8-K for 6-30-15 Earnings

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 30, 2015



Commission File Number	Exact Name of Registrant as Specified in Charter; State of Incorporation; Address and Telephone Number	IRS Employer Identification Number

1-8962	Pinnacle West Capital Corporation (an Arizona corporation) 400 North Fifth Street, P.O. Box 53999 Phoenix, AZ 85072-3999 (602) 250-1000	86-0512431

1-4473	Arizona Public Service Company (an Arizona corporation) 400 North Fifth Street, P.O. Box 53999 Phoenix, AZ 85072-3999 (602) 250-1000	86-0011170

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

This combined Form 8-K is separately filed or furnished by Pinnacle West Capital Corporation and Arizona Public Service Company. Each registrant is filing or furnishing on its own behalf all of the information contained in this Form 8-K that relates to such registrant and, where required, its subsidiaries. Except as stated in the preceding sentence, neither registrant is filing or furnishing any information that does not relate to such registrant, and therefore makes no representation as to any such information.

Item 2.02. Results of Operations and Financial Condition.

Item 7.01. Regulation FD Disclosure.

The following information is furnished pursuant to both Item 2.02 and 7.01.

On July 30, 2015, Pinnacle West Capital Corporation (the “Company” or “Pinnacle West”) issued a press release regarding its financial results for the fiscal quarter ended June 30, 2015 and its earnings outlook for 2015. A copy of the press release is attached hereto as Exhibit 99.1.

The Company is providing a quarterly consolidated statistical summary and a copy of the slide presentation made in connection with the quarterly earnings conference call on July 30, 2015. This information contains Company operating results for the fiscal quarter ended June 30, 2015 and is attached hereto as Exhibits 99.2 and 99.3. The statistical summary and slide presentation are concurrently being posted to the Company’s website at www.pinnaclewest.com, which also contains a glossary of relevant terms.

Item 9.01. Financial Statements and Exhibits.



Exhibit No.	Registrant(s)	Description

99.1	Pinnacle West APS	Earnings News Release issued on July 30, 2015.

99.2	Pinnacle West APS	Pinnacle West Capital Corporation quarterly consolidated statistical summary for the three-month and six-month periods ended June 30, 2015 and 2014.

99.3	Pinnacle West APS	Pinnacle West Capital Corporation 2nd Quarter 2015 Results slide presentation accompanying July 30, 2015 conference call.

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



		PINNACLE WEST CAPITAL CORPORATION
		(Registrant)

Dated: July 30, 2015		By: /s/ James R. Hatfield
		James R. Hatfield
		Executive Vice President and
		Chief Financial Officer

		ARIZONA PUBLIC SERVICE COMPANY
		(Registrant)

Dated: July 30, 2015		By: /s/ James R. Hatfield
		James R. Hatfield
		Executive Vice President and
		Chief Financial Officer



Exhibit No.	Registrant(s)	Description

99.1	Pinnacle West APS	Earnings News Release issued on July 30, 2015.

99.2	Pinnacle West APS	Pinnacle West Capital Corporation quarterly consolidated statistical summary for the three-month and six-month periods ended June 30, 2015 and 2014.

99.3	Pinnacle West APS	Pinnacle West Capital Corporation 2nd Quarter 2015 Results slide presentation accompanying July 30, 2015 conference call.



FOR IMMEDIATE RELEASE		July 30, 2015
Media Contact: Analyst Contact:	Alan Bunnell, (602) 250-3376 Paul Mountain, (602) 250-4952
Website:	pinnaclewest.com

PINNACLE WEST REPORTS 2015 SECOND-QUARTER RESULTS

Quarterly results impacted by mild weather

O&M expenses remain flat as cost-management and operational efficiencies deliver bottom-line results

Full-year 2015 earnings guidance maintained

PHOENIX - Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated net income attributable to common shareholders of $122.9 million, or $1.10 per diluted share of common stock, for the quarter ended June 30, 2015. This result compares with earnings of $132.5 million, or $1.19 per share, in the same 2014 period. For both the 2015 and 2014 second-quarter periods, net income is the same as on-going earnings.

Mild weather, led by one of the coolest Mays on record, was a primary driver for lower quarterly results and reduced earnings by $0.06 per share compared to the year-ago period. The average high temperature in the 2015 second quarter was 94.2 degrees, while the average high temperature in the same period a year ago was 96.4 degrees. As a result, residential cooling degree-days (a measure of the effects of weather) were 9 percent lower than last year’s second quarter.

