rate Case decision, as of April 2022, APS has completed the following payments that will be recoverable through rates related to the CCT: (i) $3.33 million to the Navajo Nation; (ii) $0.5 million to the Navajo County communities; and (iii) $1 million to the Hopi Tribe.

Consistent with APS’s commitment to the impacted communities, APS has also completed the following payments: (i) $0.5 million to the Navajo Nation for CCT; (ii) $1.1 million to the Navajo County Communities for CCT and economic development; and (iii) $1.25 million to the Hopi Tribe for CCT and economic development.

The ACC has also authorized $1.25 million to be recovered through rates for electrification of homes and businesses on both the Navajo Nation and Hopi reservation.

Expenditure of the recoverable funds for electrification of homes and businesses on the Navajo Nation and the Hopi reservations is contingent upon completion of a census of the unelectrified homes and businesses in each that are also within APS service territory.

On September 28, 2022, ACC Staff filed their staff report in the Matter of Impact of the Closures of Fossil-Based Generation Plan on Impacted Communities.

APS and other interested parties filed comments on the report.

On October 21, 2022, ACC Staff filed a revised report and proposed order.

The revised report and proposed order recommended that funds for CCT shall not be collected from rate payers.

On December 8, 2022, the ACC voted against ACC Staff’s proposed order.

APS cannot predict if the ACC will take any further action on this matter.

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

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

As a result of the December 2020 RFPs, APS executed two solar plus storage PPAs totaling 275 combined MW, a PPA for a 238 MW wind resource, two energy storage PPAs for a combined 300 MW, extended an existing natural gas tolling agreement and also executed an engineering,

In May 2022, APS issued an RFP to address resource needs for 2025 and beyond.

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

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

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

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

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

The Company is operating under long-standing pandemic and business continuity plans that exist to address situations including pandemics like COVID-19.

We are focused on ensuring the health and safety of our employees, contractors, and the general public by helping limit the spread of this virus and ensuring continued, safe, and reliable electric service for APS customers.

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

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

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

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

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

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

In the summer of 2021, the Company began transitioning employees that were previously working remotely back to the workplace on a limited basis and began the reduction of our COVID-19 safety protocols and restrictions.

Due to the COVID-19 variants and increased transmission

rates, the Company has delayed its full transition back to the workplace and COVID-19 safety protocols and restrictions remain in place.

The Company’s operations and maintenance expenses, exclusive of bad debt expense, increased by approximately $4.3 million for the year ended December 31, 2021, primarily due to costs for personal protective equipment and other health and safety-related costs related to COVID-19.

We do not expect the Company’s operation and maintenance expenses to be materially impacted in 2022 by costs related to COVID-19.

We paid half of this cash deferral by December 31, 2021, and the remainder will be paid by December 31, 2022.

On June 30, 2020, FERC issued an order granting a waiver request related to the existing AFUDC rate calculation beginning March 1, 2020, through February 28, 2021.

On February 23, 2021, this waiver was extended until September 30, 2021.

On September 21, 2021, it was further extended until March 31, 2022.

The order provides a simplified approach that companies may elect to implement in order to minimize the significant distorted effect on the AFUDC formula resulting from increased short-term debt financing during the COVID-19 pandemic.

APS has adopted this simplified approach to computing the AFUDC composite rate by using a simple average of the actual historical short-term debt balances for 2019, instead of current period short-term debt balances, and has left all other aspects of the AFUDC formula composite rate calculation unchanged.

This change impacts the AFUDC composite rate in both 2020 and 2021 but does not impact prior years.

Furthermore, the change in the composite rate calculation

does not impact our accounting treatment for these costs.

The change did not have a material impact on our financial statements.

APS has experienced and is continuing to experience an increase in bad debt expense associated with the COVID-19 pandemic, the Summer Disconnection Moratorium, and the related write-offs of customer delinquent accounts.

The Summer Disconnection Moratorium, the suspension of disconnections due to COVID-19 and the increased bad debt expense associated with both events resulted in a negative impact to its 2021 operating results of approximately $25 million pre-tax above the impact of disconnections on its operating results for years that did not have the Summer Disconnection Moratorium or COVID-19.

APS expects that the Summer Disconnection Moratorium, the suspension of disconnections due to COVID-19 and the increased bad debt expense associated with this will continue to negatively impact its operating results for the foreseeable future in amounts similar to 2020 and 2021.

The estimated impact depends on certain current assumptions, including, but not limited to, customer behaviors, population, and employment growth.

In February 2021, due to COVID-19, APS delayed the annual reset of the PSA.

Rather than the increase being effective February 2021, the PSA reset was implemented with 50% of the increase effective April 2021 and the remaining 50% increase effective November 2021.

In addition, the other unit will be operational throughout the summer season of June through October when

customer demand is the highest.

APS believes that operating Four Corners seasonally will bring environmental benefits and ensure continued service reliability for its customers, especially during Arizona’s hot summer months, as APS transitions to ceasing to use coal-fired generation by 2031.

By moving to seasonal operations, Four Corners will become a more flexible resource that supports increasing amounts of clean energy, helping to compensate for the intermittent output of renewable resources.

This change also helps ensure reliability of a critical energy source while reducing operations and maintenance costs.

APS estimates that the shift to seasonal operations will reduce annual carbon emissions at Four Corners by an estimated 20-25%, as compared to current conditions.

As a result of the all source RFP, APS executed a PPA in October 2021 for a 238 MW wind resource to be in service by June 2023, and also executed an

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

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

| | | | | | | | | | | | | | | | | | |

The plant currently supplies nearly 70% of our clean energy and provides the foundation for the reliable and affordable service for APS customers.

We own or lease [removed: 6,323] [added: 6,340] MW of regulated generation capacity and we hold a mix of both long-term and short-term purchased power agreements for additional capacity, including a variety of agreements for the purchase of renewable energy.

During [removed: 2021,] [added: 2022,] no single purchaser or user of energy accounted for more than [removed: 1.8%] [added: 2.4%] of our electric revenues.

The following map shows APS’s retail service territory, including the locations of its generating facilities and principal transmission [removed: lines.][added: lines.]

[removed: ][added: ]

APS’s sources of energy by type used to supply energy to Native Load customers during [removed: 2021] [added: 2022] were as follows:

[removed: ][added: ]

The share of APS’s energy supply being derived from clean resources is [removed: 50%,] [added: 51%,] which includes energy from nuclear, renewables and DSM.

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

[added: In addition, in January 2020, APS announced its] Clean Energy Commitment, a three-pronged approach aimed at ultimately eliminating carbon-emitting resources from its electric generation resource portfolio.

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

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

The [removed: report provides] [added: reports provide] information related to the Company and its approach to sustainability and its workplace and environmental performance.

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

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

APS operates the plant and owns 29.1% of Palo Verde Units 1 and 3 [removed: and approximately 17% of Unit 2.]

In addition, APS leases approximately 12.1% of Unit 2, resulting in a [added: 29.1% combined ownership and leasehold interest in that unit.]

See Note [removed: 18] [added: 17] for additional information regarding the Palo Verde Unit 2 sale leaseback transactions.

The Palo Verde participants have contracted for 100% of Palo Verde’s requirements for uranium concentrates through 2028 and [removed: 86%] [added: 48%] through 2029; 100% of Palo Verde’s requirements for conversion services through [removed: 2026] [added: 2030] and [removed: 30%] [added: 40%] through [removed: 2030;] [added: 2031;] 100% of Palo Verde’s requirements for enrichment services through 2026 and [removed: 76%] [added: 28%] for 2027; and 100% of Palo Verde’s requirements for fuel fabrication through 2027 for Unit 2 and Unit 1 and 2028 for Unit 3.

*Spent Nuclear Fuel and Waste Disposal —* The Nuclear Waste Policy Act of 1982 (“NWPA”) required the DOE to [added: begin to] accept, transport, and dispose of spent nuclear fuel and high-level waste generated by the nation’s nuclear power plants by 1998.

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 [removed: authorization application.]

[added: 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. Circuit”).

In addition, the settlement agreement [removed: provides] [added: provided] APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2016, which was extended to December 31, 2022.

APS has submitted [removed: seven] [added: eight] claims pursuant to the terms of the August 18, [removed: 2014,] [added: 2014] settlement [removed: agreement,] [added: agreement] for [removed: seven] [added: eight] separate time periods during July 1, [removed: 2011,] [added: 2011] through June 30, [removed: 2020.][added: 2021.]

The DOE has approved and paid [removed: $111.8] [added: $123.9] million for these claims (APS’s share is [removed: $32.5] [added: $36] million).

See Note [removed: 4.][added: 3.]

On [removed: November 1, 2021,] [added: October 31, 2022,] APS filed its [removed: eighth] [added: ninth] claim pursuant to the terms of the August 18, 2014, settlement agreement in the amount of [removed: $12.2] [added: $14.3] million (APS’s share is [removed: $3.6] [added: $4.2] million).

In February [removed: 2022,] [added: 2023,] the DOE approved this claim.

See Note [removed: 19] [added: 18] for additional information about APS’s nuclear decommissioning trusts.

*Palo Verde Liability and Insurance Matters* — See “Palo Verde Generating Station — Nuclear Insurance” in Note [removed: 11] [added: 10] for a discussion of the insurance maintained by the Palo Verde participants, including APS, for Palo Verde.

APS has long-term gas transportation agreements with three different companies, some of which are effective through [removed: 2027.][added: 2049.]

[removed: Coal-Fueled] [added: Coal Fueled] Generating Facilities

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

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 [removed: extending] [added: to extend] the life of the plant and the adjacent mine.

On April 14, 2015, the ACC approved APS’s plan to retire Unit 2, without [added: expressing any view on the future recoverability of APS’s remaining investment in the Unit.]

See Note [removed: 4] [added: 3] for details related to the resulting regulatory asset plus a return on the net book value as well as other costs related to retirement and closure, which are still being assessed and which may be material.

