Item 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A — Risk Factors in the 2021 Form 10-K, which could materially affect the business, financial condition, cash flows or future results of Pinnacle West and APS. The risks described in the 2021 Form 10-K are not the only risks facing Pinnacle West and APS. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect the business, financial condition, cash flows and/or operating results of Pinnacle West and APS.

The risk factor below is an update to our 2021 Form 10-K.

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; deflation; 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, while inflation has been relatively flat in recent years, during 2021 and 2022, the United States’ economy has experienced a substantial rise in the inflation rate. There is increased uncertainty in the near-term outlook as to whether the rise in inflation will continue. Increases in inflation raise the Company’s costs for commodities, labor, materials and services. A failure to recover through our rates increased costs caused by increased inflation could have a material adverse impact on our financial condition, results of operations or cash flows.