Leases

12 Months Ended

Dec. 31, 2011

Leases

Leases

9.Leases

We lease certain vehicles, land, buildings, equipment and miscellaneous other items through operating rental agreements with varying terms, provisions and expiration dates.

Total lease expense recognized in the Consolidated Statements of Income was $21 million in 2011, $23 million in 2010 and $28 million in 2009.  APS’s lease expense was $18 million in 2011, $19 million in 2010 and $19 million in 2009.

Estimated future minimum lease payments for Pinnacle West’s and APS’s operating leases, excluding purchased power agreements, are approximately as follows (dollars in millions):

Year	Pinnacle West Consolidated		APS
2012	$	21	$	18
2013	18		15
2014	15		12
2015	13		10
2016	2		2
Thereafter	23		22
Total future lease commitments	$	92	$	79

In 1986, APS entered into agreements with three separate lessor trust entities in order to sell and lease back interests in Palo Verde Unit 2 and related common facilities.  These lessor trust entities have been deemed variable interest entities for which APS is the primary beneficiary.  As the primary beneficiary APS consolidated these lessor trust entities.  The above lease disclosures exclude the impacts of these sale leaseback transactions, as lease accounting for these agreements is eliminated upon consolidation.  See Note 20 for a discussion of VIEs.