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

Pinnacle West Capital Corporation

Quarterly Consolidated Statistical Summary

Periods Ended September 30, 2005 and 2004

			3 Mo. Ended September								9 Mo. Ended September
Line			2005			2004		Incr (Decr)			2005			2004			Incr (Decr)
		EARNINGS CONTRIBUTION BY SUBSIDIARY ($ Millions)
	1	Arizona Public Service	$	61		$	95	$	(34	)	$	152		$	185		$	(33	)
	2	Pinnacle West Energy		(71	)		1		(72	)		(80	)		(35	)		(45	)
	3	APS Energy Services		—			1		(1	)		(3	)		4			(7	)
	4	SunCor		6			4		2			26			10			16
	5	El Dorado		—			—		—			(1	)		33			(34	)
	6	Parent Company		89			3		86			105			12			93
	7	Income From Continuing Operations		85			104		(19	)		199			209			(10	)
	8	Loss From Discontinued Operations — Net of Tax		19			1		18			(44	)		—			(44	)
	9	Cumulative Effect of Change in Accounting — Net of Tax		—			—		—			—			—			—
	10	Net Income	$	104		$	105	$	(1	)	$	155		$	209		$	(54	)
		EARNINGS PER SHARE BY SUBSIDIARY — DILUTED
	11	Arizona Public Service	$	0.62		$	1.04	$	(0.42	)	$	1.59		$	2.02		$	(0.43	)
	12	Pinnacle West Energy		(0.72	)		0.01		(0.73	)		(0.83	)		(0.39	)		(0.44	)
	13	APS Energy Services		—			0.01		(0.01	)		(0.03	)		0.05			(0.08	)
	14	SunCor		0.07			0.05		0.02			0.27			0.11			0.16
	15	El Dorado		(0.01	)		—		(0.01	)		(0.01	)		0.36			(0.37	)
	16	Parent Company		0.90			0.03		0.87			1.09			0.13			0.96
	17	Income From Continuing Operations		0.86			1.14		(0.28	)		2.08			2.28			(0.20	)
	18	Loss From Discontinued Operations — Net of Tax		0.19			0.01		0.18			(0.46	)		0.01			(0.47	)
	19	Cumulative Effect of Change in Accounting — Net of Tax		—			—		—			—			—			—
	20	Net Income	$	1.05		$	1.15	$	(0.10	)	$	1.62		$	2.29		$	(0.67	)
	21	BOOK VALUE PER SHARE	$	35.82		$	32.55	$	3.27		$	35.82		$	32.55		$	3.27
		COMMON SHARES OUTSTANDING — DILUTED (Thousands)
	22	Average		98,816			91,491		7,325			95,755			91,430			4,325
	23	End of Period		98,881			91,443		7,438			98,881			91,443			7,438

See Glossary of Terms. Page 2 of 31

Pinnacle West Capital Corporation

Quarterly Consolidated Statistical Summary

Periods Ended September 30, 2005 and 2004

			3 Mo. Ended September							9 Mo. Ended September
Line			2005		2004		Incr (Decr)			2005		2004		Incr (Decr)
		ELECTRIC OPERATING REVENUES (Dollars in Millions)
		REGULATED ELECTRICITY SEGMENT
		Retail
	24	Residential	$	414	$	360	$	54		$	872	$	794	$	78
	25	Business		308		289		19			798		757		41
	26	Total retail		722		649		73			1,670		1,551		119
		Wholesale revenue on delivered electricity
	27	Traditional contracts		9		6		3			17		13		4
	28	Off-system sales		8		—		8			20		—		20
	29	Transmission for others		7		8		(1	)		21		24		(3	)
	30	Other miscellaneous services		7		8		(1	)		21		18		3
	31	Total regulated electricity		753		671		82			1,749		1,606		143
		MARKETING AND TRADING SEGMENT
	32	Electricity and other commodity sales		107		91		16			267		290		(23	)
	33	Total operating electric revenues	$	860	$	762	$	98		$	2,016	$	1,896	$	120
		ELECTRIC SALES (GWH)
		REGULATED ELECTRICITY SEGMENT
		Retail sales
	34	Residential		4,449		4,028		421			9,705		9,160		545
	35	Business		4,100		3,937		163			10,826		10,590		236
	36	Total retail		8,549		7,965		584			20,531		19,750		781
		Wholesale electricity delivered
	37	Traditional contracts		269		210		59			624		543		81
	38	Off-system sales		212		—		212			810		—		810
	39	Retail load hedge management		1,026		943		83			2,478		1,843		635
	40	Total regulated electricity		10,056		9,118		938			24,443		22,136		2,307
		MARKETING AND TRADING SEGMENT
	41	Wholesale sales of electricity		7,228		8,995		(1,767	)		17,906		21,834		(3,928	)
	42	Total electric sales		17,284		18,113		(829	)		42,349		43,970		(1,621	)

