8-K

UNITED STATES

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):    February 23, 2018

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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.

The following information is furnished pursuant to Item 2.02.

On February 23, 2018, Pinnacle West Capital Corporation (the “Company” or “Pinnacle West”) issued a press release regarding its financial results for the fiscal quarter and full year ended December 31, 2017 and its earnings outlook for 2018.  A copy of the press release is attached hereto as Exhibit 99.1.

Item 7.01. Regulation FD Disclosure.

The following information is furnished pursuant to Item 7.01.

The Company is providing a copy of the slide presentation made in connection with its earnings conference call on February 23, 2018.  This information contains Company operating results for the fiscal quarter and fiscal year ended December 31, 2017, earnings outlook for 2018 and a quarterly and full year consolidated statistical summary. The slide presentation is attached hereto as Exhibits 99.2 and is concurrently being posted to the Company’s website at www.pinnaclewest.com.

Item 9.01.Financial Statements and Exhibits.

(d)Exhibits

Exhibit No.	Registrant(s)	Description
99.1	Pinnacle West APS	Earnings News Release issued on February 23, 2018.
99.2	Pinnacle West APS	Pinnacle West 4th Quarter and Full-Year 2017 Results slide presentation accompanying February 23, 2018 conference call.

SIGNATURES

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: February 23, 2018	By: /s/ James R. Hatfield
	James R. Hatfield
	Executive Vice President and
	Chief Financial Officer
	ARIZONA PUBLIC SERVICE COMPANY
	(Registrant)
Dated: February 23, 2018	By: /s/ James R. Hatfield
	James R. Hatfield
	Executive Vice President and
	Chief Financial Officer

EX-99.1

FOR IMMEDIATE RELEASE		February 23, 2018
Media Contact: Analyst Contacts:	Alan Bunnell (602) 250-3376 Stefanie Layton (602) 250-4541 Chalese Haraldsen (602) 250-5643
Website:	pinnaclewest.com

PINNACLE WEST REPORTS 2017 FULL-YEAR AND FOURTH-QUARTER RESULTS

• Full-year results benefit from strong operational performance and regulatory settlement

• Annual customer growth increases 1.8 percent

• Company updates 2018 guidance

PHOENIX - Pinnacle West Capital Corporation (NYSE: PNW) today reported consolidated net income attributable to common shareholders of $488.5 million, or $4.35 per diluted share, for full-year 2017. This result compares with net income of $442.0 million, or $3.95 per share, in 2016.

“Led by strong operational performance and a regulatory settlement that allows us to continue investing in a smarter and cleaner energy infrastructure, 2017 proved to be another solid year for our company,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt. “Our employees once again did an excellent job running and maintaining our generation fleet and electric grid, and ensuring that our 1.2 million customers received the reliable electrical service they have come to expect from us.”

Arizona Public Service Co.’s power reliability for the year remained among the strongest in the industry. The typical APS customer experienced less than one outage (0.75 power outages compared to a national industry median of 1.12 interruptions) over the course of the entire year - a new company record. This performance was especially impressive, Brandt said, considering the company also set an all-time peak demand record in June, breaking the prior record which had stood for 11 years.

The Company’s regulatory and rate settlement, which was approved by the Arizona Corporation Commission, continues Arizona’s solar leadership and brings substantial benefits to the state while offering customers more choice and control through new rate options.

Brandt cited several additional examples of the Company’s 2017 achievements:

• For the sixth straight year, Pinnacle West increased its common dividend, raising it by 6.1 percent. In addition, Pinnacle West’s total return to shareholders was 12.7 percent, which compared favorably with a 10.6 percent return for the S&P 1500 Electric Utilities Index.

• Palo Verde achieved its 26th consecutive year as the nation’s largest power producer - producing 32.3 million megawatt-hours of carbon-free electricity. The plant achieved a

93.8 percent capacity factor and completed both its spring and fall planned refueling outages in 30 days each - a first in plant history.

• The Company maintained its top-decile safety performance as employees’ vigilant focus led to one of the safest years on record.

Looking to the near future, Brandt said the company will maximize its regulatory settlement to continue creating value for customers and shareholders alike. “One of our top priorities from the settlement is lowering customer bills following the federal corporate tax cuts,” he said. “If approved by the Commission, the $119 million tax decrease will offset the $95 million revenue increase that resulted from our rate review this past fall.”

Brandt said the company also will remain at the forefront of innovative and advanced grid technologies (including batteries, microgrids and electric vehicle charging stations) to help the Company better manage customer demand, while strengthening an already solid record of reliable service.

