APS 2013 Annual Report Download - page 52

Table of Contents
ITEM 7. MANAGEMENT’S DISCU SSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with Pinnacle West’s Consolidated Financial Statements and APS’s Consolidated
Financial Statements and the related Notes that appear in Item 8 of this report. For information on factors that may cause our actual future results to differ
from those we currently seek or anticipate, see “Forward-Looking Statements” at the front of this report and “Risk Factors” in Item 1A.
OVERVIEW
Pinnacle West owns all of the outstanding common stock of APS. APS is a vertically-integrated electric utility that provides either retail or wholesale
electric service to most of the state of Arizona, with the major exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and
Mohave County in northwestern Arizona. APS accounts for essentially all of our revenues and earnings, and is expected to continue to do so.
Areas of Business Focus
Operational Performance, Reliability and Recent Developments.
Nuclear. APS operates and is a joint owner of Palo Verde. The March 2011 earthquake and tsunamis in Japan and the resulting accident at Japan’s
Fukushima Daiichi nuclear power station had a significant impact on nuclear power operators worldwide. In the aftermath of the accident, the NRC
conducted an independent assessment to consider actions to ensure that its regulations reflect lessons learned from the Fukushima events.
Although the NRC has repeatedly affirmed its position that continued operation of U.S. commercial nuclear power plants does not impose an
immediate risk to public health and safety, the NRC has proposed enhancements to U.S. commercial nuclear power plant equipment and emergency plans.
APS management continues to work closely with the NRC and others in the nuclear industry to ensure that the enhancements are implemented in an organized,
sequential and structured way consistent with their safety benefit and significance of the issue being addressed.
Coal and Related Environmental Matters and Transactions. APS is a joint owner of three coal-fired power plants and acts as operating agent
for two of the plants. APS is focused on the impacts on its coal fleet that may result from increased regulation and potential legislation concerning GHG
emissions. Concern over climate change and other emission-related issues could have a significant impact on our capital expenditures and operating costs in
the form of taxes, emissions allowances or required equipment upgrades for these plants. APS is closely monitoring its long-range capital management plans,
understanding that any resulting regulation and legislation could impact the economic viability of certain plants, as well as the willingness or ability of power
plant participants to fund any such equipment upgrades.
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