Arizona Public Service 8-K Results of Operations and Financial Condition

Exhibit 99.6

Last Updated
2/20/09

Pinnacle West Capital Corporation
Earnings Variance Explanations
For Three-Month and Twelve-Month Periods Ended December 31, 2008 and 2007

     The following discussion includes earnings variance explanations for Pinnacle West Capital Corporation (“Pinnacle West”) for the three months and twelve months ended December 31, 2008 and 2007. We suggest that this discussion be read in connection with the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Additional operating and financial statistics and a glossary of terms are available on our website (www.pinnaclewest.com).

EARNINGS CONTRIBUTION BY BUSINESS SEGMENT

     Pinnacle West’s two reportable business segments are:

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

• our real estate segment, which consists of SunCor’s real estate development and investment activities.

     The following table presents income (loss) from continuing operations for our regulated electricity and real estate segments and reconciles those amounts to our consolidated net income (loss) (dollars in millions):

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2008			2007			2008			2007
Regulated electricity segment	$	(17	)	$	(3	)	$	256		$	274
Real estate segment (a)		(36	)		6			(49	)		14
All other (b)		4			1			7			11
Income (loss) from continuing operations		(49	)		4			214			299
Income (loss) from discontinued operations — net of tax:
Real estate segment (c)		2			2			23			9
All other (b)		8			(3	)		5			(1	)
Net income (loss)	$	(39	)	$	3		$	242		$	307

(a)	SunCor’s net loss in 2008 included a $32 million after-tax real estate impairment charge.
(b)	Includes activities related to marketing and trading, APSES, Silverhawk and El Dorado. Income from discontinued operations for 2008 is primarily related to the resolution of certain tax issues associated with the sale of Silverhawk in 2005. The 2007 loss is primarily related to an APSES project. None of these segments is a reportable segment.
(c)	Primarily relates to sales of commercial properties.

Last Updated
2/20/09

PINNACLE WEST CONSOLIDATED — RESULTS OF OPERATIONS

Operating Results — Three-month period ended December 31, 2008 compared with three-month period ended December 31, 2007

     Our consolidated net loss for the three months ended December 31, 2008 was $39 million, compared with net income of $3 million for the comparable prior-year period. The major factors that increased (decreased) our net income for the three-month comparison are summarized in the following table (dollars in millions):

	Increase (Decrease)
	Pretax			After Tax
Regulated electricity segment:
Transmission rate increases (including related retail rates)	$	9		$	5
Lower mark-to-market valuations of fuel and purchased power contracts related to changes in market prices, net of related PSA deferrals		(12	)		(7	)
Higher interest expense, net of capitalized financing costs, primarily due to higher rates on certain APS pollution control bonds and higher short-term debt balances		(12	)		(7	)
Higher taxes other than income taxes primarily due to changes in property tax valuation assessments		(7	)		(4	)
Miscellaneous items, net		(6	)		(1	)
Decrease in regulated electricity segment net income		(28	)		(14	)
Real estate impairment charge		(53	)		(32	)
Lower real estate contribution primarily due to lower land parcel and home sales resulting from the weak real estate market		(16	)		(10	)
Other miscellaneous items, net		4			3
Decrease in income from continuing operations	$	(93	)		(53	)
Increase in other income from discontinued operations primarily related to the resolution in 2008 of certain tax issues associated with the sale of Silverhawk in 2005					11
Decrease in net income				$	(42	)

Operating Results — Twelve-month period ended December 31, 2008 compared with twelve-month period ended December 31, 2007

     Our consolidated net income decreased approximately $65 million, to $242 million in 2008 from $307 million in 2007. The major factors that increased (decreased) our net income for the year-to-year comparison are summarized in the following table (dollars in millions):