The 2017 full-year financial results comparison was positively impacted by the following major factors:

• The Company’s regulatory settlement, which included APS’s first retail base rate increase in five years,increased results by $0.30 per share. The settlement became effective Aug. 19, 2017.

• Higher transmission revenues improved earnings by $0.23 per share.

• Retail electricity salesincreased earnings $0.13 per share due in part tohigher retail revenue from customer growth, which improved 1.8 percent compared to a year ago, as well as higher average effective prices due to customer usage patterns.

• Higher recovery of lost revenue resulting from customer energy efficiency and distributed generation programs(also known as lost fixed cost recovery)contributed $0.08 per share compared to 2016.

• The effects of weather variations improved the Company’s earnings by $0.03 per share.

• The net effect of miscellaneous items increased results $0.03 per share.

The above positive factors were offset in part by the following factors:

• Operating expenses, including higher depreciation and amortization and increased taxes other than income taxes, reduced results by $0.37 per share compared with the prior-year, primarily due to increased plant in service.

• Higher operations and maintenance expenses reduced results by $0.03 per share. The increased costs were largely the result of increased employee benefit costs and higher corporate support expenses related to information technology and implementation of new customer systems. These costs were partially offset by lower Palo Verde operating costs, as well as a decrease in fossil generation costs.

For the quarter ended December 31, 2017, Pinnacle West reported lower consolidated net income attributable to common shareholders of $21.6 million, or $0.19 per diluted share. This result compares with net income of $53.2 million, or $0.47 per share, for the same period a year ago.

The 2017 fourth-quarter results comparison versus the same quarter in 2016 was positively impacted by the retail base rate increase, higher retail revenue, and an increase in transmission revenues. These factors were more than offset by higher operating expenses, the effects of weather and a higher effective tax rate.

Financial Outlook

For 2018, Pinnacle West estimates its consolidated earnings guidance will be in the range of $4.35 to $4.55 per diluted share, and expects to achieve a consolidated earned return on average common equity of more than 9.5 percent. The Company increased its earnings guidance expectations from a previously disclosed range of $4.25 to $4.45 per share.

Key factors and assumptions underlying the 2018 outlook can be found on the year-end and fourth-quarter 2017 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 2017 year-end and fourth-quarter results, as well as recent developments, at 11 a.m. ET (9 a.m. AZ time) today, February 23. 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, participants can 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), Friday, March 2, 2018, by calling (877) 481-4010 in the U.S. and Canada or (919) 882-2331 internationally and entering conference ID number 23277.

General Information

Pinnacle West Capital Corp., an energy holding company based in Phoenix, has consolidated assets of about $17 billion, about 6,200 megawatts of generating capacity and 6,300 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.

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,” “project” 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 high reliability and customer service levels;

• variations in demand for electricity, including those due to weather, seasonality, 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, ballot initiatives and regulation, including those relating to environmental requirements, regulatory policy, 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 and of debt and equity capital investment;

• 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, including 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, economic and other concerns surrounding coal-fired generation, including regulation of greenhouse gas emissions;

• volatile fuel and purchased power costs;

• the investment performance of the assets of our nuclear decommissioning trust, pension, and other post-retirement 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 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, 2017, 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

(unaudited)

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

		THREE MONTHS ENDED		TWELVE MONTHS ENDED
		DECEMBER 31,		DECEMBER 31,
		2017	2016	2017	2016
Operating Revenues		$ 759,659	$ 739,199	$ 3,565,296	$ 3,498,682
Operating Expenses
	Fuel and purchased power	203,826	243,257	981,301	1,075,510
	Operations and maintenance	266,149	208,277	924,443	911,319
	Depreciation and amortization	146,840	122,852	534,118	485,829
	Taxes other than income taxes	51,053	40,597	184,347	166,499
	Other expenses	1,181	1,400	6,660	3,541
	Total	669,049	616,383	2,630,869	2,642,698
Operating Income		90,610	122,816	934,427	855,984
Other Income (Deductions)
	Allowance for equity funds used during construction	14,345	11,061	47,011	42,140
	Other income	1,951	516	4,006	901
	Other expense	(9,044)	(3,252)	(21,539)	(15,337)
	Total	7,252	8,325	29,478	27,704
Interest Expense
	Interest charges	57,319	50,834	219,796	205,720
	Allowance for borrowed funds used during construction	(6,734)	(5,121)	(22,112)	(19,970)
	Total	50,585	45,713	197,684	185,750
Income Before Income Taxes		47,277	85,428	766,221	697,938
Income Taxes		20,775	27,309	258,272	236,411
Net Income		26,502	58,119	507,949	461,527
Less: Net income attributable to noncontrolling interests		4,873	4,873	19,493	19,493
Net Income Attributable To Common Shareholders		$ 21,629	$ 53,246	$ 488,456	$ 442,034
Weighted-Average Common Shares Outstanding - Basic		111,943	111,545	111,839	111,409
Weighted-Average Common Shares Outstanding - Diluted		112,472	112,223	112,367	112,046
Earnings Per Weighted-Average Common Share Outstanding
	Net income attributable to common shareholders - basic	$ 0.19	$ 0.48	$ 4.37	$ 3.97
	Net income attributable to common shareholders - diluted	$ 0.19	$ 0.47	$ 4.35	$ 3.95

