Exhibit 99.3

                                  RISK FACTORS

     THE DEBT SECURITIES WILL BE STRUCTURALLY SUBORDINATED TO THE DEBT
SECURITIES AND OTHER OBLIGATIONS OF OUR SUBSIDIARIES.

     Because we are structured as a holding company, all existing and future
debt and other liabilities of our subsidiaries will be effectively senior in
right of payment to our debt securities. Neither of the indentures under which
we may issue debt securities limits our ability or the ability of our
subsidiaries to incur additional debt in the future. The assets and cash flows
of our subsidiaries will be available, in the first instance, to service their
own debt and other obligations. Our ability to have the benefit of their assets
and cash flows, particularly in the case of any insolvency or financial distress
affecting our subsidiaries, would arise only through our equity ownership
interests in our subsidiaries and only after their creditors have been
satisfied.

     THE CONSTRUCTION COSTS OF THE GENERATION FACILITIES OF PINNACLE WEST ENERGY
CORPORATION ("PINNACLE WEST ENERGY") COULD NEGATIVELY IMPACT OUR RESULTS OF
OPERATIONS.

     Pinnacle West Energy, another one of our wholly-owned subsidiaries, has
completed or has under construction about 1,700 MW of natural gas-fired
generating capacity at an estimated cost of about $1 billion. In addition,
Pinnacle West Energy has begun construction of the 570 MW Silverhawk plant in
Nevada at an estimated cost of approximately $400 million. Finally, Pinnacle
West Energy has announced plans to build approximately 1,000 MW of capacity at
Redhawk Units 3 and 4 at an estimated cost of approximately $500 million. The
Company is evaluating whether to construct Redhawk Units 3. Pinnacle West Energy
has procured four gas turbines for Redhawk Units 3 and 4. The cancellation cost
for these turbines is approximately $50 million until September 2003. Pinnacle
West Energy's expansion plans will be sized to meet cash flow and market
conditions.

     Pinnacle West Energy is currently funding its capital requirements through
capital infusions from us. We finance those infusions through debt financings
and internally generated cash. We financed Pinnacle West Energy's generation
expansion program premised upon Pinnacle West Energy's receipt of APS'
generation assets by the end of 2002, as previously required by the Arizona
Corporation Commission's ("ACC") electric competition rules and the 1999
settlement agreement. As a result of recent ACC actions prohibiting APS from
transferring its generation assets, APS filed an application with the ACC
requesting the ACC to allow APS to borrow up to $500 million and to lend the
proceeds to Pinnacle West Energy or to us; to guarantee up to $500 million of
Pinnacle West Energy's or our debt, or a combination of both, not to exceed $500
million in the aggregate. On November 8, 2002 APS filed an Interim Financing
Application with the ACC requesting the ACC to permit APS to (a) make short-term
advances to Pinnacle West in the form of an inter-affiliate line of credit in
the amount of $125 million or (b) gurantee $125 million of Pinnacle West's
short-term debt.

     The ACC's reversal of the generation asset transfer requirement results in
Pinnacle West Energy being unable to obtain investment grade credit ratings.
This, in turn, precludes Pinnacle West Energy from accessing capital markets to
refinance the bridge financing provided by us to fund the construction of
Pinnacle West Energy generation assets or from effectively competing in the
wholesale markets. Our credit ratings could be adversely affected if Pinnacle
West Energy is unable to finance its capital requirements. On November 4, 2002
Standard and Poor's Corporation lowered the Company's senior unsecured debt
rating from BBB to BBB-. See the following two Risk Factors.

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     IF WE ARE NOT ABLE TO ACCESS CAPITAL AT COMPETITIVE RATES, OUR ABILITY TO
IMPLEMENT OUR FINANCIAL STRATEGY WILL BE ADVERSELY AFFECTED.

     We rely on access to both short-term money markets and longer-term capital
markets as a significant source of liquidity and for capital requirements not
satisfied by the cash flow from our operations. We believe that we will maintain
sufficient access to these financial markets based upon current credit ratings.
However, certain market disruptions or a downgrade of our credit rating may
increase our cost of borrowing or adversely affect our ability to access one or
more financial markets. Such disruptions could include:

     *    an economic downturn;

     *    capital market conditions generally;

     *    the bankruptcy of an unrelated energy company;

     *    market prices for electricity and gas;

     *    terrorist attacks or threatened attacks on our facilities or unrelated
          energy companies; or

     *    the overall health of the utility industry.

