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): May 14, 1999
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PINNACLE WEST CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
Arizona 1-8962 86-0512431
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
400 East Van Buren St., P.O. Box 52132, Phoenix, Arizona 85072-2132
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(Address of principal executive offices) (Zip code)
(602) 379-2500
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(Registrant's telephone number, including area code)
NONE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
As of May 14, 1999, Arizona Public Service Company ("APS") entered into a
comprehensive Settlement Agreement with various other parties, including
representatives of major consumer groups, related to the implementation of
retail electric competition. This Settlement Agreement has been filed with the
Arizona Corporation Commission (the "ACC") with a request for the ACC to
establish a procedural schedule so that the ACC can review the settlement as
soon as practicable. By its terms, the Settlement Agreement will not become
effective unless and until the issuance of a final ACC order approving the
Settlement Agreement without modification on or before August 1, 1999.
The following are the major provisions of the Settlement Agreement, which is
incorporated in this Form 8-K by reference:
* APS will reduce rates for standard offer service for customers with loads
less than 3 megawatts ("MW") in a series of annual rate reductions of 1.5%
beginning July 1, 1999 through July 1, 2003, for a total of 7.5%. The first
reduction includes the July 1, 1999 retail price decrease related to the
1996 regulatory agreement. See Note 6 of Notes to Condensed Consolidated
Financial Statements in Part I, Item 1 of the Pinnacle West Capital
Corporation ("Pinnacle West") Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1999 (the "March 10-Q"). For customers having loads
3 MW or greater, standard offer rates will be reduced in annual increments
that total 5% through 2002.
* Unbundled rates being charged by APS for competitive direct access service
(for example, distribution services) will become effective as of July 1,
1999, and will be subject to annual reductions, that vary by rate class,
through 2003.
* There will be a moratorium on retail rate changes for standard offer and
unbundled competitive direct access rates until July 1, 2004, except for
the price reductions described above and certain other limited
circumstances.
* APS will be permitted to defer for later recovery prudent and reasonable
costs of complying with the ACC electric competition rules, system benefits
costs in excess of the levels included in current rates, and costs
associated with APS' "provider of last resort" and standard offer
obligations for service after July 1, 2004. These costs are to be recovered
through an adjustment clause or clauses commencing on July 1, 2004.
* APS' distribution system will be open for retail access on July 1, 1999.
Customers will be eligible for retail access in accordance with the
phase-in program expected to be ultimately adopted by the ACC under the
electric competition rules when such rules become effective, with an
additional 140 MW being made available to eligible non-residential
customers. Unless subject to judicial or regulatory restraint, APS will
open its distribution system to retail access for all customers on January
1, 2001.
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* APS is currently recovering substantially all of its regulatory assets
through July 1, 2004, pursuant to the 1996 regulatory agreement. See Note 6
in the March 10-Q. In addition, the Settlement Agreement states that APS
has demonstrated that its allowable stranded costs, after mitigation and
exclusive of regulatory assets, are at least $533 million net present
value. APS will not be allowed to recover $183 million net present value of
the above amounts. The Settlement Agreement provides that APS will have the
opportunity to recover $350 million net present value through a competitive
transition charge ("CTC") that will remain in effect through December 31,
2004, at which time it will terminate. Any over/under-recovery will be
credited/debited against the costs subject to recovery under the adjustment
clause described above.
* APS will form a separate corporate affiliate or affiliates and transfer
thereto its generating assets and competitive services by December 31,
2002.
* Upon final approval of the Settlement Agreement by the ACC in an order no
longer subject to judicial review, APS will move to dismiss all of its
litigation currently pending against the ACC.
Upon final ACC order, APS will discontinue the application of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," for its generation operations. This means that regulatory
assets, unless reestablished as recoverable through ongoing regulated cash
flows, are to be eliminated and the generation assets must be tested for
impairment. The regulatory disallowance, which removes $234 million pre-tax
($183 million net present value) from ongoing regulatory cash flows, will be
recorded as a net reduction of regulatory assets. This reduction will be
reported as an extraordinary charge on the income statement. The regulatory
assets to be recovered under this Settlement Agreement would be amortized as
follows:
(Millions)
1/1 - 6/30
1999 2000 2001 2002 2003 2004 Total
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$164 $158 $145 $115 $86 $18 $686
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ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Pinnacle West hereby incorporates the following Exhibit pursuant to
Exchange Act Rule 12b-32 and Regulation ss.229.10(d) by reference to the filing
set forth below:
Originally
Filed
Exhibit No. Description As Exhibit File No.a Date Effective
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10.1 Settlement 10.1 to APS' 1-4473 5-19-99
Agreement May 14, 1999
Form 8-K Report
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a Reports filed under File No. 1-4473 were filed in the office of the
Securities and Exchange Commission located in Washington, D.C.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PINNACLE WEST CAPITAL CORPORATION
(Registrant)
Dated: May 19, 1999 By: Michael V. Palmeri
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Michael V. Palmeri
Treasurer
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