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):    August 3, 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 August 3, 2018, Pinnacle West issued a press release regarding its financial results for the fiscal quarter ended June 30, 2018 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 the quarterly earnings conference call on August 3, 2018. This information contains Company operating results for the fiscal quarter ended June 30, 2018, earnings outlook for 2018 and a quarterly consolidated statistical summary. The slide presentation is attached hereto as Exhibit 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 August 3, 2018.
99.2	Pinnacle West APS	Pinnacle West Capital Corporation Second Quarter 2018 Results slide presentation accompanying August 3, 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: August 3, 2018	By: /s/ James R. Hatfield
	James R. Hatfield
	Executive Vice President and
	Chief Financial Officer
	ARIZONA PUBLIC SERVICE COMPANY
	(Registrant)
Dated: August 3, 2018	By: /s/ James R. Hatfield
	James R. Hatfield
	Executive Vice President and
	Chief Financial Officer

EX-99.1

FOR IMMEDIATE RELEASE		August 3, 2018
Media Contact:	Alan Bunnell, (602) 250-3376
Analyst Contacts:	Stefanie Layton (602) 250-4541
Website:	pinnaclewest.com

PINNACLE WEST REPORTS 2018 SECOND-QUARTER RESULTS

• Quarterly results in line with Company expectations

• Operations and maintenance expenses increased versus a year ago due to higher planned fossil plant outages and other operating costs

• Company maintains focus on deploying innovative technologies that benefit customers

PHOENIX - Pinnacle West Capital Corp. (NYSE: PNW) today reported consolidated net income attributable to common shareholders of $166.7 million, or $1.48 per diluted share of common stock, for the quarter ended June 30, 2018. This result compares with earnings of $167.4 million, or $1.49 per share, in the same 2017 period.

“Second-quarter results were in line with our expectations, and we remain well positioned to meet our financial commitments for the full year,” said Pinnacle West Chairman, President and Chief Executive Officer Don Brandt. “We will continue investing in and deploying advanced grid technologies, like battery storage and microgrids, to provide our customers with more clean energy options while maintaining reliability and managing costs.

“Our recent RFP to equip existing APS solar plants with battery storage, and our APS Solar Communities program, which offers rooftop solar to limited- and moderate-income customers, both underscore our ongoing commitment to Arizona.”

The 2018 second-quarter results comparison was adversely impacted by the following major factors:

• Higher operations and maintenance expenses decreased earnings by $0.23 per share compared with the prior-year period. The increased costs were primarily due to higher planned outage and operating costs, including at the Four Corners Power Plant to install added emission controls; an increase in transmission, distribution and customer service costs at APS; and an increase in public outreach costs at the parent company level primarily associated with the Company’s position on the Steyer-funded ballot initiative.

• Other operating expenses, including higher depreciation and amortization and increased taxes other than income taxes, reduced results by $0.19 per share compared with the prior-year period, largely because of higher property values, changes in rates and increased plant in service.

• The effects of weather variations adverselyimpacted earningsby $0.08 per share compared to the year-ago period. Residential cooling degree-days (a measure of the effects of weather) were 10 percent less than in last year’s second quarter, which was

marked by one of the hottest June’s on record, but still 4.7 percent higher than normal 10-year averages.

• Retail electricity sales contributed to a decrease of $0.03 per share compared to a year ago, due in part to the impacts of energy efficiency and distributed generation. The sales decrease was partially offset by solid customer growth of 1.6 percent.

These factors were almost entirely offset by the following positive items:

• The Company’s 2017 regulatory settlement, which included APS’s first retail base rate increase in five years,contributed $0.29 per share to quarterly results. The settlement became effective Aug. 19, 2017.

• The effects of federal corporate tax cuts positively impacted results by $0.10 per share,driven by the timing difference between income tax expense and the passing of savings directly back to customers.

• Higher transmission revenues and recovery of lost revenue resulting from customer energy efficiency and distributed generation programs(also known as lost fixed cost recovery)improved results $0.04 per share compared to 2017.

• Adoption of new accounting guidance and higher market returns for pension and other post-retirement benefits positively impacted results by $0.03 per share.

• The net effect of miscellaneous items increased earnings $0.06 per share.

Financial Outlook

For 2018, the Company continues to expect 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.

