PINNACLE WEST CAPITAL CORP, U-1, EX-99.D.1, 2000-09-12

PINNACLE WEST CAPITAL CORP
U-1, EX-99.D.1, 2000-09-12
ELECTRIC SERVICES

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EXHIBIT D-1

[LETTERHEAD OF MORGAN, LEWIS & BOCKIUS LLP]

July 28, 2000

Honorable David P. Boergers, Secretary
Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, D.C. 20426

Re: Application of Arizona Public Service Company, Pinnacle West Capital
Corporation, and Pinnacle West Energy Corporation for Authorization to
Transfer Jurisdictional Facilities, Docket No. EC00- -000

Dear Secretary Boergers:

Pursuant to Section 203 of the Federal Power Act, 16 U.S.C. ss. 824b
(1994), and Part 33 of the regulations of the Federal Energy Regulatory
Commission, 18 C.F.R. Part 33, Arizona Public Service Company ("APS"), Pinnacle
West Capital Corporation ("PWCC"), and Pinnacle West Energy Corporation ("PWE")
(jointly "Applicants"), hereby submit for filing six copies of an Application
for Authorization to Transfer Jurisdictional Facilities.

Applicants are making this filing in connection with the proposed corporate
restructuring of APS, under which APS will separate its generation and wholesale
marketing businesses, from its transmission and distribution businesses.
Applicants developed the restructuring plan in order to comply with the Arizona
retail choice program, which provides for the introduction of customer choice
for retail customers, and requires APS to divest its generation assets. As
demonstrated in the body of the Application, the proposed transfer of
jurisdictional facilities raises no competitive or other concerns, and is in the
public interest.

A form of notice suitable for publication in the FEDERAL REGISTER and a
copy of the notice on a computer diskette are attached hereto. Applicants have
served a copy of this Application on the Arizona Corporation Commission and the
New Mexico Public Regulation Commission. In addition, copies of this transmittal
letter have been sent to all customers under each of the wholesale power sales
contracts, tariffs, and service agreements that APS seeks authorization under
Section 203 to transfer to an affiliate.
<PAGE>
Any of these customers that desire a copy of the Application should contact the
undersigned.

If you have any questions about this filing, please feel free to contact
me.

Respectfully submitted,

John D. McGrane
------------------------
John D. McGrane
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036-5869
Phone: (202) 467-7000

Barbara M. Champion, Senior Attorney
Pinnacle West Capital Corporation
P.O. Box 53999
Mail Station 8695
Phoenix, Arizona 85072-3999
Phone: (602) 250-3547

Attorneys for
Arizona Public Service Company
Pinnacle West Capital Corporation
Pinnacle West Energy Corporation

Enclosures

cc: Arizona Corporation Commission
New Mexico Public Regulation Commission
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UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION

Arizona Public Service Company ) Docket No. EC00-_________
Pinnacle West Capital Corporation )
Pinnacle West Energy Corporation )

APPLICATION OF
ARIZONA PUBLIC SERVICE COMPANY,
PINNACLE WEST CAPITAL CORPORATION, AND
PINNACLE WEST ENERGY CORPORATION
FOR AUTHORIZATION TO TRANSFER
JURISDICTIONAL FACILITIES

I. INTRODUCTION

Arizona Public Service Company ("APS"), and its affiliates Pinnacle West
Capital Corporation ("PWCC") and Pinnacle West Energy Corporation ("PWE")
(collectively, "Applicants"), submit this Application to obtain the approvals
necessary to separate APS's generation and wholesale marketing businesses from
its transmission and distribution businesses. APS is separating its generation
and marketing functions from its transmission and distribution functions, in
accordance with the Arizona retail choice program and as a means of implementing
the Settlement Agreement approved by the Arizona Corporation Commission ("ACC")
which calls for the divestitures of APS's generation assets. Upon completion of
the proposed corporate restructuring, PWE will own and operate APS's existing
generating plants, and APS will become a "wires" company, owning and operating
transmission and distribution facilities. PWCC will have a Marketing and Trading
Department and act as a power marketer, and conduct trading and brokering
functions on behalf of its subsidiaries APS, PWE, and APS Energy Services
Company, Inc. ("APSES").
<PAGE>
Under Section 203 of the Federal Power Act, 16 U.S.C. ss. 824b (1994), and
Part 33 of the Federal Energy Regulatory Commission's ("FERC" or the
"Commission") Regulations, 18 C.F.R. ss.ss. 33.1-33.10 (1999), Applicants seek
authorization for:

1. the transfer from APS to PWE, directly or indirectly, of certain
jurisdictional facilities;

2. the transfer from APS to PWE, directly or indirectly, of certain
operational agreements to PWE; and

3. the transfer from APS to PWCC of certain wholesale power sales
contracts, APS's Electric Coordination Tariff and accompanying service
agreements, and certain service agreements under APS's Market-Rate
Tariff including any new agreements APS enters into under its
market-rate tariff up to and until the time of transfer.

Upon the transfer of APS fossil generation resources to PWE, contemplated
to occur on or before January 1, 2001, PWE will sell the output from its
generation resources to PWCC. Under the restructuring plan, PWCC will, in turn,
provide APS with all of its generation-related ancillary services pursuant to
agreements to be filed with the Commission.(1) These arrangements will allow APS
to continue providing ancillary services at the existing rates in its OATT until
a market for ancillary services develops in Arizona.

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(1) Specifically, PWE intends to file an application for authorization to sell
power at market-based rates in a separate but concurrent filing. At that
time, PWE will also file an agreement for the sale of generation related
ancillary services to PWCC at exactly the same rates that APS currently
charges transmission customers under its OATT. To the extent additional
generation related ancillary services may be required by the Commission or
pursuant to protocols to be filed by the Arizona Independent System
Administrator, PWE will supply those services to PWCC. PWCC will then in
turn provide ancillary services to APS, again at the same rates currently
charged by APS under its OATT. PWE and PWCC will reserve the right to
change such rates and services as their costs of providing such service
change, or as conditions warrant.

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II. REQUEST FOR EXPEDITED APPROVAL AND REQUESTED EFFECTIVE DATES

The approvals that Applicants request are necessary to implement Arizona's
retail choice plan for the Applicants. Accordingly, Applicants request that the
Commission issue an order no later than November 30, 2000, approving the Section
203 application and request expedited consideration to the extent necessary.
Applicants note that they anticipate transferring most of the assets and
personnel at year-end, in order to facilitate calendar year record keeping, and
believe that the time between the requested approval date of November 30 and the
contemplated transfer is necessary to allow the transfer of personnel and to
implement other aspects of the transaction. Applicants will promptly notify the
Commission upon the consummation of the transactions described herein.

III. PROPOSED RESTRUCURING PLAN OF THE APPLICANTS

A. DESCRIPTION OF THE PARTIES

PWCC: PWCC is an Arizona corporation whose principal place of business is
located at 400 North 5th Street, Phoenix, Arizona. PWCC is a holding company
that is exempt from registration under the Public Utility Holding Company Act of
1935, as amended ("PUHCA"), by virtue of Section 3(a)(1) of PUHCA and Rule 2 of
the regulations of the Securities and Exchange Commission ("SEC"). PWCC is the
parent company of APS, PWE, and APSES. At present, PWCC has no electric-utility
company subsidiaries, other than APS. PWCC has two non-utility subsidiaries, El
Dorado Investment Company, an investment firm with a portfolio consisting of
venture capital, limited partnerships, and other holdings, and SunCor
Development Company, a real estate developer invested in planned communities and
commercial/industrial projects.

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PWCC is also a power marketer. On June 20, 2000, the Commission
conditionally accepted for filing a proposed market-based rate tariff and code
of conduct for PWCC in Docket No. ER00-2268-000. As ordered by the Commission,
PWCC submitted a compliance filing to resolve the remaining concerns of the
Commission regarding potential affiliate abuse and the effect of affiliate
transactions on captive wholesale customers with fuel adjustment clauses. PWCC
will market power and energy that it purchases and will engage in wholesale
marketing and brokering activities.

