Retirement Plans and Other Benefits (Tables)

12 Months Ended

Dec. 31, 2012

Retirement Plans and Other Benefits

Net periodic benefit costs and the portion of these costs charged to expense

The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction, billed to electric plant participants or charged to the regulatory asset) (dollars in thousands):

	Pension									Other Benefits
	2012			2011			2010			2012			2011			2010
Service cost-benefits earned during the period	$	63,502		$	57,605		$	59,064		$	27,163		$	21,856		$	19,236
Interest cost on benefit obligation	119,586			124,727			122,724			46,467			46,807			42,428
Expected return on plan assets	(140,979		)	(133,678		)	(124,161		)	(45,793		)	(41,536		)	(39,257		)
Amortization of:
Transition obligation	—			—			—			452			452			452
Prior service cost (credit)	1,143			1,400			1,705			(179		)	(179		)	(539		)
Net actuarial loss	44,250			25,956			18,833			20,233			15,015			10,317
Net periodic benefit cost	$	87,502		$	76,010		$	78,165		$	48,343		$	42,415		$	32,637
Portion of cost charged to expense	$	36,333		$	29,312		$	37,933		$	19,321		$	15,208		$	15,839

Schedule of changes in the benefit obligations and funded status

The following table shows the plans’ changes in the benefit obligations and funded status for the years 2012 and 2011 (dollars in thousands):

	Pension						Other Benefits
	2012			2011			2012			2011
Change in Benefit Obligation
Benefit obligation at January 1	$	2,699,126		$	2,345,060		$	1,047,094		$	827,897
Service cost	63,502			57,605			27,163			21,856
Interest cost	119,586			124,727			46,467			46,807
Benefit payments	(113,632		)	(104,257		)	(26,279		)	(24,877		)
Actuarial (gain) loss	82,264			275,991			(104,027		)	171,674
Plan amendments	—			—			—			3,737
Benefit obligation at December 31	2,850,846			2,699,126			990,418			1,047,094
Change in Plan Assets
Fair value of plan assets at January 1	1,850,550			1,775,596			608,663			567,410
Actual return on plan assets	259,363			162,042			83,567			58,367
Employer contributions	65,000			—			22,707			18,769
Benefit payments	(95,732		)	(87,088		)	(30,716		)	(35,883		)
Fair value of plan assets at December 31	2,079,181			1,850,550			684,221			608,663
Funded Status at December 31	$	(771,665	)	$	(848,576	)	$	(306,197	)	$	(438,431	)

Projected benefit obligation and the accumulated benefit obligation for pension plans with an accumulated obligation in excess of plan assets

The following table shows the projected benefit obligation and the accumulated benefit obligation for pension plans with an accumulated obligation in excess of plan assets as of December 31, 2012 and 2011 (dollars in thousands):

	2012		2011
Projected benefit obligation	$	2,850,846	$	2,699,126
Accumulated benefit obligation	2,646,306		2,396,575
Fair value of plan assets	2,079,181		1,850,550

Amounts recognized on the Consolidated Balance Sheets

The following table shows the amounts recognized on the Consolidated Balance Sheets as of December 31, 2012 and 2011 (dollars in thousands):

	Pension						Other Benefits
	2012			2011			2012			2011
Current liability	$	(19,107	)	$	(18,097	)	$	—		$	—
Noncurrent liability	(752,558		)	(830,479		)	(306,197		)	(438,431		)
Net amount recognized	$	(771,665	)	$	(848,576	)	$	(306,197	)	$	(438,431	)

Details related to accumulated other comprehensive loss

The following table shows the details related to accumulated other comprehensive loss as of December 31, 2012 and 2011 (dollars in thousands):

	Pension						Other Benefits
	2012			2011			2012			2011
Net actuarial loss	$	644,239		$	724,605		$	238,862		$	400,892
Prior service cost (credit)	3,169			4,312			(475		)	(655		)
Transition obligation	—			—			—			452
APS’s portion recorded as a regulatory asset	(550,471		)	(632,099		)	(230,020		)	(390,521		)
Income tax benefit	(38,303		)	(38,243		)	(2,585		)	(3,296		)
Accumulated other comprehensive loss	$	58,634		$	58,575		$	5,782		$	6,872

Estimated amounts that will be amortized from accumulated other comprehensive loss and regulatory assets into net periodic benefit cost in next fiscal year

The following table shows the estimated amounts that will be amortized from accumulated other comprehensive loss and regulatory assets into net periodic benefit cost in 2012 (dollars in thousands):

	Pension		Other Benefits
Net actuarial loss	$	37,574	$	12,236
Prior service cost (credit)	1,097		(179		)
Total amounts estimated to be amortized from accumulated other comprehensive loss and regulatory assets in 2013	$	38,671	$	12,057

Weighted-average assumptions used to determine benefit obligations and net periodic benefit costs

The following table shows the weighted-average assumptions used for both the pension and other benefits to determine benefit obligations and net periodic benefit costs:

	Benefit Obligations As of December 31,				Benefit Costs For the Years Ended December 31,
	2012		2011		2012		2011		2010
Discount rate-pension	4.01	%	4.42	%	4.42	%	5.31	%	5.90	%
Discount rate-other benefits	4.20	%	4.59	%	4.59	%	5.49	%	6.00	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%	4.00	%	4.00	%
Expected long-term return on plan assets	N/A		N/A		7.75	%	7.75	%	8.25	%
Initial health care cost trend rate	7.50	%	7.50	%	7.50	%	8.00	%	8.00	%
Ultimate health care cost trend rate	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%
Number of years to ultimate trend rate	4		4		4		4		4