Last Updated
2/20/09

	Increase (Decrease)
	Pretax			After Tax
Regulated electricity segment:
Impacts of retail rate increase effective July 1, 2007 and transmission rate increases:
Retail revenue increase primarily related to higher Base Fuel Rate	$	156		$	95
Decreased deferred fuel and purchased power costs related to higher Base Fuel Rate		(141	)		(86	)
Transmission rate increases (including related retail rates)		31			19
Lower mark-to-market valuations of fuel and purchased power contracts related to changes in market prices, net of related PSA deferrals		(14	)		(9	)
Regulatory disallowance in 2007		14			8
Higher retail sales primarily due to customer growth, excluding weather effects, partially offset by lower average usage		21			13
Effects of weather on retail sales		(43	)		(26	)
Operations and maintenance expense increases primarily due to:
Customer service and other costs, including distribution system reliability		(30	)		(18	)
Generation costs, including more planned maintenance		(18	)		(11	)
Employee severance costs		(9	)		(5	)
Higher depreciation and amortization primarily due to increased utility plant in service		(18	)		(11	)
Income tax benefits related to prior years resolved in 2008		—			30
Income tax benefits related to prior years resolved in 2007		—			(13	)
Higher interest expense, net of capitalized financing costs, primarily due to higher rates on certain APS pollution control bonds and higher short-term debt balances		(15	)		(9	)
Miscellaneous items, net		1			5
Decrease in regulated electricity segment net income		(65	)		(18	)
Lower real estate segment income from continuing operations primarily due to:
Real estate impairment charge		(53	)		(32	)
Lower land parcel sales resulting from the weak real estate market		(40	)		(24	)
Lower sales of residential property resulting from the weak real estate market		(4	)		(2	)
Higher other costs		(7	)		(5	)
Lower marketing and trading contribution primarily due to lower sales volumes		(16	)		(10	)
Other miscellaneous items, net		14			6
Decrease in income from continuing operations	$	(171	)		(85	)
Increase in real estate segment income from discontinued operations primarily related to a 2008 commercial property sale					14
Increase in other income from discontinued operations primarily related to the resolution in 2008 of certain tax issues associated with the sale of Silverhawk in 2005					6
Decrease in net income				$	(65	)

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)

	THREE MONTHS ENDED
	DECEMBER 31,						Increase (Decrease)
	2008			2007			Amount			Percent
Operating Revenues
Regulated electricity segment	$	634,756		$	627,096		$	7,660			1.2	%	B
Real estate segment		27,480			40,924			(13,444	)		32.9	%	W
Marketing and trading		9,274			29,149			(19,875	)		68.2	%	W
Other revenues		14,905			11,905			3,000			25.2	%	B
Total		686,415			709,074			(22,659	)		3.2	%	W
Operating Expenses
Regulated electricity segment fuel and purchased power		267,198			259,991			7,207			2.8	%	W
Real estate segment operations		30,219			39,644			(9,425	)		23.8	%	B
Real estate impairment charge		53,250			—			53,250			100.0	%	W
Marketing and trading fuel and purchased power		1,443			19,589			(18,146	)		92.6	%	B
Operations and maintenance		209,797			205,579			4,218			2.1	%	W
Depreciation and amortization		98,434			95,536			2,898			3.0	%	W
Taxes other than income taxes		30,510			23,802			6,708			28.2	%	W
Other expenses		13,090			10,388			2,702			26.0	%	W
Total		703,941			654,529			49,412			7.5	%	W
Operating Income		(17,526	)		54,545			(72,071	)		132.1	%	W
Other
Allowance for equity funds used during construction		2,425			6,321			(3,896	)		61.6	%	W
Other income		2,028			12,718			(10,690	)		84.1	%	W
Other expense		(9,523	)		(12,183	)		2,660			21.8	%	B
Total		(5,070	)		6,856			(11,926	)		173.9	%	W
Interest Expense
Interest charges		58,710			53,417			5,293			9.9	%	W
Capitalized interest		(4,227	)		(7,608	)		3,381			44.4	%	W
Total		54,483			45,809			8,674			18.9	%	W
Income (Loss) From Continuing Operations Before Income Taxes		(77,079	)		15,592			(92,671	)		594.3	%	W
Income Taxes		(28,373	)		11,124			(39,497	)		355.1	%	B
Income (Loss) From Continuing Operations		(48,706	)		4,468			(53,174	)		1190.1	%	W
Income (Loss) From Discontinued Operations
Net of Income Taxes		9,856			(1,557	)		11,413			733.0	%	B
Net Income (Loss)	$	(38,850	)	$	2,911		$	(41,761	)		1434.6	%	W
Weighted-Average Common Shares Outstanding — Basic		100,836			100,420			416			0.4	%
Weighted-Average Common Shares Outstanding — Diluted		100,836			100,963			(127	)		0.1	%
Earnings Per Weighted-Average Common Share Outstanding
Income (loss) from continuing operations — basic	$	(0.48	)	$	0.04		$	(0.52	)		1300.0	%	W
Net income (loss) — basic	$	(0.39	)	$	0.03		$	(0.42	)		1400.0	%	W
Income (loss) from continuing operations — diluted	$	(0.48	)	$	0.04		$	(0.52	)		1300.0	%	W
Net income (loss) — diluted	$	(0.39	)	$	0.03		$	(0.42	)		1400.0	%	W