APS: APS is a public service corporation organized under the laws of the
State of Arizona, engaged in the business of generating, transmitting and
distributing electricity in all or part of eleven of Arizona's fifteen counties.
APS owns or partially owns a number of generating assets. A list of the
transmission assets that APS is transferring to PWE is included as Attachment A.
The transmission assets being transferred are facilities functionalized to
production - such as step-up transformers and related equipment. A list of the
contracts that APS will be transferring to PWE and PWCC is included in
Attachment B. APS is authorized to sell wholesale power and energy at
market-based rates.(2) In its order granting market-base rate authority to APS,
the Commission found that APS does not possess market power.(3) APS has an OATT
on file with the Commission.(4)

PWE: PWE was formed as a subsidiary of its parent company, PWCC, for the
purpose of owning and operating wholesale generating facilities. PWE was
incorporated

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(2) SEE ARIZONA PUBLIC SERVICE CO., 79 FERC. & 61,022 (1997). APS recently
filed an updated market analysis concerning its market-based rates. SEE
ARIZONA PUBLIC SERVICE CO., Docket No. ER00-1875-000 (March 14, 2000).
(3) SEE ARIZONA PUBLIC SERVICE CO., 79 FERC. & 61,022, at 61,098-99.
(4) Docket Nos. OA96-153-000, ER96-2401-000.

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in Arizona on September 27, 1999, and currently has no operating generating
facilities that are subject to the Commission's jurisdiction. Upon transfer of
APS's generating assets to PWE, PWE will become a generating company(5) and APS
will become primarily a wires company. PWE will generally sell the output from
its generating facilities to PWCC but may sell a portion to other wholesale
customers.

Diagrams showing the corporate relationships between PWCC, APS, and PWE
before and following consummation of the transaction are attached as Appendices
A and B.

B. ARIZONA RESTRUCTURING

The Applicants developed the restructuring plan in response to the changes
currently underway in the wholesale and retail sectors of the electric and gas
industries in Arizona and elsewhere. Specifically in Arizona, the ACC has
implemented a plan and rules to permit retail access. On October 6, 1999, the
ACC approved a Settlement Agreement between APS and several customer groups and
consumer advocates resolving retail electric competition-related issues and
approving unbundled tariffs.(6) Under the terms of the Electric Competition
Rules of the ACC and APS's Settlement Agreement, retail choice for APS's retail
customers is being phased-in. All of APS's retail customers will be entitled to
choose their retail power supplier beginning January 1, 2001.(7) Remaining
retail customers of APS taking service under "standard offer" bundled rates

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(5) PWCC currently anticipates seeking approval from the Securities and
Exchange Commission ("SEC") under Section 9(a)(2) of Public Utilities
Holding Company Act of 1935, as amended ("PUHCA"), in connection with the
transfer since it will result in PWE becoming a public-utility company;
alternatively, PWE will file for exempt wholesale generator status under
Section 32 of PUHCA.
(6) ACC Decision No. 61973.
(7) SEE Attachment D - ACC approved Settlement Agreement,ss.1.1.

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will be subject to planned rate reductions that will continue until July,
2004.(8) Under the Settlement Agreement, APS is entitled to apply for a change
in the agreed upon rate reductions only in the event of an emergency or a
material change in its cost of service as a result of specified extraordinary
events. The approved Settlement Agreement also requires that APS divest its
generation assets by December 31, 2002, but allows APS to divest its assets to
an affiliate.(9)

C. APPLICANTS PLAN TO IMPLEMENT ARIZONA RESTRUCTURING

In response to the state restructuring proceedings, PWCC formed APSES, a
marketer of electricity and energy-related services to primarily retail
customers in Arizona and California, and PWE, a corporation formed to engage in
the business of owning and operating generating facilities in Arizona and
elsewhere. To further comply with state restructuring, APS is now transferring
its existing generating assets, and requesting the authority to transfer
associated transmission plant, and existing generation operating agreements to
PWE. Additionally, APS is requesting the authority to transfer certain existing
wholesale power sales agreements to PWCC.

To implement the actual transfer of facilities after Commission approval,
APS intends the following transactions. As previously mentioned APS and PWE are
direct and wholly-owned subsidiaries of PWCC. New subsidiaries will be created
as needed to implement the transfer of facilities. The following transactions
will occur on or about January 1, 2001, pursuant to a plan of reorganization.
First, APS will contribute its fossil and applicable solar generation assets and
its operational agreements to one or more of these newly formed subsidiaries
(hereafter all will be referred to as a "Transitory

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(8) SEE Attachment D - ACC approved Settlement Agreement,ss.ss.2.2, 2.6, 2.7.
(9) SEE Attachment D - ACC approved Settlement Agreement,ss.4.1.

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Subsidiaries"). This transaction is intended to qualify as a tax-deferred
reorganization under IRC Section 368(a)(1)(D). Second, APS will distribute or
cause to be distributed all of the stock of a Transitory Subsidiary to PWCC in a
transaction intended to qualify as a tax-deferred spin-off under IRC Section
355. Third, under state law, the Transitory Subsidiary will then be merged into
PWE (with PWE surviving) in a transaction intended to qualify as a tax-deferred
statutory merger under IRC Section 368(a)(1)(A). It is contemplated that the
three aforementioned transactions will occur simultaneously.

APS also intends to transfer certain wholesale power contracts to PWCC in a
similar manner as described above with the use of a different subsidiary (in
this case, the subsidiary will be merged into PWCC). Following approval of such
transfer, APS will transfer the contracts and, as required in Section 35.16 of
the Commission's regulations, file a Notice of Succession within 30 days. At
that time, APS will refile each agreement with the Commission in accordance with
the Commission's recent ruling on rate schedule designations.(10)

The transfer of the APS nuclear facilities is contemplated to occur by the
end of 2002 pursuant to the current plan of reorganization. APS intends to use
the same mechanism as described above for the other generating assets for
transferring the nuclear assets to PWE. The delay in transferring the nuclear
assets is to ensure additional time to adequately address complicated
contractual arrangements, such as sale/leaseback provisions, in place amongst
the various owners of the nuclear facilities. There are also certain financial
and economic considerations that must be resolved before the actual transfer of
nuclear assets can take place. APS will inform the Commission when the

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(10) SEE DESIGNATION OF ELECTRIC RATE SCHEDULE SHEETS, Order No. 614, 90 FERC. &
61,352 (2000).

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actual transfer of its nuclear generating units takes place.

The proposed restructuring plan of the Applicants will help PWCC and its
affiliates adapt their electric businesses to new and changing markets. The
restructuring plan will allow PWCC and its affiliates to better compete in these
markets and permit better service for customers and shareholders.

IV. APPLICATION PURSUANT TO SECTION 203

Section 203 of the FPA requires Commission approval for the disposition of
facilities that are subject to the Commission's jurisdiction and have value in
excess of $50,000. APS owns and operates step-up transformers and associated
transmission facilities at its generating facilities that will be included in
the direct or indirect transfer of assets to PWE. APS also has existing
wholesale contracts that will be transferred to PWCC and PWE and these contracts
are considered "facilities." SEE ENRON POWER MARKETING, INC., 65 FERC P. 61,305
(1993). Accordingly, the instant transaction involves a disposition of
jurisdictional facilities requiring Commission approval. The Commission will
approve such a disposition if it concludes that the transaction is consistent
with the public interest. SEE, E.G., BOSTON EDISON CO., 80 FERC P. 61,274
(1997). In analyzing the effect of the disposition on the public interest, FERC
generally considers the following three factors: (1) the effect on competition,
(2) the effect on rates, and (3) the effect on regulation. As shown below, the
proposed transfer of jurisdictional assets is in the public interest. The
transfer will actually benefit the public interest, as it will facilitate the
restructuring of the electric power industry in Arizona by (1) finalizing the
implementation of retail access in Arizona as promulgated by the ACC, (2)
allowing competition in the generation markets, and (3) enabling APS to operate
its transmission system as a "wires" only company.

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<PAGE>
A. THE EFFECT ON COMPETITION

The restructuring plan of the Applicants reflects the type of structural
changes that are becoming typical in the evolving competitive electric
marketplace. The restructuring will properly align the generation business into
one unit, the transmission and distribution business into another, and the
wholesale power marketing function in still another unit. Such an alignment will
be beneficial to the competitive marketplace because it will allow each entity
to focus exclusively on its core business. Because this restructuring is
internal to the Pinnacle West corporate family, there are no competitive impacts
from the transfers contemplated herein. SEE, E.G., PECO ENERGY CO., 90 FERC P.
61,269, at 61,903 (2000); PUBLIC SVC. ELEC. & GAS, CO., 88 FERC P. 61,299, at
61,916 (1999) (finding that similar internal restructuring did not increase
market concentration or affect competition).

