APS 2013 Annual Report Download - page 10

Table of Contents
Nuclear
Palo Verde Nuclear Generating Station — Palo Verde is a 3-unit nuclear power plant located approximately 50 miles west of Phoenix, Arizona.
APS operates the plant and owns 29.1% of Palo Verde Units 1 and 3 and approximately 17% of Unit 2. In addition, APS leases approximately 12.1% of Unit
2, resulting in a 29.1% combined ownership and leasehold interest in that unit. APS has a total entitlement from Palo Verde of 1,146 MW.
Palo Verde Leases — In 1986, APS entered into agreements with three separate lessor trust entities in order to sell and lease back approximately
42% of its share of Palo Verde Unit 2 and certain common facilities. In accordance with the VIE accounting guidance, APS consolidates the lessor trust
entities for financial reporting purposes, and eliminates lease accounting for these transactions. The agreements expire at the end of 2015 and contain options
to renew the leases or to purchase the property for fair market value at the end of the lease terms. APS was required to give notice to the respective lessor trusts
between December 31, 2010 and December 31, 2012 if it wished to retain the leased assets (without specifying whether it would purchase the leased assets or
extend the leases) or return the leased assets to the lessor trusts. On December 31, 2012, APS gave notice to the respective lessor trusts informing them it will
retain the leased assets. APS must give notice to the respective lessor trusts by June 30, 2014 notifying them which of the purchase or lease renewal options it
will exercise. We are currently analyzing these options. See Note 19 for additional information regarding the Palo Verde Unit 2 sale leaseback transactions.
Palo Verde Operating Licenses — Operation of each of the three Palo Verde Units requires an operating license from the NRC. The NRC issued
full power operating licenses for Unit 1 in June 1985, Unit 2 in April 1986 and Unit 3 in November 1987, and issued renewed operating licenses for each of
the three units in April 2011, which extended the licenses for Units 1, 2 and 3 to June 2045, April 2046 and November 2047, respectively.
Palo Verde Fuel Cycle — The Palo Verde participants are continually identifying their future nuclear fuel resource needs and negotiating
arrangements to fill those needs. The fuel cycle for Palo Verde is comprised of the following stages:
· mining and milling of uranium ore to produce uranium concentrates;
· conversion of uranium concentrates to uranium hexafluoride;
· enrichment of uranium hexafluoride;
· fabrication of fuel assemblies;
· utilization of fuel assemblies in reactors; and
· storage and disposal of spent nuclear fuel.
The Palo Verde participants have contracted for 100% of Palo Verde’s requirements for uranium concentrates through 2017, 90% of its requirements
in 2018 and 45% of its requirements in 2019-2020. The participants have also contracted for all of Palo Verde’s conversion services through 2016, 95% of
its requirements in 2017-2018 and 45% of its requirements in 2019-2020; all of Palo Verde’s enrichment services through 2020; and all of Palo Verde’s fuel
assembly fabrication services through 2016.
Spent Nuclear Fuel and Waste Disposal — The Nuclear Waste Policy Act of 1982 (“NWPA”) required the DOE to accept, transport, and dispose
of spent nuclear fuel and high level waste generated
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