     Changes in economic conditions could result in higher interest rates, which
would increase our interest expense on our debt and reduce funds available to us
for our current plans. Additionally, an increase in our leverage could adversely
affect us by:

     *    increasing the cost of future debt financing;

     *    increasing our vulnerability to adverse economic and industry
          conditions;

     *    requiring us to dedicate a substantial portion of our cash flow from
          operations to payments on our debt, which would reduce funds available
          to us for operations, future business opportunities or other purposes;
          and

     *    placing us at a competitive disadvantage compared to our competitors
          that have less debt.

     See the preceding and following Risk Factors.

     ANY REDUCTION IN OUR CREDIT RATINGS COULD MATERIALLY AND ADVERSELY AFFECT
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     We cannot be sure that any of our current ratings will remain in effect for
any given period of time or that a rating will not be lowered or withdrawn
entirely by a rating agency if, in its judgment, circumstances in the future so
warrant. Any downgrade could increase our borrowing costs which would diminish
our financial results. We would likely be required to pay a higher interest rate
in future financings, and our potential pool of investors and funding sources
could decrease. A downgrade could require additional support from letters of
credit or cash collateral and otherwise have a material adverse effect on our
business, financial condition and results of operations. If our short-term
ratings were to be lowered, it could limit our access to the commercial paper
market. We note that the ratings from credit agencies are not recommendations to
buy, sell or hold our securities and that each rating should be evaluated
independently of any other rating. See the preceding two Risk Factors.

     THE USE OF DERIVATIVE CONTRACTS IN THE NORMAL COURSE OF OUR BUSINESS COULD
RESULT IN FINANCIAL LOSSES THAT NEGATIVELY IMPACT OUR RESULTS OF OPERATIONS.

     Our operations include managing market risks related to commodity prices,
changes in interest rates, and investments held by our pension and nuclear
decommissioning trust funds. We are exposed to the impact of market fluctuations
in the price and transportation costs of electricity, natural gas, coal, and

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emissions allowances. We employ established procedures to manage risks
associated with these market fluctuations by utilizing various commodity
derivatives, including exchange-traded futures and options and over-the-counter
forwards, options, and swaps. As part of our overall risk management program, we
enter into derivative transactions to hedge purchases and sales of electricity,
fuels, and emissions allowances and credits. The changes in market value of such
contracts have a high correlation to price changes in the hedged commodity.

     We are exposed to losses in the event of nonperformance or nonpayment by
counterparties. We use a risk management process to assess and monitor the
financial exposure of all counterparties. Despite the fact that the majority of
trading counterparties are rated as investment grade by the credit rating
agencies, there is still a possibility that one or more of these companies could
default, resulting in a material adverse impact on our earnings for a given
period.

     Changing interest rates will affect interest paid on variable-rate debt and
interest earned by our pension and nuclear decommissioning trust funds. Our
policy is to manage interest rates through the use of a combination of
fixed-rate and floating-rate debt. The pension and nuclear decommissioning funds
also have risks associated with changing market values of equity investments.
Pension and nuclear decommissioning costs are recovered in regulated electricity
prices.

     WE ARE SUBJECT TO COMPLEX GOVERNMENT REGULATION WHICH MAY HAVE A NEGATIVE
IMPACT ON OUR BUSINESS AND OUR RESULTS OF OPERATIONS.

     We are, directly and through our subsidiaries, subject to governmental
regulation which may have a negative impact on our business and results of
operations. We are a "holding company" within the meaning of the Public Utility
Holding Company Act ("PUHCA"); however, we are exempt from the provisions of
PUHCA by virtue of our filing of an annual exemption statement with the
Securities and Exchange Commission ("SEC").

     APS, our wholly-owned electric utility is subject to comprehensive
regulation by several federal, state and local regulatory agencies, which
significantly influence its operating environment and may affect its ability to
recover costs from utility customers. APS is required to have numerous permits,
approvals and certificates from the agencies that regulate APS' business. We
believe the necessary permits, approvals and certificates have been obtained for
APS' existing operations; however, we are unable to predict the impact on our
operating results from the future regulatory activities of any of these
agencies. Changes in regulations or the imposition of additional regulations
could have an adverse impact on our results of operations.

