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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

FORM 10-Q
 
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2022
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to          
 
Commission File
Number
 Exact Name of Each Registrant as specified in its
charter; State of Incorporation; Address; and
Telephone Number
IRS Employer
Identification No.
1-8962 PINNACLE WEST CAPITAL CORPORATION86-0512431
(an Arizona corporation)
400 North Fifth Street, P.O. Box 53999
PhoenixArizona85072-3999
(602)250-1000
1-4473 ARIZONA PUBLIC SERVICE COMPANY86-0011170
(an Arizona corporation)
400 North Fifth Street, P.O. Box 53999
PhoenixArizona85072-3999
(602)250-1000
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
PNW
The New York Stock Exchange

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
PINNACLE WEST CAPITAL CORPORATIONYes
 
No 
 
ARIZONA PUBLIC SERVICE COMPANYYes
 
No 
 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
PINNACLE WEST CAPITAL CORPORATIONYes
 
No 
 
ARIZONA PUBLIC SERVICE COMPANYYes
 
No 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 PINNACLE WEST CAPITAL CORPORATION
Large accelerated filer
 
Accelerated filer Non-accelerated filer Smaller reporting company
Emerging growth company
 
ARIZONA PUBLIC SERVICE COMPANY
Large accelerated filerAccelerated filer Non-accelerated filer
 
Smaller reporting company
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.

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
PINNACLE WEST CAPITAL CORPORATIONYes   No 
 
ARIZONA PUBLIC SERVICE COMPANYYes    No 
 
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
PINNACLE WEST CAPITAL CORPORATIONNumber of shares of common stock, no par value, outstanding as of April 28, 2022: 113,001,085
ARIZONA PUBLIC SERVICE COMPANYNumber of shares of common stock, $2.50 par value, outstanding as of April 28, 2022: 71,264,947
 
Arizona Public Service Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format allowed under that General Instruction.





TABLE OF CONTENTS
 
This combined Form 10-Q is separately provided by Pinnacle West Capital Corporation (“Pinnacle West”) and Arizona Public Service Company (“APS”).  Any use of the words “Company,” “we,” and “our” refer to Pinnacle West.  Each registrant is providing on its own behalf all of the information contained in this Form 10-Q that relates to such registrant and, where required, its subsidiaries.  Except as stated in the preceding sentence, neither registrant is providing any information that does not relate to such registrant, and therefore makes no representation as to any such information.  The information required with respect to each company is set forth within the applicable items.  Item 1 of this report includes Condensed Consolidated Financial Statements of Pinnacle West and Condensed Consolidated Financial Statements of APS.  Item 1 also includes Combined Notes to Condensed Consolidated Financial Statements.

1

FORWARD-LOOKING STATEMENTS
    This document contains forward-looking statements based on current expectations.  These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume,” “project,” “anticipate,” “goal,” “seek,” “strategy,” “likely,” “should,” “will,” “could,” 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.  In addition to the 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, 2021 (“2021 Form 10-K”), Part II, Item 1A of this report and in Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report, these factors include, but are not limited to:
the potential effects of the continued Coronavirus (“COVID-19”) pandemic, including, but not limited to, demand for energy, economic growth, our employees and contractors, vaccine mandates, supply chain, expenses, inflation, capital markets, capital projects, operations and maintenance activities, uncollectable accounts, liquidity, cash flows or other unpredictable events;
our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels;
variations in demand for electricity, including those due to weather, seasonality (including large increases in ambient temperatures), the general economy or social conditions, customer and sales growth (or decline), the effects of energy conservation measures and distributed generation, and technological advancements;
the potential effects of climate change on our electric system, including as a result of weather extremes such as prolonged drought and high temperature variations in the area where APS conducts its business;
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 or interpretations of existing legislation or regulations, including those relating to environmental requirements, regulatory and energy 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 through our rates and adjustor recovery mechanisms, including returns on and of debt and equity capital investment;
our ability to meet renewable energy and energy efficiency mandates and recover related costs;
the ability of APS to achieve its clean energy goals (including a goal by 2050 of 100% clean, carbon-free electricity) and, if these goals are achieved, the impact of such achievement on APS, its customers, and its business, financial condition, and results of operations;
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 direct or indirect effect on our facilities or business from cybersecurity threats or intrusions, data security breaches, war, acts of war, international sanctions, terrorist attack, physical attack, severe storms, or other catastrophic events, such as fires, explosions, pandemic health events, or similar occurrences;
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;
general economic conditions, including inflation rates, monetary fluctuations, and supply chain constraints;
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;
2

