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

Pinnacle West Capital Corporation

Consolidated Statistics By Quarter

2005

																Increase
																(Decrease)
Line		1st Qtr			2nd Qtr			3rd Qtr			4th Qtr		Year-To-Date			vs Prior YTD
	EARNINGS CONTRIBUTION BY SUBSIDIARY ($ Millions)
1	Arizona Public Service	$	27		$	64		$	61				$	152		$	(33	)
2	Pinnacle West Energy		(21	)		12			(71	)				(80	)		(45	)
3	APS Energy Services		(3	)		1			—					(3	)		(7	)
4	SunCor		9			11			6					26			16
5	El Dorado		(1	)		—			—					(1	)		(34	)
6	Parent Company		19			(3	)		89					105			93
7	Income From Continuing Operations		30			85			85			—		199			(10	)
8	Loss From Discontinued Operations — Net of Tax		(6	)		(58	)		19					(44	)		(44	)
9	Cumulative Effect of Change in Accounting — Net of Tax		—			—			—					—			—
10	Net Income	$	24		$	27		$	104		$	—	$	155		$	(54	)
	EARNINGS PER SHARE BY SUBSIDIARY — DILUTED
11	Arizona Public Service	$	0.30		$	0.66		$	0.62				$	1.59		$	(0.43	)
12	Pinnacle West Energy		(0.23	)		0.13			(0.72	)				(0.83	)		(0.44	)
13	APS Energy Services		(0.04	)		0.01			—					(0.03	)		(0.08	)
14	SunCor		0.09			0.11			0.07					0.27			0.16
15	El Dorado		(0.01	)		—			(0.01	)				(0.01	)		(0.37	)
16	Parent Company		0.21			(0.03	)		0.90					1.09			0.96
17	Income From Continuing Operations		0.32			0.88			0.86			—		2.08			(0.20	)
18	Loss From Discontinued Operations — Net of Tax		(0.05	)		(0.60	)		0.19					(0.46	)		(0.47	)
19	Cumulative Effect of Change in Accounting — Net of Tax		—			—			—					—			—
20	Net Income	$	0.27		$	0.28		$	1.05		$	—	$	1.62		$	(0.67	)
21	BOOK VALUE PER SHARE	$	32.50		$	32.89		$	35.82				$	35.82		$	3.27
	COMMON SHARES OUTSTANDING - DILUTED (Thousands)
22	Average		92,045			96,299			98,816					95,755			4,325
23	End of Period		92,103			98,442			98,881					98,881			7,438

See Glossary of Terms. Page 8 of 31

Pinnacle West Capital Corporation

Consolidated Statistics By Quarter

2005

												Increase
												(Decrease)
Line		1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Year-To-Date		vs Prior YTD
	ELECTRIC OPERATING REVENUES (Dollars in Millions)
	REGULATED ELECTRICITY SEGMENT
	Retail
24	Residential	$	190	$	268	$	414			$	872	$	78
25	Business		209		281		308				798		41
26	Total retail		399		549		722		—		1,670		119
	Wholesale revenue on delivered electricity
27	Traditional contracts		3		5		9				17		4
28	Off-system sales		—		12		8				20		20
29	Transmission for others		7		7		7				21		(3	)
30	Other miscellaneous services		7		7		7				21		3
31	Total regulated electricity		416		580		753		—		1,749		143
	MARKETING AND TRADING SEGMENT
32	Electricity and other commodity sales		89		71		107				267		(23	)
33	Total operating electric revenues	$	505	$	651	$	860	$	—	$	2,016	$	120
	ELECTRIC SALES (GWH)
	REGULATED ELECTRICITY SEGMENT
	Retail sales
34	Residential		2,367		2,889		4,449				9,705		545
35	Business		3,042		3,684		4,100				10,826		236
36	Total retail		5,409		6,573		8,549		—		20,531		781
	Wholesale electricity delivered
37	Traditional contracts		155		200		269				624		81
38	Off-system sales		—		598		212				810		810
39	Retail load hedge management		750		702		1,026				2,478		635
40	Total regulated electricity		6,314		8,073		10,056		—		24,443		2,307
	MARKETING AND TRADING SEGMENT
41	Wholesale sales of electricity		5,777		4,901		7,228				17,906		(3,928	)
42	Total electric sales		12,091		12,974		17,284		—		42,349		(1,621	)

See Glossary of Terms. Page 9 of 31

Pinnacle West Capital Corporation

Consolidated Statistics By Quarter

2005

																Increase
																(Decrease)
Line		1st Qtr			2nd Qtr			3rd Qtr			4th Qtr		Year-To-Date			vs Prior YTD
	POWER SUPPLY ADJUSTOR (“PSA”) — REGULATED ELECTRICITY SEGMENT (Dollars in Millions)
43	Deferred fuel and purchased power regulatory asset — beginning balance	$	—		$	—		$	38				$	—		$	—
44	Deferred fuel and purchased power costs — current period		—			38			105					143			143
45	Amounts recovered through revenues		—			—			—					—			—
46	Deferred fuel and purchased power regulatory asset — end of period	$	—		$	38		$	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)	$	12		$	18		$	3				$	33		$	(14	)
48	Mark-to-market reversals on realized sales (b)		(3	)		(8	)		3					(5	)		(1	)
49	Change in mark-to-market value of forward sales		10			3			14					24			9
50	Total gross margin	$	19		$	13		$	20		$	—	$	52		$	(6	)
	By Pinnacle West Entity
51	Parent company marketing and trading division	$	21		$	6		$	26				$	53		$	21
52	APS		(4	)		3			(8	)				(9	)		(6	)
53	Pinnacle West Energy		5			—			—					5			(12	)
54	APS Energy Services		(3	)		4			2					3			(9	)
55	Total gross margin	$	19		$	13		$	20		$	—	$	52		$	(6	)