“Weather aside, we achieved results within our guidance range,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt. “Our employees have demonstrated an ability to consistently control costs by keeping operations and maintenance expenses flat, while still providing top-tier reliability and customer service.”

As examples of the company’s operational excellence and quality customer service, respectively, Brandt cited the Palo Verde Nuclear Generating Station and the 2015 J.D. Power Residential Customer Satisfaction Study. For the third consecutive year, a refueling outage at Palo Verde was completed in less than 30 days. In the recent J.D. Power residential survey, APS improved its score in all six of the study’s key categories and ranked in the top quartile among 54 large investor-owned utilities.

In addition to the adverse weather variations, the 2015 second-quarter results comparison was negatively impacted by the following major factors:

Higher depreciation and amortization expenses largely associated with the Four Corners transaction reduced earnings by $0.07 per share. The depreciation and amortization variance excludes costs associated with the Palo Verde lease extensions which are offset in net income attributable to noncontrolling interests.

Lower transmission revenues negatively impacted earnings by $0.04 per share.

Expiration of a long-term wholesale contract at the end of 2014 decreased earnings by $0.02 per share.

And, the net effect of miscellaneous items decreased earnings $0.04 per share.

These factors were partially offset by the following items:

Adjustment mechanisms improved earnings by $0.10 per share compared to the 2014 second quarter. These adjustors included a Jan. 1, 2015, rate change reflecting acquisition of Southern California Edison’s interest in Units 4 and 5 of the Four Corners Power Plant and higher lost fixed cost recovery (LFCR) revenue.

Lower interest expense, net of AFUDC, contributed $0.04 per share compared with the prior-year period, primarily because of lower interest rates on new and refinanced debt.

Compared to the same quarter a year ago, weather-normalized retail sales improved 0.3 percent, while total customer growth increased 1.2 percent quarter-over-quarter.

For 2015, the Company continues to expect its on-going consolidated earnings will be within a range of $3.75 to $3.95 per diluted share, on a weather-normalized basis.

Longer-term, the Company’s goal is to achieve a consolidated earned return on average common equity of more than 9.5 percent annually through 2016.

Key factors and assumptions underlying the 2015 outlook can be found in the second-quarter 2015 earnings presentation slides on the Company’s website at pinnaclewest.com/investors.

Conference Call and Webcast

Pinnacle West invites interested parties to listen to the live webcast of management’s conference call to discuss the Company’s 2015 second-quarter results, as well as recent developments, at 12 noon ET (9 a.m. AZ time) today, July 30. The webcast can be accessed at pinnaclewest.com/presentations and will be available for replay on the website for 30 days. To access the live conference call by telephone, dial (877) 407-8035 or (201) 689-8035 for international callers. A replay of the call also will be available until 11:59 p.m. (ET), Thursday, Aug. 6, 2015, by calling (877) 660-6853 in the U.S. and Canada or (201) 612-7415 internationally and entering conference ID number 13612909.

Pinnacle West Capital Corp., an energy holding company based in Phoenix, has consolidated assets of about $15 billion, more than 6,400 megawatts of generating capacity and about 6,400 employees in Arizona and New Mexico. Through its principal subsidiary, Arizona Public Service, the Company provides retail electricity service to nearly 1.2 million Arizona homes and businesses. For more information about Pinnacle West, visit the Company’s website at pinnaclewest.com.

Dollar amounts in this news release are after income taxes. Earnings per share amounts are based on average diluted common shares outstanding. For more information on Pinnacle West’s operating statistics and earnings, please visit pinnaclewest.com/investors.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements based on our current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume” and similar words. Because actual

results may differ materially from expectations, we caution readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or APS. These factors include, but are not limited to:

our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels;

variations in demand for electricity, including those due to weather, the general economy, customer and sales growth (or decline), and the effects of energy conservation measures and distributed generation;

power plant and transmission system performance and outages;

competition in retail and wholesale power markets;

regulatory and judicial decisions, developments and proceedings;

new legislation or regulation including those relating to environmental requirements, nuclear plant operations and potential deregulation of retail electric markets;

fuel and water supply availability;

our ability to achieve timely and adequate rate recovery of our costs, including returns on debt and equity capital;

our ability to meet renewable energy and energy efficiency mandates and recover related costs;

risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty;

current and future economic conditions in Arizona, particularly in real estate markets;

the development of new technologies which may affect electric sales or delivery;

the cost of debt and equity capital and the ability to access capital markets when required;

environmental and other concerns surrounding coal-fired generation;

volatile fuel and purchased power costs;

the investment performance of the assets of our nuclear decommissioning trust, pension, and other postretirement benefit plans and the resulting impact on future funding requirements;

the liquidity of wholesale power markets and the use of derivative contracts in our business;

potential shortfalls in insurance coverage;

new accounting requirements or new interpretations of existing requirements;

generation, transmission and distribution facility and system conditions and operating costs;

the ability to meet the anticipated future need for additional baseload generation and associated transmission facilities in our region;

the willingness or ability of our counterparties, power plant participants and power plant land owners to meet contractual or other obligations or extend the rights for continued power plant operations; and

restrictions on dividends or other provisions in our credit agreements and Arizona Corporation Commission orders.