See Note [removed: 11] [added: 10] for information regarding APS’s coal mine reclamation obligations related to these coal-fired plants.

APS developed utility scale solar resources through the [removed: 170] [added: 180] MW ACC-approved AZ Sun Program, investing approximately $675 million in this program.

In addition to the AZ Sun Program, APS developed the [removed: 40] [added: 44] MW Red Rock Solar Plant, which it owns and operates.

This fleet of solar systems includes a 3 MW facility located at the Prescott Airport and 1 MW of small solar systems in various locations across [removed: Arizona.]

APS has also developed solar photovoltaic distributed [added: renewable] energy systems installed as part of the Community Power Project in Flagstaff, Arizona.

APS currently has a diverse portfolio of renewable resources,

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

and approximately 17% of Unit 2.

authorization application.

An additional extension is currently pending.

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

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

The other unit would remain online year-round, subject to market conditions as well as planned maintenance outages and unplanned outages.

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

Arizona.

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

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

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

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

Service under this agreement is expected to begin in 2025.

Renewable Energy Portfolio

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

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

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

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

| Agave Solar | | | | | | Arlington, AZ | | | | | | 2023 | | | | | | | | | | | | | | | | | | 150 | | |

| Sunstreams 3 | | | | | | Arlington, AZ | | | | | | 2024 | | | | | | 20 | | | | | | | | | | | | 215 | | |

| Sunstreams 4 | | | | | | Arlington, AZ | | | | | | 2025 | | | | | | 20 | | | | | | | | | | | | 300 | | |

| Chevelon Butte II | | | | | | Winslow, AZ | | | | | | 2024 | | | | | | 20 | | | | | | | | | | | | 216 | | |

(b)Does not include MW of capacity planned or under development.

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

APS intends to file its next IRP later in 2023.

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

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

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

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

APS cannot predict the outcome of this matter.

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

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

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

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

The ACC has not yet ruled on the proposal.

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

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

In addition, in January 2020, APS announced its

29.1% combined ownership and leasehold interest in that unit.

Several legal

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

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

expressing any view on the future recoverability of APS’s remaining investment in the Unit.

Additionally, APS owns

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

| Energy Storage | | | | | | Various | | | | | | 510 | | |

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

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

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

On July 1,

| | | | | | | 2022 | | | | | | 2025 | | |

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

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

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

In December 2020, APS issued two additional RFPs: (i) a battery storage RFP for projects to be located at two AZ Sun sites; and (ii) an all source RFP that solicited resources to meet our clean energy needs and capacity to maintain system reliability, and that was later amended to include a request for 150 MW of solar resources to be developed on APS property and owned by APS (collectively, the “December 2020 RFPs”).

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

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

Once it secures those

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

1998.

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

On October 29, 2021, the U.S. Supreme Court announced that it was accepting judicial review of the January D.C. Circuit decision vacating the ACE regulations.

Nation, and water supplies for our power plants.

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

While certain changes have been prompted by utility industry petitions,

- Based on an August 21, 2018, D.C. Circuit decision, which vacated and remanded those provisions of the EPA CCR regulations that allow for the operation of unlined CCR surface impoundments, EPA recently proposed corresponding changes to federal CCR regulations.

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

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

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

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

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

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

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

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

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

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

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

See Note [removed: 4] [added: 3] for ACC and FERC-related matters.

See Note [removed: 11] [added: 10] for information regarding environmental matters, Superfund–related matters and other disputes.

For the fiscal year ended December 31, [removed: 2021][added: 2022]

| ARIZONA PUBLIC SERVICE COMPANY | | | | | | $ | 0 | | as of June 30, [removed: 2021] [added: 2022] | | |

| PINNACLE WEST CAPITAL CORPORATION | | | Number of shares of common stock, no par value, outstanding as of February [removed: 17, 2022:] [added: 21, 2023:] | | | [removed: 112,931,929] [added: 113,175,507] | | |

| ARIZONA PUBLIC SERVICE COMPANY | | | Number of shares of common stock, $2.50 par value, outstanding as of February [removed: 17, 2022:] [added: 21, 2023:] | | | 71,264,947 | | |

Portions of Pinnacle West Capital Corporation’s definitive Proxy Statement relating to its Annual Meeting of Shareholders to be held on May [removed: 18, 2022] [added: 17, 2023] are incorporated by reference into Part III hereof.

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| [Item [removed: 9B.](#i846037845a49440fa7612a783c218cf2_208)] [added: 9B.](#iefa03c257a7c412c9b6c25f752dd3e40_211)] | | | [Other [removed: Information](#i846037845a49440fa7612a783c218cf2_208)] [added: Information](#iefa03c257a7c412c9b6c25f752dd3e40_211)] | | | [removed: [197](#i846037845a49440fa7612a783c218cf2_208)] [added: [202](#iefa03c257a7c412c9b6c25f752dd3e40_211)] | | |

| [Item [removed: 9C.](#i846037845a49440fa7612a783c218cf2_2135)] [added: 9C.](#iefa03c257a7c412c9b6c25f752dd3e40_214)] | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#i846037845a49440fa7612a783c218cf2_2135)] [added: Inspections](#iefa03c257a7c412c9b6c25f752dd3e40_214)] | | | [removed: [197](#i846037845a49440fa7612a783c218cf2_2135)] [added: [202](#iefa03c257a7c412c9b6c25f752dd3e40_214)] | | |

| [Item [removed: 10.](#i846037845a49440fa7612a783c218cf2_214)] [added: 10.](#iefa03c257a7c412c9b6c25f752dd3e40_220)] | | | [Directors, Executive Officers and Corporate Governance of Pinnacle [removed: West](#i846037845a49440fa7612a783c218cf2_214)] [added: West](#iefa03c257a7c412c9b6c25f752dd3e40_220)] | | | [removed: [197](#i846037845a49440fa7612a783c218cf2_214)] [added: [202](#iefa03c257a7c412c9b6c25f752dd3e40_220)] | | |

| [Item [removed: 11.](#i846037845a49440fa7612a783c218cf2_217)] [added: 11.](#iefa03c257a7c412c9b6c25f752dd3e40_223)] | | | [Executive [removed: Compensation](#i846037845a49440fa7612a783c218cf2_217)] [added: Compensation](#iefa03c257a7c412c9b6c25f752dd3e40_223)] | | | [removed: [197](#i846037845a49440fa7612a783c218cf2_217)] [added: [202](#iefa03c257a7c412c9b6c25f752dd3e40_223)] | | |

| [Item [removed: 12.](#i846037845a49440fa7612a783c218cf2_220)] [added: 12.](#iefa03c257a7c412c9b6c25f752dd3e40_226)] | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i846037845a49440fa7612a783c218cf2_220)] [added: Matters](#iefa03c257a7c412c9b6c25f752dd3e40_226)] | | | [removed: [197](#i846037845a49440fa7612a783c218cf2_220)] [added: [202](#iefa03c257a7c412c9b6c25f752dd3e40_226)] | | |

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| [Item [removed: 16.](#i846037845a49440fa7612a783c218cf2_2189)] [added: 16.](#iefa03c257a7c412c9b6c25f752dd3e40_241)] | | | [Form 10-K [removed: Summary](#i846037845a49440fa7612a783c218cf2_2189)] [added: Summary](#iefa03c257a7c412c9b6c25f752dd3e40_241)] | | | [removed: [221](#i846037845a49440fa7612a783c218cf2_2189)] [added: [226](#iefa03c257a7c412c9b6c25f752dd3e40_241)] | | |

The information required with respect to each company is set forth [removed: within the applicable items.][added: within]

| COVID-19 | | | [added: 2019 Novel] Coronavirus | | |

| distributed [added: renewable] energy systems [added: or DG] | | | Small-scale renewable energy technologies that are located on customers’ properties, such as rooftop solar systems | | |

- variations in demand for electricity, including those due to weather, seasonality (including large increases in ambient temperatures), the general economy or social conditions, customer, and sales growth (or decline), the effects of energy conservation measures and distributed [removed: generation ("DG"),] [added: generation,] and technological advancements;

- current and future economic conditions in [removed: Arizona, including in real estate markets;][added: Arizona;]

- the development of new technologies which may affect electric sales or [removed: delivery;][added: delivery, including as a result of delays in the development and application of new technologies;]

- the cost of [removed: debt] [added: debt, including increased cost as a result of rising interest rates,] and equity capital and the ability to access capital markets when required;

| PINNACLE WEST CAPITAL CORPORATION | | | | | | $ | 8,247,902,707 | | as of June 30, 2022 | | |

| [PART I](#iefa03c257a7c412c9b6c25f752dd3e40_16) | | | | | | [3](#iefa03c257a7c412c9b6c25f752dd3e40_16) | | |

| [PART II](#iefa03c257a7c412c9b6c25f752dd3e40_40) | | | | | | [54](#iefa03c257a7c412c9b6c25f752dd3e40_40) | | |

| | | | [APS Financial Statements](#iefa03c257a7c412c9b6c25f752dd3e40_112) | | | [106](#iefa03c257a7c412c9b6c25f752dd3e40_112) | | |

| | | | [Pinnacle West Schedule I](#iefa03c257a7c412c9b6c25f752dd3e40_196) | | | [197](#iefa03c257a7c412c9b6c25f752dd3e40_196) | | |

| [PART III](#iefa03c257a7c412c9b6c25f752dd3e40_217) | | | | | | [202](#iefa03c257a7c412c9b6c25f752dd3e40_217) | | |

| [PART IV](#iefa03c257a7c412c9b6c25f752dd3e40_235) | | | | | | [205](#iefa03c257a7c412c9b6c25f752dd3e40_235) | | |

| [SIGNATURES](#iefa03c257a7c412c9b6c25f752dd3e40_244) | | | | | | [227](#iefa03c257a7c412c9b6c25f752dd3e40_244) | | |

the applicable items.