EX-99.2

Fourth Quarter and Full-Year 2017 FOURTH QUARTER AND FULL-YEAR 2017 RESULTS February 23, 2018

Fourth Quarter and Full-Year 20172 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,” “project” 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 high reliability and customer service levels; variations in demand for electricity, including those due to weather seasonality, 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, ballet initiatives and regulation, including those relating to environmental requirements, regulatory policy, 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 and of debt and equity capital investments; 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, including 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, economic and other concerns surrounding coal-fired generation, including regulation of greenhouse gas emissions; 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 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, 2017, 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 “electricity 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, and is 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.

Fourth Quarter and Full-Year 20173 CONSOLIDATED EPS COMPARISON 2017 VS. 2016 $0.19 $0.47 2017 2016 4th Quarter GAAP Net Income $4.35 $3.95 2017 2016 Full-Year GAAP Net Income

Fourth Quarter and Full-Year 20174 Adjusted O&M(1) $(0.27) EPS VARIANCES 4TH QUARTER 2017 VS. 4TH QUARTER 2016 4Q 2016 4Q 2017 $0.47 $0.19 D&A $(0.13) Other, net $(0.04) Other Taxes $(0.06) Adjusted Gross Margin(1) $0.29 Effective Tax Rate $(0.07)Gross Margin Rate Increase $ 0.17 Sales / Usage $ 0.05 LFCR $ - Transmission $ 0.06 Weather $ (0.03) Other $ 0.04 (1) Excludes costs and offsetting operating revenues associated with renewable energy and demand side management programs. See non-GAAP reconciliation in Appendix.

Fourth Quarter and Full-Year 20175 EPS VARIANCES FULL YEAR 2017 VS. 2016 (1) Excludes costs and offsetting operating revenues associated with renewable energy and demand side management programs. See non-GAAP reconciliation in Appendix. Adjusted Gross Margin(1) $0.85 Adjusted O&M(1) $(0.03) D&A $(0.27) Other, net $(0.03) Interest, net of AFUDC $(0.02) $3.95 $4.35 2016 2017 Other Taxes $(0.10) Gross Margin Rate Increase $ 0.30 Sales / Usage $ 0.13 LFCR $ 0.08 Transmission $ 0.23 Weather $ 0.03 Other $ 0.08

Fourth Quarter and Full-Year 20176 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 U.S. Phoenix ECONOMIC INDICATORS Arizona and Metro Phoenix remain attractive places to live and do business E Year over Year Employment Growth1 Above-average job growth in tourism, health care, manufacturing, financial services, and construction Maricopa County ranked #1 in U.S. for population growth in 2016 - U.S. Census Bureau March 2017 Scottsdale ranked best place in the U.S. to find a new job in 2017; 4 other valley cities ranked in Top 20 - WalletHub January 2017 2017 housing construction at highest level since 2007 Vacancy rates in office and retail space have fallen to pre-recessionary levels 0 10,000 20,000 30,000 40,000 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Single Family Multifamily Projected Single Family & Multifamily Housing Permits Maricopa County Arizona population surpassed 7 million in 2017 1 Employment data is based on CPS as of December 2017 Arizona #1 state in the country in 2017 for in-bound moves - North American Moving Services January 2018

Fourth Quarter and Full-Year 20177 EPS GUIDANCE AS OF FEBRUARY 23, 2018 2017 EPS 2018 Guidance Raising 2018 Guidance Range 1 $4.35 $4.35 - $4.55 + Rate increase* + Adjustment mechanisms, primarily Transmission Cost Adjustor (TCA) and Lost Fixed Cost Recovery (LFCR) + Selective Catalytic Reduction (SCR) and Ocotillo deferrals* + Modest sales growth – Higher D&A due to plant additions and rates* – Higher O&M, primarily planned fossil outages – Higher Taxes Other Than Income Taxes, primarily higher property taxes* – Higher Interest Key Drivers 2017 - 2018 1 Prior 2018 EPS Guidance: $4.25 - $4.45 * 2017 Rate Review Order specific items. See key factors and assumptions in appendix.

