SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 14, 2001
ARIZONA PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Arizona 1-4473 86-0011170
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
400 North Fifth Street, P.O. Box 53999, Phoenix, Arizona 85004
(Address of principal executive offices) (Zip Code)
(602) 250-1000
(Registrant's telephone number, including area code)
NONE
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
ARIZONA SUPREME COURT REVIEW OF SETTLEMENT AGREEMENT
As previously disclosed, Arizona Public Service Company (the "Company"), a
wholly-owned subsidiary of Pinnacle West Capital Corporation ("Pinnacle West"),
entered into a comprehensive Settlement Agreement on May 14, 1999 (the
"Settlement Agreement") with various parties relating to the implementation of
retail electric competition. On September 23, 1999, the Arizona Corporation
Commission (the "ACC) approved the Settlement Agreement with some modifications.
On December 13, 1999, two parties filed lawsuits challenging the ACC's approval
of the Settlement Agreement. The Arizona Court of Appeals affirmed the ACC's
approval of the Settlement Agreement in both of these lawsuits. One of these
decisions was not appealed and has become final. The other decision, however,
was appealed to the Arizona Supreme Court. On October 5, 2001, the Arizona
Supreme Court agreed to hear the appeal on the singular issue of whether the ACC
could itself become a party to the Settlement Agreement by virtue of its
approval of the Settlement Agreement. See "Arizona Supreme Court Review of
Settlement Agreement" in Item 5 of the Company's Report on Form 8-K dated
October 18, 2001 (the "October 8-K").
On December 14, 2001, the Arizona Supreme Court vacated its own October 5,
2001 order accepting jurisdiction and decided to dismiss the appeal. As a
result, the judicial challenges to the Settlement Agreement have terminated.
Consistent with its obligations under the Settlement Agreement, on January 7,
2002, the Company and the ACC filed in Maricopa County Superior Court a
stipulation to dismiss all of the Company's litigation pending against the ACC.
On January 15, 2002, a Maricopa County Superior Court judge issued an order
dismissing such litigation.
ARIZONA ELECTRIC INDUSTRY RESTRUCTURING
As previously disclosed, in a filing with the ACC on October 18, 2001, the
Company requested the ACC to (a) grant the Company a partial variance from an
ACC rule that would obligate it to acquire all of its customers' "standard
offer" generation requirements from the competitive market (with at least 50% of
that coming from a "competitive bidding" process) starting in 2003 and (b)
approve as just and reasonable a long-term purchase power agreement ("PPA")
between the Company and Pinnacle West. See "ACC Filing Regarding Rule Waiver and
Purchase Power Agreement" in Item 5 of the October 8-K.
By letter dated January 14, 2002, the Chairman of the ACC stated that "the
[ACC's] Electric Competition Rules, along with the Settlement Agreements
approved for [the Company] and [Tucson Electric Power Company], establish the
framework for a transition to a retail generation competitive market." The ACC
Chairman then recommended that the ACC establish a new "generic" docket to
"determine if changed circumstances require the [ACC] to take another look at
electric restructuring in Arizona." Matters that would be addressed by the ACC
in the new docket would include:
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* Whether the ACC should continue implementation of the retail electric
competition rules adopted by the ACC in 1999 in their current form or with
modifications;
* Whether the ACC should "slow the pace of the implementation of the [rules]
to provide an opportunity to consider the extent to which [rule]
modification and variance is in the public interest, including changing the
direction to retail electric competition"; and
* Whether the ACC should "step back from electric industry restructuring
until the [ACC] is convinced that there exists a viable competitive
wholesale electric market to support retail electric competition in
Arizona."
On January 22, 2002 the ACC's Chief Administrative Law Judge issued a
procedural order by which a generic docket was opened. The order also indicated
that any decision on whether to consolidate the generic docket with the
Company's request, as suggested in Chairman Mundell's letter, will be made at a
later time.
The Company is required to transfer its generation assets and competitive
services to one or more corporate affiliates on or before December 31, 2002.
Consistent with that requirement, the Company has been addressing the legal and
regulatory requirements necessary to complete the transfer of its generation
assets to Pinnacle West Energy Corporation, another wholly-owned subsidiary of
Pinnacle West, on or before that date. In anticipation of the Company's transfer
of generation assets, Pinnacle West Energy has completed, and is in the process
of developing and planning, various generation expansion projects so that the
Company can reliably meet the energy requirements of its Arizona customers. A
modification to the competition rules as a result of the generic docket could,
among other things, adversely affect the Company's ability to transfer its
generation assets to Pinnacle West Energy by December 31, 2002. The Company
cannot predict the outcome of the generic docket or its effect on the Company's
October 18, 2001 filing, the existing Arizona electric competition rules, or the
Settlement Agreement, or what responsive actions the Company may take.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARIZONA PUBLIC SERVICE COMPANY
(Registrant)
Dated: January 30, 2002 By: Barbara M. Gomez
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Barbara M. Gomez
Treasurer