Future Marketing and Trading Mark-to-Market Realization

As of September 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 10 of 31

Pinnacle West Capital Corporation

Consolidated Statistics By Quarter

2005

																	Increase
																	(Decrease)
Line		1st Qtr			2nd Qtr			3rd Qtr			4th Qtr		Year-To-Date				vs Prior YTD
	AVERAGE ELECTRIC CUSTOMERS
	Retail customers
56	Residential		889,967			888,509			895,789					891,422				36,521
57	Business		109,772			110,658			111,648					110,700				4,166
58	Total		999,739			999,167			1,007,437			—		1,002,122				40,687
59	Wholesale customers		81			76			78					78				(5	)
60	Total customers		999,820			999,243			1,007,515			—		1,002,200				40,682
61	Customer Growth (% over prior year)		4.0	%		4.2	%		4.5	%				4.2	%			0.5	%
	RETAIL SALES (GWH) — WEATHER NORMALIZED
62	Residential		2,430			2,903			4,445					9,778				414
63	Business		3,058			3,693			4,119					10,870				251
64	Total		5,488			6,596			8,564			—		20,648				665
	RETAIL USAGE (KWh/Average Customer)
65	Residential		2,660			3,252			4,967					10,887				174
66	Business		27,712			33,292			36,723					97,795				(1,610	)
	RETAIL USAGE — WEATHER NORMALIZED (KWh/Average Customer)
67	Residential		2,730			3,268			4,963					10,969				16
68	Business		27,860			33,374			36,897					98,201				(1,478	)
	ELECTRICITY DEMAND (MW)
69	System peak demand		3,997			6,458			7,000					7,000				598
See Glossary of Terms.																page 11 of 31

Pinnacle West Capital Corporation

Consolidated Statistics By Quarter

2005

																	Increase
																	(Decrease)
Line		1st Qtr			2nd Qtr			3rd Qtr			4th Qtr		Year-To-Date				vs Prior YTD
	ENERGY SOURCES (GWH)
	Generation production
70	Nuclear		2,247			1,619			2,147					6,013				(359	)
71	Coal		2,940			3,088			3,574					9,602				263
72	Gas, oil and other		1,127			2,074			3,018					6,219				1,966
73	Total		6,314			6,781			8,739			—		21,834				1,870
	Purchased power
74	Firm load		586			880			1,589					3,072				(230	)
75	Marketing and trading		5,832			5,984			7,795					19,611				(2,367	)
76	Total		6,418			6,864			9,384			—		22,683				(2,597	)
77	Total energy sources		12,732			13,645			18,123			—		44,517				(727	)
	POWER PLANT PERFORMANCE
	Capacity Factors
78	Nuclear		94	%		67	%		88	%				83	%			(4	)%
79	Coal		80	%		83	%		95	%				86	%			3	%
80	Gas, oil and other		17	%		27	%		40	%				28	%			7	%
81	System average		49	%		49	%		63	%				54	%			1	%
	Generation Capacity Out of Service and Replaced for Native Load (average MW/day)
82	Nuclear		52			329			107					488				108
83	Coal		195			244			57					496				132
84	Gas		212			164			140					516				381
85	Total		459			737			304			—		1,500				621
See Glossary of Terms.																page 12 of 31

Pinnacle West Capital Corporation

Consolidated Statistics By Quarter

2005

																Increase
																(Decrease)
Line		1st Qtr			2nd Qtr			3rd Qtr			4th Qtr		Year-To-Date			vs Prior YTD
	ENERGY MARKET INDICATORS (a)
	Electricity Average Daily Spot Prices ($/MWh)
	On-Peak
86	Palo Verde	$	49.74		$	53.33		$	78.94				$	60.67		$	12.02
87	SP15	$	55.70		$	55.19		$	83.21				$	64.70		$	11.30
	Off-Peak
88	Palo Verde	$	37.04		$	33.03		$	52.35				$	40.81		$	7.22
89	SP15	$	40.96		$	34.73		$	56.08				$	43.92		$	6.79
	WEATHER INDICATORS
	Actual
90	Cooling degree-days		34			1,538			2,583					4,155			(187	)
91	Heating degree-days		457			1			—					458			(105	)
92	Average humidity		56	%		20	%		29	%				35	%		7	%
	10-Year Averages
93	Cooling degree-days		80			1,491			2,540					4,111			—
94	Heating degree-days		521			36			—					557			—
95	Average humidity		43	%		24	%		33	%				33	%		0	%
	ECONOMIC INDICATORS
	Building Permits — Metro Phoenix (b) (d)
96	Single-family		10,356			12,013			7,982					30,351			(3,113	)
97	Multi-family		1,741			1,645			2,038					5,424			826
98	Total		12,097			13,658			10,020			—		35,775			(2,287	)
	Arizona Job Growth (c) (d)
99	Payroll job growth (% over prior year)		4.1	%		3.9	%		4.2	%				4.0	%		0.9	%
100	Unemployment rate (%, seasonally adjusted)		4.4	%		4.7	%		4.8	%				4.6	%		(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 13 of 31