Fourth Quarter and Full-Year 2017 APPENDIX

Fourth Quarter and Full-Year 20179 2018 EPS GUIDANCE Key Factors & Assumptions as of February 23, 2018 2018 Electricity gross margin* (operating revenues, net of fuel and purchased power expenses) $2.47 - $2.52 billion • Retail customer growth about 1.5–2.5% • Weather-normalized retail electricity sales volume about 0.5-1.5% higher compared to prior year • Assumes normal weather Operating and maintenance (O&M)* $860 – $880 million Other operating expenses (depreciation and amortization, Four Corners SCRs and Ocotillo deferrals, taxes other than income taxes, and other miscellaneous expenses) $790 – $810 million Interest expense, net of allowance for borrowed and equity funds used during construction (Total AFUDC $65 million) $180 – $190 million Net income attributable to noncontrolling interests $20 million Effective tax rate 18% Average diluted common shares outstanding ~113 million EPS Guidance $4.35 - $4.55 * Excludes O&M of $85 million, and offsetting revenues, associated with renewable energy and demand side management programs.

Fourth Quarter and Full-Year 201710 FINANCIAL OUTLOOK Key Factors & Assumptions as of February 23, 2018 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% Assumption Impact 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 $14 million annually of carrying costs for government-mandated environmental capital expenditures (cumulative per kWh cap rate of $0.00050) Power Supply Adjustor (PSA) • 100% recovery • Includes certain environmental chemical costs and third-party battery storage Transmission Cost Adjustor (TCA) • TCA is filed each May and automatically goes into rates effective June 1 • Transmission revenue is accrued each month as it is earned. APS Solar Communities • Additions to flow through RES until next base rate case Four Corners Units 4 and 5 SCRs • 2019 step increase Property Tax Rate Deferral: APS is allowed to defer for future recovery (or credit to customers) the Arizona property tax expense above (or below) the 2015 test year caused by changes to the applicable composite property tax rate. Gross Margin – Customer and Sales Growth (2018-2020) Gross Margin – Related to 2017 Rate Review Order Outlook Through 2019: 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)

Fourth Quarter and Full-Year 201711 TAX REFORM Tax Cuts and Jobs Act provides benefits to both our customers and shareholders Regulatory Steps − Received ACC approval of $119M annual rate reduction reflecting lower corporate tax rate through the Tax Expense Adjustor Mechanism (TEAM) − Second filing under the TEAM expected later in 2018 to return excess deferred income taxes to customers − FERC guidance on the rate reduction for transmission customers expected in 2018 Key Impacts Recap of Excess Deferred Taxes ($ millions) As of December 31, 2017 Total Regulated Excess Deferred Taxes $1,140 Depreciation Related Excess Deferred Taxes (to be returned over the life of property) $1,020 - $1,040 Non-Depreciation Related Excess Deferred Taxes $100 - $120 2017 Tax Reform Impacts ($ millions) Income Tax Expense Regulatory Liability Revaluation of Regulated Deferred Taxes (includes gross up) $1,520 Revaluation of Non-Regulated Deferred Taxes $9 Total PNW Impacts $9 $1,520 Rate Base Growth − Higher incremental rate base of $150 million per year in 2018 and 2019 Continued Interest Deductibility − Majority of Pinnacle West debt likely allocable to regulated operations and excluded from any limitation Cash Taxes − Minimal cash tax payments through 2018 due to existing $85M in tax credit carryforwards

Fourth Quarter and Full-Year 201712 $218 $282 $241 $198 $235 $120 $9 $193 $91 $22 $46 $3 $16 $24 $17 $174 $148 $215 $180 $419 $444 $541 $617 $99 $80 $101 $153 2017 2018 2019 2020 APS CAPITAL EXPENDITURES Capital expenditures are funded primarily through internally generated cash flow ($ Millions) $1,341 $1,181 Other Distribution Transmission Renewable Generation Environmental(1) Traditional Generation Projected $1,153 New Gas Generation(2) • The chart does not include capital expenditures related to 4CA’s 7% interest in the Four Corners Power Plant Units 4 and 5 of $29 million in 2017, $15 million in 2018, $7 million in 2019 and $6 million in 2020. • 2018 – 2020 as disclosed in 2017 Form 10-K. (1) Includes Selective Catalytic Reduction controls at Four Corners with in-service dates of Q4 2017 (Unit 5) and Q1 2018 (Unit 4) (2) Ocotillo Modernization Project: 2 units scheduled for completion in Q4 2018, 3 units scheduled for completion in Q1 2019 $1,211