Additionally, APS has had market rate approval for the past three years. On
May 2, 2000, an updated market power study by APS was accepted by the Commission
in Docket No. ER00-1875-000. The updated report shows that APS does not possess
market power in the generation or transmission markets. In addition, PWCC
recently received conditional approval for a market-based tariff in Docket No.
ER00-2268-000.(11) Finally, PWE is filing for market-based rate approval in a
separate but concurrent filing. Since neither APS, PWCC, or PWE possess market
power in generation or transmission markets, the transfer of assets should not
create any competitive issues. In fact, providing a competitive alternative for
generation resources in the retail and wholesale markets, the transfer of assets
will further competition to the benefit of all customers.

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(11) As noted previously in III.A, on July 13, 2000, APS and PWCC submitted a
compliance filing to address the sole remaining concern of the Commission
regarding the treatment of APS's captive wholesale customers with fuel
adjustment clauses.

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B. THE EFFECT ON RATES

The transfer of assets should not affect the rates currently paid by retail
and wholesale customers. APS does not intend to change its transmission rates,
since none of the transmission assets being transferred to PWE are currently in
APS's transmission rates reflected in its OATT. In order to deliver the output
of the PWE generating assets, the entity purchasing the power will be required
to use transmission service pursuant to APS's OATT.

As stated previously, the retail customers of APS are protected by rate
reductions through July, 2004 and all retail customers will be able by January
1, 2001 to choose their electric supplier. Most of APS's wholesale transactions
are currently conducted under market-based rates or through the Western System
Power Pool and the transfer of assets should have no effect on their competitive
rates. APS does have some cost-based wholesale rate customers, of which all but
two can readily choose alternate power suppliers. APS does not believe the
transfer of assets will harm its current wholesale customers. APS recently
proposed measures that will protect wholesale customers from any potential
affiliate abuse associated with affiliated transactions. To protect existing
customers with system incremental cost (SIC) in their pricing provisions, APS
will cap the pass-through of cost at the lesser of SIC or prices based on the
Palo Verde Index. For customers with a fuel adjustment clause (FAC) in their
contracts, APS has proposed that the customers would pay the lesser of a FAC
calculated with inter-affiliate transactions included, a FAC calculated with the
inter-affiliate transactions priced not as actual but at the Palo Verde Index
price for a similar duration, or the average of the actual corrected FAC for the
same month for 1998 or 1999 (SEE PINNACLE WEST CAPITAL CORPORATION, Docket No.
ER00-2268-000). These protections will continue in place.

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In addition, further protection to all customers regarding ancillary
services will be provided. In separate Section 205 filings, appropriate
agreements will be filed with the Commission that will provide APS with its
generation related ancillary services. Inasmuch as the charges for such
ancillary services currently included in APS's OATT are based on the fossil
generation units to be transferred from APS to PWE, the costs associated with
providing these ancillary services will be unchanged when the units are
transferred. Upon the transfer of the assets, PWE will sell generation-related
ancillary services to PWCC at rates identical to those in APS's OATT, and under
a separate agreement, PWCC in turn will provide APS with its generation-related
ancillary services at exactly the same charges. Under this arrangement APS is
ensured of obtaining all its generation-related ancillary services, and will
merely pass through to customers subscribing to such services the costs APS
incurs for these services at exactly the same rates currently in APS's OATT.
Indeed, by PWE becoming a separate entity with the above-mentioned safeguards,
competition in the generation market should expand, and all customers should
benefit.

C. THE EFFECT ON REGULATION

The Commission requires Applicants under Section 203 to evaluate the effect
of a proposed transaction on regulation at both the Federal and state level. The
Commission is mainly concerned with instances where (1) the transaction will
shift regulatory authority from the Commission to the SEC or otherwise diminish
Commission authority; or (2) the affected state commissions will not have
authority to act on the proposed transaction.(12)

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(12) SEE INQUIRY CONCERNING THE COMMISSION'S MERGER POLICY UNDER THE FEDERAL
POWER ACT: POLICY STATEMENT, Order No. 592, FERC Stats. & Regs. & 30,110
(1996), at 30,124-25.

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The transfer will not impair or diminish the Commission's jurisdiction in
any respect. The restructuring plan of APS will not materially affect the
ability of the Commission or state regulators to assert their regulatory
jurisdiction over PWCC and its subsidiaries APS and PWE. After the transfer of
assets, the Commission will continue to have jurisdiction over all of the
existing wholesale transactions of APS that are being assigned to PWCC and PWE,
and PWCC and PWE will be subject to federal regulation with respect to all of
their wholesale power transactions. APS will continue to be subject to FERC
oversight pertaining to transmission and wholesale power contracts. APS will
also continue to be subject to state regulation pertaining to distribution rates
and retail sales to standard offer customers under bundled rates. PWE will be
under state regulation where the generation plants are located regarding
applicable permitting and siting requirements. Finally, PWCC will continue to be
an exempt holding company under PUHCA; therefore, the transfer will not result
in any transfer of jurisdiction from the Commission to the SEC.

D. PUBLIC INTEREST CONCLUSION

Given that the proposed restructuring plan will have no adverse effect on
competition, rates, or regulation, the Commission should find the plan
consistent with the public interest.

V. FILING REQUIREMENTS UNDER PART 33

In accordance with the regulations, 18 C.F.R.ss. 33.2, Applicant states as
follows:

A. EXACT NAME AND ADDRESS OF THE PRINCIPAL BUSINESS OFFICE OF APPLICANTS
ARE:

Arizona Public Service Company Pinnacle West Capital Corporation
400 North Fifth Street 400 North Fifth Street
Phoenix, AZ 85004 Phoenix, AZ 85004

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Pinnacle West Energy Corporation
400 North Fifth Street
Phoenix, AZ 85004

B. NAMES AND ADDRESSES OF THE PERSONS AUTHORIZED ON BEHALF OF APPLICANTS
TO RECEIVE NOTICES AND COMMUNICATIONS IN RESPECT TO THIS APPLICATION
ARE AS FOLLOWS:

James M. Levine Barbara M. Champion
Executive Vice President Generation Senior Attorney
Arizona Public Service Company Pinnacle West Capital Corporation
400 North 5th Street 400 North 5th Street
Mail Station 9046 Mail Station 8695
Phoenix, Arizona 85004 Phoenix, Arizona 85004
Phone: (602) 250-2095 Phone: (602) 250-3547

Joel R. Spitzkoff John D. McGrane
Manager of Federal Regulation Mary Ann K. Huntington
Arizona Public Service Company Kristina Beard
400 North 5th Street Morgan, Lewis & Bockius, LLP
Mail Station 9905 1800 M Street, N.W
Phoenix, Arizona 85004 Washington, D.C. 20036
Phone: (602) 250-2949 Phone: (202) 467-7000

C. DESIGNATION OF THE TERRITORIES SERVED BY APPLICANTS, BY COUNTIES AND
STATES:

APS is an investor-owned utility engaged in the business of
generation, transmission, distribution and sale of electricity in all
or part of eleven of Arizona's fifteen counties. APS serves numerous
wholesale customers with power, and provides various transmission
services to wholesale marketers, other utilities, municipalities,
Federal power marketing agencies, electric cooperatives, electric
districts and irrigation districts within the State of Arizona.
Neither PWE nor PWCC has any service territories.

D. GENERAL STATEMENT BRIEFLY DESCRIBING THE FACILITIES OWNED OR OPERATED
FOR TRANSMISSION OF ELECTRIC ENERGY IN INTERSTATE COMMERCE OR THE SALE
OF ELECTRIC ENERGY AT WHOLESALE IN INTERSTATE COMMERCE:

APS owns and operates generation resources and 4,283 miles of
transmission facilities in Arizona and 140 miles of transmission
facilities in New Mexico, and distribution facilities throughout much
of Arizona. PWE will not possess transmission facilities other than
the transmission facilities associated with generation plants that APS
proposes to transfer to PWE. PWCC will not have any transmission
facilities. Both PWCC and

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PWE will have contracts and agreements with other parties that will be
jurisdictional.