Effects of one percentage point change in the assumed initial and ultimate health care cost trend rates

A one percentage point change in the assumed initial and ultimate health care cost trend rates would have the following effects (dollars in millions):

	1% Increase		1% Decrease
Effect on other postretirement benefits expense, after consideration of amounts capitalized or billed to electric plant participants	$	14	$	(11	)
Effect on service and interest cost components of net periodic other postretirement benefit costs	17		(13		)
Effect on the accumulated other postretirement benefit obligation	172		(136		)

Fair value of Pinnacle West's pension plan and other postretirement benefit plan assets, by asset category

The fair value of Pinnacle West’s pension plan and other postretirement benefit plan assets at December 31, 2012, by asset category, are as follows (dollars in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Other (c)			Balance at December 31, 2012
Pension Plan:
Assets:
Cash and cash equivalents	$	579	$	—	$	—		$	—		$	579
Fixed Income Securities:
Corporate	—		607,749		—			—			607,749
U.S. Treasury	232,161		—		—			—			232,161
Other (b)	—		67,992		—			—			67,992
Equities:
U.S. Companies	531,291		—		—			—			531,291
International Companies	43,848		—		—			—			43,848
Common and collective trusts:
U.S. Equities	—		176,694		—			—			176,694
International Equities	—		271,735		—			—			271,735
Real estate	—		117,854		—			—			117,854
Short-term investments and other	—		26,922		2,419		(a)	(63		)	29,278
Total Pension Plan	$	807,879	$	1,268,946	$	2,419		$	(63	)	$	2,079,181
Other Benefits:
Assets:
Cash and cash equivalents	$	60	$	—	$	—		$	—		$	60
Fixed Income Securities:
Corporate	—		163,306		—			—			163,306
U.S. Treasury	112,558		—		—			—			112,558
Other (b)	—		33,998		—			—			33,998
Equities:
U.S. Companies	205,714		—		—			—			205,714
International Companies	14,412		—		—			—			14,412
Common and collective trusts:
U.S. Equities	—		60,038		—			—			60,038
International Equities	—		76,969		—			—			76,969
Real Estate	—		9,378		—			—			9,378
Short-term investments and other	402		6,340		—			1,046			7,788
Total Other Benefits	$	333,146	$	350,029	$	—		$	1,046		$	684,221

(a) Represents investments in a partnership that invests in privately held portfolio companies.

(b) This category consists primarily of debt securities issued by municipalities.

(c) Represents plan receivables and payables.

The fair value of Pinnacle West’s pension plan and other postretirement benefit plan assets at December 31, 2011, by asset category, are as follows (dollars in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Other (a)		Balance at December 31, 2011
Pension Plan:
Assets:
Cash and cash equivalents	$	1,441	$	—	$	—	$	1,441
Fixed Income Securities:
Corporate	—		584,619		—		584,619
U.S. Treasury	207,862		—		—		207,862
Other (b)	—		62,906		—		62,906
Equities:
U.S. Companies	436,393		—		—		436,393
International Companies	118,263		—		—		118,263
Common and collective trusts:
U.S. Equities	—		139,321		—		139,321
International Equities	—		156,407		—		156,407
Real estate	—		106,147		—		106,147
Short-term investments and other	—		29,913		7,278		37,191
Total Pension Plan	$	763,959	$	1,079,313	$	7,278	$	1,850,550
Other Benefits:
Assets:
Cash and cash equivalents	$	160	$	—	$	—	$	160
Fixed Income Securities:
Corporate	—		148,417		—		148,417
U.S. Treasury	103,321		—		—		103,321
Other (b)	—		30,105		—		30,105
Equities:
U.S. Companies	179,235		—		—		179,235
International Companies	22,486		—		—		22,486
Common and collective trusts:
U.S. Equities	—		52,507		—		52,507
International Equities	—		53,504		—		53,504
Real Estate	—		8,446		—		8,446
Short-term investments and other	—		8,516		1,966		10,482
Total Other Benefits	$	305,202	$	301,495	$	1,966	$	608,663

(a) Represents plan receivables and payables.

(b) This category consists primarily of debt securities issued by municipalities.

Changes in fair value for assets that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

The following table shows the changes in fair value for assets that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2012 (dollars in thousands):

Short-Term Investments and Other	Pension
Beginning balance at January 1, 2012	$	—
Actual return on assets still held at December 31, 2012	(668		)
Purchases, sales, and settlements	3,087
Transfers in and/or out of Level 3	—
Ending balance at December 31, 2012	$	2,419

Estimated future benefit payments, which reflect estimated future employee service, for the next five years and the succeeding five years thereafter

Benefit payments, which reflect estimated future employee service, for the next five years and the succeeding five years thereafter are estimated to be as follows (dollars in thousands):

Year	Pension		Other Benefits
2013	$	126,091	$	26,934
2014	135,602		29,870
2015	145,438		32,929
2016	155,774		35,893
2017	165,535		38,765
Years 2018-2022	971,362		235,170