Fourth Quarter and Full-Year 201713 RATE BASE APS’s revenues come from a regulated retail rate base and meaningful transmission business $6.8 $9.1 $1.4 $1.8 2016 2017 2018 2019 2020 APS Rate Base Growth Year-End ACC FERC Total Approved Rate Base Projected ACC FERC Rate Effective Date 8/19/2017 6/1/2017 Test Year Ended 12/31/20151 12/31/2016 Rate Base $6.8B $1.4B Equity Layer 55.8% 55% Allowed ROE 10.0% 10.75% 1 Adjusted to include post test-year plant in service through 12/31/2016 83% 17% Generation & Distribution Transmission Rate base $ in billions, rounded Rate Base Guidance: 6-7% Average Annual Growth Rate

Fourth Quarter and Full-Year 201714 OPERATIONS & MAINTENANCE Goal is to keep O&M per kWh flat, adjusted for planned outages 751 753 734 756 770 785 - 795 37 52 38 72 63 75 - 85$788 $805 $772 $828 $833 $860 - $880 2013 2014 2015 2016 2017 2018E* PNW Consolidated ex RES/DSM** Planned Fleet Outages * 2018 excludes impacts related to the adoption of the new accounting standard regarding the presentation of pension and postretirement benefit costs. See Notes 2 and 7 in the 2017 Form 10-K for additional information. ** Excludes RES/DSM of $137 million in 2013, $103 million in 2014, $96 million in 2015, $83 million in 2016, $91 million in 2017 and $85 million in 2018E. ($ Millions)

Fourth Quarter and Full-Year 201715 Palo Verde Generating Station − Palo Verde will continue to have two refueling outages each year (18 months cycles for each of the three units) − APS’s share of the annual planned outage expense at Palo Verde has been between $18 - $22 million per year since 2013 − Equipment testing, inspections, and plant modifications are performed during the outages that cannot be done while the unit is online − Outage duration and cost are driven by scope of planned work as well as emergent work identified during the outage Gas/Oil Plants − No planned cycles; major maintenance outages are based on run hours and/or the number of starts and overall plant condition − Increasing levels of solar generation, participation in Energy Imbalance Market, and low gas prices have resulted in increased starts Coal Plants − Major maintenance outage cycles are typically between 6 to 8 years PLANNED OUTAGE CYCLES The length of time between outages varies from plant to plant

Fourth Quarter and Full-Year 201716 Credit Ratings (1) • A- or equivalent ratings or better at S&P, Moody’s and Fitch 2017 Major Financing Activities • $250 million re-opening in March of APS’s outstanding 4.35% senior unsecured notes due November 2045 • $300 million 10-year 2.95% APS senior unsecured notes issued in September • $300 million 3-year 2.25% PNW senior unsecured notes issued in November 2018 Major Financing Activities • Currently expect up to $600 million of long-term debt issuance at APS (1) We are disclosing credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds. BALANCE SHEET STRENGTH $82 $600 $250 $300 $- $100 $200 $300 $400 $500 $600 2018 2019 2020 APS PNW ($Millions) Long-Term Debt Maturity Schedule

Fourth Quarter and Full-Year 201717 2017 RATE REVIEW ORDER* EFFECTIVE AUGUST 19, 2017 Key Financial Proposals – Base Rate Changes Annualized Base Rate Revenue Changes ($ millions) Non-fuel, Non-depreciation Base Rate Increase $ 87.2 Decrease fuel and Purchased Power over Base Rates (53.6) Increase due to Changes in Depreciation Schedules 61.0 Total Base Rate Increase $ 94.6 Key Financial Assumptions Allowed Return on Equity 10.0% Capital Structure Long-term debt 44.2% Common equity 55.8% Base Fuel Rate (¢/kWh) 3.0168 Post-test year plant period 12 months *The ACC’s decision is subject to appeals.