See Glossary of Terms. Page 3 of 31

Pinnacle West Capital Corporation

Quarterly Consolidated Statistical Summary

Periods Ended September 30, 2005 and 2004

			3 Mo. Ended September									9 Mo. Ended September
Line			2005			2004			Incr (Decr)			2005			2004			Incr (Decr)
		POWER SUPPLY ADJUSTOR (“PSA”) — REGULATED ELECTRICITY SEGMENT (Dollars in Millions)
	43	Deferred fuel and purchased power regulatory asset — beginning balance	$	38		$	—		$	38		$	—		$	—		$	—
	44	Deferred fuel and purchased power costs — current period		105			—			105			143			—			143
	45	Amounts recovered through revenues		—			—		$	—			—			—			—
	46	Deferred fuel and purchased power regulatory asset — end of period	$	143		$	—		$	143		$	143		$	—		$	143
		MARKETING AND TRADING SEGMENT PRETAX GROSS MARGIN ANALYSIS (Dollars in Millions)
		Realized and Mark-To-Market Components
	47	Electricity and other commodity sales, realized (a)	$	3		$	13		$	(10	)	$	33		$	47		$	(14	)
	48	Mark-to-market reversals on realized sales (b)		3			(3	)		6			(5	)		(4	)		(1	)
	49	Change in mark-to-market value of forward sales		14			5			9			24			15			9
	50	Total gross margin	$	20		$	15		$	5		$	52		$	58		$	(6	)
		By Pinnacle West Entity
	51	Parent company marketing and trading division	$	26		$	9		$	17		$	53		$	32		$	21
	52	APS		(8	)		2			(10	)		(9	)		(3	)		(6	)
	53	Pinnacle West Energy		—			—			—			5			17			(12	)
	54	APS Energy Services		2			4			(2	)		3			12			(9	)
	55	Total gross margin	$	20		$	15		$	5		$	52		$	58		$	(6	)

Future Marketing and Trading Mark-to-Market Realization

As of Septmeber 30, 2005, Pinnacle West had accumulated net mark-to-market gains of $58 million related to our power marketing and trading activities. We estimate that these gains will be reclassified to realized gains as the underlying commodities are delivered, as follows: 2005, $17 million; 2006, $10 million; 2007, $21 million; and thereafter, $10 million.

(a)

The net effect on pretax gross margin from realization of prior-period mark-to-market included in line 47 and in line 48 is zero. Realization of prior-period mark-to-market relates to cash flow recognition, not earnings recognition. The arithmetic opposites of amounts included in line 47 are included in line 48. For example, line 48 shows that a prior-period mark-to-market loss of $3 million was transferred to “realized” for the third quarter of 2005. A $3 million realized loss is included in the $3 million on line 47 for the third quarter of 2005.

(b)

Quarterly amounts do not total to the annual amounts because of intra-year mark-to-market eliminations.

See Glossary of Terms. Page 4 of 31

Pinnacle West Capital Corporation

Quarterly Consolidated Statistical Summary

Periods Ended September 30, 2005 and 2004

			3 Mo. Ended September									9 Mo. Ended September
Line			2005			2004			Incr (Decr)			2005			2004			Incr (Decr)
		AVERAGE ELECTRIC CUSTOMERS
		Retail customers
	56	Residential		895,789			856,353			39,436			891,422			854,901			36,521
	57	Business		111,648			107,583			4,065			110,700			106,534			4,166
	58	Total		1,007,437			963,936			43,501			1,002,122			961,435			40,687
	59	Wholesale customers		78			85			(7	)		78			83			(5	)
	60	Total customers		1,007,515			964,021			43,494			1,002,200			961,518			40,682
	61	Customer Growth (% over prior year)		4.5	%		3.9	%		0.6	%		4.2	%		3.7	%		0.5	%
		RETAIL SALES (GWH) — WEATHER NORMALIZED
	62	Residential		4,445			4,231			214			9,778			9,364			414
	63	Business		4,119			4,005			114			10,870			10,619			251
	64	Total		8,564			8,236			328			20,648			19,983			665
		RETAIL USAGE (KWh/Average Customer)
	65	Residential		4,967			4,704			263			10,887			10,713			174
	66	Business		36,723			36,595			128			97,795			99,405			(1,610	)
		RETAIL USAGE — WEATHER NORMALIZED (KWh/Average Customer)
	67	Residential		4,963			4,941			22			10,969			10,953			16
	68	Business		36,897			37,227			(330	)		98,201			99,679			(1,478	)
		ELECTRICITY DEMAND (MW)
	69	System peak demand		7,000			6,402			598			7,000			6,402			598