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 landowners 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 (“ACC”) orders. 
These and other factors are discussed in the Risk Factors described in Part I, Item 1A of our 2021 Form 10-K, Part II, Item 1A of this report, and in Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report, 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.
3

PART I — FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 
 Page
  
 


4


PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars and shares in thousands, except per share amounts)
 
 Three Months Ended
March 31,
 20222021
OPERATING REVENUES (NOTE 2)$783,531 $696,475 
OPERATING EXPENSES  
Fuel and purchased power265,269 198,227 
Operations and maintenance218,342 230,055 
Depreciation and amortization186,605 157,820 
Taxes other than income taxes57,998 59,483 
Other expenses825 3,356 
Total729,039 648,941 
OPERATING INCOME54,492 47,534 
OTHER INCOME (DEDUCTIONS)  
Allowance for equity funds used during construction9,747 9,207 
Pension and other postretirement non-service credits - net 23,809 27,791 
Other income (Note 9)
1,704 12,429 
Other expense (Note 9)
(3,422)(3,853)
Total31,838 45,574 
INTEREST EXPENSE  
Interest charges65,389 61,938 
Allowance for borrowed funds used during construction(4,482)(4,994)
Total60,907 56,944 
INCOME BEFORE INCOME TAXES25,423 36,164 
INCOME TAXES4,161 (4,350)
NET INCOME21,262 40,514 
Less: Net income attributable to noncontrolling interests (Note 6)
4,306 4,873 
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$16,956 $35,641 
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING - BASIC113,102 112,829 
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING -DILUTED113,295 113,093 
EARNINGS PER WEIGHTED-AVERAGE COMMON SHARE OUTSTANDING  
Net income attributable to common shareholders - basic$0.15 $0.32 
Net income attributable to common shareholders - diluted$0.15 $0.32 
 The accompanying notes are an integral part of the financial statements.
5

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)
 
 Three Months Ended
March 31,
 20222021
NET INCOME$21,262 $40,514 
OTHER COMPREHENSIVE INCOME, NET OF TAX  
Derivative instruments net unrealized gain, net of tax expense of $83 and $86
252 262 
Pension and other postretirement benefit activity, net of tax expense $296 and $336
901 1,022 
Total other comprehensive income1,153 1,284 
COMPREHENSIVE INCOME22,415 41,798 
Less: Comprehensive income attributable to noncontrolling interests4,306 4,873 
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$18,109 $36,925 
The accompanying notes are an integral part of the financial statements.

6

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
 
 March 31, 2022December 31, 2021
ASSETS  
CURRENT ASSETS  
Cash and cash equivalents$13,968 $9,969 
Customer and other receivables324,659 391,923 
Accrued unbilled revenues132,765 133,980 
Allowance for doubtful accounts (Note 2)
(24,666)(25,354)
Materials and supplies (at average cost)358,287 349,135 
Income tax receivable6,972 7,514 
Fossil fuel (at average cost)20,772 18,032 
Assets from risk management activities (Note 7)
206,102 63,481 
Deferred fuel and purchased power regulatory asset (Note 4)
354,816 388,148 
Other regulatory assets (Note 4)
131,444 130,376 
Other current assets69,474 83,896 
Total current assets1,594,593 1,551,100 
INVESTMENTS AND OTHER ASSETS  
Nuclear decommissioning trusts (Notes 11 and 12)
1,227,465 1,294,757 
Other special use funds (Notes 11 and 12)
349,042 358,410 
Assets from risk management activities (Note 7)
91,521 46,908 
Other assets105,605 97,884 
Total investments and other assets1,773,633 1,797,959 
PROPERTY, PLANT AND EQUIPMENT  
Plant in service and held for future use21,844,618 21,688,661 
Accumulated depreciation and amortization(7,597,037)(7,504,603)
Net14,247,581 14,184,058 
Construction work in progress1,418,308 1,329,478 
Palo Verde sale leaseback, net of accumulated depreciation (Note 6)
93,199 94,166 
Intangible assets, net of accumulated amortization269,802 273,693 
Nuclear fuel, net of accumulated amortization119,296 106,039 
Total property, plant and equipment16,148,186 15,987,434 
DEFERRED DEBITS  
Regulatory assets (Note 4)
1,184,246 1,192,987 
Operating lease right-of-use assets896,907 890,057 
Assets for pension and other postretirement benefits (Note 5)
563,019 545,723 
Other40,370 37,962 
Total deferred debits2,684,542 2,666,729 
TOTAL ASSETS$22,200,954 $22,003,222 
 The accompanying notes are an integral part of the financial statements.

