Exhibit 10.8

                                 August 16, 1996


Mr. William L. Stewart
Paradise Valley, AZ  85253

Dear Bill,

As a result of our meeting on Tuesday,  July 23,  1996,  I am pleased to provide
you with a summary of the compensation and retirement benefit  enhancements that
we agreed upon.

Base Salary:
- ------------
Your base salary will be increased by $100,000 effective July 23, 1996. Your new
base salary will be $410,026.

Incentive Pay Plan:
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You will  continue to be a  participant  in the  Officers  Incentive  Plan as an
Executive Vice President, with an incentive opportunity ranging from 0% - 52% of
base pay.

Retirement:
- -----------
Your  retirement  benefit will be  calculated  by adding a base amount of 20% of
your average  monthly wage (as determined by the highest 36 consecutive  months)
and 10% of your average  monthly wage for each year of service.  You will become
vested in this  benefit  when you have  accrued  four  years  and 1000  hours of
service  (November  1998).  The  maximum  benefit you can accrue is 100% of your
average  monthly  wage.  Under this  schedule,  you will qualify for the maximum
benefit in November 2001.  Please note,  this  retirement  benefit  replaces our
previous agreement outlined in your offer letter dated December 21, 1993.

Restricted Stock:
- -----------------
You will receive two thousand shares of restricted  stock for each calendar year
you are actively  employed at APS  retroactive to 1994. This results in an award
of four thousand shares to be issued as soon as possible.  Each subsequent years
award  will be made in the last  quarter  of each year and will be  provided  in
addition  to any other stock award you  receive  under the  Pinnacle  West Stock
Option and Restricted Stock Program.

Home Purchase:
- --------------
The Company will  purchase  your home at its market value and you may live there
for the  remainder of your  employment at APS. You will be  responsible  for any
personal income taxes due to this arrangement.

Should you have any  questions  regarding any of the above  information,  please
feel free to contact Armando Flores who will implement all of the above actions.

Sincerely,


WILLIAM J. POST
- -----------------------------------
William J. Post
Chief Operating Officer
Arizona Public Service Company





The foregoing is agreed to and accepted:


WILLIAM L. STEWART
- ----------------------------------
William L. Stewart