E. THIS APPLICATION SEEKS AUTHORIZATION OF THE COMMISSION TO TRANSFER:

As described in Section III of this Application, APS seeks to transfer
certain FERC-jurisdictional facilities and operating agreements to
PWE, a newly formed affiliate of its parent company, Pinnacle West
Capital Corporation. The transfer of assets will be at their book
value at the time of transfer. Their current value at the time of
filing is $24,514,216 Additionally, APS seeks to transfer to PWCC
certain wholesale contracts, APS's Electric Coordination Tariff with
all related service agreements, and certain service agreements under
its market based tariff.

F. A STATEMENT OF FACILITIES TO BE DISPOSED OF, CONSOLIDATED, OR MERGED,
GIVING A DESCRIPTION OF THEIR PRESENT USE AND OF THEIR PROPOSED USE
AFTER DISPOSITION, CONSOLIDATION OR MERGER. STATE WHETHER THE PROPOSED
DISPOSITION OF FACILITIES OR PLAN FOR CONSOLIDATION OR MERGER INCLUDES
ALL THE OPERATING FACILITIES OF THE PARTIES OF THE TRANSACTION:

Attachment A contains a list of the jurisdictional transmission
facilities that APS is transferring to PWE under this Application. The
jurisdictional transmission facilities being transferred are step-up
transformers and associated facilities located at or adjacent to the
generation plants that APS is also transferring to PWE. As described
in Section III of this Application, the transferred facilities will be
utilized in the same manner as before the transfer. APS will continue
to operate as a "wires" company with transmission and distribution
assets.

Attachment B is a list of the contracts and service agreements that
APS intends to transfer to PWE and PWCC. APS also seeks permission to
transfer additional service agreements to PWCC that it may enter into
between the time of this filing and when the actual transfer of
contracts is approved.

G. A STATEMENT (IN THE FORM PRESCRIBED BY THE COMMISSION'S UNIFORM SYSTEM
OF ACCOUNTS FOR PUBLIC UTILITIES AND LICENSEES) OF THE COST OF THE
FACILITIES INVOLVED IN THE SALE, LEASE, OR OTHER DISPOSITION OR MERGER
OR CONSOLIDATION. IF ORIGINAL COST IS NOT KNOWN, AN ESTIMATE OF
ORIGINAL COST BASED, INSOFAR AS POSSIBLE, UPON RECORDS OR DATA OF THE
APPLICANT OR ITS PREDECESSORS MUST BE FURNISHED, TOGETHER WITH A FULL
EXPLANATION OF THE MANNER IN WHICH SUCH ESTIMATE HAS BEEN MADE, AND A
DESCRIPTION AND STATEMENT OF THE PRESENT CUSTODY OF ALL EXISTING
PERTINENT DATA AND RECORDS:

SEE Attachment C. The Applicants intend to account for the transfer in
accordance with Electric Plant Instruction No. 5 and Account 102 of
the

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Commission's Uniform System of Accounts. Applicants will file the
proposed accounting when they notify the Commission that the transfer
is consummated.

H. A STATEMENT AS TO THE EFFECT OF THE PROPOSED TRANSACTION UPON ANY
CONTRACT FOR THE PURCHASE, SALE OR INTERCHANGE OF ELECTRIC ENERGY:

The transfer of facilities will not have any effect upon the ability
of APS, PWCC, or PWE to meet their contractual obligations. The
transfer of transmission facilities is ancillary to the generating
units being transferred and will not have any material effect on the
existing transmission contracts of APS. SEE Section IV. B. on the
discussion of how the APS restructuring plan will effect rates.

I. A STATEMENT AS TO WHETHER ANY APPLICATION WITH RESPECT TO THE
TRANSACTION OR ANY PART THEREOF IS REQUIRED TO BE FILED WITH ANY OTHER
FEDERAL OR STATE REGULATORY BODY:

The following other regulatory approvals have been or will be obtained
to facilitate the transfer of assets:

* The approval of the settlement agreement on October 6, 1999 by
the ACC authorized APS to transfer its generating assets to a
separate affiliate to foster open retail access (SEE Attachment
D). APS intends to inform the ACC at least thirty days before the
actual transfer of the assets.

* Approval of the transfer of APS's interest in the Palo Verde
Nuclear Generating Facility by the Nuclear Regulatory Commission
pursuant to the Atomic Energy Act.

* Further approvals, if necessary, from the Securities and Exchange
Commission and the Federal Communications Commission to complete
the APS restructuring plan.

J. THE FACTS RELIED UPON BY APPLICANT TO SHOW THAT THE PROPOSED
DISPOSITION, MERGER, OR CONSOLIDATION OF FACILITIES OR ACQUISITION OF
SECURITIES WILL BE CONSISTENT WITH THE PUBLIC INTEREST:

SEE Section IV of the Application.

K. A BRIEF STATEMENT OF FRANCHISES HELD, SHOWING DATE OF EXPIRATION IF
NOT PERPETUAL:

SEE Attachment E, List of County and Municipal Franchises.

15
<PAGE>
L. A FORM OF NOTICE SUITABLE FOR PUBLICATION IN THE FEDERAL REGISTER, AS
WELL AS A COPY OF THE SAME NOTICE IN ELECTRONIC FORMAT:

SEE Attachment F. An electronic version of the notice is included in
the filing on a 3 1/2" diskette, in Wordperfect.

VI. REQUIRED EXHIBITS UNDER PART 33

EXHIBITS A, C, D, E, AND F:

Applicants request a waiver of the requirements to include Exhibits A, C,
D, E, and F. Such a waiver is consistent with the Commission's NOTICE OF
PROPOSED RULEMAKING: REVISED FILING REQUIREMENTS UNDER PART 33 OF THE
COMMISSION'S REGULATIONS, IV FERC Stats. & Regs. P. 32,528, at 33,364
(1998), in which the Commission proposed to streamline the filing of the
financial and accounting information currently required in Exhibits A, C,
D, E, and F. Good cause exists to waive these filing requirements because
the information required by these exhibits is not necessary for the
Commission to render a decision on this Application. The Commission has
recently approved other Applications for corporate realignments similar to
this filing without detailed financial information. SEE, E. G., PUBLIC
SERVICE ELECTRIC & GAS CO., 88 FERC P. 61,299 (1999). In accordance with
the regulations, 18 C.F.R. ss. 33.3, Applicants attach the following
exhibits to this Application:

EXHIBIT B: STATEMENT OF MEASURE OF CONTROL

The proposed transactions will not create new corporate relationships with
third parties. All relevant entities are wholly owned subsidiaries of PWCC,
which remains the parent company. A statement describing the measure of
control or ownership is attached as Exhibit B.

EXHIBIT G: APPLICATION FILED WITH FEDERAL AND STATE REGULATORS

In the event Applicants file their Application with the Nuclear Regulatory
Commission ("NRC") for approval to transfer APS's interest in the Palo
Verde Nuclear Generating Facility to PWE prior to such time as the
Commission has approved the instant Section 203 application, Applicants
will submit a copy of the NRC Application to the Commission. Otherwise,
Applicants request a waiver from the requirement to file Exhibit G.

EXHIBIT H: COPY OF ALL CONTRACTS BETWEEN APS AND PWE REGARDING THE PROPOSED
TRANSFER OF ASSETS

As this Application is for an affiliate transfer, APS has not entered into
any contracts to sell, lease, or otherwise dispose of the jurisdictional
facilities that are the subject of this Application.

16
<PAGE>
EXHIBIT I: MAP

A map showing the location of the generation facilities of APS that are
being transferred to PWE along with their related transmission facilities
is attached as Exhibit I.

VII. PROCEDURAL MATTERS

A. REQUEST FOR APPROVAL WITHOUT HEARING

Applicants respectfully request that the Commission approve the disposition
of jurisdictional facilities associated with the restructuring that is occurring
in Arizona on an expedited basis and without hearing based on the facts and
supporting documents provided in this Application. The Application should
support a finding that the transfer of assets is in the public interest and will
promote competition.

17
<PAGE>
B. WAIVER

To the extent necessary, Applicants request a waiver of the requirement to
file a market analysis in accordance with Appendix A of the Merger Policy
Statement and any other waiver the Commission deems necessary to approve this
Application under Section 203. Given that this filing is required to accommodate
restructuring in Arizona, and that there are no rate impacts on existing
customers, the Applicants believe good cause is shown for such a waiver.