| PSA | | | Power Supply Adjustor | | |

| TOU | | | Time of Use | | |

iii

- the current economic environment and its effects, such as lower economic growth, a tight labor market, inflation, supply chain delays, increased expenses, volatile capital markets, or other unpredictable effects;

| PINNACLE WEST CAPITAL CORPORATION | | | | | | $ | 9,024,891,205 | | as of June 30, 2021 | | |

| [PART I](#i846037845a49440fa7612a783c218cf2_16) | | | | | | [3](#i846037845a49440fa7612a783c218cf2_16) | | |

| [PART II](#i846037845a49440fa7612a783c218cf2_40) | | | | | | [53](#i846037845a49440fa7612a783c218cf2_40) | | |

| | | | [APS Financial Statements](#i846037845a49440fa7612a783c218cf2_109) | | | [105](#i846037845a49440fa7612a783c218cf2_109) | | |

| | | | [Pinnacle West Schedule I](#i846037845a49440fa7612a783c218cf2_193) | | | [192](#i846037845a49440fa7612a783c218cf2_193) | | |

| [PART III](#i846037845a49440fa7612a783c218cf2_211) | | | | | | [197](#i846037845a49440fa7612a783c218cf2_211) | | |

| [PART IV](#i846037845a49440fa7612a783c218cf2_229) | | | | | | [200](#i846037845a49440fa7612a783c218cf2_229) | | |

| [SIGNATURES](#i846037845a49440fa7612a783c218cf2_235) | | | | | | [222](#i846037845a49440fa7612a783c218cf2_235) | | |

| ASU | | | Accounting Standards Update | | |

| MMBtu | | | One million British Thermal Units | | |

| PSA | | | Power supply adjustor approved by the ACC to provide for recovery or refund of variations in actual fuel and purchased power costs compared with the Base Fuel Rate | | |

- the potential effects of the continued COVID-19 pandemic, including, but not limited to, demand for energy, economic growth, our employees and contractors, vaccine mandates, supply chain, expenses, capital markets, capital projects, operations and maintenance activities, uncollectable accounts, liquidity, cash flows or other unpredictable events;

Neither Pinnacle West nor APS has received written comments regarding its periodic or current reports from the SEC staff that were issued 180 days or more preceding the end of its [removed: 2021] [added: 2022] fiscal year and that remain unresolved.

APS’s portfolio of owned generating facilities as of December 31, [removed: 2021] [added: 2022] is provided in the table below:

| Redhawk [removed: (e)] [added: (d)] | | | | | | 2 | | | | | | | | | | | | Gas | | | | | | Load Following | | | | | | 1,088 | | |

| Ocotillo [removed: (d)] [added: (e)] | | | | | | 7 | | | | | | | | | | | | Gas | | | | | | Peaking | | | | | | 620 | | |

| [removed: Douglas/Fairview] [added: Douglas] | | | | | | 1 | | | | | | | | | | | | Oil | | | | | | Peaking | | | | | | 16 | | |

| Hyder I (f) | | | | | | 1 | | | | | | | | | | | | Solar | | | | | | As Available | | | | | | [removed: 16] [added: 17] | | |

| Chino Valley | | | | | | 1 | | | | | | | | | | | | Solar | | | | | | As Available | | | | | | [removed: 19] [added: 20] | | |

| Gila Bend (f) | | | | | | 1 | | | | | | | | | | | | Solar | | | | | | As Available | | | | | | [removed: 32] [added: 36] | | |

| Foothills (f) | | | | | | 1 | | | | | | | | | | | | Solar | | | | | | As Available | | | | | | [removed: 35] [added: 38] | | |

| Luke AFB | | | | | | 1 | | | | | | | | | | | | Solar | | | | | | As Available | | | | | | [removed: 10] [added: 11] | | |

| Red Rock | | | | | | 1 | | | | | | | | | | | | Solar | | | | | | As Available | | | | | | [removed: 40] [added: 44] | | |

| APS Owned Distributed Energy | | | | | | | | | | | | | | | | | | Solar | | | | | | As Available | | | | | | [removed: 33] [added: 36] | | |

| Total Solar | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: 247] [added: 264] | | |

| Total Capacity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: 6,323] [added: 6,340] | | |

[removed: (d)Ocotillo] [added: (e)Ocotillo] Steam Units 1 and 2 were retired on January 10, 2019.

[removed: (e)Redhawk] [added: (d)Redhawk] generation capacity increased by 104 MW following the Advanced Gas Path upgrade installed on both units.

Current Facilities. [added: As of January 3, 2023,] APS’s transmission facilities consist of approximately [removed: 5,814] [added: 5,828] pole miles of overhead lines and approximately [removed: 74] [added: 85] miles of underground lines, [removed: 5,743] [added: 5,768] miles of which are located in Arizona.

APS’s distribution facilities consist of approximately [removed: 11,258] [added: 11,276] miles of overhead lines and approximately [removed: 22,821] [added: 23,082] miles of underground primary cable [removed: (19,778] [added: (20,021] when excluding abandoned conductor), all of which are located in Arizona.

APS also owns and maintains [removed: 475] [added: 469] substations, including both transmission and distribution yards.

The following table shows APS’s jointly-owned interests in those transmission facilities recorded on the Consolidated Balance Sheets at December 31, [removed: 2021:][added: 2022:]

| ANPP 500kV System | | | [removed: 33.5] [added: 33.4] | | % |

| Four Corners Switchyards | | | [removed: 60.1] [added: 61.9] | | % |

| Palo Verde — Yuma 500kV System | | | [removed: 25.8] [added: 25.4] | | % |

In APS’s [removed: 2022 plan,] [added: 2023 Ten-Year Plan,] APS projects it will develop [removed: 81] [added: 84] miles of new transmission lines over the next 10 years.

The [removed: 2022] [added: 2023] Ten-Year Plan includes a new [removed: 35-mile] [added: 25-mile] 500kV line from the Jojoba substation to the Rudd substation.

The purpose of this [added: 500kV line] project is to bring in a new source to the west and southwest parts of the Phoenix metropolitan area which is experiencing rapid economic development.

In recent negotiations, certain of the affected Indian tribes have required payments substantially [removed: in excess of amounts that we have paid in the past for such rights-of-way.]

| Agua Fria Switchyard | | | 10.0 | | % |

Additionally, APS plans to upgrade 55 miles of existing transmission lines over the same horizon.

The 2023 Ten-Year Plan includes numerous projects with the purpose to interconnect new renewable energy resources to the transmission system.

in excess of amounts that we have paid in the past for such rights-of-way.

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.

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

The executive officers, their ages at February [removed: 25, 2022,] [added: 27, 2023,] current positions and principal occupations for the past five years are as follows:

| Jeffrey B. Guldner | | | | | | [removed: 56] [added: 57] | | | | | | Chairman of the Board, Chief Executive Officer and President of Pinnacle West | | | | | | 2019-Present | | |

| | | | | | | | | | | | | Chairman of the Board, Chief Executive Officer and President of APS | | | | | | [removed: 2021-Present] [added: 2021-2022] | | |

| [added: Jose L. Esparza] | | | | | | [added: 48] | | | | | | Senior Vice President, Public Policy of APS | | | | | | [removed: 2014-2017] [added: 2022-Present] | | |

| Elizabeth A. Blankenship | | | | | | [removed: 50] [added: 51] | | | | | | Vice President, Controller and Chief Accounting Officer of Pinnacle West and APS | | | | | | 2019-Present | | |

| [removed: Andrew D. Cooper] | | | | | | [removed: 43] | | | | | | Vice President and Treasurer of Pinnacle West and APS | | | | | | [removed: 2020-Present] [added: 2020-2022] | | |

| Donna M. Easterly | | | | | | [removed: 57] [added: 58] | | | | | | Senior Vice President, Human Resources of APS | | | | | | 2020-Present | | |

| [removed: Theodore N. Geisler] | | | | | | [removed: 43] | | | | | | Senior Vice President and Chief Financial Officer of Pinnacle West and APS | | | | | | [removed: 2020-Present] [added: 2020-2022] | | |

| [removed: Maria L. Lacal] [added: Adam C. Heflin] | | | | | | [removed: 61] [added: 59] | | | | | | Executive Vice President and Chief Nuclear Officer, PVGS, of APS | | | | | | [removed: 2020-Present] [added: 2022-Present] | | |

| Robert E. Smith | | | | | | [removed: 52] [added: 53] | | | | | | Executive Vice President, General Counsel and Chief Development Officer of Pinnacle West and APS | | | | | | [removed: 2021- Present] [added: 2021-Present] | | |

| Jacob Tetlow | | | | | | [removed: 49] [added: 50] | | | | | | Executive Vice President, Operations of APS | | | | | | 2021-Present | | |

| | | | | | | | | | | | | Chairman of the Board and Chief Executive Officer of APS | | | | | | 2022-Present | | |

| Andrew D. Cooper | | | | | | 44 | | | | | | Senior Vice President and Chief Financial Officer of Pinnacle West and APS | | | | | | 2022-Present | | |

| | | | | | | | | | | | | Vice President, Regulatory of APS | | | | | | 2022 | | |

| | | | | | | | | | | | | Officer and Senior Vice President, Customer Engagement and Information Technology of Southwest Gas | | | | | | 2019-2021 | | |

| | | | | | | | | | | | | Vice President, Customer Engagement of Southwest Gas | | | | | | 2012-2019 | | |

| Theodore N. Geisler | | | | | | 44 | | | | | | President of APS | | | | | | 2022-Present | | |

| | | | | | | | | | | | | Chief Executive Officer of Wolf Creek Nuclear Operating Corporation | | | | | | 2014-2019 | | |

| Paul J. Mountain | | | | | | 45 | | | | | | Vice President and Treasurer of Pinnacle West and APS | | | | | | 2022-Present | | |

| | | | | | | | | | | | | Vice President, Finance and Planning of Pinnacle West and APS | | | | | | 2020-2022 | | |

| | | | | | | | | | | | | General Manager, Finance of Pinnacle West | | | | | | 2017-2020 | | |

| | | | | | | | | | | | | Vice President, Chief Procurement Officer of APS | | | | | | 2014-2017 | | |

| | | | | | | | | | | | | Director, Investor Relations of Pinnacle West | | | | | | 2016-2017 | | |

| | | | | | | | | | | | | Senior Vice President, Regulatory and Oversight, PVGS, of APS | | | | | | 2016-2020 | | |

| Barbara D. Lockwood | | | | | | 55 | | | | | | Senior Vice President, Public Policy of APS | | | | | | 2020-Present | | |

| | | | | | | | | | | | | Vice President, Regulation of APS | | | | | | 2015-2020 | | |

| | | | | | | | | | | | | General Manager, Transmission Operations and Maintenance of APS | | | | | | 2014-2017 | | |

At the close of business on February [removed: 17, 2022,] [added: 21, 2023,] Pinnacle West’s common stock was held of record by approximately [removed: 15,730] [added: 15,182] shareholders.