Key factors and assumptions underlying the 2018 outlook can be found in the second-quarter 2018 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 2018 second-quarter results, as well as recent developments, at noon ET (9 a.m. Arizona time) today, Aug. 3. 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), Friday, Aug. 10, 2018, by calling (877) 481-4010 in the U.S. and Canada or (919) 882-2331 internationally and entering conference ID number 33622.

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.

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,” “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		SIX MONTHS ENDED
		JUNE 30,		JUNE 30,
		2018	2017	2018	2017
Operating Revenues		$ 974,123	$ 944,587	$ 1,666,837	$ 1,622,315
Operating Expenses
	Fuel and purchased power	257,087	254,611	454,197	467,006
	Operations and maintenance	268,397	220,985	534,079	447,056
	Depreciation and amortization	145,436	125,739	290,261	253,366
	Taxes other than income taxes	53,607	44,289	107,207	88,125
	Other expenses	7,434	1,706	7,597	2,094
	Total	731,961	647,330	1,393,341	1,257,647
Operating Income		242,162	297,257	273,496	364,668
Other Income (Deductions)
	Allowance for equity funds used during construction	13,073	10,456	27,152	19,938
	Pension and other postretirement non-service credits - net	12,006	6,972	24,865	13,067
	Other income	6,598	484	10,583	964
	Other expense	(3,771)	(3,822)	(7,000)	(7,502)
	Total	27,906	14,090	55,600	26,467
Interest Expense
	Interest charges	60,708	54,969	119,662	106,833
	Allowance for borrowed funds used during construction	(6,291)	(4,906)	(13,046)	(9,378)
	Total	54,417	50,063	106,616	97,455
Income Before Income Taxes		215,651	261,284	222,480	293,680
Income Taxes		44,039	88,967	42,774	93,178
Net Income		171,612	172,317	179,706	200,502
Less: Net income attributable to noncontrolling interests		4,874	4,874	9,747	9,747
Net Income Attributable To Common Shareholders		$ 166,738	$ 167,443	$ 169,959	$ 190,755
Weighted-Average Common Shares Outstanding - Basic		112,115	111,797	112,067	111,763
Weighted-Average Common Shares Outstanding - Diluted		112,471	112,345	112,482	112,270
Earnings Per Weighted-Average Common Share Outstanding
	Net income attributable to common shareholders - basic	$ 1.49	$ 1.50	$ 1.52	$ 1.71
	Net income attributable to common shareholders - diluted	$ 1.48	$ 1.49	$ 1.51	$ 1.70

EX-99.2

SECOND QUARTER 2018 RESULTS August 3, 2018 Second Quarter 2018

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 “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. We present “adjusted interest, net of AFUDC” and “adjusted other” that have been adjusted for the deferral impacts of the Four Corner’s Selective Catalytic Reduction equipment. We also present “adjusted gross margin” and “adjusted operations and maintenance” that have been adjusted to exclude costs and offsettingoperating revenues associated with renewable energy and demand side management programs. We also present “adjusted income taxes" that shows the impact of tax reform. Adjusted interest, net of AFUDC, adjusted other, adjusted gross margin, adjusted operations and maintenance, and adjusted income taxes are “non-GAAP financial measures,” as defined in accordance with SEC rules. The appendix contains a reconciliation to show the deferral impacts of the Four Corners Selective Catalytic Reduction equipment, the exclusion of costs and offsetting operating revenues associated with renewable energy and demand side management programs, and the impact of tax reform. We believe the information provided in the reconciliation provides 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, such as the installation of the SCR equipment and tax reform impacts, and exclude the effects of programs that overstate our gross margin. 2 Second Quarter 2018

EPS VARIANCES 2ND QUARTER 2018 VS. 2ND QUARTER 2017 Adjusted Pension Gross Adjusted & Adjusted Margin1 O&M1 OPEB Income $0.12 $(0.23) Adjusted Non- Taxes4 $1.49 D&A Interest, service $0.30 $1.48 Other Adjusted $(0.13) net of Credits, Taxes Other2,3 AFUDC2 net $(0.06) $(0.06) $0.02 $0.03 Adjusted Gross Margin Rate Increase $ 0.29 Transmission $ 0.03 Federal Tax $ (0.20) Reform4 Weather $ (0.08) Sales / Usage $ (0.03) LFCR $ 0.01 Other3 $0.10 2Q 2017 2Q 2018 1 Excludes costs and offsetting operating revenues associated with renewable energy and demand side management programs. 2 Driver adjusted for the deferral impacts of the Four Corner’s Selective Catalytic Reduction (SCR) equipment. 3 Other gross margin impacts are largely offset by other expenses. 4 The effects of federal corporate tax cuts positively impacted results by $0.10 per share. See non-GAAP reconciliation in Appendix. 3 Second Quarter 2018