Fourth Quarter and Full-Year 201718 Key Proposals – Revenue Requirement Four Corners • Cost deferral order from in-service dates to incorporation of SCRs in rates using a step-increase no later than January 1, 2019 Ocotillo Modernization Project • Cost deferral order from in-service dates to effective date in next rate case Power Supply Adjustor (PSA) • Modified to include certain environmental chemical costs and third-party battery storage Property Tax Deferral • Defer for future recovery the Arizona property tax expense above or below the test year rate Key Proposals – Rate Design Lost Fixed Cost Recovery (LFCR) • Modified to be applied as a capacity (demand) charge per kW for customer with a demand rate and as a kWh charge for customers with a two-part rate without demand Environmental Improvement Surcharge (EIS) • Increased cumulative per kWh cap rate from $0.00016 to a new rate of $0.00050 and include a balancing account Time-of-Use Rates (TOU) • Modified on-peak period for residential, and extra small through large general service to 3:00 pm – 8:00 pm weekdays • After September 1, 2018, a new TOU rate will be the standard rate for all new customers (except small use) Distributed Generation • New DG customers eligible for TOU rate with Grid Access Charge or Demand rates • Resource Comparison Proxy (RCP) for exported energy of $0.129/kWh in year one APS Solar Communities • New program for utility-owned solar distributed generation, recoverable through the Renewable Energy Adjustment Clause (RES), to be no less than $10 million per year, and not more than $15 million per year Other Considerations Rate Case Moratorium • No new general rate case application before June 1, 2019 (3-year stay-out) Self-Build Moratorium • APS will not pursue any new self-build generation (with exceptions) having an in-service date prior to January 1, 2022 (extended to December 31, 2027 for combined-cycle generating units) unless expressly authorized by the ACC 2017 RATE REVIEW ORDER* EFFECTIVE AUGUST 19, 2017 *The ACC’s decision is subject to appeals.

Fourth Quarter and Full-Year 201719 OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs Ocotillo Modernization Project Four Corners SCRs In-Service Dates Units 6, 7 – Fall 2018 Units 3, 4 and 5 – Spring 2019 Unit 5 – Late 2017 Unit 4 – Spring 2018 Total Cost (APS) $500 million $400 million Estimated Cost Deferral $45 million (through 2019) $30 million (through 2018) Accounting Deferral − Cost deferral from date of commercial operation to the effective date of rates in next rate case − Includes depreciation, O&M, property taxes, and capital carrying charge1 − Cost deferral from time of installation to incorporation of the SCR costs in rates using a step increase beginning in 2019 − Includes depreciation, O&M, property taxes, and capital carrying charge1 • Included in the 2017 Rate Review Order*, APS has been granted Accounting Deferral Orders for two large generation-related capital investments – Ocotillo Modernization Project: Retiring two aging, steam-based, natural gas units, and replacing with 5 new, fast-ramping, combustion turbine units – Four Corners Power Plant: Installing Selective Catalytic Reduction (SCR) equipment to comply with Federal environmental standards 1 APS will calculate the capital carrying charge using the 5.13% embedded cost of debt established in the 2017 Rate Review Order. *The ACC’s decision is subject to appeals.

Fourth Quarter and Full-Year 201720 FOUR CORNERS SCR RATE RIDER APS will file for a rate increase in April 2018 1 Estimate as of December 31, 2017 2 Based on 2017 Rate Review Order Financial Cost of Capital Bill Impact • Consistent with prior disclosed estimates • 7.85% Return on Rate Base2 – Weighted Average Cost of Capital (WACC) • Rate rider applied as a percentage of base rates for all applicable customers • $390 million1 direct costs vs. $400 million2 contemplated in APS’s recent rate case • 5.13% Return on Deferral2 – Embedded Cost of Debt • ~$65 million revenue requirement • $40 million1 in indirect costs (overhead, AFUDC) • 5% Depreciation Rate – 20 year useful life (2038-depreciation study) • ~2% bill impact • 5 Year Deferral Amortization Key Components of APS’s Anticipated Request

Fourth Quarter and Full-Year 201721 • Funded status of the pension plan finished 2017 at 95%, up 7% from YE 2016. • The pension plan continues to employ a liability driven investment strategy in order to reduce volatility in the plan’s funded status. PENSION & OTHER POST RETIREMENT BENEFITS (“OPEB”) 88% 88% 95% YE 2015 YE 2016 YE 2017 Pension Funded Status(1) Expense(2) 2017A 2018E(3) Pension(1) $21 $8 OPEB $(18) $(13) Contributions 2017A 2018E 2019E 2020E Pension $100 Up to $250 OPEB $0.4 $0.0 $0.0 $0.0 Expense Assumptions 2017 2018 Discount Rate: Pension 4.08% 3.65% Expected Long-Term Return on Plan Assets: Pension 6.55% 6.05% (1) Excludes supplemental excess benefit retirement plan calculated on a PBO basis. (2) Excludes amounts capitalized or billed to electric generating plant joint owners. (3) Excludes impacts related to the adoption of the new accounting standard regarding the presentation of pension and postretirement benefit costs. See Notes 2 and 7 in the 2017 Form 10-K for additional information. Data as of February 23, 2018 ($ in millions)

