APS 2012 Annual Report Download - page 54

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investments in the plants as well as other costs related to early retirement, but cannot predict whether it
would obtain such recovery.
APS faces physical and operational risks related to climate change, and potential financial risks
resulting from climate change litigation and legislative and regulatory efforts to limit greenhouse
gas emissions.
Concern over climate change, deemed by many to be induced by rising levels of greenhouse
gases in the atmosphere, has led to significant legislative and regulatory efforts to limit CO2, which is a
major byproduct of the combustion of fossil fuel, and other greenhouse gas emissions. In addition,
lawsuits have been filed against companies that emit greenhouse gases, including a lawsuit filed by the
Native Village of Kivalina and the City of Kivalina, Alaska against us and several other utilities
seeking damages related to climate change.
Financial Risks – Potential Legislation and Regulation. It is possible that some form of
legislation or EPA action to regulate domestic greenhouse gas emissions may occur in the future at the
federal level. If the United States Congress, or individual states or groups of states in which APS
operates, ultimately pass legislation, or if EPA promulgates additional regulations regulating the
emissions of greenhouse gases from existing generation facilities, any resulting limitations on CO2 and
other greenhouse gas emissions could result in the creation of substantial additional capital
expenditures and operating costs in the form of taxes, emissions allowances, or required equipment
upgrades and could have a material adverse impact on all fossil-fuel-fired generation facilities
(particularly coal-fired facilities, which constitute approximately 28% of APS’s generation capacity).
At the state level, the California legislature enacted legislation to address greenhouse gas
emissions and the California Air Resources Board approved regulations that will establish a cap-and-
trade program for greenhouse gas. This legislation, regulation and other state-specific initiatives may
affect APS’s business, including sales into the impacted states or the ability of its out-of-state power
plant participants to continue their participation in certain coal-fired power plants, including Four
Corners following 2016.
Physical and Operational Risks. Weather extremes such as drought and high temperature
variations are common occurrences in the Southwest’s desert area, and these are risks that APS
considers in the normal course of business in the engineering and construction of its electric system.
Large increases in ambient temperatures could require evaluation of certain materials used within its
system and represent a greater challenge.