B — Better

W — Worse

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)

	TWELVE MONTHS ENDED
	DECEMBER 31,						Increase (Decrease)
	2008			2007			Amount			Percent
Operating Revenues
Regulated electricity segment	$	3,127,383		$	2,918,163		$	209,220			7.2	%	B
Real estate segment		131,067			212,586			(81,519	)		38.3	%	W
Marketing and trading		66,897			138,247			(71,350	)		51.6	%	W
Other revenues		41,729			48,018			(6,289	)		13.1	%	W
Total		3,367,076			3,317,014			50,062			1.5	%	B
Operating Expenses
Regulated electricity segment fuel and purchased power		1,284,116			1,140,923			143,193			12.6	%	W
Real estate segment operations		149,125			192,972			(43,847	)		22.7	%	B
Real estate impairment charge		53,250			—			53,250			100.0	%	W
Marketing and trading fuel and purchased power		45,572			100,462			(54,890	)		54.6	%	B
Operations and maintenance		807,852			728,340			79,512			10.9	%	W
Depreciation and amortization		390,358			372,102			18,256			4.9	%	W
Taxes other than income taxes		125,336			128,210			(2,874	)		2.2	%	B
Other expenses		34,171			38,925			(4,754	)		12.2	%	B
Total		2,889,780			2,701,934			187,846			7.0	%	W
Operating Income		477,296			615,080			(137,784	)		22.4	%	W
Other
Allowance for equity funds used during construction		18,636			21,195			(2,559	)		12.1	%	W
Other income		12,078			24,694			(12,616	)		51.1	%	W
Other expense		(31,576	)		(25,857	)		(5,719	)		22.1	%	W
Total		(862	)		20,032			(20,894	)		104.3	%	W
Interest Expense
Interest charges		216,290			208,521			7,769			3.7	%	W
Capitalized interest		(18,820	)		(23,063	)		4,243			18.4	%	W
Total		197,470			185,458			12,012			6.5	%	W
Income From Continuing Operations Before Income Taxes		278,964			449,654			(170,690	)		38.0	%	W
Income Taxes		65,407			150,910			(85,503	)		56.7	%	B
Income From Continuing Operations		213,557			298,744			(85,187	)		28.5	%	W
Income From Discontinued Operations
Net of Income Taxes		28,568			8,399			20,169			240.1	%	B
Net Income	$	242,125		$	307,143		$	(65,018	)		21.2	%	W
Weighted-Average Common Shares Outstanding — Basic		100,691			100,256			435			0.4	%
Weighted-Average Common Shares Outstanding — Diluted		100,965			100,835			130			0.1	%
Earnings Per Weighted-Average Common Share Outstanding
Income from continuing operations — basic	$	2.12		$	2.98		$	(0.86	)		28.9	%	W
Net income — basic	$	2.40		$	3.06		$	(0.66	)		21.6	%	W
Income from continuing operations — diluted	$	2.12		$	2.96		$	(0.84	)		28.4	%	W
Net income — diluted	$	2.40		$	3.05		$	(0.65	)		21.3	%	W

B — Better

W — Worse