These and other factors are discussed in Risk Factors described in Part 1, Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which readers should review carefully before placing any reliance on our financial statements or disclosures. Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law.

PINNACLE WEST CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(dollars and shares in thousands, except per share amounts)



		THREE MONTHS ENDED		SIX MONTHS ENDED
		JUNE 30,		JUNE 30,
		2015	2014	2015	2014

Operating Revenues		$ 890,648	$ 906,264	$ 1,561,867	$ 1,592,515

Operating Expenses
	Fuel and purchased power	281,477	290,854	504,714	540,640
	Operations and maintenance	210,965	211,222	425,909	424,104
	Depreciation and amortization	122,739	105,150	243,688	206,922
	Taxes other than income taxes	43,032	44,004	86,248	89,849
	Other expenses	462	921	1,651	1,717
	Total	658,675	652,151	1,262,210	1,263,232

Operating Income		231,973	254,113	299,657	329,283

Other Income (Deductions)
	Allowance for equity funds used during construction	9,345	7,499	18,569	14,941
	Other income	175	2,781	410	5,148
	Other expense	(2,609)	(508)	(6,895)	(5,192)
	Total	6,911	9,772	12,084	14,897

Interest Expense
	Interest charges	48,328	51,751	96,727	104,720
	Allowance for borrowed funds used during construction	(4,322)	(3,790)	(8,538)	(7,560)
	Total	44,006	47,961	88,189	97,160

Income Before Income Taxes		194,878	215,924	223,552	247,020

Income Taxes		67,371	74,540	75,318	80,945

Net Income		127,507	141,384	148,234	166,075

Less: Net income attributable to noncontrolling interests		4,605	8,926	9,210	17,851

Net Income Attributable To Common Shareholders		$ 122,902	$ 132,458	$ 139,024	$ 148,224


Weighted-Average Common Shares Outstanding - Basic		110,986	110,565	110,958	110,546

Weighted-Average Common Shares Outstanding - Diluted		111,460	111,002	111,426	110,925

Earnings Per Weighted-Average Common Share Outstanding
	Net income attributable to common shareholders - basic	$ 1.11	$ 1.20	$ 1.25	$ 1.34
	Net income attributable to common shareholders - diluted	$ 1.10	$ 1.19	$ 1.25	$ 1.34

Last Updated 7/30/2015 Line 2015 2014 Incr (Decr) 2015 2014 Incr (Decr) EARNINGS CONTRIBUTION BY SUBSIDIARY (Dollars in Millions) 1 Arizona Public Service 130$ 144$ (14)$ 154$ 172$ (18)$ 2 El Dorado - - - - - - 3 Parent Company (2) (3) 1 (6) (6) - 4 Net Income 128 141 (13) 148 166 (18) 5 Less: Net Income Attributable to Noncontrolling Interests 5 9 (4) 9 18 (9) 6 Net Income Attributable to Common Shareholders 123$ 132$ (9)$ 139$ 148$ (9)$ EARNINGS PER SHARE BY SUBSIDIARY - DILUTED 7 Arizona Public Service 1.17$ 1.30$ (0.13)$ 1.39$ 1.55$ (0.16)$ 8 El Dorado - - - - - - 9 Parent Company (0.03) (0.03) - (0.06) (0.05) (0.01) 10 Net Income 1.14 1.27 (0.13) 1.33 1.50 (0.17) 11 Less: Net Income Attributable to Noncontrolling Interests 0.04 0.08 (0.04) 0.08 0.16 (0.08) 12 Net Income Attributable to Common Shareholders 1.10$ 1.19$ (0.09)$ 1.25$ 1.34$ (0.09)$ 13 BOOK VALUE PER SHARE 39.63$ 38.35$ 1.28$ 39.63$ 38.35$ 1.28$ COMMON SHARES OUTSTANDING (Thousands) 14 Average - Diluted 111,460 111,002 458 111,426 110,925 501 15 End of Period - Basic 110,986 110,407 579 110,958 110,407 551 3 Months Ended June 30, 6 Months Ended June 30, Pinnacle West Capital Corporation Quarterly Consolidated Statistical Summary Periods Ended June 30, 2015 and 2014 Page 1 of 4