ECONOMIC Arizona and Metro Phoenix remain attractive places to INDICATORS live and do business Year over Year Employment Growth Maricopa County ranked #1 in U.S. for U.S. Phoenix population growth for second straight year - U.S. Census Bureau March 2018 5.0% 4.0% Arizona is a top 5 state in personal income growth 3.0% - U.S. Bureau of Economic Analysis March 2018 2.0% Above-average job growth in tourism, 1.0% health care, manufacturing, financial 0.0% services, and construction Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 APS partnered with Greater Phoenix Single Family & Multifamily Housing Permits Economic Council and Arizona Commerce Maricopa County Authority to welcome 21 new companies Single Family Multifamily Projected 40,000 to the state in 2017 30,000 2017 housing construction at highest level since 2007 20,000 Arizona #1 state in the country in 2017 10,000 for in-bound moves - North American Moving Services January 2018 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18E 4 Second Quarter 2018

APPENDIX Second Quarter 2018

Key Factors & Assumptions as of 2018 EPS GUIDANCE August 3, 2018 2018 Adjusted gross margin1 (operating revenues, net of fuel and $2.47 – $2.52 billion purchased power expenses) • Retail customer growth about 1.5–2.5% • Weather-normalized retail electricity sales volume about 0-1% higher compared to prior year • Assumes normal weather Adjusted operating and maintenance (O&M)1 $905 – $925 million Other operating expenses (depreciation and amortization, Four Corners SCRs and $790 – $810 million Ocotillo deferrals, taxes other than income taxes, and other miscellaneous expenses) Other income (pension and other post-retirement non-service credits, other income $45 – $55 million and other expense) Interest expense, net of allowance for borrowed and equity funds used during $180 – $190 million construction (Total AFUDC $65 million) Net income attributable to noncontrolling interests $20 million Effective tax rate 20% Average diluted common shares outstanding ~113 million EPS Guidance $4.35 - $4.55 1 Excludes O&M of $105 million, and offsetting revenues, associated with renewable energy and demand side management programs. 6 Second Quarter 2018

Key Factors & Assumptions as of FINANCIAL OUTLOOK August 3, 2018 Gross Margin – Customer and Sales Growth (2018-2020) 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 • About 0.5–1.5% volume growth Gross Margin – Related to 2017 Rate Review Order 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 • Assumed to recover up to $14 million annually of carrying costs for government-mandated (EIS) 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. 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) 7 Second Quarter 2018

Tax Cuts and Jobs Act provides TAX REFORM benefits to both our customers and shareholders Regulatory Steps Timing Impacts − Received ACC approval of $119 million annual rate − The impact of the lower federal income tax rate is reduction reflecting lower corporate tax rate through based on our quarterly pre-tax earnings the Tax Expense Adjustor Mechanism (TEAM) − The reduction to customers’ rates through the TEAM − Second filing under the TEAM expected in August 2018 is based on a per kWh sales credit to return excess deferred income taxes to customers − Our typical seasonal pre-tax earnings and kWh sales − Received FERC approval of $57 million annual rate patterns are as follows1: reduction primarily related to lower corporate tax rate effective beginning June 1, 2018 Q1 Q2 Q3 Q4 Recap of Excess Deferred Taxes As of June 30, ($ millions) 2018 Pre-Tax Earnings 5% 30% 55% 10% Kilowatt Hour Sales 21% 25% 33% 21% Total Regulated Excess Deferred Taxes $1,140 1 Based on historical five-year average Depreciation Related Excess Deferred Taxes (to be returned over the life of $1,020 - $1,040 Rate Base Growth property) − Higher incremental rate base of $130 million in 2018 Non-Depreciation Related Excess and $150 million 2019 $100 - $120 Deferred Taxes Cash Taxes Continued Interest Deductibility − Minimal cash tax payments in 2018 due to utilization − Majority of Pinnacle West debt likely allocable to of existing $85 million in tax credit carryforwards regulated operations and excluded from any limitation − Cash taxes will trend to a normalized level in 2020 after our tax credit carryforward balance is fully utilized in 2019 8 Second Quarter 2018

