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): April 19, 2002
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 ELECTRIC INDUSTRY RESTRUCTURING
As previously reported, on February 8, 2002, the Chief Administrative Law
Judge of the Arizona Corporation Commission (the "ACC") issued a procedural
order which consolidated several ACC dockets, including:
* the ACC docket relating to an October 2001 filing by Arizona Public
Service Company (the "Company") requesting approval of a long-term
purchase power agreement between the Company and Pinnacle West Capital
Corporation ("Pinnacle West"), as well as a variance from a
competitive bidding process required by an ACC rule; and
* a "generic" docket requested by the ACC Chairman to "determine if
changed circumstances require the [ACC] to take another look at
restructuring in Arizona."
See Note 3 of Notes to Financial Statements in the Company's Report on Form 10-K
for the fiscal year ended December 31, 2001 for additional information about the
consolidated docket, the comprehensive 1999 Settlement Agreement approved by the
ACC among the Company and various parties related to the implementation of
retail electric competition in Arizona, and the retail electric competition
rules adopted by the ACC.
On April 19, 2002, the Company filed a motion in the consolidated docket
addressing the following issues, among others:
* The Company confirmed its position that whether or not the ACC
approved the matters requested in its October 2001 filing, the Company
would proceed with the divestiture of its generation assets this year.
* The Company also advised the ACC that whether or not the ACC approved
the matters requested in its October 2001 filing, the Company would
implement a competitive bidding process later this year to the extent
legally required.
* The Company noted that Pinnacle West Energy Corporation ("Pinnacle
West Energy"), the affiliate to which the Company intends to transfer
the generation assets, had committed to a $1 billion investment in
generating capacity to meet the Company's customer needs in reliance
on the 1999 Settlement Agreement and in accordance with an ACC rule
that prohibited the Company's ownership of new generation assets. The
Company further noted that it had taken numerous actions in reliance
on the 1999 Settlement Agreement and the ACC retail electric
competition rules, including writing off $234 million of prudently
incurred costs, reducing retail rates by approximately $120 million in
a still-ongoing series of rate reductions, and incurring tens of
millions of dollars in expenses related to the expected generation
asset transfer. The Company stated that if the ACC elects to reverse
course on retail electric competition or attempts to stay the transfer
of the Company's generation assets, the ACC would be legally required
to address just compensation to the Company and Pinnacle West Energy,
which would include, at a minimum:
- recognizing the transfer to the Company of all assets that
Pinnacle West Energy constructed to meet the Company's
load-serving requirements, and subsequently including such units
in the Company's rate base in accordance with traditional
rate-of-return regulation;
- reversing the Company's $234 million write-off and providing for
the recovery of such amounts in future rates; and
- providing for the recovery of all costs incurred as a result of
the transition to competition, including 100 percent of the costs
incurred in preparation for divestiture (and not just the 2/3 of
costs permitted under the Settlement Agreement approved by the
ACC in 1999).
* The Company recommended that the ACC confirm whether or not Arizona
would proceed with the transition to a competitive electric market,
and proposed the following procedural plan in response to issues
identified by the ACC staff in a previous report:
- Market Power and Market Monitoring: The Company recommended that
the ACC monitor evolving federal regulatory developments in the
wholesale power markets and respond to market power or market
monitoring issues at the state level after the federal issues are
more fully developed.
- Competitive Bidding: The Company advised the ACC that it intends
to issue a request for proposal for competitive bidding no later
than September 1, 2002, with the amount bid dependent on the
ACC's action on the October 2001 filing made by the Company.
- Transfer of Generation Assets: Consistent with, and in reliance
upon, the 1999 Settlement Agreement, the Company has been
addressing the legal and regulatory requirements necessary to
complete the transfer of its generation assets to Pinnacle West
Energy on or before December 31, 2002. As required and authorized
by the 1999 Settlement Agreement, on or about August 1, 2002, the
Company intends to formally provide the ACC with a 30-day notice
of the generation assets being transferred to Pinnacle West
Energy.
- Transmission Constraints and Reliability: The Company recommended
that the ACC staff structure a process to address the various
issues affecting transmission constraints and reliability in
Arizona, and suggested that this process could begin in May 2002
as part of the ACC's 2002-2003 Biennial Transmission Assessment.
2
- Adjustor Mechanisms: The Company recommended that it is
appropriate for the ACC to consider specific standard-offer rate
adjustor mechanisms in utility-specific proceedings and noted
that the 1999 Settlement Agreement requires the Company to submit
an adjustment clause for ACC approval that will recover electric
competition-related costs specified in the 1999 Settlement
Agreement.
- Retail Direct Access and Shopping Credits: The Company
recommended that the ACC staff initiate a workshop process to
assess the appropriate scope of direct access and noted that the
specific issues surrounding the "shopping credit" for the Company
should be addressed in the general rate case that the Company is
required to file by June 30, 2003 pursuant to the 1999 Settlement
Agreement. A "shopping credit" is the amount that a customer does
not pay to a utility distribution company if the customer obtains
generation from another party.
A copy of the Company's motion is incorporated in this Form 8-K by
reference as Exhibit 99.1. The Company cannot currently predict the outcome of
the October 2001 filing or the consolidated docket, including the potential for
changes to the existing Arizona electric competition rules or effects to the
1999 Settlement Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) EXHIBITS.
The Company hereby incorporates the following Exhibit pursuant to Exchange
Act Rule 12b-32 and Regulation section 229.10(d) by reference to the filing set
forth below:
DATE
EXHIBIT NO. DESCRIPTION ORIGINALLY FILED AS EXHIBIT: FILE NO.(a) EFFECTIVE
- ----------- ----------- ---------------------------- ----------- ---------
99.1 Motion of Arizona Public 99.11 to Pinnacle West's 1-8962 4-22-02
Service Company for March 31, 2002 Form 8-K
Procedural Schedule, as filed Report
with the Arizona Corporation
Commission on April 19, 2002
- ----------
(a) Reports filed under File No. 1-8962 were filed in the Office of the
Securities and Exchange Commission located in Washington, D.C.
3
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: April 24, 2002 By: Barbara M. Gomez
------------------------------------
Barbara M. Gomez
Treasurer
4