Last Updated 7/30/2015 Line 2015 2014 Incr (Decr) 2015 2014 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail 16 Residential 423$ 428$ (5)$ 717$ 710$ 7$ 17 Business 413 416 (3) 749 745 4 18 Total retail 836 844 (8) 1,466 1,455 11 Wholesale revenue on delivered electricity 19 Traditional contracts 4 15 (11) 6 26 (20) 20 Off-system sales 34 30 4 57 78 (21) 21 Native load hedge liquidation - - - - - - 22 Total wholesale 38 45 (7) 63 104 (41) 23 Transmission for others 7 8 (1) 15 16 (1) 24 Other miscellaneous services 9 9 - 16 16 - 25 Total electric operating revenues 890$ 906$ (16)$ 1,560$ 1,591$ (31)$ ELECTRIC SALES (GWH) Retail sales 26 Residential 3,143 3,204 (61) 5,560 5,586 (26) 27 Business 3,721 3,797 (76) 6,981 7,027 (46) 28 Total retail 6,864 7,001 (137) 12,541 12,613 (72) Wholesale electricity delivered 29 Traditional contracts 71 230 (159) 111 374 (263) 30 Off-system sales 1,361 789 572 2,371 1,892 479 31 Retail load hedge management - - - - - - 32 Total wholesale 1,432 1,019 413 2,482 2,266 216 33 Total electric sales 8,296 8,020 276 15,023 14,879 144 Pinnacle West Capital Corporation 3 Months Ended June 30, 6 Months Ended June 30, Quarterly Consolidated Statistical Summary Periods Ended June 30, 2015 and 2014 Page 2 of 4

Last Updated 7/30/2015 Line 2015 2014 Incr (Decr) 2015 2014 Incr (Decr) AVERAGE ELECTRIC CUSTOMERS Retail customers 34 Residential 1,042,275 1,029,918 12,357 1,045,615 1,032,966 12,649 35 Business 130,396 129,197 1,199 130,274 129,015 1,259 36 Total retail 1,172,671 1,159,115 13,556 1,175,889 1,161,981 13,908 37 Wholesale customers 49 55 (6) 47 56 (9) 38 Total customers 1,172,720 1,159,170 13,550 1,175,936 1,162,037 13,899 39 Total customer growth (% over prior year) 1.2% 1.4% (0.2)% 1.2% 1.3% (0.1)% RETAIL SALES (GWH) - WEATHER NORMALIZED 40 Residential 3,186 3,166 20 5,822 5,831 (9) 41 Business 3,776 3,779 (3) 6,984 7,004 (20) 42 Total 6,962 6,945 17 12,806 12,835 (29) 43 Retail Sales (GWH) (% over prior year) 0.3% (0.2)% RETAIL USAGE (KWh/Average Customer) 44 Residential 3,015 3,111 (96) 5,318 5,408 (90) 45 Business 28,538 29,393 (855) 53,586 54,462 (876) RETAIL USAGE - WEATHER NORMALIZED (KWh/Average Customer) 46 Residential 3,057 3,074 (17) 5,568 5,645 (77) 47 Business 28,958 29,251 (293) 53,608 54,286 (678) ELECTRICITY DEMAND (MW) 48 Native load peak demand 6,622 6,289 333 6,622 6,289 333 WEATHER INDICATORS - RESIDENTIAL Actual 49 Cooling degree-days 484 530 (46) 484 530 (46) 50 Heating degree-days 1 6 (5) 254 245 9 51 Average humidity 24% 13% 11% 24% 13% 11% 10-Year Averages 52 Cooling degree-days 485 485 - 485 485 - 53 Heating degree-days 10 10 - 524 524 - 54 Average humidity 17% 17% - 17% 17% - Quarterly Consolidated Statistical Summary Periods Ended June 30, 2015 and 2014 3 Months Ended June 30, 6 Months Ended June 30, Pinnacle West Capital Corporation Page 3 of 4