C. SERVICE AND COMMUNICATION

Applicants have served a copy of this Application on the ACC and the New
Mexico Public Regulation Commission. Applicants have also served a copy of the
transmittal letter accompanying this filing on all customers under APS wholesale
contracts and service agreements that are being transferred to either PWCC or
PWE. Applicants will provide any of the above customers with a complete copy of
this filing upon request.

Communications regarding this Application should be addressed to the
following persons, who are also designated for service in this proceeding:

Joel R. Spitzkoff John D. McGrane
Manager of Federal Regulation Mary Ann K. Huntington
Arizona Public Service Company Kristina Beard
400 North 5th Street Morgan, Lewis & Bockius, LLP
Mail Station 9905 1800 M Street, N.W.
Phoenix, Arizona 85004 Washington, D.C. 20036
Phone: (602) 250-2949 Phone: (202) 467-7000

18
<PAGE>
VIII. CONCLUSION

For the foregoing reasons, Applicants respectfully request the Commission
(1) to authorize the transfer of FERC-jurisdictional facilities required to
implement APS's restructuring plan as described in this Application, (2) to
approve the Application without hearing, and (3) to grant waiver of any filing
requirements or other regulations as the Commission may find appropriate to
allow approval of the transfer of assets from APS to PWE, directly or
indirectly, and the transfer of jurisdictional rate schedules from APS to PWCC
and PWE.

Respectfully submitted,

John D. McGrane
--------------------------
John D. McGrane
Mary Ann K. Huntington
Kristina Beard
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036
Phone: (202) 467-7000

Barbara M. Champion, Senior Attorney
Pinnacle West Capital Corporation
P.O. Box 53999
Mail Station 8695
Phoenix, Arizona 85072-3999
Phone: (602) 250-3547

Attorneys for
Arizona Public Service Company
Pinnacle West Capital Corporation
Pinnacle West Energy Corporation

Dated: July 28, 2000

19
<PAGE>
SERVICE LIST

<TABLE>
<S> <C> <C>
DEBORAH SCOTT KENNETH R. SALINE, P.E. MR. W.A. DUNN, CHAIRMAN
ARIZONA CORPORATION COMMISSION K.R. SALINE & ASSOCIATES ELECTRICAL DISTRICT NO. 3
1200 WEST WASHINGTON STREET 160 N. PASADENA, SUITE # 101 ELECTRICAL DISTRICT NO. 1
PHOENIX, AZ 85007 MESA, AZ 85201-6764 41630 W. LOUIS JOHNSON DR.
MARICOPA, AZ 85239

AJO IMPROVEMENT COMPANY SHERYL A. SWEENEY, ESQ. ELIZABETH STORY, ADMINISTRATOR
P.O. DRAWER 9 RYLEY, CARLOCK & APPLEWHITE TONOPAH IRRIGATION DISTRICT
AJO, AZ 85321 101 NORTH FIRST AVENUE, SUITE 2600 P.O. BOX 159
PHOENIX, AZ 85003-1973 TONOPAH, AZ 85354

AMERICAN ELECTRIC POWER WILLIAM D. BAKER, ESQ. HENRY A. BRUBAKER, PRESIDENT
1 RIVERSIDE PLAZA ELLIS & BAKER AGUILA IRRIGATION DISTRICT
COLUMBUS, OH 43215-2373 2111 EAST HIGHLAND, SUITE 355 P.O. BOX 263
PHOENIX, AZ 85016 AGUILA, AZ 85320

AMERICAN HUNTER ENERGY, INC. JAY I. MOYES, ESQ. JACKIE A. MECK, MANAGER
1100 LOUISIANA, SUITE 5025 MOYES STOREY BUCKEYE WATER CONSERVATION &
HOUSTON, TX 77002 3003 NORTH CENTRAL AVENUE, SUITE 1250 DRAINAGE DISTRICT
PHOENIX, AZ 85001-2199 P.O. BOX 1726
BUCKEYE, AZ 85326-0160

ARIZONA ELECTRIC POWER COOP. CAJUN ELECTRIC POWER COOP. H.C. DOUGLAS, PRESIDENT
P.O. BOX 670 112 TELLY STREET ELECTRICAL DISTRICT NO. 6
BENSON, AZ 85602 NEW ROADS, LA 70760 P.O. BOX 167
QUEEN CREEK, AZ 85242

BRITISH COLUMBIA POWER EXCHANGE CALIFORNIA INDEPENDENT SYSTEM OPERATOR R.D. JUSTICE, MANAGER
666 BURRARD STREET, SUITE 1440 151 BLUE RAVEEN ROAD ELECTRICAL DISTRICT NO. 7
VANCOUVER, B.C. V6C 2X8 FOLSOM, CA 95630 14629 W. PEORIA AVE
CANADA WADDELL, AZ 85355

CALIFORNIA POWER EXCHANGE CENTRAL LOUISIANA ELECTRIC COMPANY JAMES D. DOWNING, P.E.
1000 SOUTH FREEMONT AVE P.O. BOX 5000 ELECTRICAL DISTRICT NO. 8
BLDG A9W - 5TH FLOOR PINEVILLE, LA 71361-5000 MCMULLEN VALLEY WATER CONSERVATION
ALHAMBRA, CA 91803 & DRAINAGE DISTRICT
P.O. BOX 99
SALOME, AZ 85348

RESAL CRAVEN CINERGY SERVICES, INC. STEPHEN P. PAVICH, PRESIDENT
CITIZENS UTILITIES COMPANY 139 EAST 4 STREET, E.F. 401 HARQUAHALA VALLEY POWER DISTRICT
2901 NORTH CENTRAL AVENUE, SUITE 1660 CINCINNATI, OH 45201 402 S. HARQUAHALA VALLEY RD
PHOENIX, AZ 85012 TONOPAH, AZ 85354

TUCSON ELECTRIC POWER CO. CITIZENS LEHMAN POWER SALES JAMES R. SWEENEY, GEN. MGR.
P.O. BOX 711 160 FEDERAL STREET MARICOPA COUNTY MUNICIPAL WATER
TUCSON, AZ 85702 BOSTON, MA 02110 CONSERVATION DISTRICT NO. 1
P.O. BOX 900
WADDELL, AZ 85355-0900

CITY OF AZUSA CITY OF WICKENBURG STANLEY H. ASHBY, SECRETARY
P.O. BOX 9500 MR. TOM CANDELARIA ROOSEVELT IRRIGATION DISTRICT
AZUSA, CA 91702 155 N. TEGNER STREET 103 W. BASELINE ROAD
WICKENBURG, AZ 58390-1456 BUCKEYE, AZ 85326
</TABLE>

20
<PAGE>
SERVICE LIST

<TABLE>
<S> <C> <C>
CITY OF BURBANK US DEPARTMENT OF THE INTERIOR IDAHO POWER COMPANY
P.O. BOX 631 1849 C STREET, N.W. P.O. BOX 70
BURBANK, CA 91503-0631 WASHINGTON, D.C. 20240 BOISE, ID 83707

CITY OF GLENDALE E PRIME INDUSTRIAL ENERGY APPLICATIONS, INC.
729 N. AVENUE, 4TH LEVEL 1331 17TH STREET, SUITE 601 5925 DRY CREEK LANE, NE
GLENDALE, CA 91206-4496 DENVER, CO 80202 CEDAR RAPIDS, IA 52402

CITY OF IDAHO FALLS EASTERN POWER DISTRIBUITON, INC. INTERCOASTAL ENERGY APPS., INC.
140 S. CAPITAL AVENUE 2800 EISENHOWER AVE P.O. BOX 657
IDAHO FALLS, ID 86402 ALEXANDRIA, VA 22314 DES MOINES IA 50303-0657

CITY OF NEEDLES EDISON SOURCE KOCH ENERGY TRADING, INC.
ENOVA ENERGY MANAGEMENT, INC. 13191 CROSSROADS PKWY N, SUITE 405 P.O. BOX 2626
12555 HIGH BLUFF DR, SUITE 155 CITY OF INDUSTRY, CA 91746 HOUSTON, TX 77252-2626
SAN DIEGO, CA 92130

COASTAL ELECTRIC SERVICES COMPANY ELECTRIC CLEARINGHOUSE, INC. LA DEPT. OF WATER & POWER
COASTAL TOWER DBA DYNERGY P.O. BOX 111
NINE GREENWAY PLAZA 2999 NORTH 44 ST., SUITE 300 LOS ANGELES, CA 90012-2694
HOUSTON, TX 77046-0995 PHOENIX, AZ 85012