Fourth Quarter and Full-Year 201722 484 680 832 715 1157 1158 1349 1141 1002 1189 1077 1168 1153 759 1267 1001 1291 1413 1364 2033 1603 1443 1283 14341463 1578 1843 1971 2495 3817 2210 3591 328 554 648 705 995 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 Applications 2016 Applications 2017 Applications 2018 Applications * Monthly data equals applications received minus cancelled applications. As of January 31, 2018, approximately 74,000 residential grid-tied solar photovoltaic (PV) systems have been installed in APS’s service territory, totaling approximately 581 MWdc of installed capacity. Excludes APS Solar Partner Program residential PV systems. 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 chart above. RESIDENTIAL PV APPLICATIONS* 10 18 22 44 51 57 74 133 150 2 2009 2012 2014 2016 2018 Residential DG (MWdc) Annual Additions YTD

Fourth Quarter and Full-Year 201723 (4) 10 (13) 4 2 12 (10) (2) $(15) $(10) $(5) $0 $5 $10 $15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions All periods recalculated to current 10-year rolling average (2005-2014) 2016 $(3) Million 2017 $2 Million

Fourth Quarter and Full-Year 201724 8 4 7 6 5 2 12 19 12 15 18 13 12 15 16 10 $0 $10 $20 $30 $40 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Renewable Energy Demand Side Management RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES* * Renewable energy and demand side management expenses are offset by adjustment mechanisms. Pretax Millions 2016 $83 Million 2017 $91 Million

Fourth Quarter and Full-Year 201725 2018 KEY DATES Other Key Dates Q1 Q2 Q3 Q4 Arizona State Legislature In session Jan 8 – End of Q2 Elections Aug 28: Primary Nov 6: General ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Key Recurring Regulatory Filings Lost Fixed Cost Recovery E-01345A-11-0224 File Feb 15 Implement May 1 Transmission Cost Adjustor E-01345A-11-0224 File May 15 Implement Jun 1 2019 DSM/EE Implementation Plan TBD 2018 DSM Decision Expected March 2018 Jun 1: File 2019 Plan Decision expected by end of 2018 2019 RES Implementation Plan TBD 2018 RES Decision Expected March 2018 Jul 1: File 2019 Plan Decision expected by end of 2018 APS Rate Review/ Four Corners SCR Step Increase E-01345A-16-0036 Feb: Customer Transition Begins May 1: File Year Two RCP Export Rate Apr: File Four Corners SCR Request Sep 1: Year Two RCP Export Rate Implemented Resource Planning and Procurement E-00000V-15-0094 Decision expected in March 2018 Workshops begin for APS 2020 IRP Review and Modification of Current Net Metering Rules RE-00000A-17-0260 Staff Draft Rules Expected Q2 Modification of the Federal Tax Reform Rate Adjustment AU-00000A-17-0379 Jan 9: APS TEAM filing Jan 31:Workshop Arizona Energy Modernization Plan E-00000Q-16-0289

Fourth Quarter and Full-Year 201726 NON-GAAP MEASURE RECONCILIATION $ millions pretax, except per share amounts 2017 2016 Operating revenues* 760$ 739$ Fuel and purchased power expenses* (204) (243) Gross margin 556 496 0.33$ Adjustments: Renewable energy and demand side management programs (31) (25) (0.04) Adjusted gross margin 525$ 471$ 0.29$ Operations and maintenance* (266)$ (208)$ (0.32)$ Adjustments: Renewable energy and demand side management programs (29) (19) 0.05 Adjusted operations and maintenance (237)$ (189)$ (0.27)$ * Line items from Consolidated Statements of Income Three Months Ended December 31, EPS Impact

Fourth Quarter and Full-Year 201727 NON-GAAP MEASURE RECONCILIATION $ millions pretax, except per share amounts 2017 2016 Operating revenues* 3,565$ 3,499$ Fuel and purchased power expenses* (981) (1,076) Gross margin 2,584 2,423 0.89$ Adjustments: Renewable energy and demand side management programs (112) (105) (0.04) Adjusted gross margin 2,472$ 2,318$ 0.85$ Operations and maintenance* (924)$ (911)$ (0.07)$ Adjustments: Renewable energy and demand side management programs (91) (83) 0.04 Adjusted operations and maintenance (833)$ (828)$ (0.03)$ * Line items from Consolidated Statements of Income Twelve Months Ended December 31, EPS Impact

