APS 2011 Annual Report Download - page 149

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Of the various fuel and purchased power contracts mentioned above, some of those contracts
have take-or-pay provisions. The contracts APS has for its coal supply include take-or-pay provisions.
The current take-or-pay coal contracts have terms that expire in 2024.
The following table summarizes our actual and estimated take-or-pay commitments (dollars in
millions):
Actual Estimated (a)
2009 2010 2011 2012 2013 2014 2015 2016 Thereafter
Coal take-or-pay
commitments $ 93 $ 66 $ 68 $ 79 $ 82 $ 86 $ 88 $ 58 $ 148
(a) Total take-or-pay commitments are approximately $541 million. The total net present
value of these commitments is approximately $401 million.
Renewable Energy Credits
APS has entered into contracts to purchase renewable energy credits to comply with the RES.
APS estimates the contract requirements to be approximately $58 million in 2012; $32 million in 2013;
$33 million in 2014; $32 million in 2015; $32 million in 2016; and $388 million thereafter.
Coal Mine Reclamation Obligations
APS must reimburse certain coal providers for amounts incurred for coal mine reclamation.
APS’s coal mine reclamation obligation was approximately $118 million at December 31, 2011 and
$117 million at December 31, 2010.
FERC Market Issues
On July 25, 2001, the FERC ordered an evidentiary proceeding to discuss and evaluate possible
refunds for wholesale sales in the Pacific Northwest. The FERC affirmed the administrative law
judge’s conclusion that the prices in the Pacific Northwest were not unreasonable or unjust and refunds
should not be ordered in this proceeding. This decision was appealed to the U.S. Court of Appeals for
the Ninth Circuit and ultimately remanded to the FERC for further consideration. On October 3, 2011,
the FERC ordered an evidentiary, trial-type hearing before an administrative law judge to address
possible activity that may have influenced prices in the Pacific Northwest spot market during the
period from December 25, 2000 through June 20, 2001. FERC rejected a market-wide remedy
approach and instead directed that buyers seeking refunds must demonstrate that a particular seller
engaged in unlawful market activity in the spot market and that such unlawful activity directly affected
the particular contract or contracts to which the seller was a party.
This hearing has been held in abeyance to provide an opportunity for the parties to engage in
settlement negotiations. Although the FERC has not yet determined whether any refunds will
ultimately be required, we do not expect that the resolution of these issues will have a material adverse
impact on our financial position, results of operations or cash flows.