COLORADO RIVER AGENCY ENERGY MASTERS INTERNATIONAL LG&E ENERGY MARKETING, INC.
ROUTE 1, BOX 9-C 1385 MENDOTA HEIGHTS ROAD 220 W. MAIN STREET, 7TH FLOOR
PARKER, AZ 85344 ST. PAUL, MN 55120-1129 LOUISVILLE, KY 40202

COLORADO RIVER COMMISSION OF NEVADA ENGELHARD POWER MARKETING, INC. MERCHANT ENERGY GROUP OF THE AMERICAS
555 EAST WASHINGTON AVENUE 101 WOOD AVENUE 151 WEST STREET, SUITE 300
SUITE 3100 ISELIN, NJ 08830-0770 ANNAPOLIS, MD 21401
LAS VEGAS, NV 89101

CON AGRA ENERGY SERVICES, INC. ENTERGY POWER MARKETING CORP. MORGAN STANLEY CAP. GROUP, INC
9 CON AGRA DRIVE PARKWOOD TWO BUILDING 1585 BROADWAY
OHAMA, NE 68102-5009 10055 GROGAN'S MILL RD, SUITE 500 NEW YORK, NY 10036
THE WOODLANDS, TX 77380

COOK INLET ENERGY SUPPLY FEDERAL ENERGY SALES, INC. MONTANA POWER COMPANY
10100 SANTA MONICA BLVD, 25TH FLOOR 3222 N. RIDGE ROAD 40 E. BROADWAY
LOS ANGELES, CA 90024 ELYRIA, OH 44035 BUTTE, ME 59701-9394

CORAL POWER, LLC GULFSTREAM ENERGY, LLC NATIONAL GAS & ELECTRIC
909 FANNIN, SUITE 700 2930 REVERE ST., STE 202 3555 TIMMONS, SUITE 1500
HOUSTON, TX 77010 HOUSTON TX 77098 HOUSTON, TX 77027
</TABLE>

21
<PAGE>
SERVICE LIST

<TABLE>
<S> <C> <C>
NEVADA POWER COMPANY SALT RIVER PROJECT AGRICULTURAL UTAH MUNICAPAL POWER AGENCY
P.O. BOX 230 IMPROVEMENT & POWER DISTRICT 8722 SOUTH 300 WEST
LAS VEGAS, NV 89151-0230 P.O. BOX 52025 SANDY, UT 84070
PHOENIX, AZ

NORTHERN WASCO COUNTY PUD SAN CARLOS IRRIGATION PROJECT UTILITY 2000 ENERGY
2345 RIVER ROAD P.O. BOX 250 140 FOURTH AVENUE, S.W.
DALLES, OR 97058 COOLIDGE, AZ 85228 SUITE 1710
CALGARY, ALBERTA T2P 3N3
CANADA

NP ENERGY INC. SAN DIEGO GAS & ELECTRIC VALLEY ELECTRIC ASSOCIATION
3650 NATIONAL CITY TOWER P.O. BOX 1831 P.O. BOX 237
LOUISVILLE, KY 40202 SAN DIEGO, CA 92112-4120 PAHRUMP, NV 89041

PACIFICORP SNOHOMISH COUNTY PUD #1 WASHINGTON WATER POWER
825 NE MULTNOMAH P.O. BOX 1107 P.O. BOX 3727
PORTLAND, OR 97232 EVERETT, WA 8206-1107 SPOKANE, SA 99220-3727

PG&E ENERGY SERVICES SONAT POWER MARKETING WESTERN POWER SERVICES, INC.
VALERO POWER SERVICES CO. 1900 FIFTH AVENUE 12200 NORTH PECOS STREET
353 SACRAMENTO STREET, SUITE 1900 BIRMINGHAM, AL 35203 DENVER, CO 80234-3439
SAN FRANCISCO, CA 94111

POWER COMPANY OF AMERICA SOUTHERN CALIFORNIA EDISON WESTERN RESOURCES, INC.
2 GREENWICH PLAZA, 2ND FLOOR 2244 WALNUT GROVE AVENUE P.O. BOX 889
GREENWICH, CT 06830 ROSEMEAD, CA 91770 TOPEKA, KS 66601

POWER EXCHANGE CORP. EL PASO ELECTRIC COMPANY WILLIAMS ENERGY SERVICES COMPANY
450 SANSOME ST., SUITE 1400 P.O. BOX 982 P.O. BOX 2848
SAN FRANCISCO, CA 94111 EL PASO, TX 79960 TULSA, OK 74101-9567

PUBLIC SERVICE COMPANY OF NEW MEXICO THE ENERGY AUTHORITY, INC. AQUILA ENERGY MARKETING CORP.
ALVARADO SQUARE 76 S. LAURA STREET, STE 1500 P.O. BOX 13207
ALBUQUERQUE, NM 87158 JACKSONVILLE, FL 32202 KANSAS CITY, MO 64199-3207

RAINBOW ENERGY MARKETING CORP. TOHONO O'ODHAM UTILITY AUTHORITY TRACTABEL ENERGY MARKETING, INC.
909 SOUTH 7TH STREET, SUITE 405 P.O. BOX 816 1177 WEST LOOP, SUITE 800
BISMARK, SD 58504 SELLS, AZ 85635 HOUSTON, TX 77027

ROCKY MOUNTAIN GENERATION COOP. NEW MEXICO PUBLIC SERVICE COMMISSION
5441 BOEING DR., SUITE 200 224 EAST PALACE
LOVELAND, CO 80538-8810 SANTA FE, NM 87503
</TABLE>

22
<PAGE>
VERIFICATION

23
<PAGE>
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION

Arizona Public Service Company ) Docket No. EC00-_____-000
Pinnacle West Capital Corporation ) Docket No. ER00-_____-000
Pinnacle West Energy Company )

VERIFICATION

JACK E. DAVIS

STATE OF ARIZONA )
) ss.
County of Maricopa )

Jack E. Davis, being first duly sworn upon oath, deposes and says:

That he is Chief Corporation Officer and Executive Vice President of
Pinnacle West Capital Corporation, and makes this verification for and on behalf
of said corporations, being thereto duly authorized; that he has read the
foregoing Application and knows the contents thereof, and that the same is true
to the best of his knowledge, information and belief.

Jack Davis
----------------------------------------

SUBSCRIBED AND SWORN to before me this 27th day of July, 2000.

Joel R. Spitzkoff
----------------------------------------
Notary Public

My Commission expires:

June 22, 2003
------------------------------
[SEAL]

24
<PAGE>
APPENDIX A

PRE-RESTRUCTURING

ORGANIZATIONAL CHART
<PAGE>
APPENDIX A
PNW CORPORATE STRUCTURE
(PRIOR TO PROPOSED RESTRUCTURING)

Pursuant to Regulation S-T, Rule 304, Appendix A is a diagram of holding company
structure titled "PNW Corporate Structure (Prior to Proposed Restructing),"
which shows Pinnacle West Capital Corporation as the parent corporation, with a
Shared Services division. The following wholly-owned subsidiaries of PNW are
also shown: PWE (Expanded Generation), APSES (Competitive Retail Sales), SunCor
Development Company, El Dorado Investment Company, and APS (including Generation
Business Unit (Current Generation), Bulk Power Marketing Group (wholesale
merchant), and Energy Delivery and Sales (Transmission , Distribution & Retail
Standard Offer Sales)). Two inactive subsidiaries of APS -- Axiom and Bixco --
are also shown.
<PAGE>
APPENDIX B

POST-RESTRUCTURING

ORGANIZATIONAL CHART
<PAGE>
APPENDIX B
POST - RESTRUCTURING
ORGANIZATIONAL CHART

Pursuant to Regulation S-T, Rule 304, Appendix B is a diagram of holding company
structure titled "PNW Corporate Structure (Subsequent to Proposed Restructing),"
which shows Pinnacle West Capital Corporation as the parent corporation, with a
Shared Services division and a Bulk Power Marketing division. The following
wholly-owned subsidiaries of PNW are also shown: PWE (Generation), APSES
(Competitive Retail Sales), SunCor Development Company, El Dorado Investment
Company, and APS (Transmission, Distribution and Retail Sales). Two inactive
subsidiaries of APS -- Axiom and Bixco -- are also shown.
<PAGE>
ATTACHMENT A

LIST OF THE JURISDICTIONAL TRANSMISSION FACILITIES
<PAGE>
ATTACHMENT A

LIST OF THE JURISDICTIONAL
TRANSMISSION FACILITIES
BEING TRANSFERRED
FROM APS TO PWE

APS is requesting permission to transfer associated transmission equipment
composed of step-up transformers, breakers, disconnect switches, potential and
current transformers, metering and tie lines located at the following generating
sites that APS is also transferring to its affiliate PWE:

PALO VERDE NUCLEAR GENERATING PLANT
(APS operates the plant and owns 29.1% of all three Units.)