See Glossary of Terms. Page 5 of 31

Pinnacle West Capital Corporation

Quarterly Consolidated Statistical Summary

Periods Ended September 30, 2005 and 2004

		3 Mo. Ended September									9 Mo. Ended September
Line		2005			2004			Incr (Decr)			2005			2004			Incr (Decr)
	ENERGY SOURCES (GWH)
	Generation production
70	Nuclear		2,147			2,364			(217	)		6,013			6,372			(359	)
71	Coal		3,574			3,417			157			9,602			9,339			263
72	Gas, oil and other		3,018			2,547			471			6,219			4,253			1,966
73	Total		8,739			8,328			411			21,834			19,964			1,870
	Purchased power
74	Firm load		1,589			1,068			521			3,072			3,302			(230	)
75	Marketing and trading		7,795			9,301			(1,506	)		19,611			21,978			(2,367	)
76	Total		9,384			10,369			(985	)		22,683			25,280			(2,597	)
77	Total energy sources		18,123			18,697			(574	)		44,517			45,244			(727	)
	POWER PLANT PERFORMANCE
	Capacity Factors
78	Nuclear		88	%		96	%		(8	)%		83	%		87	%		(4	)%
79	Coal		95	%		90	%		5	%		86	%		83	%		3	%
80	Gas, oil and other		40	%		38	%		2	%		28	%		21	%		7	%
81	System average		63	%		64	%		(1	)%		54	%		53	%		1	%
	Generation Capacity Out of Service and Replaced for Native Load (average MW/day)
82	Nuclear		107			13			94			488			380			108
83	Coal		57			63			(6	)		496			364			132
84	Gas		140			39			101			516			135			381
85	Total		304			115			189			1,500			879			621

See Glossary of Terms. Page 6 of 31

Pinnacle West Capital Corporation

Quarterly Consolidated Statistical Summary

Periods Ended September 30, 2005 and 2004

		3 Mo. Ended September									9 Mo. Ended September
Line		2005			2004			Incr (Decr)			2005			2004			Incr (Decr)
	ENERGY MARKET INDICATORS (a)
	Electricity Average Daily Spot Prices ($/MWh)
	On-Peak
86	Palo Verde	$	78.94		$	51.86		$	27.08		$	60.67		$	48.65		$	12.02
87	SP15	$	83.21		$	57.09		$	26.12		$	64.70		$	53.40		$	11.30
	Off-Peak
88	Palo Verde	$	52.35		$	33.37		$	18.98		$	40.81		$	33.59		$	7.22
89	SP15	$	56.08		$	37.18		$	18.90		$	43.92		$	37.13		$	6.79
	WEATHER INDICATORS
	Actual
90	Cooling degree-days		2,583			2,471			112			4,155			4,342			(187	)
91	Heating degree-days		—			—			—			458			563			(105	)
92	Average humidity		29	%		26	%		3	%		35	%		28	%		7	%
	10-Year Averages
93	Cooling degree-days		2,540			2,540			—			4,111			4,111			—
94	Heating degree-days		—			—			—			557			557			—
95	Average humidity		33	%		33	%		0	%		33	%		33	%		0	%
	ECONOMIC INDICATORS
	Building Permits — Metro Phoenix (b) (d)
96	Single-family		7,982			9,783			(1,801	)		30,351			33,464			(3,113	)
97	Multi-family		2,038			1,517			521			5,424			4,598			826
98	Total		10,020			11,300			(1,280	)		35,775			38,062			(2,287	)
	Arizona Job Growth (c) (d)
99	Payroll job growth (% over prior year)		4.2	%		3.6	%		0.6	%		4.0	%		3.1	%		0.9	%
100	Unemployment rate (%, seasonally adjusted)		4.8	%		5.0	%		(0.2	)%		4.6	%		5.1	%		(0.5	)%

Sources:
(a)	This price is an average of daily prices obtained and used with permission from Dow Jones & Company, Inc.
(b)	Arizona Real Estate Center, Arizona State University W.P. Carey College of Business
(c)	Arizona Department of Economic Security
(d)	The economic indicators reflect latest available data through periods ending August 2005.

See Glossary of Terms. Page 7 of 31