APS 2011 Annual Report Download - page 51

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The operation of APS’s nuclear power plant exposes it to substantial regulatory oversight and
potentially significant liabilities and capital expenditures.
The NRC has broad authority under federal law to impose licensing and safety-related
requirements for the operation of nuclear generation facilities. Events at nuclear facilities of other
operators or impacting the industry generally may lead the NRC to impose additional requirements and
regulations on existing and new facilities. As a result of the March 2011 earthquake and tsunami that
caused significant damage to the Fukushima Daiichi Nuclear Power Plant in Japan, various industry
organizations are working to analyze information from the Japan incident and develop action plans for
U.S. nuclear power plants. Additionally, the NRC is performing its own independent review of the
events at Fukushima Daiichi, including a review of the agency’s processes and regulations in order to
determine whether the agency should promulgate additional regulations and possibly make more
fundamental changes to the NRC’s system of regulation. We cannot predict when or if the NRC will
take formal action as a result of its review. The financial and/or operational impacts on Palo Verde and
APS may be significant.
In the event of noncompliance with its requirements, the NRC has the authority to impose
monetary civil penalties or a progressively increased inspection regime that could ultimately result in
the shut-down of a unit, or both, depending upon the NRC’s assessment of the severity of the situation,
until compliance is achieved. The increased costs resulting from penalties, a heightened level of
scrutiny and implementation of plans to achieve compliance with NRC requirements may adversely
affect APS’s financial condition, results of operations and cash flows.
APS is subject to numerous environmental laws and regulations, and changes in, or liabilities
under, existing or new laws or regulations may increase APS’s cost of operations or impact its
business plans.
APS is subject to numerous environmental laws and regulations affecting many aspects of its
present and future operations, including air emissions, water quality, wastewater discharges, solid
waste, hazardous waste, and coal combustion products, which consist of bottom ash, fly ash, and air
pollution control wastes. 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 APS to obtain and comply with a wide
variety of environmental licenses, permits, and other approvals. If there is a delay or failure to obtain
any required environmental regulatory approval, or if APS fails to obtain, maintain, or comply with
any such approval, operations at affected facilities could be suspended or subject to additional
expenses. In addition, failure to comply with applicable environmental laws and regulations could
result in civil liability or criminal penalties. Both public officials and private individuals may seek to
enforce applicable environmental laws and regulations. APS cannot predict the outcome (financial or
operational) of any related litigation that may arise.
Environmental Clean Up. APS has been named as a PRP for a Superfund site in Phoenix,
Arizona and it could be named a PRP in the future for other environmental clean up at sites identified
by a regulatory body. APS 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.