FOUR CORNERS POWER PLANT
(APS operates the plant and owns 100% of Unit 1, 2, and 3. APS owns 15% of
Unit 4 and 5.)

CHOLLA POWER PLANT
(APS operates the plant but owns only Units 1, 2, and 3. Unit 4 is owned by
PacifiCorp.)

WEST PHOENIX POWER PLANT (APS operates the plant and owns all units.)

YUCCA POWER PLANT
(APS operates the plant but only owns Units 1, 2, 3, and 4. Unit 5 is owned
by Imperial Irrigation District.)

OCOTILLO POWER PLANT
(APS operates the plant and owns all units.)

SAGUARO POWER PLANT
(APS operates the plant and owns all units.)

NAVAJO POWER PLANT
(APS owns 14% of all three units, but does not operate the plant)

FAIRVIEW/DOUGLAS
(APS operates the plant and owns the one unit.)
<PAGE>
ATTACHMENT B

LIST OF WHOLESALE CONTRACTS AND SERVICE AGREEMENTS
BEING TRANSFERRED FROM APS TO PWCC AND PWE
<PAGE>
Attachment B
Page 1 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
1 FPC Rate Schedule No. 5 Axis Station Agreement Southern California Edison Pinnacle West Energy

2 FPC Rate Schedule No. 46 United States Department Southern California Edison, Pinnacle West Capital
of Interior Kaiparowits San Diego Gas & Electric, Corporation
Power Coordination United States of America
Contract

3 FERC Rate Schedule No.106 Operating Letter for Electrical District No. 3 Pinnacle West Capital
Banking of Arizona Power Corporation
Authority Energy

4 FERC Rate Schedule No. 117 Operating Letter for Electrical District No. 1 Pinnacle West Capital
Banking of Arizona Power Corporation
Authority Energy

5 FERC Rate Schedule No. 120 Wholesale Power Agreement Southern California Edison Pinnacle West Capital
Corporation

6 FERC Rate Schedule No. 182 Long Term Power PacifiCorp Pinnacle West Capital
Transaction Agreement Corporation

7 FERC Rate Schedule No. 211 Four Corners Co-tenancy Southern California Edison, Pinnacle West Energy
Agreement and Four Public Service Company of New
Corners Operating Mexico, El Paso Electric,
Agreement Salt River Project
Agricultural Improvement &
Power District, Tucson
Electric Power Company

8 FERC Rate Schedule No. 215 Transmission Service Southern California Pinnacle West Capital
Agreement Edison/Colorado River Corporation
Irrigation Project (Bureau of
Indian Affairs)

9 FERC Rate Schedule No. 225 Power Service Agreement Citizens Utilities Company Pinnacle West Capital
Corporation

10 FERC Rate Schedule No. 229 Navajo Project Co-tenancy United States of America, Pinnacle West Energy
Agreement Dept. of Water & Power of Los
Angeles, Nevada Power
Company, Salt River Project
Agricultural Improvement &
Power District, Tucson
Electric Power Company

11 FERC Rate Schedule No. 231 Electric Power Service Colorado River Commission of Pinnacle West Capital
Agreement Nevada Corporation

12 FERC Rate Schedule No.237 Service Agreement Under Washington Water Power Pinnacle West Capital
FERC Electric Tariff, Corporation
Original Volume No. 9 of
Washington Water Power
</TABLE>
<PAGE>
Attachment B
Page 2 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
13 FERC Rate Schedule No. 238 Service Agreement Under PacifiCorp Pinnacle West Capital
FERC Electric Tariff, Corporation
Original Volume No. 12 of
PacifiCorp

14 FERC Rate Schedule No. 239 Mutual Netting/Settlement PacifiCorp Pinnacle West Capital
Agreement Corporation

15 FERC Electric Tariff, Market Based Rate Tariff Rainbow Energy Marketing Corp Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 1

16 FERC Electric Tariff, Market Based Rate Tariff NP Energy Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 2

17 FERC Electric Tariff, Market Based Rate Tariff Valley Electric Association Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 3

18 FERC Electric Tariff, Market Based Rate Tariff Cinergy Services, Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 4

19 FERC Electric Tariff, Market Based Rate Tariff LG&E Energy Marketing Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 5

20 FERC Electric Tariff, Market Based Rate Tariff Rocky Mountain Generation Pinnacle West Capital
Second Revised Volume 3, Service Agreements Coop. Corporation
Service Agreement No. 6

21 FERC Electric Tariff, Market Based Rate Tariff Entergy Power Marketing Corp. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 7

22 FERC Electric Tariff, Market Based Rate Tariff E Prime Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 8

23 FERC Electric Tariff, Market Based Rate Tariff Power Company of America Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 9
</TABLE>
<PAGE>
Attachment B
Page 3 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
24 FERC Electric Tariff, Market Based Rate Tariff Idaho Power Company Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 10

25 FERC Electric Tariff, Market Based Rate Tariff Sonat Power Marketing Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 11

26 FERC Electric Tariff, Market Based Rate Tariff American Hunter Energy Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 12

27 FERC Electric Tariff, Market Based Rate Tariff Western Power Services, Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 13

28 FERC Electric Tariff, Market Based Rate Tariff National Gas & Electric Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 14

29 FERC Electric Tariff, Market Based Rate Tariff Cajun Electric Power Coop. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 15

30 FERC Electric Tariff, Market Based Rate Tariff British Columbia Power Pinnacle West Capital
Second Revised Volume 3, Service Agreements Exchange Corporation
Service Agreement No. 17

31 FERC Electric Tariff, Market Based Rate Tariff Cook Inlet Energy Supply Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 18

32 FERC Electric Tariff, Market Based Rate Tariff Snohomish County PUD #1 Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 19

33 FERC Electric Tariff, Market Based Rate Tariff PG&E/ Valero Power Services Pinnacle West Capital
Second Revised Volume 3, Service Agreements Inc Corporation
Service Agreement No. 20
</TABLE>
<PAGE>
Attachment B
Page 4 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
34 FERC Electric Tariff, Market Based Rate Tariff Western Resources, Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 21

35 FERC Electric Tariff, Market Based Rate Tariff MP Energy Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 22

36 FERC Electric Tariff, Market Based Rate Tariff Tucson Electric Power Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 23

37 FERC Electric Tariff, Market Based Rate Tariff Coral Power LLC Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 24

38 FERC Electric Tariff, Market Based Rate Tariff City of Burbank Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 25

39 FERC Electric Tariff, Market Based Rate Tariff Morgan Stanley Capital Group Pinnacle West Capital
Second Revised Volume 3, Service Agreements Inc Corporation
Service Agreement No. 26

40 FERC Electric Tariff, Market Based Rate Tariff Tractabel Energy Marketing, Pinnacle West Capital
Second Revised Volume 3, Service Agreements Inc. Corporation
Service Agreement No. 27

41 FERC Electric Tariff, Market Based Rate Tariff Koch Energy Trading Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 28

42 FERC Electric Tariff, Market Based Rate Tariff PG&E Energy Services Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 29

43 FERC Electric Tariff, Market Based Rate Tariff Williams Energy Services Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 30
</TABLE>
<PAGE>
Attachment B
Page 5 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
44 FERC Electric Tariff, Market Based Rate Tariff Central Louisiana Electric Pinnacle West Capital
Second Revised Volume 3, Service Agreements Company Corporation
Service Agreement No. 31

45 FERC Electric Tariff, Market Based Rate Tariff LA Dept of Water & Power Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 32

46 FERC Electric Tariff, Market Based Rate Tariff Nevada Power Company Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 33

47 FERC Electric Tariff, Market Based Rate Tariff San Diego Gas & Electric Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 34