7

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
 March 31, 2022December 31, 2021
LIABILITIES AND EQUITY  
CURRENT LIABILITIES  
Accounts payable$343,255 $393,083 
Accrued taxes222,492 168,645 
Accrued interest61,648 57,332 
Common dividends payable 95,988 
Short-term borrowings (Note 3)
262,950 292,000 
Current maturities of long-term debt (Note 3)
 150,000 
Customer deposits41,628 42,293 
Liabilities from risk management activities (Note 7)
1,706 4,373 
Liabilities for asset retirements4,069 4,473 
Operating lease liabilities100,949 100,443 
Regulatory liabilities (Note 4)
448,778 296,271 
Other current liabilities109,255 151,968 
Total current liabilities1,596,730 1,756,869 
LONG-TERM DEBT LESS CURRENT MATURITIES (Note 3)
7,226,624 6,913,735 
DEFERRED CREDITS AND OTHER  
Deferred income taxes2,318,959 2,311,862 
Regulatory liabilities (Note 4)
2,438,672 2,499,213 
Liabilities for asset retirements771,720 762,909 
Liabilities for pension benefits (Note 5)
149,856 152,865 
Customer advances314,664 257,151 
Coal mine reclamation175,776 174,616 
Deferred investment tax credit186,251 186,570 
Unrecognized tax benefits4,758 4,657 
Operating lease liabilities735,718 728,401 
Other231,090 232,914 
Total deferred credits and other7,327,464 7,311,158 
COMMITMENTS AND CONTINGENCIES (NOTE 8)
EQUITY  
Common stock, no par value; authorized 150,000,000 shares, 113,047,699 and 113,014,528 issued at respective dates
2,706,325 2,702,743 
Treasury stock at cost; 50,921 and 87,608 shares at respective dates
(3,648)(6,401)
Total common stock2,702,677 2,696,342 
Retained earnings3,281,601 3,264,719 
Accumulated other comprehensive loss(53,708)(54,861)
Total shareholders’ equity5,930,570 5,906,200 
Noncontrolling interests (Note 6)
119,566 115,260 
Total equity6,050,136 6,021,460 
TOTAL LIABILITIES AND EQUITY$22,200,954 $22,003,222 
The accompanying notes are an integral part of the financial statements.
8

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
 Three Months Ended
March 31,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$21,262 $40,514 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization including nuclear fuel203,639 176,409 
Deferred fuel and purchased power(6,110)(52,210)
Deferred fuel and purchased power amortization39,442 (564)
Allowance for equity funds used during construction(9,747)(9,207)
Deferred income taxes3,835 (11,077)
Deferred investment tax credit(319)(529)
Stock compensation5,338 11,337 
Changes in current assets and liabilities:  
Customer and other receivables66,146 50,545 
Accrued unbilled revenues1,215 10,163 
Materials, supplies and fossil fuel(11,892)(4,801)
Income tax receivable542 6,792 
Other current assets13,347 (9,042)
Accounts payable(13,873)24,465 
Accrued taxes53,847 53,985 
Other current liabilities(40,211)(46,028)
Change in margin and collateral accounts — assets8,600  
Change in other long-term assets52,153 (39,667)
Change in operating lease assets324 2,890 
Change in other long-term liabilities(47,883)(513)
Change in operating lease liabilities953 (1,450)
Net cash provided by operating activities340,608 202,012 
CASH FLOWS FROM INVESTING ACTIVITIES 
Capital expenditures(391,583)(363,775)
Contributions in aid of construction28,262 15,296 
Allowance for borrowed funds used during construction(4,422)(4,994)
Proceeds from nuclear decommissioning trusts sales and other special use funds361,754 379,978 
Investment in nuclear decommissioning trusts and other special use funds(361,809)(380,548)
Other(6,543)5,974 
Net cash used for investing activities(374,341)(348,069)
CASH FLOWS FROM FINANCING ACTIVITIES  
Issuance of long-term debt312,052 150,000 
Short-term borrowing and (repayments) - net(29,050)49,750 
Short-term debt repayments under revolving credit facility (4,000)
Dividends paid on common stock(94,265)(91,721)
Repayment of long-term debt(150,000) 
Common stock equity issuances and (purchases) - net(1,005)(738)
Net cash provided by financing activities37,732 103,291 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS3,999 (42,766)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD9,969 59,968 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$13,968 $17,202 
The accompanying notes are an integral part of the financial statements.
9