Last Updated 7/30/2015 Line 2015 2014 Incr (Decr) 2015 2014 Incr (Decr) ENERGY SOURCES (GWH) Generation production 55 Nuclear 2,217 2,197 20 4,727 4,709 18 56 Coal 2,862 2,739 123 5,136 5,535 (399) 57 Gas, oil and other 1,454 1,402 52 2,459 2,448 11 58 Total generation production 6,533 6,338 195 12,322 12,692 (370) Purchased power 59 Firm load 2,002 2,027 (25) 3,258 2,883 375 60 Marketing and trading 105 98 7 189 211 (22) 61 Total purchased power 2,107 2,125 (18) 3,447 3,094 353 62 Total energy sources 8,640 8,463 177 15,769 15,786 (17) POWER PLANT PERFORMANCE Capacity Factors 63 Nuclear 89% 88% 1% 95% 95% - 64 Coal 68% 65% 3% 61% 66% (5)% 65 Gas, oil and other 24% 19% 5% 20% 16% 4% 66 System average 45% 45% - 41% 45% (4)% ECONOMIC INDICATORS Building Permits (a) 67 Metro Phoenix 6,117 5,012 1,105 10,580 10,425 155 Arizona Job Growth (b) 68 Payroll job growth (% over prior year) 2.2% 1.8% 0.4% 2.4% 1.9% 0.5% 69 Unemployment rate (%, seasonally adjusted) 5.9% 6.9% (1.0)% 6.2% 7.0% (0.8)% Sources: (a) U.S. Census Bureau (b) Arizona Department of Economic Security 3 Months Ended June 30, 6 Months Ended June 30, Quarterly Consolidated Statistical Summary Pinnacle West Capital Corporation Periods Ended June 30, 2015 and 2014 Page 4 of 4

Second Quarter 2015 SECOND QUARTER 2015 RESULTS July 30, 2015

Second Quarter 20152 FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES This presentation contains forward-looking statements based on current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume” and similar words. Because actual results may differ materially from expectations, we caution you not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or APS. These factors include, but are not limited to: our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels; variations in demand for electricity, including those due to weather, the general economy, customer and sales growth (or decline), and the effects of energy conservation measures and distributed generation; power plant and transmission system performance and outages; competition in retail and wholesale power markets; regulatory and judicial decisions, developments and proceedings; new legislation or regulation, including those relating to environmental requirements, nuclear plant operations and potential deregulation of retail electric markets; fuel and water supply availability; our ability to achieve timely and adequate rate recovery of our costs, including returns on debt and equity capital; our ability to meet renewable energy and energy efficiency mandates and recover related costs; risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty; current and future economic conditions in Arizona, particularly in real estate markets; the development of new technologies which may affect electric sales or delivery; the cost of debt and equity capital and the ability to access capital markets when required; environmental and other concerns surrounding coal-fired generation; volatile fuel and purchased power costs; the investment performance of the assets of our nuclear decommissioning trust, pension, and other postretirement benefit plans and the resulting impact on future funding requirements; the liquidity of wholesale power markets and the use of derivative contracts in our business; potential shortfalls in insurance coverage; new accounting requirements or new interpretations of existing requirements; generation, transmission and distribution facility and system conditions and operating costs; the ability to meet the anticipated future need for additional baseload generation and associated transmission facilities in our region; the willingness or ability of our counterparties, power plant participants and power plant land owners to meet contractual or other obligations or extend the rights for continued power plant operations; and restrictions on dividends or other provisions in our credit agreements and ACC orders. These and other factors are discussed in Risk Factors described in Part I, Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2014 which you should review carefully before placing any reliance on our financial statements, disclosures or earnings outlook. Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law. In this presentation, references to net income and earnings per share (EPS) refer to amounts attributable to common shareholders. We present “gross margin” per diluted share of common stock. Gross margin refers to operating revenues less fuel and purchased power expenses. Gross margin is a “non-GAAP financial measure,” as defined in accordance with SEC rules. The appendix contains a reconciliation of this non-GAAP financial measure to the referenced revenue and expense line items on our Consolidated Statements of Income, which are the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America (GAAP). We view gross margin as an important performance measure of the core profitability of our operations. We refer to “on-going earnings” in this presentation, which is also a non-GAAP financial measure. We also provide a reconciliation to show impacts of our noncontrolling interests for the Palo Verde lease extensions. We believe on-going earnings and the information provided in the reconciliation provide investors with useful indicators of our results that are comparable among periods because they exclude the effects of unusual items that may occur on an irregular basis. Investors should note that these non-GAAP financial measures may involve judgments by management, including whether an item is classified as an unusual item. These measures are key components of our internal financial reporting and are used by our management in analyzing the operations of our business. We believe that investors benefit from having access to the same financial measures that management uses.