48 FERC Electric Tariff, Market Based Rate Tariff Arizona Electric Power Coop. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 35

49 FERC Electric Tariff, Market Based Rate Tariff Salt River Project Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 36

50 FERC Electric Tariff, Market Based Rate Tariff Southern California Edison Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 37

51 FERC Electric Tariff, Market Based Rate Tariff Majority Districts (ED6, ED7, Pinnacle West Capital
Second Revised Volume 3, Service Agreements ED8, MWD, Harquahala, Corporation
Service Agreement No. 38 McMullen, RID, AID, BID & TID)

52 FERC Electric Tariff, Market Based Rate Tariff American Electric Power Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 39

53 FERC Electric Tariff, Market Based Rate Tariff ConAgra Energy Services, Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 40
</TABLE>
<PAGE>
Attachment B
Page 6 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
54 FERC Electric Tariff, Market Based Rate Tariff Eastern Power Distribution Inc Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 41

55 FERC Electric Tariff, Market Based Rate Tariff Morgan Stanley Capital Group Pinnacle West Capital
Second Revised Volume 3, Service Agreements Inc Corporation
Service Agreement No. 42

56 FERC Electric Tariff, Market Based Rate Tariff Tohono O'Odham Utility Pinnacle West Capital
Second Revised Volume 3, Service Agreements Authority Corporation
Service Agreement No. 43

57 FERC Electric Tariff, Market Based Rate Tariff Town of Wickenburg Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 44

58 FERC Electric Tariff, Market Based Rate Tariff California ISO Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 46

59 FERC Electric Tariff, Market Based Rate Tariff California Power Exchange Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 47

60 FERC Electric Tariff, Market Based Rate Tariff Electrical District No. 1 Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 48

61 FERC Electric Tariff, Market Based Rate Tariff Electrical District No. 3 Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 49

62 FERC Electric Tariff, Market Based Rate Tariff Public Service Company of New Pinnacle West Capital
Second Revised Volume 3, Service Agreements Mexico Corporation
Service Agreement No. 50

63 FERC Electric Tariff, Market Based Rate Tariff Merchant Energy Group of the Pinnacle West Capital
Second Revised Volume 3, Service Agreements Americas Corporation
Service Agreement No. 51
</TABLE>
<PAGE>
Attachment B
Page 7 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
64 FERC Electric Tariff, Market Based Rate Tariff Northern Wasco County PUD Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 52

65 FERC Electric Tariff, Market Based Rate Tariff San Carlos Irrigation Project Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 53

66 FERC Electric Tariff, Market Based Rate Tariff City of Idaho Falls Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 54

67 FERC Electric Tariff, Market Based Rate Tariff San Carlos Irrigation Project Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 55

68 FERC Electric Tariff, Market Based Rate Tariff Utah Municipal Power Agency Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 56

69 FERC Electric Tariff, Market Based Rate Tariff The Energy Authority, Inc. Pinnacle West Capital
Second Revised Volume 3, Service Agreements Corporation
Service Agreement No. 57

70 FERC Electric Tariff, Electric Coordination Pinnacle West Capital
Volume 1 Tariff Corporation

71 FERC Electric Tariff, Electric Coordination Snohomish Public Utility
Volume 1, Service Tariff Service Agreement District Pinnacle West Capital
Agreement No. 1 Corporation

72 FERC Electric Tariff, Electric Coordination Electric Clearinghouse Inc. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 2

73 FERC Electric Tariff, Electric Coordination Gulfstream Energy, LLC Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 3

74 FERC Electric Tariff, Electric Coordination Citizens Utility Company Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 4

75 FERC Electric Tariff, Electric Coordination LG&E Power Marketing, Inc. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 5

76 FERC Electric Tariff, Electric Coordination Power Exchange Corp. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 6
</TABLE>
<PAGE>
Attachment B
Page 8 of 9

77 FERC Electric Tariff, Electric Coordination Intercoastal Power Marketing Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 8

78 FERC Electric Tariff, Electric Coordination Rainbow Energy Marketing Corp. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 9

79 FERC Electric Tariff, Electric Coordination Town of Wickenburg Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 10

80 FERC Electric Tariff, Electric Coordination Engelhard Power Marketing, Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Inc. Corporation
Agreement No. 11

81 FERC Electric Tariff, Electric Coordination Coastal Electric Services Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Company Corporation
Agreement No. 13

82 FERC Electric Tariff, Electric Coordination Utility 2000 Energy Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 14

83 FERC Electric Tariff, Electric Coordination City of Needles Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 15

84 FERC Electric Tariff, Electric Coordination Citizens Lehman Power Sales Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 16

85 FERC Electric Tariff, Electric Coordination Energy Masters International Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 17

86 FERC Electric Tariff, Electric Coordination Aquila Energy Marketing Corp. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 18

87 FERC Electric Tariff, Electric Coordination Industrial Energy Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Applications, Inc. Corporation
Agreement No. 19

88 FERC Electric Tariff, Electric Coordination Electrical District No. 3 Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 20

89 FERC Electric Tariff, Electric Coordination Western Power Services, Inc. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 21

90 FERC Electric Tariff, Electric Coordination Federal Energy Sales, Inc. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 22

91 FERC Electric Tariff, Electric Coordination Cinergy Services, Inc. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 23

92 FERC Electric Tariff, Electric Coordination Ajo Improvement Company Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 24
</TABLE>
<PAGE>
Attachment B
Page 9 of 9

Existing APS Agreements, Tariffs and Service Agreements
to be Transferred to Other APS Affiliates
<TABLE>
<CAPTION>
Rate Schedule Designations Agreement/Tariff Title Counter-Party Assigned to:
-------------------------- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
93 FERC Electric Tariff, Electric Coordination City of Glendale Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 25

94 FERC Electric Tariff, Electric Coordination City of Azusa Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 26

95 FERC Electric Tariff, Electric Coordination Tohono O'Odham Utility Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Authority Corporation
Agreement No. 27

96 FERC Electric Tariff, Electric Coordination Koch Energy Trading, Inc. Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 28

97 FERC Electric Tariff, Electric Coordination Edison Source Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 29

98 FERC Electric Tariff, Electric Coordination Williams Energy Services Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Company Corporation
Agreement No. 30

99 FERC Electric Tariff, Electric Coordination Colorado River Agency Pinnacle West Capital
Volume 1, Service Tariff Service Agreement Corporation
Agreement No. 31
</TABLE>
<PAGE>
ATTACHMENT C

STATEMENT OF THE COST OF FACILITIES INVOLVED IN
THE TRANSFER OF ASSETS BETWEEN APS AND PWE
<PAGE>
ATTACHMENT C

ARIZONA PUBLIC SERVICE COMPANY
TRANSMISSION EQUIPMENT
BY POWER PLANT AND RELATED SUBSTATION EQUIPMENT
ORIGINAL COSTS AND ACCUMULATED DEPRECIATION
AS OF MAY 31-2000

POWER PLANTS
<TABLE>
<CAPTION>
ORIGINAL COSTS ACCUM DEPR NET BOOK VALUE
-------------- ---------- --------------
<S> <C> <C> <C>
FAIRVIEW/DOUGLAS $ 186,986 $ 149,683 $ 37,303

OCOTILLO POWER PLANT $ 2,164,238 $ 1,405,630 $ 758,608

SAGUARO POWER PLANT $ 1,649,298 $ 1,397,934 $ 251,364

YUCCA POWER PLANT $ 652,184 $ 537,451 $ 114,733

CHOLLA STEAM PLANT $13,197,993 $ 7,326,215 $ 5,871,778

PALO VERDE NUCLEAR PLANT $21,126,640 $ 6,436,097 $14,690,543

NAVAJO STEAM PLANT $ 2,009,351 $ 1,203,950 $ 805,401

WEST PHOENIX PLANT $ 2,409,236 $ 1,729,150 $ 680,086

FOUR CORNERS STEAM PLANT $ 3,835,334 $ 2,530,934 $ 1,304,400

---------------------------------------------
TOTAL POWER PLANT EQUIP IN TRANSMISSION $47,231,260 $22,717,044 $24,514,216
=============================================
</TABLE>
<PAGE>
ATTACHMENT D

SETTLEMENT AGREEMENT APPROVED BY THE ARIZONA CORPORATION COMMISSION AUTHORIZING
APS TO TRANSFER ITS GENERATING FACILITIES TO A SEPARATE AFFILIATE