At December 31, [removed: 2021,] [added: 2022,] APS did not have any outstanding preferred stock.

[Table of [removed: Contents](#i846037845a49440fa7612a783c218cf2_7)][added: Contents](#iefa03c257a7c412c9b6c25f752dd3e40_7)]

This graph compares the cumulative total shareholder return on Pinnacle West’s common stock during the five years ended December 31, [removed: 2021,] [added: 2022,] to the cumulative total returns on the S&P 500 Index and the Edison Electric Index.

The comparison assumes that $100 was invested on December 31, [removed: 2016,] [added: 2017,] in Pinnacle [removed: West's] [added: West’s] common stock and in each of the indices shown and that all of the dividends were reinvested.

[removed: ][added: ]

| Company/Index | | | | | | [removed: 2016 | | |] 2017 | | | 2018 | | | 2019 | | | 2020 | | | 2021 | | | [added: 2022 | | |]

| Pinnacle West Common Stock | | | | | | $100 | | | [removed: $113] [added: $104] | | | [removed: $117] [added: $113] | | | [removed: $127] [added: $104] | | | [removed: $117] [added: $96] | | | [removed: $108] [added: $109] | | |

| Edison Electric Institute Index | | | | | | $100 | | | $104 | | | $130 | | | $129 | | | $151 | | | $153 | | |

| S&P 500 Index | | | | | | $100 | | | $96 | | | $126 | | | $149 | | | $192 | | | $156 | | |

| Edison Electric Institute Index | | | | | | $100 | | | $112 | | | $116 | | | $146 | | | $144 | | | $169 | | |

| S&P 500 Index | | | | | | $100 | | | $122 | | | $116 | | | $153 | | | $181 | | | $233 | | |

| [Management’s Report on Internal Control over Financial Reporting (Pinnacle West Capital [removed: Corporation)](#i846037845a49440fa7612a783c218cf2_79)] [added: Corporation)](#iefa03c257a7c412c9b6c25f752dd3e40_82)] | | | [removed: [89](#i846037845a49440fa7612a783c218cf2_79)] [added: [90](#iefa03c257a7c412c9b6c25f752dd3e40_82)] | | |

| [Report of Independent Registered Public Accounting [removed: Firm](#i846037845a49440fa7612a783c218cf2_82)] [added: Firm](#iefa03c257a7c412c9b6c25f752dd3e40_85)] (PCAOB ID No. 34) | | | [removed: [90](#i846037845a49440fa7612a783c218cf2_82)] [added: [91](#iefa03c257a7c412c9b6c25f752dd3e40_85)] | | |

| [Pinnacle West Consolidated Statements of Income for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_85)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_88)] | | | [removed: [94](#i846037845a49440fa7612a783c218cf2_85)] [added: [95](#iefa03c257a7c412c9b6c25f752dd3e40_88)] | | |

| [Pinnacle West Consolidated Statements of Comprehensive Income for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_88)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_91)] | | | [removed: [95](#i846037845a49440fa7612a783c218cf2_88)] [added: [96](#iefa03c257a7c412c9b6c25f752dd3e40_91)] | | |

| [Pinnacle West Consolidated Balance Sheets as of December 31, [removed: 2021] [added: 2022] and [removed: 2020](#i846037845a49440fa7612a783c218cf2_91)] [added: 2021](#iefa03c257a7c412c9b6c25f752dd3e40_94)] | | | [removed: [96](#i846037845a49440fa7612a783c218cf2_91)] [added: [97](#iefa03c257a7c412c9b6c25f752dd3e40_94)] | | |

| [Pinnacle West Consolidated Statements of Cash Flows for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_94)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_97)] | | | [removed: [98](#i846037845a49440fa7612a783c218cf2_94)] [added: [99](#iefa03c257a7c412c9b6c25f752dd3e40_97)] | | |

| [Pinnacle West Consolidated Statements of Changes in Equity for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_97)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_100)] | | | [removed: [99](#i846037845a49440fa7612a783c218cf2_97)] [added: [100](#iefa03c257a7c412c9b6c25f752dd3e40_100)] | | |

| [Management’s Report on Internal Control over Financial Reporting (Arizona Public Service [removed: Company)](#i846037845a49440fa7612a783c218cf2_103)] [added: Company)](#iefa03c257a7c412c9b6c25f752dd3e40_106)] | | | [removed: [100](#i846037845a49440fa7612a783c218cf2_103)] [added: [101](#iefa03c257a7c412c9b6c25f752dd3e40_106)] | | |

| [Report of Independent Registered Public Accounting [removed: Firm](#i846037845a49440fa7612a783c218cf2_106)] [added: Firm](#iefa03c257a7c412c9b6c25f752dd3e40_109)] (PCAOB ID No. 34) | | | [removed: [101](#i846037845a49440fa7612a783c218cf2_106)] [added: [102](#iefa03c257a7c412c9b6c25f752dd3e40_109)] | | |

| [APS Consolidated Statements of Income for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_109)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_112)] | | | [removed: [105](#i846037845a49440fa7612a783c218cf2_109)] [added: [106](#iefa03c257a7c412c9b6c25f752dd3e40_112)] | | |

| [APS Consolidated Statements of Comprehensive Income for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_112)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_115)] | | | [removed: [106](#i846037845a49440fa7612a783c218cf2_112)] [added: [107](#iefa03c257a7c412c9b6c25f752dd3e40_115)] | | |

| [APS Consolidated Balance Sheets as of December 31, [removed: 2021] [added: 2022] and [removed: 2020](#i846037845a49440fa7612a783c218cf2_115)] [added: 2021](#iefa03c257a7c412c9b6c25f752dd3e40_118)] | | | [removed: [107](#i846037845a49440fa7612a783c218cf2_115)] [added: [108](#iefa03c257a7c412c9b6c25f752dd3e40_118)] | | |

| [APS Consolidated Statements of Cash Flows for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_118)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_121)] | | | [removed: [109](#i846037845a49440fa7612a783c218cf2_118)] [added: [110](#iefa03c257a7c412c9b6c25f752dd3e40_121)] | | |

| [APS Consolidated Statements of Changes in Equity for [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#i846037845a49440fa7612a783c218cf2_121)] [added: 2020](#iefa03c257a7c412c9b6c25f752dd3e40_124)] | | | [removed: [110](#i846037845a49440fa7612a783c218cf2_121)] [added: [111](#iefa03c257a7c412c9b6c25f752dd3e40_124)] | | |

[removed: | [Combined Notes to Consolidated Financial Statements](#i846037845a49440fa7612a783c218cf2_127) | | | [111](#i846037845a49440fa7612a783c218cf2_127) | | |][added: COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

| [Note 1. Summary of Significant Accounting [removed: Policies](#i846037845a49440fa7612a783c218cf2_127)] [added: Policies](#iefa03c257a7c412c9b6c25f752dd3e40_130)] | | | [removed: [111](#i846037845a49440fa7612a783c218cf2_127)] [added: [112](#iefa03c257a7c412c9b6c25f752dd3e40_130)] | | |

| [removed: [Note 5.] [added: [Note](#iefa03c257a7c412c9b6c25f752dd3e40_142) [4](#iefa03c257a7c412c9b6c25f752dd3e40_142)[.] Income [removed: Taxes](#i846037845a49440fa7612a783c218cf2_139)] [added: Taxes](#iefa03c257a7c412c9b6c25f752dd3e40_142)] | | | [removed: [143](#i846037845a49440fa7612a783c218cf2_139)] [added: [143](#iefa03c257a7c412c9b6c25f752dd3e40_142)] | | |

[removed: | [Note 6. Lines] [added: 5. Lines] of Credit and Short-Term [removed: Borrowings](#i846037845a49440fa7612a783c218cf2_142) | | | [147](#i846037845a49440fa7612a783c218cf2_142) | | |][added: Borrowings]

| [Note [removed: 7.] [added: 6.] Long-Term Debt and Liquidity [removed: Matters](#i846037845a49440fa7612a783c218cf2_145)] [added: Matters](#iefa03c257a7c412c9b6c25f752dd3e40_148)] | | | [removed: [149](#i846037845a49440fa7612a783c218cf2_145)] [added: [150](#iefa03c257a7c412c9b6c25f752dd3e40_148)] | | |

| [Note [removed: 8.] [added: 7.] Retirement Plans and Other Postretirement [removed: Benefits](#i846037845a49440fa7612a783c218cf2_148)] [added: Benefits](#iefa03c257a7c412c9b6c25f752dd3e40_151)] | | | [removed: [151](#i846037845a49440fa7612a783c218cf2_148)] [added: [153](#iefa03c257a7c412c9b6c25f752dd3e40_151)] | | |

| [Note [removed: 18.] [added: 17.] Palo Verde Sale Leaseback Variable Interest [removed: Entities](#i846037845a49440fa7612a783c218cf2_181)] [added: Entities](#iefa03c257a7c412c9b6c25f752dd3e40_184)] | | | [removed: [187](#i846037845a49440fa7612a783c218cf2_181)] [added: [192](#iefa03c257a7c412c9b6c25f752dd3e40_184)] | | |

| [Note [removed: 19.] [added: 18.] Investments in Nuclear Decommissioning Trusts and Other Special Use [removed: Funds](#i846037845a49440fa7612a783c218cf2_184)] [added: Funds](#iefa03c257a7c412c9b6c25f752dd3e40_187)] | | | [removed: [188](#i846037845a49440fa7612a783c218cf2_184)] [added: [193](#iefa03c257a7c412c9b6c25f752dd3e40_187)] | | |

| [Note [removed: 20.] [added: 19.] Changes in Accumulated Other Comprehensive [removed: Loss](#i846037845a49440fa7612a783c218cf2_187)] [added: Loss](#iefa03c257a7c412c9b6c25f752dd3e40_190)] | | | [removed: [191](#i846037845a49440fa7612a783c218cf2_187)] [added: [196](#iefa03c257a7c412c9b6c25f752dd3e40_190)] | | |

Based on our evaluation under the framework in *Internal Control — Integrated Framework (2013),* our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2021.][added: 2022.]