Second Quarter 20153 CONSOLIDATED EPS COMPARISON 2015 VS. 2014 $1.10 $1.19 2015 2014 2nd Quarter GAAP Net Income $1.10 $1.19 2nd Quarter On-Going Earnings $1.25 $1.34 2015 2014 Year-to-Date GAAP Net Income $1.25 $1.34 Year-to-Date On-Going Earnings

Second Quarter 20154 Gross Margin(1) $(0.02) ON-GOING EPS VARIANCES 2ND QUARTER 2015 VS. 2ND QUARTER 2014 Other, net $(0.04) Interest, Net of AFUDC $0.04 (1) Excludes costs, and offsetting operating revenues, associated with renewable energy (excluding AZ Sun), demand side management and similar regulatory programs. (2) Adjusted for the impacts of our noncontrolling interests for the Palo Verde lease extensions. See non-GAAP reconciliation in appendix. D&A(2) $(0.07) Net Decrease $(0.09) =

Second Quarter 20155 GROSS MARGIN EPS DRIVERS 2ND QUARTER 2015 VS. 2ND QUARTER 2014 Lost Fixed Cost Recovery Mechanism $0.02 = Net Decrease $(0.02) Transmission Revenue $(0.04) See non-GAAP reconciliation for gross margin in appendix. Weather $(0.06)Four Corners Rate Change $0.08 Wholesale Contract $(0.02)

Second Quarter 20156 ARIZONA ECONOMIC INDICATORS Business services, healthcare, tourism, and consumer services leading job recovery – each growing 3-7% YoY 0% 5% 10% 15% 20% 25% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Industrial Nonresidential Building Vacancy – Metro Phoenix Single Family & Multifamily Housing Permits Maricopa County Home Prices – Metro Phoenix Value Relative to Jan ‘05 50 75 100 125 150 175 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Vacancy Rate Office Retail Job Growth (Total Nonfarm) - Arizona (10.0)% (5.0)% 0.0% 5.0% 10.0% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 YoY Change E Q2Apr 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 '07 '08 '09 '10 '11 '12 '13 '14 '15 Single Family Multifamily Q2

Second Quarter 20157 BALANCE SHEET STRENGTH $250 $50 $500 $250 $125 $- $100 $200 $300 $400 $500 2016 2017 2018 2019 2020 APS PNW ($Millions) Debt Maturity Schedule Credit Ratings • A- rating or better at S&P, Moody’s and Fitch • Moody’s and Fitch upgraded APS and PNW in Q2 2015 Major Financing Activities • $250 million 5-year 2.20% APS senior unsecured notes issued in January 2015 • $300 million 10-year 3.15% APS senior unsecured notes issued in May 2015 - proceeds used to refinance $300 million of 4.65% notes that matured May 15, 2015 • Currently expect up to an additional $300 million of new long-term debt

Second Quarter 20158 2015 ON-GOING EPS GUIDANCE Key Factors & Assumptions as of July 30, 2015 2015 Electricity gross margin* (operating revenues, net of fuel and purchased power expenses) $2.27 – $2.32 billion • Retail customer growth about 1.5-2.5% • Weather-normalized retail electricity sales volume about 0-1.0% to prior year taking into account effects of customer conservation, energy efficiency and distributed renewable generation initiatives • Assumes normal weather Operating and maintenance* $775 - $795 million Other operating expenses (depreciation and amortization, and taxes other than income taxes) $650 - $670 million Interest expense, net of allowance for borrowed and equity funds used during construction (Total AFUDC $45 million) $150 - $160 million Net income attributable to noncontrolling interests ~$20 million Effective tax rate 35% Average diluted common shares outstanding ~111.0 million On-Going EPS Guidance $3.75 - $3.95 * Excludes O&M of $109 million, and offsetting revenues, associated with renewable energy and demand side management programs.

Second Quarter 2015 APPENDIX

Second Quarter 201510 2015 KEY DATES ACC Key Dates Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery E-01345A-11-0224 Jan 15 Net Metering – Quarterly Installation Filings E-01345A-13-0248 Jan 15 Apr 15 Jul 15 Oct 15 Transmission Cost Adjustor E-01345A-11-0224 May 15 Renewable Energy Surcharge E-01345A-15-0241 Jul 1 2014 Integrated Resource Plan (Biennial) and Cholla Unit 2 Retirement Proposal E-00000V-13-0070 Apr 14: ACC Review Resource Planning and Procurement in 2015 and 2016 E-00000V-15-0094 Comments due on proposed process change Grid Access Charge Filing E-01345A-13-0248 Apr 2 ALJ Recommended Opinion and Order ACC Open Meetings - ACC Open Meetings Held Monthly Other Key Dockets Docket # Ocotillo Modernization Project L-00000D-14-0292-00169 Inquiry into Solar DG business models and practices (Generic Docket) E-00000J-14-0415

