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): November 27, 2000
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
STATE REGULATORY MATTERS
SETTLEMENT AGREEMENT
As previously reported, in December 1999 two parties filed lawsuits
challenging the Arizona Corporation Commission ("ACC") approval of a
comprehensive Settlement Agreement between Arizona Public Service Company
("APS") and various parties relating to the implementation of retail electric
competition. See Note 6 of Notes to Condensed Consolidated Financial Statements
in the Pinnacle West Capital Corporation (the "Company") Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2000 (the "September 2000
10-Q"). With respect to one of the appeals, on December 26, 2000, the Court of
Appeals affirmed the ACC's approval of the Settlement Agreement. The other
appeal, which raises a number of different issues, is still pending a decision
from the court.
RETAIL ELECTRIC COMPETITION RULES
On November 27, 2000, a Maricopa County Superior Court judge issued a final
judgment holding that the Retail Electric Competition Rules (the "Rules") are
unconstitutional and unlawful in their entirety due to failure to establish fair
value rate base and because certain of the Rules were not submitted to the
Arizona Attorney General for certification. See Note 6 of Notes to Condensed
Consolidated Financial Statements in the Company's September 2000 10-Q for a
discussion of the judge's preliminary rulings in this matter. The judgment also
invalidates all ACC orders authorizing competitive electric service providers in
Arizona. We do not believe the ruling affects the Settlement Agreement with the
ACC. The Settlement Agreement was not at issue in the consolidated cases before
the judge. Further, the ACC made findings related to the fair value of APS'
property in the order approving the APS Settlement Agreement.
The ACC and other parties aligned with the ACC have appealed the ruling to
the Court of Appeals, as a result of which the ruling is automatically stayed
pending further judicial review.
COMPANY RESTRUCTURING
The Settlement Agreement and the Rules require APS to transfer its
generating assets and competitive services, including wholesale power marketing
and trading activities, to one or more corporate affiliates. Subject to the
receipt of requisite non-ACC approvals, APS plans to move certain of its
non-nuclear generating facilities and related assets, as well as certain
employees of APS' generation business unit, to Pinnacle West Energy Corporation,
a subsidiary of the Company ("PWEC"), during the first half of 2001. Wholesale
power marketing and trading activities are expected to be moved from APS to the
Company during that same period.
GENERATION EXPANSION
As previously reported, in April 2000 PWEC entered into two separate
agreements with Southern California Edison
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Company ("SCE") to purchase SCE's 15.8% ownership interest in the Palo Verde
Nuclear Generating Station ("Palo Verde") and its 48% ownership interest in
Units 4 and 5 of the Four Corners Power Plant ("Four Corners"). See Note 10 of
Notes to Condensed Consolidated Financial Statements in the Company's September
2000 10-Q. PWEC had the right to match the terms of any binding agreement that
SCE entered into with any party that submitted an indication of interest for
SCE's Palo Verde and/or Four Corners ownership interest. On January 5, 2001 PWEC
informed SCE that it will not match a competing bid that SCE received for its
Four Corners ownership interest. Subject to California Public Utilities
Commission ("CPUC") approval and other conditions, including PWEC's acquisition
of SCE's Palo Verde ownership interest, PWEC remains committed as a standby
purchaser of SCE's Four Corners ownership interest at the original $300 million
purchase price if the competing Four Corners transaction does not close. SCE did
not receive a qualified superior offer for SCE's Palo Verde ownership interest.
PWEC's agreement to purchase SCE's Palo Verde ownership interest for $250
million is still pending approval from the CPUC. While the CPUC has not ruled on
the pending request to approve the Palo Verde sale, it has recently stated that,
in light of recent developments in the California electricity market, it will
evaluate whether it is in the public interest for the California utilities to
divest remaining generation facilities. Accordingly, the Company cannot predict
whether the CPUC will approve the sale of SCE's Palo Verde ownership interest.
PWEC is currently planning a 650-megawatt expansion of the West Phoenix
Power Plant and the construction of a natural gas-fired electric generating
station of up to 2,120 megawatts, called Redhawk, near Palo Verde. Construction
on West Phoenix Unit 4 began in June 2000, with commercial operation of the unit
expected in the summer of 2001. PWEC expects construction to begin on the
530-megawatt West Phoenix Unit 5 in mid-2001, with commercial operation in
mid-2003. PWEC and Calpine have terminated discussions on joint development of
West Phoenix Unit 5. PWEC began construction of Redhawk Units 1 and 2 (530
megawatts each) in December 2000, with commercial operation scheduled for the
summer of 2002.
FORWARD-LOOKING STATEMENTS
The above discussion contains forward-looking statements that involve risks
and uncertainties. Words such as "estimates," "expects," "anticipates," "plans,"
"believes," "projects," and similar expressions identify forward-looking
statements. These risks and uncertainties include, but are not limited to, the
ongoing restructuring of the electric industry; the outcome of the regulatory
proceedings relating to the restructuring; regulatory, tax, and environmental
legislation; our ability to successfully compete outside traditional regulated
markets; regional economic conditions, which could affect customer growth; the
cost of debt and equity capital; weather variations affecting customer usage;
technological developments in the electric industry; and the successful
completion of large-scale construction projects. These factors and the other
matters discussed above may cause future results to differ materially from
historical results, or from results or outcomes we currently expect or seek.
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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: January 10, 2001 By: Michael V. Palmeri
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Michael V. Palmeri
Vice President, Finance
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