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein and also relates to the Company’s consolidated financial statements.

We have audited the accompanying consolidated balance sheets of Pinnacle West Capital Corporation and subsidiaries (the “Company”) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the related consolidated statements of income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Regulatory Accounting — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and [removed: 4] [added: 3] to the financial [removed: statements*.*][added: statements]

- We read relevant regulatory rate orders issued by the ACC for APS and other public utilities in Arizona, regulatory statutes, interpretations, procedural memorandums, filings made by [removed: interveners,] [added: intervenors,] and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the ACC’s treatment of similar costs under similar circumstances.

[removed: We read the minutes] of the [removed: Boards of Directors of the] Company for discussions of changes in legal, regulatory, or business factors which could impact management’s assessment.

We read the Notice of Direct Appeal filed with the Arizona Court of Appeals and Petition for Special Action filed with the Arizona Supreme Court, [added: read the Company’s opening brief submitted to the Arizona Court of Appeals, read the ACC’s Answering Brief, read the Intervenors’ briefs, read the Company’s reply brief, and observed the Appeal Oral Arguments,] reviewed the [removed: Company's] [added: Company’s] internally prepared memo, and reviewed a legal letter from the [removed: Company's] [added: Company’s] external counsel to assess the likelihood of recovery in future rates or of a future reduction in rates based on the ACC decision.

| | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| OPERATING REVENUES (Note 2) | | | $ | [removed: 3,803,835] [added: 4,324,385] | | | | | $ | [removed: 3,586,982] [added: 3,803,835] | | | | | $ | [removed: 3,471,209] [added: 3,586,982] | |

| Fuel and purchased power | | | [removed: 1,152,551] [added: 1,629,343] | | | | | | [removed: 993,419] [added: 1,152,551] | | | | | | [removed: 1,042,237] [added: 993,419] | | |

| Operations and maintenance | | | [removed: 954,067] [added: 987,072] | | | | | | [removed: 958,910] [added: 954,067] | | | | | | [removed: 941,616] [added: 958,910] | | |

| Depreciation and amortization | | | [removed: 650,875] [added: 753,195] | | | | | | [removed: 614,378] [added: 650,875] | | | | | | [removed: 590,929] [added: 614,378] | | |

| Taxes other than income taxes | | | [removed: 234,639] [added: 220,370] | | | | | | [removed: 224,835] [added: 234,639] | | | | | | [removed: 218,579] [added: 224,835] | | |

| Other expenses | | | [removed: 6,393] [added: 2,494] | | | | | | [removed: 7,288] [added: 6,393] | | | | | | [removed: 5,888] [added: 7,288] | | |

| [Combined Notes to Consolidated Financial Statements](#iefa03c257a7c412c9b6c25f752dd3e40_130) | | | [112](#iefa03c257a7c412c9b6c25f752dd3e40_130) | | |

| [Note 2. Revenue](#iefa03c257a7c412c9b6c25f752dd3e40_133) | | | [120](#iefa03c257a7c412c9b6c25f752dd3e40_133) | | |

| [Note](#iefa03c257a7c412c9b6c25f752dd3e40_139) [3](#iefa03c257a7c412c9b6c25f752dd3e40_139)[. Regulatory Matters](#iefa03c257a7c412c9b6c25f752dd3e40_139) | | | [122](#iefa03c257a7c412c9b6c25f752dd3e40_139) | | |

| [Note 8. Leases](#iefa03c257a7c412c9b6c25f752dd3e40_154) | | | [162](#iefa03c257a7c412c9b6c25f752dd3e40_154) | | |

| [Note 9. Jointly-Owned Facilities](#iefa03c257a7c412c9b6c25f752dd3e40_157) | | | [166](#iefa03c257a7c412c9b6c25f752dd3e40_157) | | |

| [Note 10. Commitments and Contingencies](#iefa03c257a7c412c9b6c25f752dd3e40_160) | | | [167](#iefa03c257a7c412c9b6c25f752dd3e40_160) | | |

| [Note 11. Asset Retirement Obligations](#iefa03c257a7c412c9b6c25f752dd3e40_163) | | | [176](#iefa03c257a7c412c9b6c25f752dd3e40_163) | | |

| [Note 12. Fair Value Measurements](#iefa03c257a7c412c9b6c25f752dd3e40_166) | | | [176](#iefa03c257a7c412c9b6c25f752dd3e40_166) | | |

| [Note 13. Earnings Per Share](#iefa03c257a7c412c9b6c25f752dd3e40_169) | | | [183](#iefa03c257a7c412c9b6c25f752dd3e40_169) | | |

| [Note 14. Stock-Based Compensation](#iefa03c257a7c412c9b6c25f752dd3e40_172) | | | [184](#iefa03c257a7c412c9b6c25f752dd3e40_172) | | |

| [Note 15. Derivative Accounting](#iefa03c257a7c412c9b6c25f752dd3e40_175) | | | [187](#iefa03c257a7c412c9b6c25f752dd3e40_175) | | |

| [Note 16. Other Income and Other Expense](#iefa03c257a7c412c9b6c25f752dd3e40_178) | | | [191](#iefa03c257a7c412c9b6c25f752dd3e40_178) | | |

- We read APS’s 2022 rate application submitted to the ACC on October 28, 2022.

We read the minutes of the Boards of Directors

We read the Notice of Direct Appeal filed with the Arizona Court of Appeals and Petition for Special Action filed with the Arizona Supreme Court, read APS’s opening brief submitted to the Arizona Court of Appeals, read the ACC’s Answering Brief, read the Intervenors’ briefs, read APS’s reply brief, and observed the Appeal Oral Arguments, reviewed the Company’s internally prepared memo, and reviewed a legal letter from the Company’s external counsel to assess the likelihood of recovery in future rates or of a future reduction in rates based on the ACC decision.

Tempe, Arizona

February 27, 2023

| | | | 2022 | | | | | | 2021 | | |

| | | | 2022 | | | | | | 2021 | | |

| Net Income | | | $ | 500,826 | | | | | $ | 635,944 | | | | | $ | 570,052 | |

| Change in derivative instruments fair value | | | 777 | | | | | | — | | | | | | — | | |

| Net income | | | | | | | | | — | | | | | | | | | | | | — | | | | | | 483,602 | | | | | | — | | | | | | 17,224 | | | | | | 500,826 | | |

| Issuance of common stock | | | 232,661 | | | | | | 21,996 | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 21,996 | | |

| Balance, December 31, 2022 | | | 113,247,189 | | | | | | $ | 2,724,740 | | | | | (73,613) | | | | | | $ | (5,005) | | | | | $ | 3,360,347 | | | | | $ | (31,435) | | | | | $ | 111,229 | | | | | $ | 6,159,876 | |

Based on our evaluation under the framework in *Internal Control — Integrated Framework (2013),* our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

February 27, 2023

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

- We read relevant regulatory rate orders issued by the ACC for APS and other public utilities in Arizona, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the ACC’s treatment of similar costs under similar circumstances.

- We read the Company’s 2022 rate application submitted to the ACC on October 28, 2022.

We read the minutes of the Boards of Directors

of the Company for discussions of changes in legal, regulatory, or business factors which could impact management’s assessment.

Tempe, Arizona

February 27, 2023

| OPERATING REVENUES (Note 2) | | | $ | 4,324,385 | | | | | $ | 3,803,835 | | | | | $ | 3,586,982 | |

| Fuel and purchased power | | | 1,629,343 | | | | | | 1,152,551 | | | | | | 993,419 | | |

| Allowance for equity funds used during construction (Note 1) | | | 45,263 | | | | | | 41,737 | | | | | | 33,776 | | |

| Allowance for borrowed funds used during construction (Note 1) | | | (26,839) | | | | | | (21,052) | | | | | | (18,530) | | |

| Less: Net income attributable to noncontrolling interests (Note 17) | | | 17,224 | | | | | | 17,224 | | | | | | 19,493 | | |

| [Note 2. Revenue](#i846037845a49440fa7612a783c218cf2_130) | | | [119](#i846037845a49440fa7612a783c218cf2_130) | | |

| [Note 3. New Accounting Standards](#i846037845a49440fa7612a783c218cf2_133) | | | [121](#i846037845a49440fa7612a783c218cf2_133) | | |

| [Note 4. Regulatory Matters](#i846037845a49440fa7612a783c218cf2_136) | | | [121](#i846037845a49440fa7612a783c218cf2_136) | | |

| [Note 9. Leases](#i846037845a49440fa7612a783c218cf2_151) | | | [160](#i846037845a49440fa7612a783c218cf2_151) | | |

| [Note 10. Jointly-Owned Facilities](#i846037845a49440fa7612a783c218cf2_154) | | | [163](#i846037845a49440fa7612a783c218cf2_154) | | |

| [Note 11. Commitments and Contingencies](#i846037845a49440fa7612a783c218cf2_157) | | | [164](#i846037845a49440fa7612a783c218cf2_157) | | |

| [Note 12. Asset Retirement Obligations](#i846037845a49440fa7612a783c218cf2_160) | | | [172](#i846037845a49440fa7612a783c218cf2_160) | | |

| [Note 13. Fair Value Measurements](#i846037845a49440fa7612a783c218cf2_163) | | | [173](#i846037845a49440fa7612a783c218cf2_163) | | |

| [Note 14. Earnings Per Share](#i846037845a49440fa7612a783c218cf2_166) | | | [178](#i846037845a49440fa7612a783c218cf2_166) | | |

| [Note 15. Stock-Based Compensation](#i846037845a49440fa7612a783c218cf2_169) | | | [178](#i846037845a49440fa7612a783c218cf2_169) | | |

| [Note 16. Derivative Accounting](#i846037845a49440fa7612a783c218cf2_172) | | | [181](#i846037845a49440fa7612a783c218cf2_172) | | |

| [Note 17. Other Income and Other Expense](#i846037845a49440fa7612a783c218cf2_175) | | | [186](#i846037845a49440fa7612a783c218cf2_175) | | |

February 25, 2022

Phoenix, Arizona

◦We observed the ACC open meetings for the APS 2019 Retail Rate Case.