Second Quarter 201511 CREDIT RATINGS APS Parent Corporate Credit Ratings Moody’s A2 A3 S&P A- A- Fitch A- A- Senior Unsecured Moody’s A2 - S&P A- - Fitch A - Outlook Moody’s Stable Stable S&P Stable Stable Fitch Stable Stable We are disclosing credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds. Investment Grade Credit Ratings

Second Quarter 201512 2015 2016 2017 RETAIL SALES IMPACT FROM ENERGY EFFICIENCY AND DISTRIBUTED GENERATION YoY Retail Sales Before Customer Programs Energy Efficiency & Customer Conservation Distributed Generation Distributed Generation (DG) Impact • DG makes up 0.5% or less of the negative impact to retail sales growth as shown in the chart • Average residential rooftop solar system produces 10,000 – 12,000 KWh per year (average metro-Phoenix customer’s usage is nearly 15,000 KWh) The difference between customer growth and weather-normalized retail sales, mostly driven by EE and DG, has ranged from (1)-(2)%, in line with guidance, despite some larger quarterly variances. • 2015 YTD: (1.4)% • 2014: (1.4)% • 2013: (1.8)% • 2012: (1.0)% Annual Retail Sales Growth

Second Quarter 201513 250 364 346 450 637 728 654 803 878 969 545 863 527 735 874 782 1,228 1,249 0 28 33 83 41 45 62 64 84 63 94 34 69 102 90 48 71 77 53 0 200 400 600 800 1,000 1,200 1,400 RESIDENTIAL PV APPLICATIONS As of June 30, 2015, nearly 34,000 residential grid-tied solar photovoltaic (PV) systems have been installed in APS’s service territory, equivalent to 239 MW. *Note: www.arizonagoessolar.org logs total residential application volume, including cancellations. Solar water heaters can also be found on the site, but are not included in the above chart. 2014 Applications* 2014 Canceled Apps 2015 Applications* 2015 Canceled Apps Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 15 19 23 44 51 57 2009 2010 2011 2012 2013 2014 Residential DG (MW) Annual Additions

Second Quarter 201514 FINANCIAL OUTLOOK Key Factors & Assumptions as of July 30, 2015 Assumption Impact Retail customer growth • Expected to average about 2-3% annually • Modestly improving Arizona and U.S. economic conditions Weather-normalized retail electricity sales volume growth • About 0.5-1.5% after customer conservation and energy efficiency and distributed renewable generation initiatives Assumption Impact AZ Sun Program • Additions to flow through RES until next base rate case • First 50 MW of AZ Sun is recovered through base rates Lost Fixed Cost Recovery (LFCR) • Offsets 30-40% of revenues lost due to ACC-mandated energy efficiency and distributed renewable generation initiatives Environmental Improvement Surcharge (EIS) • Assumed to recover up to $5 million annually of carrying costs for government- mandated environmental capital expenditures Power Supply Adjustor (PSA) • 100% recovery as of July 1, 2012 Transmission Cost Adjustor (TCA) • TCA is filed each May and automatically goes into rates effective June 1 • Beginning July 1, 2012 following conclusion of the regulatory settlement, transmission revenue is accrued each month as it is earned. Four Corners Acquisition • Four Corners rate increase effective January 1, 2015 Potential Property Tax Deferrals (2012 retail rate settlement): Assume 60% of property tax increases relate to tax rates, therefore, will be eligible for deferrals (Deferral rates: 50% in 2013; 75% in 2014 and thereafter) Gross Margin – Customer Growth and Weather (2015-2017) Gross Margin – Related to 2012 Retail Rate Settlement Outlook Through 2016: Goal of earning more than 9.5% Return on Equity (earned Return on Equity based on average Total Shareholder’s Equity for PNW consolidated, weather-normalized)

Second Quarter 201515 OPERATIONS & MAINTENANCE OUTLOOK Targeting to be top quartile in peer benchmarking for staffing $749 $754 $761 $788 $805 $121 $150 $124 $137 $103 $109 2010 2011 2012 2013 2014 2015E PNW Consolidated RES/DSM* *Renewable energy and demand side management expenses are offset by adjustor mechanisms. $775 - $795 ($ Millions) 2015+ Outlook • Goal is to keep O&M per kWh flat • Complete documentation of over 1,800 policies, processes and procedures, including more than 275 process improvements to drive additional efficiencies • Execute targeted initiatives to address specific gaps and inefficiencies

