APS 2012 Annual Report Download - page 151

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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October 4, 2012, the plaintiffs filed a petition for rehearing by the entire Ninth Circuit, but on
November 27, 2012, the court denied plaintiffs’ petition. APS continues to believe the action in
Kivalina is without merit and will continue to defend against both the federal and state claims.
Southwest Power Outage
On September 8, 2011 at approximately 3:30PM, a 500 kV transmission line running between
the Hassayampa and North Gila substations in southwestern Arizona tripped out of service due to a fault
that occurred at a switchyard operated by APS. At the time, an APS employee at the North Gila
substation was performing a procedure to remove from service a capacitor bank that was believed not to
be operating properly. Approximately ten minutes after the transmission line went off-line, generation
and transmission resources for the Yuma area were lost, resulting in approximately 69,700 APS
customers losing service.
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 2.7 million customers 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.
The FERC and the North American Electric Reliability Corporation (“NERC”) conducted a
joint inquiry into the outages and, on May 1, 2012, they issued a report (the “Joint Report”) withtheir
analysis and conclusions as to the causes of the events. The report includes recommendations to help
industry operators prevent similar outages in the future, including increased data sharing and
coordination among the western utilities and entities responsible for bulk electric system reliability
coordination. The Joint Report does not address potential reliability violations or an assessment of
responsibility of the parties involved. APS continues to analyze business practices and procedures
related to the September 8 events.
APS cannot predict the timing, results or potential impacts of enforcement actions that may be
brought against APS relating to the September 8 events, or any 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 a
violation is found to have been in existence.
Clean Air Act Lawsuit
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 New Source Review 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 NSR permits and complies with the NSPS. The plaintiffs further request the court to order the
payment of civil penalties, including a beneficial mitigation project. On April 2, 2012, APS and the