We read the ACC approved decision regarding the 2019 Retail Rate Case.

◦We obtained the Company’s internally prepared memo regarding impacts of the ACC decision to rates and recorded balances.

◦We tested that new rates were implemented within the system effective December 1, 2021.

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance, December 31, 2018 | | | 112,159,896 | | | | | | $ | 2,634,265 | | | | | (58,135) | | | | | | $ | (4,825) | | | | | $ | 2,641,183 | | | | | $ | (47,708) | | | | | $ | 125,790 | | | | | $ | 5,348,705 | |

| Net income | | | | | | | | | — | | | | | | | | | | | | — | | | | | | 538,320 | | | | | | — | | | | | | 19,493 | | | | | | 557,813 | | |

| Issuance of common stock | | | 380,230 | | | | | | 25,296 | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 25,296 | | |

| Balance, December 31, 2018 | | | 71,264,947 | | | | | | $ | 178,162 | | | | | $ | 2,721,696 | | | | | $ | 2,788,256 | | | | | $ | (27,107) | | | | | $ | 125,790 | | | | | $ | 5,786,797 | |

| Net income | | | | | | | | | — | | | | | | — | | | | | | 565,271 | | | | | | — | | | | | | 19,493 | | | | | | 584,764 | | |

| Other comprehensive loss | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | (8,415) | | | | | | — | | | | | | (8,415) | | |

and $3,415 million, respectively.

On March 13, 2020, due to the COVID-19 pandemic we voluntarily suspended disconnections of customers for nonpayment.

The suspension of customer disconnections was extended from March 13, 2020, through December 31, 2020.

The suspension of disconnection of customers for nonpayment ended on January 1, 2021, and certain customers with past due balances were placed on eight-month payment arrangements.

During this time, our disconnection policies were also impacted by the Summer Disconnection Moratorium.

These circumstances and the on-going COVID-19 pandemic continue to impact our allowance for doubtful accounts including our write-off factor.

See Note 1 for our accounting policies on allowance for doubtful accounts.

See Note 4 for additional discussion on the COVID-19 pandemic and the Summer Disconnection Moratorium.

New Accounting Standards

ASU 2021-05, Leases: Certain Leases with Variable Lease Payments

In July 2021, a new accounting standard was issued that amends the lease accounting guidance.

The amended guidance will require lessors to account for certain lease transactions, that contain variable lease payments, as operating leases.

The amendments are intended to eliminate the recognition of any day-one loss associated with certain sales-type and direct-financing lease transactions.

The changes do not impact lessee accounting.

Pinnacle West’s management, with the participation of Pinnacle West’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of Pinnacle West’s disclosure controls and procedures as of December 31, [removed: 2021.][added: 2022.]

APS’s management, with the participation of APS’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of APS’s disclosure controls and procedures as of December 31, [removed: 2021.][added: 2022.]

No change in Pinnacle West’s or APS’s internal control over financial reporting occurred during the fiscal quarter ended December 31, [removed: 2021,] [added: 2022,] that materially affected, or is reasonably likely to materially affect, Pinnacle West’s or APS’s internal control over financial reporting.

Reference is hereby made to “Information About Our Board and Corporate Governance” and “Proposal 1 — Election of Directors” in the Pinnacle West Proxy Statement relating to the Annual Meeting of Shareholders to be held on May [removed: 18, 2022] [added: 17, 2023] (the [removed: “2022] [added: “2023] Proxy Statement”) and to the “Information about our Executive Officers” section in Part I of this report.

Reference is hereby made to “Director Compensation,” “Executive Compensation,” and “Human Resources Committee Interlocks and Insider Participation” in the [removed: 2022] [added: 2023] Proxy Statement.

Reference is hereby made to “Ownership of Pinnacle West Stock” in the [removed: 2022] [added: 2023] Proxy Statement.

The following table sets forth information as of December 31, [removed: 2021,] [added: 2022,] with respect to the the 2021 Plan, 2012 Plan, the 2007 Plan, under which our equity securities are outstanding or currently authorized for issuance.

| Equity compensation plans approved by security holders | | | [removed: 1,243,225] [added: 1,340,572] | | | | | | — | | | | | | [removed: 1,241,996] [added: 864,533] | | |

See Note [removed: 15] [added: 14] of the Notes to Consolidated Financial Statements for additional information regarding these plans.

| Total | | | 1,340,572 | | | | | | — | | | | | | 864,533 | | |

| Total | | | 1,243,225 | | | | | | — | | | | | | 1,241,996 | | |

Reference is hereby made to “Information About Our Board and Corporate Governance” and “Related Party Transactions” in the [removed: 2022] [added: 2023] Proxy Statement.

Reference is hereby made to “Audit Matters — Audit Fees and — Pre-Approval Policies” in the [removed: 2022] [added: 2023] Proxy Statement.

| Type of Service | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Audit Fees (1) | | | | | | $ | [removed: 2,580,260] [added: 2,653,737] | | | | | $ | [removed: 2,414,909] [added: 2,580,260] | |

| Audit-Related Fees (2) | | | | | | [removed: 333,905] [added: 498,167] | | | | | | [removed: 323,067] [added: 333,905] | | |

(1) The aggregate fees billed for services rendered for the audit of annual financial statements and for review of financial statements included in Reports on Form [removed: 10-Q.][added: 10-K and Form 10-Q, respectively.]

(2) The aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements and are not included in Audit Fees reported above, which primarily consist of fees for employee benefit plan audits [added: and environmental, social and governance assurance readiness] performed in [removed: 2021] [added: 2022] and [removed: 2020.][added: 2021.]

All of the services performed by Deloitte & Touche LLP for APS in [removed: 2021] [added: 2022] were pre-approved by the Audit Committee or the Chair consistent with the pre-approval policy.

| 3.1 | | | | | | Pinnacle West | | | | | | [Articles of Incorporation, restated as of May 21, 2008](http://www.sec.gov/Archives/edgar/data/7286/000095015308001386/p76062exv3w1.htm) | | | | | | 3.1 to Pinnacle West/APS June 30, 2008 Form 10-Q Report, File No. 1-8962 | | | | | | [removed: 8/7/2008] | | |

| [removed: 3.3.1] [added: 3.3(1)] | | | | | | APS | | | | | | [Amendment to the Articles of Incorporation of Arizona Public Service Company, amended May 16, 2012](http://www.sec.gov/Archives/edgar/data/7286/000110465912039100/a12-12612_1ex3d1.htm) | | | | | | 3.1 to Pinnacle West/APS May 22, 2012 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 5/22/2012 | | |

| 3.4 | | | | | | APS | | | | | | [Arizona Public Service Company Bylaws, amended as of December 16, 2008](http://www.sec.gov/Archives/edgar/data/7286/000095013409003359/p14106exv3w4.htm) | | | | | | 3.4 to Pinnacle West/APS December 31, 2008 Form [removed: 10-K,] [added: 10-K Report,] File No. 1-4473 | | | | | | 2/20/2009 | | |

| [removed: 4.4a] [added: 4.4(a)] | | | | | | Pinnacle West | | | | | | [Fourth Supplemental Indenture dated as of June 17, 2020](https://www.sec.gov/Archives/edgar/data/764622/000076462220000049/exhibit41fourthsupplem.htm) | | | | | | 4.1 to Pinnacle West June 10, 2020 Form 8-K Report, File No. 1-8962 | | | | | | 6/16/2020 | | |

| [removed: 4.6a] [added: 4.6(a)] | | | | | | Pinnacle West APS | | | | | | [Seventh Supplemental Indenture dated as of May 1, 2003](http://www.sec.gov/Archives/edgar/data/7286/000095014703000593/ex4-1.txt) | | | | | | 4.1 to APS’s Registration Statement No. 333-90824 by means of May 7, 2003 Form 8-K Report, File No. 1-4473 | | | | | | 5/9/2003 | | |

| [removed: 4.6b] [added: 4.6(b)] | | | | | | Pinnacle West APS | | | | | | [Ninth Supplemental Indenture dated as of August 15, 2005](http://www.sec.gov/Archives/edgar/data/7286/000095015305002105/p71111exv4w1.htm) | | | | | | 4.1 to APS’s Registration Statements Nos. 333-106772 and 333-121512 by means of August 17, 2005 Form 8-K Report, File No. 1-4473 | | | | | | 8/22/2005 | | |

| [removed: 4.6c] [added: 4.6(c)] | | | | | | APS | | | | | | [Tenth Supplemental Indenture dated as of August 1, 2006](http://www.sec.gov/Archives/edgar/data/7286/000095015306002013/p72693exv4w1.htm) | | | | | | 4.1 to APS’s July 31, 2006 Form 8-K Report, File No. 1-4473 | | | | | | 8/3/2006 | | |