Second Quarter 201516 $289 $316 $352 $547$24 $43 $178 $180 $63 $80 $1 $2 $192 $192 $113 $146 $242 $325 $375 $331 $73 $100 $92 $79 2014 2015 2016 2017 CAPITAL EXPENDITURES 70% of capital expenditures are recovered through rate adjustors (30%) and depreciation cash flow (40%) ($ Millions) $883 $1,056 $1,111 Other Distribution Transmission Renewable Generation Environmental Traditional Generation Projected $1,285 • The table does not include capital expenditures related to El Paso's 7% interest in Four Corners Units 4 and 5 of $3 million in 2015, $21 million in 2016 and $26 million in 2017. • 2015 – 2017 as disclosed in Second Quarter 2015 Form 10-Q.

Second Quarter 201517 • FERC Formula Rates adopted in 2008 • Adjusted annually with 10.75% allowed ROE • Based on FERC Form 1 and projected closings – Update filed each May – Annual rate true-up compares projected revenue requirement to actual, with variance incorporated into next annual update • Retail portion flows through ACC Transmission Cost Adjustor (TCA) REGULATORY MECHANISMS (TCA) We have achieved constructive transmission rate treatment with annual adjustments As Filed 2015 2014 2013 Annual Rate Increase Rate Effective Date Annual Rate Increase Rate Effective Date Annual Rate Increase Rate Effective Date Retail Portion (TCA) $(7)M 6/1/2015 $5 M 6/1/2014 $21 M 6/1/2013 Wholesale Portion $(11)M 6/1/2015 $1 M 6/1/2014 $5 M 6/1/2013 Total Increase (Decrease) $(18)M $6 M $26 M Equity Ratio 58% 58% 57% Rate Base (Year-End) $1.3B $1.3 B $1.2 B Test Year 2014 2013 2012

Second Quarter 201518 6/1 Rate Goes Into Effect REGULATORY MECHANISMS (TCA) We have achieved constructive transmission rate treatment with annual adjustments 2014 2015 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 6/1 Rate Goes Into Effect ~5/15 File/Post FERC Rate ~5/1 File FERC Form 1 ~5/15 File/Post FERC Rate ~5/1 File FERC Form 1 • New accounting treatment began July 1, 2012, effective with 2012 Settlement Agreement • Quarterly true-ups can occur throughout the year (2015 included adjustments of 2014 revenue) 2014 Revenue 2014 Rates (Including True-Up) 2015 Rates (Including True-Up) 2015 Revenue Quarterly True-Ups Quarterly True-Ups

Second Quarter 201519 (17) 5 (4) (7) (10) (6) $(20) $(10) $0 $10 Q1 Q2 Q3 Q4 Q1 Q2 GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions 2014 $(23) Million All periods recalculated to current 10-year rolling average (2004-2013). 2015 $(16) Million

Second Quarter 201520 10 8 15 11 12 7 16 14 17 12 11 14 $0 $10 $20 $30 $40 $50 Q1 Q2 Q3 Q4 Q1 Q2 Renewable Energy Demand Side Management RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES* * O&M expenses related to renewable energy, demand side management and similar regulatory programs are offset by comparable revenue amounts. Pretax Millions 2014 $103 Million 2015 $44 Million

Second Quarter 201521 NON-GAAP MEASURE RECONCILIATION GROSS MARGIN $ millions pretax, except per share amounts 2015 2014 Operating revenues* 890$ 906$ Fuel and purchased power expenses* (281) (291) Gross margin 609 615 (0.03)$ Adjustments: Renewable energy (excluding AZ Sun), demand side management and similar regulatory programs (17) (19) 0.01 Gross margin - adjusted 592$ 596$ (0.02)$ * Line items from Consolidated Statements of Income Three Months Ended June 30, EPS Impact

Second Quarter 201522 NON-GAAP MEASURE RECONCILIATION OTHER NON-GAAP $ millions pretax, except per share amounts 2015 Palo Verde Lease Extensions2 2015 Adjusted 2014 Depreciation and amortization1 123 (5) 118 105 (0.07)$ 4 5 9 9 N/A 1 Line items from Consolidated Statements of Income 2 Not tax effected EPS Impact Three Months Ended June 30, Net income attributable to noncontrolling interests1