APS CAPITAL Capital expenditures are funded primarily through internally EXPENDITURES generated cash flow ($ Millions) Other $1,341 $99 $1,211 $1,181 $1,153 Distribution $82 $117 $115 $419 Transmission $450 Renewable $519 $630 $174 Generation $3 $148 $193 Environmental1 $12 $83 $203 $176 $235 $120 $16 $22 $17 New Gas $10 $36 Generation2 $286 $218 $268 $235 Traditional Generation 2017 2018 2019 2020 Projected • 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 and $10 million in 2018. • 2018 – 2020 as disclosed in Second Quarter 2018 Form 10-Q. 1 Includes Selective Catalytic Reduction controls at Four Corners with in-service dates of Q4 2017 (Unit 5) and Q2 2018 (Unit 4). 2 Ocotillo Modernization Project: 2 units scheduled for completion in Q4 2018, 3 units scheduled for completion in Q1 2019. 9 Second Quarter 2018

DISTRIBUTION GRID Grid Operations and Investment Projected $1.6 billion from 2018- INVESTMENTS 2020 Customer Growth Grid Modernization Run and Maintain Approximately 51% of distribution capex Approximately 9% of distribution capex Approximately 40% of distribution capex R T Reclosers – Supervisory Advanced Distribution System Cap Bank Controllers, Substation Controlled Switches, Trip Savers Platform Regulators, Voltage Management Average annual spend ~ $13M Project in planning phase Algorithms Average annual spend ~ $7M • Automated switches controlled from • Integrated operational platform the Distribution Operations Center • Increases efficiency and life of • Controls regulators and capacitor • Manage load without sending field distribution system; improves safety banks to manage power quality such personnel to manually operate the and communication; increases ability as power factor and voltage switch to manage overall reliability; and enables Distributed Energy Resources Monitors – Transformers, Communications Backhaul Sensors – Current, Voltage Breakers, Bushings Average annual spend ~ $4M Average annual spend ~ $2.5M Average annual spend ~ $0.5M • New technologies such as APS’s • Leveraging AMI for distribution • Line sensors to measure & identify fault Transformer Oil Analysis & Notification automation current, fault location and voltage system leverage advances in • Strategically deploying Fiber for • Improves outage restoration time and communications and sensing to remotely communications backhaul operations efficiency monitor health of transformers, enabling • Transitioning to Internet Protocol proactive maintenance actions to prevent based networks for future growth & critical failures and increase reliability scalability 10 Second Quarter 2018

APS’s revenues come from a RATE BASE regulated retail rate base and meaningful transmission business APS Rate Base Growth Total Approved Rate Base Year-End ACC FERC Generation & Distribution Transmission Rate Base Guidance: 6-7% Average Annual Growth Rate 17% $1.8 83% $1.4 ACC FERC Rate Effective Date 8/19/2017 6/1/2017 $9.1 Test Year Ended 12/31/20151 12/31/2016 $6.8 Rate Base $6.8B $1.4B Equity Layer 55.8% 55% Allowed ROE 10.0% 10.75% 2016 2017 2018 2019 2020 Projected 1 Adjusted to include post test-year plant in service through 12/31/2016 Rate base $ in billions, rounded 11 Second Quarter 2018

OPERATIONS & Goal is to keep O&M per kWh flat, MAINTENANCE adjusted for planned outages ($ Millions) $905 - $925 $858 $848 75 - 85 72 63 830 - 840 776 795 20161 20171 2018E PNW Consolidated ex RES/DSM2 Planned Fleet Outages 1 Reclassified to reflect the adoption of the new accounting requirements for presenting pension and other postretirement non-service costs (“Pension & OPEB Presentation”). Increases in O&M due to the Pension & OPEB Presentation change are approximately $20 million in 2016, $25 million in 2017 and $35 million in 2018, which are offset in pension and other postretirement non-service credits on the income statement. See Notes 5 and 13 in the Second Quarter 2018 Form 10-Q for additional information. 2 Excludes RES/DSM of $83 million in 2016, $91 million in 2017 and $105 million in 2018E. 12 Second Quarter 2018

