APS 2012 Annual Report Download - page 150

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
125
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.
The first phase of the hearing is currently expected to commence in April 2013. However, APS
and Pinnacle West have entered into settlement agreements with all claimants with direct claims against
us. The last of these settlement agreements was filed with FERC on December 5, 2012 and is currently
pending FERC approval. Thus, we do not expect the outcome of the hearing to have a material adverse
impact on our financial position, results of operations or cash flows.
Superfund
Superfund establishes liability for the cleanup of hazardous substances found contaminating the
soil, water or air. Those who generated, transported or disposed of hazardous substances at a
contaminated site are among those who are PRPs. PRPs may be strictly, and often are jointly and
severally, liable for clean-up. On September 3, 2003, EPA advised APS that EPA considers APS to be
a PRP in the Motorola 52nd Street Superfund Site, OU3 in Phoenix, Arizona. APS has facilities that are
within this Superfund site. APS and Pinnacle West have agreed with EPA to perform certain
investigative activities of the APS facilities within OU3. In addition, on September 23, 2009, APS
agreed with EPA and one other PRP to voluntarily assist with the funding and management of the site-
wide groundwater remedial investigation and feasibility study work plan. We estimate that our costs
related to this investigation and study will be approximately $2 million. We anticipate incurring
additional expenditures in the future, but because the overall investigation is not complete and ultimate
remediation requirements are not yet finalized, at the present time expenditures related to this matter
cannot be reasonably estimated.
Climate Change Lawsuit
In February 2008, the Native Village of Kivalina and the City of Kivalina, Alaska filed a lawsuit
in federal court in the Northern District of California against nine oil companies, fourteen power
companies (including Pinnacle West), and a coal company, alleging that the defendants’ emissions of
carbon dioxide contribute to global warming and constitute a public and private nuisance under both
federal and state law. The plaintiffs also allege that the effects of global warming will require the
relocation of the village, and they are seeking an unspecified amount of monetary damages. In
June 2008, the defendants filed motions to dismiss the action, which were granted. The plaintiffs filed
an appeal with the United States Court of Appeals for the Ninth Circuit in November 2009.
On September 21, 2012, a three-judge panel of the Ninth Circuit affirmed the district court’s
dismissal of the Kivalina plaintiffs’ federal common law public nuisance action. The court declined to
address any other issue raised by the parties, including the plaintiffs’ state nuisance law claim. On