Fourth Quarter and Full-Year 201728 NON-GAAP MEASURE RECONCILIATION $ millions pretax Operating revenues* 3,645$ - 3,705$ Fuel and purchased power expenses* (1,090) - (1,100) Gross margin 2,555 - 2,605 Adjustments: Renewable energy and demand side management programs (85) - (85) Adjusted gross margin 2,470$ - 2,520$ Operations and maintenance* 945$ - 965$ Adjustments: Renewable energy and demand side management programs (85) - (85) Adjusted operations and maintenance 860$ - 880$ * Line items from Consolidated Statements of Income 2018 Guidance

Fourth Quarter and Full-Year 201729 CONSOLIDATED STATISTICS 2017 2016 Incr (Decr) 2017 2016 Incr (Decr) ELECTRIC OPERATING REVENUES (Dollars in Millions) Retail Residential 353$ 332$ 21 1,792$ 1,730$ 62$ Business 370 362 8 1,615 1,605 10 Total Retail 723 694 29 3,407 3,335 72 Sales for Resale (Wholesale) 18 30 (12) 80 95 (15) Transmission for Others 11 7 4 46 28 18 Other Miscellaneous Services 5 6 (1) 21 32 (11) Total Electric Operating Revenues 757$ 737$ 20 3,554$ 3,490$ 64$ ELECTRIC SALES (GWH) Retail Residential 2,552 2,671 (119) 13,207 13,195 12 Business 3,390 3,460 (70) 14,811 14,827 (16) Total Retail 5,942 6,131 (189) 28,018 28,022 (4) Sales for Resale (Wholesale) 597 1,045 (448) 2,875 3,767 (892) Total Electric Sales 6,539 7,176 (637) 30,893 31,789 (896) RETAIL SALES (GWH) - WEATHER NORMALIZED Residential 2,631 2,653 (22) 13,278 13,321 (43) Business 3,353 3,440 (87) 14,727 14,772 (45) Total Retail Sales 5,984 6,093 (108) 28,005 28,093 (88) Retail sales (GWH) (% over prior year) (1.8)% (0.3)% AVERAGE ELECTRIC CUSTOMERS Retail Customers Residential 1,086,642 1,066,711 19,931 1,080,665 1,061,814 18,851 Business 134,843 132,173 2,670 133,961 131,697 2,264 Total Retail 1,221,485 1,198,884 22,601 1,214,626 1,193,511 21,115 Wholesale Customers 35 46 (11) 40 46 (6) Total Customers 1,221,520 1,198,930 22,590 1,214,666 1,193,557 21,109 Total Customer Growth (% over prior year) 1.9% 1.8% RETAIL USAGE - WEATHER NORMALIZED (KWh/Average Customer) Residential 2,421 2,487 (66) 12,287 12,545 (258) Business 24,868 26,026 (1,158) 109,934 112,166 (2,232) 3 Months Ended December 31, 12 Months Ended December 31, Numbers may not foot due to rounding.

Fourth Quarter and Full-Year 201730 CONSOLIDATED STATISTICS 2017 2016 Incr (Decr) 2017 2016 Incr (Decr) WEATHER INDICATORS - RESIDENTIAL Actual Cooling Degree-Days 52 57 (5) 1,776 1,720 56 Heating Degree-Days 203 282 (79) 642 679 (37) Average Humidity 22% 29% (7)% 24% 27% (3)% 10-Year Averages (2005 - 2014) Cooling Degree-Days 44 44 - 1,766 1,766 - Heating Degree-Days 344 344 - 836 836 - Average Humidity 28% 28% - 25% 25% - ENERGY SOURCES (GWH) Generation Production Nuclear 2,264 2,276 (12) 9,411 9,384 27 Coal 1,506 2,376 (870) 7,140 6,687 453 Gas, Oil and Other 2,234 1,508 726 7,916 8,270 (354) Renewables 121 93 28 567 501 66 Total Generation Production 6,125 6,252 (127) 25,034 24,842 192 Purchased Power - - Conventional 414 753 (339) 5,061 5,737 (676) Resales 137 188 (51) 770 1,027 (257) Renewables 430 431 (1) 1,897 1,828 69 Total Purchased Power 981 1,372 (390) 7,728 8,592 (864) Total Energy Sources 7,106 7,624 (518) 32,762 33,433 (672) POWER PLANT PERFORMANCE Capacity Factors - Owned Nuclear 90% 90% - 94% 93% 1% Coal 41% 64% (23)% 49% 46% 3% Gas, Oil and Other 32% 22% 10% 28% 30% (2)% Solar 24% 22% 2% 28% 30% (2)% System Average 44% 46% (2)% 46% 46% - 3 Months Ended December 31, 12 Months Ended December 31, Numbers may not foot due to rounding.