BALANCE SHEET STRENGTH 1 Long-Term Debt Maturity Schedule Credit Ratings ($Millions) • APS Senior Unsecured: A- or equivalent ratings or better at S&P, Moody’s and Fitch $600 • PNW Senior Unsecured: BBB+ or $500 equivalent ratings or better at S&P, Moody’s and Fitch $400 $300 2018 Major Financing Activities $300 $600 • Currently expect up to $600 million of debt issuance at APS 1 $200 We are disclosing credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds. $250 $100 $82 $- 20182 2019 2020 APS PNW 2 Maturities paid off in the second quarter of 2018. 13 Second Quarter 2018

OCOTILLO MODERNIZATION PROJECT AND FOUR CORNERS SCRs • Included in the 2017 Rate Review Order1, 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: Installed Selective Catalytic Reduction (SCR) equipment to comply with Federal environmental standards Ocotillo Modernization Project Four Corners SCRs Units 6, 7 – Fall 2018 Unit 5 – Late 2017 In-Service Dates Units 3, 4 and 5 – Spring 2019 Unit 4 – Spring 2018 Total Cost (APS) $500 million $400 million Estimated Cost Deferral $45 million (through 2019) $30 million (through 2018) − Cost deferral from date of commercial − Cost deferral from time of installation operation to the effective date of rates to incorporation of the SCR costs in in next rate case rates using a step increase beginning Accounting Deferral − Includes depreciation, O&M, property in 2019 taxes, and capital carrying charge2 − Includes depreciation, O&M, property taxes, and capital carrying charge2 1 The ACC’s decision is subject to appeals. 2 APS will calculate the capital carrying charge using the 5.13% embedded cost of debt established in the 2017 Rate Review Order. 14 Second Quarter 2018

FOUR CORNERS SCR APS filed for a rate increase STEP INCREASE on April 27, 2018 Key Components of APS’s Filed Request Financial Cost of Capital Bill Impact • Consistent with prior • 7.85% Return on Rate • Rate rider applied as a disclosed estimates Base1 percentage of base rates – Weighted Average Cost for all applicable customers of Capital (WACC) • $390 million direct costs • 5.13% Return on Deferral1 • $67.5 million revenue vs. $400 million1 – Embedded Cost of Debt requirement contemplated in APS’s recent rate case • $40 million in indirect • 5% Depreciation Rate • ~2% bill impact costs (overhead, AFUDC) – 20-year useful life (2038-depreciation study) • 5-year Deferral Amortization 1 Based on 2017 Rate Review Order 15 Second Quarter 2018

GROSS MARGIN EFFECTS OF WEATHER VARIANCES VS. NORMAL Pretax Millions $15 $10 21 $5 10 3 $0 - $(5) $(10) (13) (25) $(15) $(20) Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 $(1) Million $(3) Million All periods recalculated to current 10-year rolling average (2006 – 2015) 16 Second Quarter 2018

RENEWABLE ENERGY AND DEMAND SIDE MANAGEMENT EXPENSES1 Pretax Millions Renewable Energy Demand Side Management $40 $30 10 10 12 $20 16 12 $10 21 15 19 17 12 5 $0 2 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 $91 Million $60 Million 1 Renewable energy and demand side management expenses are offset by adjustment mechanisms. 17 Second Quarter 2018

Residential DG (MWdc) Annual Additions 150 133 RESIDENTIAL PV 74 73 57 44 51 1 22 APPLICATIONS 10 18 2009 2012 2014 2016 2018 YTD 4,000 3718 3432 3,500 3,000 2464 2,500 2143 2033 1944 2,000 1818 1561 1602 1426 1445 1364 1442 1434 1,500 1267 1291 1283 1153 1201 1001 1413 1002 962 1349 1,000 822 1158 1189 973 1157 1141 1168 759 1077 801 832 500 680 715 629 614 538 484 321 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 Applications 2016 Applications 2017 Applications 2018 Applications 1 Monthly data equals applications received minus cancelled applications. As of June 30, 2018, approximately 81,000 residential grid-tied solar photovoltaic (PV) systems have been installed in APS’s service territory, totaling approximately 637 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. 18 Second Quarter 2018