| [removed: 4.6d] [added: 4.6(d)] | | | | | | Pinnacle West APS | | | | | | [Twelfth Supplemental Indenture dated as of August 25, 2011](http://www.sec.gov/Archives/edgar/data/7286/000076462215000013/exhibit46f.htm) | | | | | | 4.6f to Pinnacle West/APS 2014 Form 10-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 2/20/2015 | | |

| [removed: 4.6e] [added: 4.6(e)] | | | | | | Pinnacle West APS | | | | | | [Thirteenth Supplemental Indenture dated as of January 13, 2012](http://www.sec.gov/Archives/edgar/data/7286/000076462215000013/exhibit46g.htm) | | | | | | 4.6g to Pinnacle West/APS 2014 Form 10-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 2/20/2015 | | |

| [removed: 4.6f] [added: 4.6(f)] | | | | | | Pinnacle West APS | | | | | | [Fourteenth Supplemental Indenture dated as of January 10, 2014](http://www.sec.gov/Archives/edgar/data/7286/000076462215000013/exhibit46h.htm) | | | | | | 4.6h to Pinnacle West/APS 2014 Form 10-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 2/20/2015 | | |

| [removed: 4.6g] [added: 4.6(g)] | | | | | | Pinnacle West APS | | | | | | [Fifteenth Supplemental Indenture dated as of June 18, 2014](http://www.sec.gov/Archives/edgar/data/7286/000076462215000013/exhibit46i.htm) | | | | | | 4.6i to Pinnacle West/APS 2014 Form 10-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 2/20/2015 | | |

| [removed: 4.6h] [added: 4.6(h)] | | | | | | Pinnacle West APS | | | | | | [Seventeenth Supplemental Indenture dated as of May 19, 2015](http://www.sec.gov/Archives/edgar/data/7286/000076462215000033/exhibit41seventeenthsupple.htm) | | | | | | 4.1 to Pinnacle West/APS May 14, 2015 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 5/19/2015 | | |

| [removed: 4.6i] [added: 4.6(i)] | | | | | | Pinnacle West APS | | | | | | [Eighteenth Supplemental Indenture dated as of November 6, 2015](http://www.sec.gov/Archives/edgar/data/7286/000076462215000073/exhibit41eighteenthsupplem.htm) | | | | | | 4.1 to Pinnacle West/APS November 3, 2015 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 11/6/2015 | | |

| [removed: 4.6j] [added: 4.6(j)] | | | | | | Pinnacle West APS | | | | | | [Nineteenth Supplemental Indenture dated as of May 6, 2016](http://www.sec.gov/Archives/edgar/data/7286/000110465916118564/a16-9669_3ex4d1.htm) | | | | | | 4.1 to Pinnacle West/APS May 3, 2016 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 5/6/2016 | | |

| [removed: 4.6k] [added: 4.6(k)] | | | | | | Pinnacle West APS | | | | | | [Twentieth Supplemental Indenture dated as of September 20, 2016](http://www.sec.gov/Archives/edgar/data/7286/000076462216000137/exhibit41twentiethsuppleme.htm) | | | | | | 4.1 to Pinnacle West/APS September 15, 2016 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 9/20/2016 | | |

| [removed: 4.6l] [added: 4.6(l)] | | | | | | Pinnacle West APS | | | | | | [Twenty-First Supplemental Indenture dated as of September 11, 2017](http://www.sec.gov/Archives/edgar/data/7286/000076462217000065/exhibit41twenty-firstsuppl.htm) | | | | | | 4.1 to Pinnacle West/APS September 11, 2017 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 9/11/2017 | | |

| [removed: 4.6m] [added: 4.6(m)] | | | | | | Pinnacle West APS | | | | | | [Twenty-Second Supplemental Indenture dated as of August 9, 2018](https://www.sec.gov/Archives/edgar/data/7286/000076462218000055/exhibit41twenty-secondsupp.htm) | | | | | | 4.1 to Pinnacle West/APS August 9, 2018 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 8/9/2018 | | |

| [removed: 4.6n] [added: 4.6(n)] | | | | | | Pinnacle West APS | | | | | | [Twenty-Third Supplemental Indenture dated as of February 28, 2019](http://www.sec.gov/Archives/edgar/data/7286/000076462219000025/exhibit41twenty-thirdsuppl.htm) | | | | | | 4.1 to Pinnacle West/APS February 28, 2019 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 2/28/2019 | | |

| [removed: 4.6o] [added: 4.6(o)] | | | | | | Pinnacle West APS | | | | | | [Twenty-Fourth Supplemental Indenture dated as of August 19, 2019](http://www.sec.gov/Archives/edgar/data/7286/000076462219000077/exhibit41twenty-fourth.htm) | | | | | | 4.1 to Pinnacle West/APS August 16, 2019 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 8/16/2019 | | |

| [removed: 4.6p] [added: 4.6(p)] | | | | | | Pinnacle West APS | | | | | | [Twenty-Fifth Supplemental Indenture dated as of November 20, 2019](http://www.sec.gov/Archives/edgar/data/7286/000076462219000100/exhibit41twenty-fifths.htm) | | | | | | 4.1 to Pinnacle West/APS November 20, 2019 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 11/20/2019 | | |

| [removed: 4.6q] [added: 4.6(q)] | | | | | | Pinnacle West APS | | | | | | [Twenty-Sixth Supplemental Indenture dated as of May 22, 2020](https://www.sec.gov/Archives/edgar/data/7286/000076462220000040/exhibit41twenty-sixths.htm) | | | | | | 4.1 to Pinnacle West/APS May 22, 2020 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 5/22/2020 | | |

| [removed: 4.6r] [added: 4.6(r)] | | | | | | Pinnacle West APS | | | | | | [Twenty-Seventh Supplemental Indenture dated as of September 11, 2020](https://www.sec.gov/Archives/edgar/data/7286/000076462220000064/exhibit41twenty-sevent.htm) | | | | | | 4.1 to Pinnacle West/APS September 11, 2020 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 9/11/2020 | | |

| [removed: 4.6s] [added: 4.6(s)] | | | | | | Pinnacle West APS | | | | | | [Twenty-Eighth Supplemental [removed: Indenture](https://www.sec.gov/Archives/edgar/data/7286/000076462221000056/exhibit4108162128thsupplem.htm) [dated] [added: Indenture dated] as of August 16, 2021](https://www.sec.gov/Archives/edgar/data/7286/000076462221000056/exhibit4108162128thsupplem.htm) | | | | | | 4.1 to Pinnacle West/APS August 16, 2021 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 8/16/2021 | | |

| [removed: 4.7a] [added: 4.7(a)] | | | | | | Pinnacle West | | | | | | [Third Amended and Restated Pinnacle West Capital Corporation Investors Advantage Plan dated as of November 25, 2008](http://www.sec.gov/Archives/edgar/data/764622/000095013408021205/p13537exv4w1.htm) | | | | | | 4.1 to Pinnacle West’s Form S-3 Registration Statement No. 333-155641, File No. 1-8962 | | | | | | 11/25/2008 | | |

| [removed: 4.8a] [added: 4.8(a)] | | | | | | Pinnacle West APS | | | | | | [Agreement, dated March 21, 1994, relating to the filing of instruments defining the rights of holders of APS long-term debt not in excess of 10% of APS’s total assets](http://www.sec.gov/Archives/edgar/data/7286/0000950147-94-000030.txt) | | | | | | 4.1 to APS’s 1993 Form 10-K Report, File No. 1-4473 | | | | | | 3/30/1994 | | |

| 4.9 | | | | | | Pinnacle West APS | | | | | | [Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of [removed: 1934](https://www.sec.gov/Archives/edgar/data/764622/000076462222000014/pnw20211231exhibit49.htm)] [added: 1934](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/pnw20221231exhibit49.htm)] | | | | | | | | | | | | | | |

| [removed: 10.1.1] [added: 10.1(1)] | | | | | | Pinnacle West APS | | | | | | Two separate Decommissioning Trust Agreements (relating to PVGS Units 1 and 3, respectively), each dated July 1, 1991, between APS and Mellon Bank, N.A., as Decommissioning Trustee | | | | | | 10.2 to APS’s September 30, 1991 Form 10-Q Report, File No. 1-4473 | | | | | | 11/14/1991 | | |

| [removed: 10.1.1a] [added: 10.1(1)(a)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 1 to Decommissioning Trust Agreement (PVGS Unit 1), dated as of December 1, 1994](http://www.sec.gov/Archives/edgar/data/7286/0000950147-95-000038.txt) | | | | | | 10.1 to APS’s 1994 Form 10-K Report, File No. 1-4473 | | | | | | 3/30/1995 | | |

| [removed: 10.1.1b] [added: 10.1(1)(b)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 1 to Decommissioning Trust Agreement (PVGS Unit 3), dated as of December 1, 1994](http://www.sec.gov/Archives/edgar/data/7286/0000950147-95-000038.txt) | | | | | | 10.2 to APS’s 1994 Form 10-K Report, File No. 1-4473 | | | | | | 3/30/1995 | | |

| [removed: 10.1.1c] [added: 10.1(1)(c)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 2 to APS Decommissioning Trust Agreement (PVGS Unit 1) dated as of July 1, 1991](http://www.sec.gov/Archives/edgar/data/7286/0000950147-97-000184.txt) | | | | | | 10.4 to APS’s 1996 Form 10-K [removed: Report ,] [added: Report,] File No. 1-4473 | | | | | | 3/28/1997 | | |

| [removed: 10.1.1d] [added: 10.1(1)(d)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 2 to APS Decommissioning Trust Agreement (PVGS Unit 3) dated as of July 1, 1991](http://www.sec.gov/Archives/edgar/data/7286/0000950147-97-000184.txt) | | | | | | 10.6 to APS’s 1996 Form 10-K Report, File No. 1-4473 | | | | | | 3/28/1997 | | |

