SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 27, 2003
PINNACLE WEST CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Arizona 1-8962 86-0512431
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
400 North Fifth Street, P.O. Box 53999, Phoenix, Arizona 85072-3999
(Address of principal executive offices) (Zip Code)
(602) 250-1000
(Registrant's telephone number, including area code)
NONE
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
APS RATE REQUEST
On June 27, 2003, Arizona Public Service Company ("APS") filed a request
with the Arizona Corporation Commission (the "ACC") for a $175.1 million, or
9.8%, increase in its annual retail electricity revenues, to become effective
July 1, 2004.
MAJOR COMPONENTS OF THE REQUEST
The major reasons for the request include:
o complying with the provisions of the APS' regulatory settlement agreement
approved by the ACC in 1999 (the "1999 Settlement Agreement");
o incorporating significant increases in fuel and purchased power costs,
including results of purchases through the ACC's Track B procurement
process;
o recognizing changes in APS' cost of service, cost allocation and rate
design;
o obtaining rate recognition of the generating plants (the "PWEC Assets")
built in Arizona by Pinnacle West Energy Corporation ("Pinnacle West
Energy" or "PWEC"), another subsidiary of Pinnacle West Capital Corporation
(the "Company") since 1999 to serve APS' retail electricity customers;
o recovering $234 million written off by APS as a result of the 1999
Settlement Agreement; and
o recovering restructuring and compliance costs associated with the ACC's
electric competition rules.
For additional background information regarding the 1999 Settlement Agreement,
the ACC's electric competition rules, and this rate case, see Note 5 of Notes to
Condensed Consolidated Financial Statements in the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2003.
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REQUESTED RATE INCREASE
The requested rate increase totals $175.1 million, or 9.8%, and is
comprised of the following items:
Annual Revenue Percent
Increase Increase
-------- --------
Increase in base rates $ 166.8 million 9.3%
Competition rules compliance charge 8.3 million 0.5%
--------------- ---
Total increase $ 175.1 million 9.8%
=============== ===
TEST YEAR
The filing is based on an adjusted historical test year ended December 31,
2002.
COST OF CAPITAL
The proposed weighted average cost of capital for the test year ended
December 31, 2002 is 8.67%, including an 11.5% return on equity.
RATE BASE
The request is based on a rate base of $4.2 billion, calculated using
Original Cost Less Depreciation ("OCLD") methodology. The OCLD rate base
approximates the ACC-jurisdictional portion of the net book value of utility
plant, net of accumulated depreciation, as of December 31, 2002.
The requested rate base includes the PWEC Assets - specifically, Redhawk
Combined Cycle Units 1 and 2, West Phoenix Combined Cycle Units 4 and 5 and the
Saguaro Combustion Turbine Unit 3, with a total combined capacity of
approximately 1700 megawatts. Upon approval of the request, the PWEC Assets
would be transferred to APS from Pinnacle West Energy.
The filing also includes calculated amounts for Fair Value Rate Base and
Replacement Cost New Depreciated ("RCND") rate base. The ACC is required by the
Arizona Constitution to make a finding of Fair Value Rate Base, which is defined
as the arithmetic average of OCLD rate base and RCND rate base.
RECOVERY OF PREVIOUS $234 MILLION WRITE-OFF
The request includes recovery, over a fifteen year period, of the write-off
of $234 million pretax by APS as a result of the 1999 Settlement Agreement.
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ESTIMATED TIMELINE
APS has asked the ACC to approve the requested rate increase by July 1,
2004. The Company expects the ACC to issue procedural schedules during the next
several months detailing the timeline for addressing the request.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements based on current
expectations and we assume no obligation to update these statements or make any
further statements on any of these issues, except as required by applicable
laws. 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
results or outcomes currently expected or sought by us. These factors include
the ongoing restructuring of the electric industry, including the introduction
of retail electric competition in Arizona; the outcome of regulatory and
legislative proceedings relating to the restructuring; state and federal
regulatory and legislative decisions and actions, including the outcome of the
rate case APS filed with the ACC on June 27, 2003 and the wholesale electric
price mitigation plan adopted by the FERC; regional economic and market
conditions, including the results of litigation and other proceedings resulting
from the California energy situation and completion of generation construction
in the region, which could affect customer growth and the cost of power
supplies; the cost of debt and equity capital; weather variations affecting
local and regional customer energy usage; conservation programs; power plant
performance; the successful completion of our generation construction program,
such as permitting and licensing; our ability to compete successfully outside
traditional regulated markets (including the wholesale market); our ability to
manage our marketing and trading activities and the use of derivative contracts
in our business; technological developments in the electric industry; the
performance of the stock market, which affects the amount of our required
contributions to our pension plan and nuclear decommissioning trust funds; the
strength of the real estate market in SunCor's market areas, which include
Arizona, New Mexico and Utah; and other uncertainties, all of which are
difficult to predict and many of which are beyond our control.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Exhibit No. Description
----------- -----------
99.1 Rate Application and Schedules
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PINNACLE WEST CAPITAL CORPORATION
(Registrant)
Dated: June 27, 2003 By: Barbara M. Gomez
-------------------------------------
Barbara M. Gomez
Treasurer
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