2018 KEY DATES ACC Key Dates / Docket # Q1 Q2 Q3 Q4 Lost Fixed Cost Recovery Filed Feb 15 Decision Expected Q3 E-01345A-11-0224 Transmission Cost Adjustor Filed May 15 E-01345A-11-0224 Implemented Jun 1 Sep 7: File 2019 Plan 2019 DSM/EE Implementation Plan E-01345A-18-0105 2018 DSM Decision Expected Q3 Jun 12: 2018 RES Plan 2019 RES Implementation Plan approved E-01345A-18-0226 June 29: Filed 2019 Plan Apr 27: Filed Four Sep 1: Year Two RCP APS Rate Review/ Export Rate Feb: Customer Corners SCR Request Four Corners SCR Step Increase Expected Implementation Transition began E-01345A-16-0036 May 1: Filed Year Two Sep 5: Four Corners SCR RCP Export Rate Hearing begins ACC declined to Resource Planning and Procurement Workshops begin for acknowledge Arizona E-00000V-15-0094 APS 2020 IRP utility’s IRPs Review and Modification of Current Net Workshops expected Metering Rules RE-00000A-17-0260 to begin Modification of the Federal Tax Reform Aug: Second filing under Implemented March 1 Rate Adjustment AU-00000A-17-0379 TEAM Energy Modernization Plan Staff Notice of Inquiry Apr 23: Responses to July 5: Tobin filed draft E-00000Q-16-0289 opened February 22 Notice of Inquiry Plan Other Key Dates Q1 Q2 Q3 Q4 Arizona State Legislature In session Jan 8 – May 4 Elections Aug 28: Primary Nov 6: General 19 Second Quarter 2018

NON-GAAP MEASURE RECONCILIATION Three Months Ended June 30, Tax Benefit Four of Lower RES/ Corners Pre-Tax 2018 RES/ 2017 EPS 1 2 1,3 $ millions pretax, except per share amounts 2018 DSM Deferral Income Adjusted 2017 DSM Adjusted Impact Operating revenues$ 974 (34)$ $ - $ - $ 940 945$ (25)$ $ 920 Fuel and purchased power expenses (257) - - - (257) (255) - (255) Gross margin 717 (34) 683 690 (25) 665 $ 0.12 Operations and maintenance 268 (29) - - 239 221 (16) 205 $ (0.23) Allowance for equity funds used during construction (13) - - - (13) (10) - (10) Interest charges 61 - (4) - 57 55 - 55 Allowance for borrowed funds used during construction (6) - - - (6) (5) - (5) Interest expense, net of AFUDC 42 - (4) 38 40 - 40 $ 0.02 Other expenses (operating) 7 - - - 7 2 - 2 Other income (6) - 4 - (2) (1) - (1) Other expense 4 - - - 4 4 - 4 Renewable energy and demand side management and similar regulatory programs, net (5) - - (5) (9) (9) Other 5 (5) 4 4 5 (9) (4) $ (0.06) Income taxes 44 - - 11 55 89 - 89 $ 0.30 1 Line items from Consolidated Statements of Income. 2 See Note 4, Regulatory Matters, in Form 10-Q for the period ended June 30, 2018, for total Four Corners deferral impacts. 3 No impact to 2017 Consolidated Statements of Income related to Four Corners deferral. 20 Second Quarter 2018 Numbers may not foot due to rounding.

NON-GAAP MEASURE RECONCILIATION GUIDANCE 2018 Guidance $ millions pretax Operating revenues1 $ 3,665 - 3,725$ Fuel and purchased power expenses1 (1,090) - (1,100) Gross margin 2,575 - 2,625 Adjustments: Renewable energy and demand side management programs (105) - (105) Adjusted gross margin$ 2,470 - 2,520$ Operations and maintenance1 $ 1,010 - 1,030$ Adjustments: Renewable energy and demand side management programs (105) - (105) Adjusted operations and maintenance $ 905 -$ 925 1 Line items from Consolidated Statements of Income. 21 Second Quarter 2018