     The Federal Energy Regulatory Commission ("FERC"), the Nuclear Regulatory
Commission ("NRC"), the Environmental Protection Agency ("EPA"), and the ACC
regulate many aspects of our utility operations, including siting and
construction of facilities, customer service and the rates that APS can charge
customers.

     We are unable to predict the impact on our business and operating results
from future regulatory activities of these federal, state and local agencies.
Changes in regulations or the imposition of additional regulations could have a
negative impact on our business and results of operations.

     DEREGULATION OR RESTRUCTURING OF THE ELECTRIC INDUSTRY MAY RESULT IN
INCREASED COMPETITION, WHICH COULD HAVE A SIGNIFICANT ADVERSE IMPACT ON OUR
BUSINESS AND OUR FINANCIAL RESULTS.

     Retail competition and the unbundling of regulated energy could have a
significant adverse financial impact on us due to an impairment of assets, a
loss of retail customers, lower profit margins or increased costs of capital. In
1999, the ACC approved rules that provide a framework for the introduction of

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retail electric competition in Arizona. Under the rules, as modified by a 1999
settlement agreement among APS and various parties, APS was required to transfer
all of its competitive electric assets and services to an unaffiliated party or
parties or to a separate corporate affiliate or affiliates no later than
December 31, 2002. On September 10, 2002, the ACC unilaterally modified the 1999
settlement agreement and directed APS to cancel any plans to divest interests in
any of its generating assets. The ACC further established a requirement that APS
competitively procure, at a minimum, any power required for its retail customers
that APS cannot produce from its existing generating assets. The ACC ordered the
ACC staff and interested parties to develop a competitive procurement process by
March 1, 2003. These regulatory developments and legal challenges to the rules
have raised considerable uncertainty about the status and pace of retail
electric competition in Arizona. Although some very limited retail competition
existed in APS' service area in 1999 and 2000, there are currently no active
retail competitors offering unbundled energy or other utility services to APS'
customers. As a result, we cannot predict when, and the extent to which,
additional competitors will re-enter APS' service territory. These matters are
discussed in detail in the documents filed by us with the SEC.

     As a result of changes in federal law and regulatory policy, competition in
the wholesale electricity market has greatly increased due to a greater
participation by traditional electricity suppliers, non-utility generators,
independent power producers, and wholesale power marketers and brokers. This
increased competition could affect our load forecasts, plans for power supply
and wholesale energy sales and related revenues. As a result of the changing
regulatory environment and the relatively low barriers to entry, we expect
wholesale competition to increase. As competition continues to increase, our
financial position and results of operations could be adversely affected.

     THE UNCERTAIN OUTCOME REGARDING THE CREATION OF REGIONAL TRANSMISSION
ORGANIZATIONS, OR RTOS, MAY MATERIALLY IMPACT OUR OPERATIONS, CASH FLOWS OR
FINANCIAL POSITION.

     In a December 1999 order, the FERC set minimum characteristics and
functions that must be met by utilities that participate in RTOs. The
characteristics for an acceptable RTO include independence from market
participants, operational control over a region large enough to support
efficient and nondiscriminatory markets, and exclusive authority to maintain
short-term reliability. On October 16, 2001, APS and other owners of electric
transmission lines in the Southwest filed with the FERC a request for a
declaratory order confirming that their proposal to form WestConnect RTO, LLC
would satisfy the FERC's requirements for the formation of an RTO. On October
10, 2002, the FERC issued an order finding that the WestConnect proposal, if
modified to address specified issues, could meet the FERC's RTO requirements and
provide the basic framework for a standard market design for the Southwest . In
its order, the FERC also stated that its approval of various WestConnect
provisions addressed in the order would not be overturned or affected by the
final rule the FERC intends to ultimately adopt in response to its July 31, 2002
Notice of Proposed Rulemaking regarding a standard market design for the
electric utility industry. FERC did not address all of the proposed WestConnect
provisions in its order and some could still be affected by a final rule in the
pending rulemaking proceeding. We cannot currently predict what, if any, impact
there may be to the WestConnect proposal or to us if the FERC adopts the
proposed rule. On November 12, 2002, APS and other owners filed a request for
rehearing and clarification on portions of the October 10 order.