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
(dollars in thousands)
Three Months Ended March 31, 2022
Common StockTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling InterestsTotal
SharesAmountSharesAmount
Balance, January 1, 2022113,014,528 $2,702,743 (87,608)$(6,401)$3,264,719 $(54,861)$115,260 $6,021,460 
Net income— — 16,956 — 4,306 21,262 
Other comprehensive income— — — 1,153 — 1,153 
Dividends on common stock — — (74)— — (74)
Issuance of common stock33,171 3,582 — — — — 3,582 
Purchase of treasury stock (a)— (24,885)(1,665)— — — (1,665)
Reissuance of treasury stock for stock-based compensation and other— 61,572 4,418 — — — 4,418 
Balance, March 31, 2022113,047,699 $2,706,325 (50,921)$(3,648)$3,281,601 $(53,708)$119,566 $6,050,136 
Three Months Ended March 31, 2021
Common StockTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling InterestsTotal
SharesAmountSharesAmount
Balance, January 1, 2021112,760,051 $2,677,482 (72,006)$(6,289)$3,025,106 $(62,796)$119,290 $5,752,793 
Net income— — 35,641 — 4,873 40,514 
Other comprehensive income— — — 1,284 — 1,284 
Dividends on common stock — — 5 — — 5 
Issuance of common stock31,514 9,570 — — — — 9,570 
Purchase of treasury stock (a)— (17,437)(1,333)— — — (1,333)
Reissuance of treasury stock for stock-based compensation and other— 45,105 3,846 — — — 3,846 
Other— — — — 1 1 
Balance, March 31, 2021112,791,565 $2,687,052 (44,338)$(3,776)$3,060,752 $(61,512)$124,164 $5,806,680 
(a)Primarily represents shares of common stock withheld from certain stock awards for tax purposes.
    
The accompanying notes are an integral part of the financial statements.







10


ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands)
 
 Three Months Ended
March 31,
 20222021
OPERATING REVENUES (NOTE 2)
$783,531 $696,475 
OPERATING EXPENSES  
Fuel and purchased power265,269 198,227 
Operations and maintenance214,601 226,401 
Depreciation and amortization186,583 157,800 
Taxes other than income taxes57,959 59,472 
Other expenses825 3,356 
Total725,237 645,256 
OPERATING INCOME58,294 51,219 
OTHER INCOME (DEDUCTIONS)  
Allowance for equity funds used during construction9,747 9,207 
Pension and other postretirement non-service credits - net23,907 27,837 
Other income (Note 9)
1,152 11,960 
Other expense (Note 9)
(1,849)(3,350)
Total32,957 45,654 
INTEREST EXPENSE  
Interest charges62,309 59,388 
Allowance for borrowed funds used during construction(4,422)(4,994)
Total57,887 54,394 
INCOME BEFORE INCOME TAXES33,364 42,479 
INCOME TAXES4,859 2,319 
NET INCOME28,505 40,160 
Less: Net income attributable to noncontrolling interests (Note 6)
4,306 4,873 
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDER$24,199 $35,287 
 The accompanying notes are an integral part of the financial statements.
11

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)
 
 Three Months Ended
March 31,
 20222021
NET INCOME$28,505 $40,160 
OTHER COMPREHENSIVE INCOME, NET OF TAX  
Pension and other postretirement benefits activity, net of tax expense $269 and $305
820 927 
Total other comprehensive income820 927 
COMPREHENSIVE INCOME29,325 41,087 
Less: Comprehensive income attributable to noncontrolling interests4,306 4,873 
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDER$25,019 $36,214 
 The accompanying notes are an integral part of the financial statements.

12

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
 
March 31,
2022
December 31,
2021
ASSETS  
PROPERTY, PLANT AND EQUIPMENT  
Plant in service and held for future use$21,841,156 $21,685,200 
Accumulated depreciation and amortization(7,593,747)(7,501,317)
Net14,247,409 14,183,883 
Construction work in progress1,404,913 1,327,721 
Palo Verde sale leaseback, net of accumulated depreciation (Note 6)
93,199 94,166 
Intangible assets, net of accumulated amortization269,647 273,537 
Nuclear fuel, net of accumulated amortization119,296 106,039 
Total property, plant and equipment16,134,464 15,985,346 
INVESTMENTS AND OTHER ASSETS  
Nuclear decommissioning trusts (Notes 11 and 12)
1,227,465 1,294,757 
Other special use funds (Notes 11 and 12)
349,042 358,410 
Assets from risk management activities (Note 7)
91,521 46,908 
Other assets43,661 42,440 
Total investments and other assets1,711,689 1,742,515 
CURRENT ASSETS  
Cash and cash equivalents12,120 9,374 
Customer and other receivables323,679 390,533 
Accrued unbilled revenues132,765 133,980 
Allowance for doubtful accounts (Note 2)
(24,666)(25,354)
Materials and supplies (at average cost)358,287<