CONSOLIDATED STATISTICS 3 Months Ended June 30, 6 Months Ended June 30, 2018 2017 Incr (Decr) 2018 2017 Incr (Decr) REGULATED ELECTRIC OPERATING REVENUES (Dollars in Millions) Ret ail Resident ial$ 500 $ 476 24 $ 817 $ 778 $ 39 Business 436 433 3 779 770 9 Total Retail 936 909 27 1,596 1,548 48 Sales for Resale (Wholesale) 15 17 (2) 28 41 (13) Transmission for Others 15 11 4 30 21 9 Other Miscellaneous Services 5 6 (1) 9 10 (1) Total Regulated Electric Operating Revenues$ 971 $ 943 28 $ 1,663 $ 1,620 $ 43 ELECTRIC SALES (GWH) Ret ail Resident ial 3,337 3,445 (108) 5,685 5,902 (217) Business 3,771 3,850 (79) 6,920 7,111 (191) Total Retail 7,109 7,295 (186) 12,605 13,013 (408) Sales for Resale (Wholesale) 448 549 (101) 739 1,623 (884) Total Elec tric Sales 7,557 7,844 (287) 13,344 14,636 (1,292) RETAIL SALES (GWH) - WEATHER NORMALIZED Resident ial 3,267 3,292 (25) 5,750 5,740 10 Business 3,730 3,780 (50) 6,923 7,028 (105) Total Retail Sales 6,997 7,072 (75) 12,673 12,768 (95) Retail sales (GWH) (% over prior year) (1.1)% 1.1% (2.1)% (0.7)% (0.8)% 0.1% AVERAGE ELECTRIC CUSTOMERS Ret ail Cust omers Residential 1,095,913 1,077,292 18,621 1,096,953 1,078,337 18,616 Business 134,317 133,651 666 134,282 133,086 1,196 Total Retail 1,230,230 1,210,943 19,287 1,231,235 1,211,423 19,812 Wholesale Customers 37 42 (5) 33 44 (11) Total Customers 1,230,267 1,210,985 19,282 1,231,268 1,211,467 19,801 Total Customer Growth (% over prior year) 1.6% 1.8% (0.2)% 1.6% 1.6% 0.0% RETAIL USAGE - WEATHER NORMALIZED (KWh/Average Customer) Resident ial 2,982 3,056 (74) 5,242 5,323 (81) Business 27,772 28,284 (512) 51,555 52,809 (1,254) 22 Second Quarter 2018 Numbers may not foot due to rounding.

CONSOLIDATED STATISTICS 3 Months Ended June 30, 6 Months Ended June 30, 2018 2017 Incr (Decr) 2018 2017 Incr (Decr) ENERGY SOURCES (GWH) Generation Production Nuc lear 2,137 2,120 17 4,615 4,632 (17) Coal 1,733 1,407 325 2,831 3,541 (710) Gas, Oil and Other 1,564 1,898 (334) 3,210 3,016 194 Renewables 180 173 6 311 272 39 Total Generation Production 5,613 5,598 15 10,968 11,461 (493) Purchased Power - - Conventional 1,692 1,828 (136) 2,111 2,421 (310) Resales 299 191 108 320 395 (75) Renewables 606 595 11 1,037 1,077 (40) Total Purchased Power 2,597 2,614 (17) 3,468 3,893 (425) Total Energy Sources 8,211 8,212 (1) 14,435 15,354 (919) POWER PLANT PERFORMANCE Capacity Factors - Owned Nuclear 85% 85% 1% 93% 85% 8% Coal 47% 39% 9% 39% 39% (0)% Gas, Oil and Other 22% 27% (5)% 23% 27% (4)% Solar 37% 35% 2% 32% 35% (3)% System Average 41% 41% (0)% 41% 41% 0% 23 Second Quarter 2018 Numbers may not foot due to rounding.

CONSOLIDATED STATISTICS 3 Months Ended June 30, 6 Months Ended June 30, 2018 2017 Incr (Decr) 2018 2017 Incr (Decr) WEATHER INDIC ATORS - RESIDENTIAL Actual Cooling Degree-Days 513 571 (58) 513 571 (58) Heating Degree-Days - 3 (3) 323 439 (116) Average Humidity 16% 17% (1)% 16% 17% (1)% 10-Year Averages (2006 - 2015) Cooling Degree-Days 490 504 (14) 490 504 (14) Heating Degree-Days 10 10 - 473 492 (19) Average Humidity 16% 16% - 16% 16% - 24 Second Quarter 2018 Numbers may not foot due to rounding.