     WE ARE SUBJECT TO NUMEROUS ENVIRONMENTAL LAWS AND REGULATIONS WHICH MAY
INCREASE OUR COST OF OPERATIONS, IMPACT OUR BUSINESS PLANS, OR EXPOSE US TO
ENVIRONMENTAL LIABILITIES.

     We are subject to numerous environmental regulations affecting many aspects
of our present and future operations, including air emissions, water quality,
wastewater discharges, solid waste, and hazardous waste. These laws and
regulations can result in increased capital, operating, and other costs,
particularly with regard to enforcement efforts focused on power plant emissions
obligations. These laws and regulations generally require us to obtain and
comply with a wide variety of environmental licenses, permits, inspections and
other approvals. Both public officials and private individuals may seek to
enforce applicable environmental laws and regulations. We cannot predict the
outcome (financial or operational) of any related litigation that may arise.

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     In addition, we may be a responsible party for environmental clean up at
sites identified by a regulatory body. We cannot predict with certainty the
amount and timing of all future expenditures related to environmental matters
because of the difficulty of estimating clean-up costs. There is also
uncertainty in quantifying liabilities under environmental laws that impose
joint and several liability on all potentially responsible parties.

     We cannot be sure that existing environmental regulations will not be
revised or that new regulations seeking to protect the environment will not be
adopted or become applicable to us. Revised or additional regulations that
result in increased compliance costs or additional operating restrictions,
particularly if those costs are not fully recoverable from APS' customers, could
have a material adverse effect on our results of operations.

     RECENT EVENTS IN THE ENERGY MARKETS THAT ARE BEYOND OUR CONTROL MAY HAVE
NEGATIVE IMPACTS ON OUR BUSINESS.

     As a result of the energy crisis in California during the summer of 2001,
the recent volatility of natural gas prices in North America, the filing of
bankruptcy by the Enron Corporation, and investigations by governmental
authorities into energy trading activities, companies generally in the regulated
and unregulated utility businesses have been under an increased amount of public
and regulatory scrutiny. The capital markets and ratings agencies also have
increased their level of scrutiny. We believe that we are complying with all
applicable laws, but it is difficult or impossible to predict or control what
effect these or related issues may have on our business or our access to the
capital markets.

     OUR RESULTS OF OPERATIONS CAN BE ADVERSELY AFFECTED BY MILDER WEATHER.

     Weather conditions directly influence the demand for electricity and affect
the price of energy commodities. Electric power demand is generally a seasonal
business. In Arizona, demand for power peaks during the hot summer months, with
market prices also peaking at that time. As a result, our overall operating
results fluctuate substantially on a seasonal basis. In addition, we have
historically sold less power, and consequently earned less income, when weather
conditions are milder. As a result, unusually mild weather could diminish our
results of operations and harm our financial condition.

     THERE ARE INHERENT RISKS IN THE OPERATION OF NUCLEAR FACILITIES, SUCH AS
ENVIRONMENTAL, HEALTH AND FINANCIAL RISKS AND THE RISK OF TERRORIST ATTACK.

     Through APS, we have an ownership interest in and operate the Palo Verde
Nuclear Generating Station ("Palo Verde"). Palo Verde is subject to
environmental, health and financial risks such as the ability to dispose of
spent nuclear fuel, the ability to maintain adequate reserves for
decommissioning, potential liabilities arising out of the operation of these
facilities, and the costs of securing the facilities against possible terrorist
attacks. We maintain decommissioning trusts and external insurance coverage to
minimize our financial exposure to these risks; however, it is possible that
damages could exceed the amount of insurance coverage.

     The NRC has broad authority under federal law to impose licensing and
safety-related requirements for the operation of nuclear generation facilities.
In the event of noncompliance, the NRC has the authority to impose fines or shut
down a unit, or both, depending upon its assessment of the severity of the
situation, until compliance is achieved. In addition, although we have no reason
to anticipate a serious nuclear incident at Palo Verde, if an incident did
occur, it could materially and adversely affect our results of operations or
financial condition. A major incident at a nuclear facility anywhere in the
world could cause the NRC to limit or prohibit the operation or licensing of any
domestic nuclear unit.

     The operation of Palo Verde requires licenses that need to be periodically
renewed and/or extended. We do not anticipate any problems renewing these
licenses. However, as a result of potential terrorist threats and increased
public scrutiny of utilities, the licensing process could result in increased
licensing or compliance costs that are difficult or impossible to predict.

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