APS 2011 Annual Report Download - page 151

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
126
Within the same time period that APS’s Yuma customers lost service, a series of transmission
and generation disruptions occurred across the systems of several utilities that resulted in outages
affecting portions of southern Arizona, southern California and northern Mexico. A total of
approximately 7,900 MW of firm load and 2.8 million customers (1.6 million in the United States and
1.2 million in northern Mexico) were reported to have been affected. Service to all affected APS
customers was restored by 9:15PM on September 8. Service to customers affected by the wider
regional outages was restored by approximately 3:25AM on September 9.
APS has an internal review of the September 8 events underway. In addition:
 the FERC and the North American Electric Reliability Corporation (“NERC”) are
conducting a joint inquiry into the outages; and
 the Western Electricity Coordinating Council (“WECC”) initiated a Detailed
Disturbance Analysis process to identify and understand the cause of the events that
occurred, and identify and ensure timely implementation of corrective actions.
APS cannot predict the timing, results or potential impacts of any of the inquiries into the
September 8 events, or any other claims that may be made as a result of the outages. If violations of
NERC Reliability Standards are ultimately determined to have occurred, FERC has the legal authority
to assert a possible fine of up to $1 million per violation per day that the violation is found to have
been in existence.
Lawsuit. On September 12, 2011, two purported consumer class action complaints were filed
in Federal District Court in San Diego, California, naming APS, Pinnacle West and San Diego Gas &
Electric Company as defendants and seeking damages for loss of perishable inventory as a result of
interruption of electrical service. On December 22, 2011, the plaintiffs voluntarily dismissed both
lawsuits. In January 2012, one of the cases was refiled in California Superior Court in San Diego,
California. APS and Pinnacle West have numerous defenses against any such complaints, and do not
believe that any potential impact will be material.
New Source Review
On October 4, 2011, Earthjustice, on behalf of several environmental organizations, filed a
lawsuit in the United States District Court for the District of New Mexico against APS and the other
Four Corners participants alleging violations of the PSD provisions of the Clean Air Act. Subsequent
to filing its original Complaint, on January 6, 2012, Earthjustice filed a First Amended Complaint
adding claims for violations of the Clean Air Act’s NSPS program. Among other things, the plaintiffs
seek to have the court enjoin operations at Four Corners until APS applies for and obtains any required
PSD permits and complies with the NSPS. The plaintiffs further request the court to order the payment
of civil penalties, including a beneficial mitigation project. APS believes the claims in this matter are
without merit and will vigorously defend against them. We are unable to determine a range of
potential losses that are reasonably possible of occurring.
Financial Assurances
APS has entered into various agreements that require letters of credit for financial assurance
purposes. At December 31, 2011, approximately $44 million of letters of credit were outstanding to
support existing pollution control bonds of a similar amount. The letters of credit are available to fund