SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 30, 1994
PINNACLE WEST CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Arizona 1-8962 86-0512431
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
400 East Van Buren Street, P. O. Box 52132, Phoenix, Arizona 85072-2132
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (602) 379-2500
NONE
(Former name or former address, if changed since last report)
<PAGE>
The following information relates primarily to Pinnacle West Capital
Corporation (the "Company") and its principal subsidiary, Arizona Public
Service Company ("APS").
ITEM 5.
Other Events
Palo Verde Nuclear Generating Station
As previously reported, tube cracking in the steam generators of
the Palo Verde Nuclear Generating Station ("Palo Verde") adversely affected
operations in 1993, and will continue to do so in 1994 and probably into
1995, because of the cost of replacement power and maintenance expense
associated with unit outages and corrective actions required to deal with
the issue. See Note 13 of Notes to Financial Statements in Part II, Item 8
of The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
Palo Verde Unit 2
The operation of Palo Verde Unit 2 has been particularly affected by
this issue. APS has encountered axial tube cracking in the upper regions of
the two steam generators in Unit 2. This form of tube degradation is
uncommon in the industry and, in March 1993, led to a tube rupture and an
outage of the unit that extended to September 1993, during which the unit
was refueled. In March 1994, a mid-cycle inspection outage was completed
which revealed further tube degradation in Unit 2. The outage included,
among other things, inspecting and chemically cleaning each of Unit 2's
steam generators, and subsequently starting the unit up using boric acid in
the secondary water system. Unit 2 is scheduled for another mid- cycle
inspection outage in the fall of 1994. The Unit 2 refueling and maintenance
outage which was originally planned for the fall of 1994 is now scheduled to
be completed in early 1995.
Palo Verde Unit 3
Palo Verde Unit 3 is currently in a refueling outage, during which APS
is inspecting and chemically cleaning each of Unit 3's two steam generators,
and the unit will be started up with boric acid in the secondary water
system. APS' inspection of one of these generators has revealed axial
cracking in a small number of tubes in the upper region of the generator.
As a result, APS is expanding the scope of its inspection of this steam
generator to obtain additional information about the extent and severity of
the axial cracking. Similar inspections have not yet been completed in the
other steam generator, but APS expects that these inspections will be
completed within the next few weeks. APS currently expects that Unit 3 will
be restarted in June. However, in light of the axial cracking that APS has
found to date, APS anticipates that Unit 3 would be removed from service
in late 1994 for a mid-cycle inspection of steam generators.
Palo Verde Unit 1
Palo Verde Unit 1 is scheduled for a refueling outage beginning in
March 1995. In late 1993 APS concluded that Unit 1 could be safely operated
until the 1995 outage and submitted its supporting analysis to the Nuclear
Regulatory Commission. However, in light of the axial cracking found in one
of the Unit 3 steam generators, APS is currently evaluating the potential
need for a mid-cycle steam generator tube inspection outage in Unit 1
late in 1994.
General
Although its analysis is not yet completed, APS believes that the axial
cracking in the Unit 2 and Unit 3 steam generator tubes is due to the
susceptibility of tube materials to a combination of deposits on the tubes
and the relatively high temperatures at which all three units are currently
designed to operate. APS also believes that it can retard further tube
degradation to acceptable levels by remedial actions, which include
chemically cleaning the generators and performing analyses and adjustments
that will allow the units to be operated at lower temperatures without
appreciably reducing their power output. Chemical cleaning has been
completed in Unit 2 and is being performed on Unit 3 during its current
refueling outage. The temperature analyses should be concluded within the
next several months. In the meantime, the lower temperatures will be
achieved by operating the units at less than full power (86%).
APS previously reported that all three units should be returned to full
power by mid-1995, and one or more of the units could be returned to full
power during 1994. However due to the axial cracking found in Unit 3, APS
cannot currently predict when one or more of the units will be returned to
full power.
As a result of the Unit 2 mid-cycle outage and operating the units at
reduced power during the three months ended March 31, 1994, APS incurred
additional fuel and purchased power costs totaling about $10 million (before
income taxes). During the last nine months of 1994, APS expects to incur
replacement power costs related to a mid-cycle inspection outage at Unit 2
and operating the three units at 86% power averaging approximately $1.5
million (before income taxes) a month, which costs may continue into 1995.
In the event that mid-cycle inspection outages are necessary in late 1994
for Units 1 and 3 and assuming that each such outage will last forty (40)
days, the replacement power costs for both outages are estimated to total
approximately $7 million (before income taxes). Fuel and purchased power
costs increased $15.5 million (before income taxes) in 1993 due to Palo
Verde outages and reduced power operations related to steam generator tube
cracking.
APS estimates that additional operations and maintenance expenses
totaling approximately $6 million (before income taxes) will be incurred if
mid-cycle inspection outages are performed at Units 1 and 3 in late 1994.
When tube cracks are detected during any outage, the affected tubes are
taken out of service by plugging. That has occurred in a number of tubes in
all three units, particularly in Unit 2, which is by far the most affected
by cracking and plugging. APS expects that because of the foregoing
remedial actions the rate of plugging will slow considerably and that, while
it may ultimately reach some limit on plugging, it can operate the present
steam generators over a number of years.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PINNACLE WEST CAPITAL CORPORATION
(Registrant)
Dated: May 9, 1994 By Nancy E. Newquist
--------------------
Nancy E. Newquist
Vice President and Treasurer
