APS Files for 2009 Rate Changes

Continued construction of needed power supply facilities and dramatic increases in basic commodity costs have compelled Arizona Public Service (APS) to ask the Arizona Corporation Commission (ACC) to approve an increase in retail customer prices of $265.5 million annually to become effective no later than July 1, 2009.

The 8.1 percent average net increase takes into account a proposal to implement an impact fee for new customers to connect to the system. The fee will enable growth to partially pay for itself.

The growing demand for electricity in Arizona requires us to build more infrastructure, which has become increasingly more expensive, said APS CEO and President Don Brandt. We must continue to invest approximately $1 billion a year in our system to maintain reliable service to our customers, something to which we are deeply committed.

Costs for the basic building blocks for providing electricity such as copper, steel and aluminum are up 273 percent, 142 percent and 51 percent, respectively, since 2001. A transformer that cost $953 in 2003 now costs $1,626, a 70 percent increase. Gasoline to fuel APS line trucks and other vehicles has increased more than 120 percent.

We dont like to raise prices, said Brandt. While other businesses have a choice to limit their capital investments in response to market conditions, APS does not. Even as we prepare for another challenging summer, our current prices do not reflect all of the costs of the equipment that keeps the lights on and our homes cool.

In addition, APS seeks to continue working with the ACC on ways to expand and promote the Companys conservation and demand-side management programs. APS proposes new Time of Use rates as well as a super peak rate option from 3 p.m. to 6 p.m. during the hottest summer months when conservation measures can have their greatest impact. With 40 percent enrollment, APS leads the nation in Time of Use customer participation. These voluntary programs offer customers lower rates during non-peak hours.

We are continuing to develop programs that help our customers use electricity more efficiently and reduce the impact of this rate increase. The ability to fund and carry these programs forward depends on positive outcomes in this rate filing, said Brandt.

If the Companys request is approved by the ACC, an average monthly residential bill would increase by $11.51 or, a little less than one cent per kilowatt hour from $123.90 to $135.41 based on an average year-round usage of 1,175 kilowatt hours.

Even with the current economic slowdown, Arizona continues to grow. APS expects to add 430,000 customers by 2020, including roughly 380,000 new homes and 50,000 new businesses. The Company will need 4,500 additional megawatts to meet this need.

APS is aggressively planning for its next round of generation, including power from renewable energy such as the recently announced Solana Generating Station. If built today, Solana would be the worlds largest solar facility at 280 megawatts and provide APS customers with more solar energy than any other utility in the nation. Currently, APS provides more than 130 MW of renewable energy to customers from solar, wind and biomass and offers customers the opportunity to purchase as much renewable energy as they choose. In addition, APS continues to invest in new technologies that reduce greenhouse gas emissions.

In 2007, APS recorded all-time best reliability results while setting 34,000 new meters and managing one of the hottest summers on record. The Company expects similar performance through the upcoming summer as a result of the reliability enhancements it has made to the system.

Arizonas future requires an electric company that is strong enough to power a growing economy and attract the capital to finance required expansion. The ability to recover our costs is essential for the Company to maintain the highest levels of reliability and continue building the necessary infrastructure to meet the demands of our customers and the state, said Brandt.

The Company expects the ACC to issue a procedural schedule during the next several months detailing the timeline for addressing the request.

APS, Arizonas largest and longest-serving electricity utility, serves about 1.1 million customers in 11 of the states 15 counties. With headquarters in Phoenix, APS is the largest subsidiary of Pinnacle West Capital Corporation (NYSE: PNW).

Contacts:

APS, Phoenix
Media Contacts:
Jim McDonald, 602-250-3703 or 602-321-3738
Dan Wool, 602-250-3127 or 480-280-8287
Analyst Contacts:
Rebecca Hickman, 602-250-5668
Lisa Malagon, 602-250-5671
www.aps.com

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