Exhibit 99.3

                                  RISK FACTORS

Set forth below and in other documents we file with the SEC are risks and
uncertainties that could affect our financial results.

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 following Risk Factor for more information relating to this discussion.

A SIGNIFICANT 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given period of time or that a rating will not be lowered or withdrawn entirely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 in the form of letters of
credit or cash or other 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.

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 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 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. Pursuant to an ACC
order dated 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 has further established a requirement that
APS solicit bids for certain estimated capacity and energy requirements for
periods beginning July 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.

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.

                                        2

THE PROCUREMENT OF WHOLESALE POWER BY APS WITHOUT THE ABILITY TO ADJUST RETAIL
RATES COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND FINANCIAL RESULTS.

A 1999 settlement agreement limits APS' ability to change retail rates until at
least July 1, 2004, which could have a significant adverse financial impact on
us if wholesale power prices significantly exceed the amount included for
generation costs in APS' current bundled retail rates. Under the ACC's rules,
APS is the "provider of last resort" for standard-offer, full-service customers
under rates that have been approved by the ACC. These rates are established
until at least July 1, 2004. The 1999 settlement agreement allows APS to seek
adjustment of these rates in the event of emergency conditions or circumstances,
such as the inability to secure financing on reasonable terms; material changes
in APS' cost of service for ACC-regulated services resulting from federal,
tribal, state or local laws; regulatory requirements; or judicial decisions,
actions or orders. Energy prices in the western wholesale market vary and,
during the course of the last two years, have been volatile. At various times,
prices in the spot wholesale market have significantly exceeded the amount of
generation costs per kilowatt hour (kWh) included in APS' current retail rates.
In the event of shortfalls due to unforeseen increases in load demand or
generation or transmission outages, APS may need to purchase additional
supplemental power in the wholesale spot market. The ACC has further established
a requirement that APS solicit bids for certain estimated capacity and energy
requirements for periods beginning July 1, 2003. This competitive procurement
process may adversely affect the cost of APS' procurement of wholesale power. In
sum, there can be no assurance that APS would be able to fully recover the costs
of wholesale power under its present rate structure. Although APS could seek to
adjust its rates under the emergency provisions of the settlement agreement
discussed above, ACC approval of such an adjustment also cannot be assured.

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 SEC.

APS 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. The Federal Energy Regulatory Commission ("FERC"), the
Nuclear Regulatory Commission ("NRC"), the Environmental Protection Agency
("EPA"), and the Arizona Corporation Commission ("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 believe the

                                        3

necessary permits, approvals and certificates have been obtained for APS'
existing operations. However, we are unable to predict the impact on our
business and 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.

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 nuclear
decommissioning trust funds 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

                                        4

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.

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 plan 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
emissions allowances and credits. We have 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 plan 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 plan and nuclear decommissioning
trust funds also have risks associated with changing market values of equity
investments. Most of the pension costs and all of the nuclear decommissioning
costs are recovered in regulated electricity prices.

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 regional transmission
organizations. 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

                                        5

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. As
of March 28, 2003, the FERC was considering various aspects of its order as a
result of requests for clarification filed by the WestConnect applicants.

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.

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.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

The market price of our common stock could be subject to significant
fluctuations in response to factors such as the following, some of which are
beyond our control:

     *    variations in our quarterly operating results;

     *    operating results that vary from the expectations of management,
          securities analysts and investors;

     *    changes in expectations as to our future financial performance,
          including financial estimates by securities analysts and investors;

                                        6

     *    developments generally affecting industries in which we operate,
          particularly the energy distribution and energy generation industries;

     *    announcements by us or our competitors of significant contracts,
          acquisitions, joint marketing relationships, joint ventures or capital
          commitments;

     *    announcements by third parties of significant claims or proceedings
          against us;

     *    favorable or adverse regulatory developments;

     *    our dividend policy;

     *    future sales of our equity or equity-linked securities; and

     *    general domestic and international economic conditions.

In addition, the stock market in general has experienced extreme volatility that
has often been unrelated to the operating performance of a particular company.
These broad market fluctuations may adversely affect the market price of our
common stock.

OUR STOCK PRICE COULD BE AFFECTED BECAUSE A SUBSTANTIAL NUMBER OF SHARES OF OUR
COMMON STOCK COULD BE AVAILABLE FOR SALE IN THE FUTURE.

Sales in the public market of a substantial number of shares of common stock
could depress the market price of the common stock and could impair our ability
to raise capital through the sale of additional equity securities. Because of
the number of shares of our common stock that we are authorized to issue under
our articles of incorporation, a substantial number of shares of our common
stock could be available for future sale.

OUR CASH FLOW AND ABILITY TO PAY DIVIDENDS LARGELY DEPENDS ON THE PERFORMANCE OF
OUR SUBSIDIARIES.

We conduct our operations primarily through subsidiaries. Substantially all of
our consolidated assets are held by such subsidiaries. Accordingly, our cash
flow and our ability to pay dividends on our capital stock are largely dependent
upon the earnings of these subsidiaries and the distribution or other payment of
such earnings to us in the form of dividends, loans or advances or repayment of
loans and advances from us. The subsidiaries are separate and distinct legal
entities and have no obligation to pay dividends or to make any funds available
for such payment.

The debt agreements of some of our subsidiaries may restrict their ability to
pay dividends, make distributions or otherwise transfer funds to us. Section
39(III) of APS' mortgage requires APS to meet a financial covenant before paying
common stock dividends. Under this covenant, APS may pay dividends on its common

                                        7

stock if there is a sufficient amount "available" from retained earnings and the
excess of cumulative book depreciation (since the mortgage's inception) over
mortgage depreciation, which is the cumulative amount of additional property
pledged each year to address collateral depreciation. As of December 31, 2002,
the amount "available" under the mortgage would have allowed APS to pay
approximately $3 billion of dividends compared to APS' current annual common
stock dividends of $170 million. As part of the ACC's approval of a $500 million
financing arrangement between APS and Pinnacle West Energy, the ACC required APS
to maintain a common equity ratio of at least forty percent and prohibited APS
from paying common stock dividends if such payment would reduce its common
equity below that threshold.

WE HAVE AND MAY ENTER INTO CREDIT AND OTHER AGREEMENTS FROM TIME TO TIME THAT
RESTRICT OUR ABILITY TO PAY DIVIDENDS.

Payment of dividends on the common stock may be restricted by loan agreements,
indentures and other transactions entered into by us from time to time. As of
March 28, 2003, one of our loan agreements restricts our ability to pay
dividends to dividends paid on our capital stock in the ordinary course and
consistent with past practice (including increases in such dividends consistent
with past practices). However, if an event of default exists under that
agreement, we would be prohibited from paying any dividends while the event of
default continues.

                                        8