| [removed: 10.1.1e] [added: 10.1(1)(e)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 3 to the Decommissioning Trust Agreement (PVGS Unit 1), dated as of March 18, 2002](http://www.sec.gov/Archives/edgar/data/764622/000095014702000674/ex10-2.txt) | | | | | | 10.2 to Pinnacle West’s March 31, 2002 Form 10-Q Report, File No. 1-8962 | | | | | | 5/15/2002 | | |

| [removed: 10.1.1f] [added: 10.1(1)(f)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 3 to the Decommissioning Trust Agreement (PVGS Unit 3), dated as of March 18, 2002](http://www.sec.gov/Archives/edgar/data/764622/000095014702000674/ex10-4.txt) | | | | | | 10.4 to Pinnacle West’s March 2002 Form 10-Q Report, File No. 1-8962 | | | | | | 5/15/2002 | | |

| [removed: 10.1.1g] [added: 10.1(1)(g)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 4 to the Decommissioning Trust Agreement (PVGS Unit 1), dated as of December 19, 2003](http://www.sec.gov/Archives/edgar/data/764622/000095015304000639/p68820exv10w3.txt) | | | | | | 10.3 to Pinnacle West’s 2003 Form 10-K Report, File No. 1-8962 | | | | | | 3/15/2004 | | |

| [removed: 10.1.1h] [added: 10.1(1)(h)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 4 to the Decommissioning Trust Agreement (PVGS Unit 3), dated as of December 19, 2003](http://www.sec.gov/Archives/edgar/data/764622/000095015304000639/p68820exv10w5.txt) | | | | | | 10.5 to Pinnacle West’s 2003 Form 10-K Report, File No. 1-8962 | | | | | | 3/15/2004 | | |

| [removed: 10.1.1i] [added: 10.1(1)(i)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 5 to the Decommissioning Trust Agreement (PVGS Unit 1), dated as of May 1, 2007](http://www.sec.gov/Archives/edgar/data/7286/000095015307001049/p73819exv10w1.htm) | | | | | | 10.1 to Pinnacle West/APS March 31, 2007 Form 10-Q Report, File Nos. 1-8962 and 1-4473 | | | | | | 5/9/2007 | | |

| [removed: 10.1.1j] [added: 10.1(1)(j)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 5 to the Decommissioning Trust Agreement (PVGS Unit 3), dated as of May 1, 2007](http://www.sec.gov/Archives/edgar/data/7286/000095015307001049/p73819exv10w2.htm) | | | | | | 10.2 to Pinnacle West/APS March 31, 2007 Form 10-Q Report, File Nos. 1-8962 and 104473 | | | | | | 5/9/2007 | | |

| [removed: 10.1.2] [added: 10.1(2)] | | | | | | Pinnacle West APS | | | | | | Amended and Restated Decommissioning Trust Agreement (PVGS Unit 2) dated as of January 31, 1992, among APS, Mellon Bank, N.A., as Decommissioning Trustee, and State Street Bank and Trust Company, as successor to The First National Bank of Boston, as Owner Trustee under two separate Trust Agreements, each with a separate Equity Participant, and as Lessor under two separate Facility Leases, each relating to an undivided interest in PVGS Unit 2 | | | | | | 10.1 to Pinnacle West’s 1991 Form 10-K Report, File No. 1-8962 | | | | | | 3/26/1992 | | |

| [removed: 10.1.2a] [added: 10.1(2)(a)] | | | | | | Pinnacle West APS | | | | | | First Amendment to Amended and Restated Decommissioning Trust Agreement (PVGS Unit 2), dated as of November 1, 1992 | | | | | | 10.2 to APS’s 1992 Form 10-K Report, File No. 1-4473 | | | | | | 3/30/1993 | | |

| [removed: 10.1.2b] [added: 10.1(2)(b)] | | | | | | Pinnacle West APS | | | | | | [Amendment No. 2 to Amended and Restated Decommissioning Trust Agreement (PVGS Unit 2), dated as of November 1, 1994](http://www.sec.gov/Archives/edgar/data/7286/0000950147-95-000038.txt) | | | | | | 10.3 to APS’s 1994 Form 10-K Report, File No. 1-4473 | | | | | | 3/30/1995 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | 8/7/2008 | | |

| 4.6(t) | | | | | | Pinnacle West APS | | | | | | [Twenty-Ninth Supplemental Indenture dated as of November 8, 2022](https://www.sec.gov/Archives/edgar/data/764622/000076462222000097/exhibit4129thsupplementind.htm) | | | | | | 4.1 to Pinnacle West/APS November 8, 2022 Form 8-K Report, File Nos. 1-8962 and 1-4473 | | | | | | 11/8/2022 | | |

| 10.4(8)b | | | | | | Pinnacle West APS | | | | | | [Offer of Employment Letter dated May 19, 2022 between APS and Adam Heflin](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex1048.htm) | | | | | | | | | | | | | | |

| 10.4(9)b | | | | | | Pinnacle West APS | | | | | | [Discretionary Credit Award Agreement dated](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex1049.htm) [June 21](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex1049.htm)[, 2019](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex1049.htm) [](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex1049.htm)[between APS and](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex1049.htm) [Jacob Tetlow](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex1049.htm) | | | | | | | | | | | | | | |

| 10.4(10)b | | | | | | Pinnacle West APS | | | | | | [First Amendment to Discretionary Credit Award Agreement dated February 2](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex10410.htm)[1](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex10410.htm)[, 2021 between APS and Jacob Tetlow](https://www.sec.gov/Archives/edgar/data/764622/000076462223000023/ex10410.htm) | | | | | | | | | | | | | | |

| 10.6.5sbd | | | | | | Pinnacle West | | | | | | [Form of Performance Share Award Agreement under the Pinnacle West Capital Corporation 2021 Long-Term Incentive Plan](https://www.sec.gov/Archives/edgar/data/764622/000076462222000014/pnw20211231exhibit1065s.htm) | | | | | | | | | | | | | | |

| 10.15.3a | | | | | | Pinnacle West APS | | | | | | [Addendum to Memorandum of Agreement between APS and SRP dated as of May 19, 1998](http://www.sec.gov/Archives/edgar/data/7286/0000950147-98-000493.txt) | | | | | | 10.2 to APS’s May 19, 1998 Form 8-K Report, File No. 1-4473 | | | | | | 6/26/1998 | | |

| Date: February [removed: 25, 2022] [added: 27, 2023] | | | /s/ Jeffrey B. Guldner | | |

| | | | (Jeffrey B. Guldner, Chairman of the Board of [removed: Directors, President] [added: Directors] and Chief Executive Officer) | | |

We, the undersigned directors and executive officers of Pinnacle West Capital Corporation, hereby severally appoint [removed: Theodore N.][added: Andrew Cooper and Robert E.]

| /s/ Jeffrey B. Guldner | | | | | | Principal Executive Officer | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ [removed: Theodore N. Geisler] [added: Andrew Cooper] | | | | | | Principal Financial Officer | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ Elizabeth A. Blankenship | | | | | | Principal Accounting Officer | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ Glynis A. Bryan | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ Richard P. Fox | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ Dale E. Klein, [removed: Ph.D.] [added: Ph. D.] | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ Kathryn L. Munro | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ Bruce J. Nordstrom | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ Paula J. Sims | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ William H. Spence | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ James E. Trevathan, Jr. | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ David P. Wagener | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

We, the undersigned directors and executive officers of Arizona Public Service Company, hereby severally appoint [removed: Theodore N.][added: Andrew Cooper and Robert E.]

| of the Board of [removed: Directors, President] [added: Directors] and | | | | | | | | | | | | | | |

| /s/ Dale E. [removed: Klein] [added: Klein, Ph. D.] | | | | | | Director | | | | | | February [removed: 25, 2022] [added: 27, 2023] | | |

| /s/ James E. Trevathan, Jr. | | | | | | [added: Director] | | | | | | [added: February 27, 2023] | | |

| (Andrew Cooper, | | | | | | | | | | | | | | |

| /s/ Gonzalo A. de la Melena, Jr. | | | | | | Director | | | | | | February 27, 2023 | | |

| (Gonzalo A. de la Melena, Jr.) | | | | | | | | | | | | | | |

| Date: February 27, 2023 | | | /s/ Jeffrey B. Guldner | | |

| /s/ Jeffrey B. Guldner | | | | | | Principal Executive Officer | | | | | | February 27, 2023 | | |

| /s/ Andrew Cooper | | | | | | Principal Financial Officer | | | | | | February 27, 2023 | | |

| (Andrew Cooper, | | | | | | | | | | | | | | |

| /s/ Elizabeth A. Blankenship | | | | | | Principal Accounting Officer | | | | | | February 27, 2023 | | |

| /s/ Glynis A. Bryan | | | | | | Director | | | | | | February 27, 2023 | | |

| /s/ Richard P. Fox | | | | | | Director | | | | | | February 27, 2023 | | |

| /s/ Gonzalo A. de la Melena, Jr. | | | | | | Director | | | | | | February 27, 2023 | | |

| (Gonzalo A. de la Melena, Jr.) | | | | | | | | | | | | | | |

| /s/ Kathryn L. Munro | | | | | | Director | | | | | | February 27, 2023 | | |

| /s/ Bruce J. Nordstrom | | | | | | Director | | | | | | February 27, 2023 | | |

| /s/ Paula J. Sims | | | | | | Director | | | | | | February 27, 2023 | | |

| /s/ William H. Spence | | | | | | Director | | | | | | February 27, 2023 | | |

| | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | |

| /s/ David P. Wagener | | | | | | Director | | | | | | February 27, 2023 | | |

| | | | | | | | | | | | | | | |

Geisler and Robert E.

| (Theodore N. Geisler, | | | | | | | | | | | | | | |

| /s/ Denis A. Cortese, M.D. | | | | | | Director | | | | | | February 25, 2022 | | |

| (Denis A. Cortese, M.D.) | | | | | | | | | | | | | | |

| | | | | | | Director | | | | | | February 25, 2022 | | |