Political Participation Policy

February 2016

1. PURPOSE

1.1. Pinnacle West Capital Corporation (“Pinnacle West” or “the Company”) participates in the democratic process to advance our long-term business interests and the interests of our customers, employees, communities and shareholders. We believe that broad political participation contributes to a strong democracy, promotes good government and encourages sound policymaking.

1.1.1. Our company’s principal subsidiary, Arizona Public Service Company (“APS”) has the responsibility to provide customers in our service territory with safe, reliable and affordable electricity. Because Pinnacle West and APS participate in a wide range of business activities to fulfill this responsibility, policy decisions at the federal, state and local levels can have profound impacts on virtually all aspects of our business.

1.1.2. Our experience and expertise gives us an informed perspective on how public policy can affect our company, our customers and Arizona’s energy future. We have a responsibility to our customers, employees, communities and shareholders to participate in the political process, when appropriate, so that our perspectives are heard and so that we can develop productive working relationships with governmental decision-makers.

1.2. The purpose of this policy is to promote compliance with all applicable federal, state and local laws, rules, and regulations surrounding political contributions by Pinnacle West in a manner consistent with our values.

2. POLICY STATEMENTS

2.1. As one of the largest and longest-serving local businesses in Arizona, Pinnacle West takes its commitment to corporate citizenship seriously. Being a good corporate citizen includes being informed about issues, encouraging our employees to volunteer and participate in their communities, speaking publicly about the issues of the day, sponsoring a political action committee and, where permitted by law, considering the contribution of corporate funds to political candidates, political parties and organizations that engage in political activity.

2.2. Many factors guide our political contribution decisions. In general, we support candidates and organizations that share an interest in public policy that furthers our business objectives and promotes our mission of creating a sustainable energy future for Arizona. The Company’s contribution decisions are based on what is in the best interests of Pinnacle West and not based on the personal preference of our executives.

2.3. We do not make corporate contributions to political candidates or office holders where prohibited by law. No political contribution will be given in anticipation of, in recognition of, or in return for any official act.

2.4. We contribute to entities organized and operating under section 527 of the Internal Revenue Code (tax exempt organizations that engage in political activities). We also make contributions to non-profit groups that are organized and operated to promote social welfare. These groups may also engage in political activities, so long as such activities do not become their primary purpose.

2.5. We participate in federal, state, and local issues through membership in trade associations, which we join to represent various business and industry interests. In addition, we actively promote the economic health of the jurisdictions we serve through our activities with chambers of commerce. Depending on their roles, these organizations may be subject to lobbyist registration and disclosure reporting obligations, with their reports being made available to the public by the federal and state agencies overseeing lobbying activities.

2.6. The Company discloses all political contributions as required by law. We provide a voluntary annual report of contributions made to organizations operating under section 527 of the Internal Revenue Code. We also provide a voluntary annual report of the portion of our trade association dues used for lobbying purposes, when those groups provide that information to us.

2.7. Our decision to support an organization may be guided by a shared view on a specific issue, or may reflect a more general agreement on public policy. Pinnacle West may not always agree with political positions taken by such organizations; however, on balance, the Company believes when it makes a contribution to such organizations that it receives more benefit than detriment.

2.8. Pinnacle West encourages its employees to be active members of their communities. Along with participation in civic, charitable and volunteer activities, this includes participation in the political process. All eligible employees of Pinnacle West may make voluntary contributions to the Pinnacle West Political Action Committee (“PNWPAC”). The PNWPAC is a voluntary, nonprofit, non-partisan political association created to provide an easy and effective means for eligible employees to become politically involved on behalf of the Company and support candidates for federal, state and local office.

2.8.1. Federal law permits lawful administrative support of PNWPAC from Pinnacle West. PNWPAC provides timely, complete and accurate disclosure of its political contributions as required by law.

2.9. Pinnacle West encourages employees to participate in the political process personally by voting and by supporting candidates of their choosing. Such participation is not in the Company’s name or on its behalf. Employees will not be reimbursed for personal political contributions or expenses, either directly or through compensation increases.

2.10. Some Pinnacle West employees choose to serve their communities by holding public office. We encourage these employees and appreciate their public spirit. Employees of Pinnacle West who wish to campaign for, or serve in, public office must first notify their supervisor and the Senior Vice President of Public Policy.

2.10.1. Employees are not permitted to campaign on work time, nor can they use company resources to further their campaigns. Employees must clearly communicate that they are acting as private individuals, that their views are their own, and that they are not representing or endorsed by the Company.

2.10.2. Employees who hold public office must recuse themselves from matters directly involving Pinnacle West. If an employee in public office is uncertain whether an issue directly affects Pinnacle West, he or she should contact the Senior Vice President of Public Policy.

3. OVERSIGHT

3.1. During the first quarter of each calendar year management reviews with the Corporate Governance Committee its governmental affairs strategies for the year, including the policies and priorities for the Company’s political expenditure and lobbying activities expected to be undertaken in furtherance of such strategies. During the year, management periodically reports to the Corporate Governance Committee on the progress of the Company's strategy, including any significant activities not encompassed within the initial strategy discussion. At each Board meeting the Corporate Governance Committee provides a summary to the Board of the matters discussed at its meetings. In addition, as part of its reporting responsibilities to the Board after year-end, management summarizes the actions taken in furtherance of its governmental affairs strategy during the year. At least annually, the Corporate Governance Committee reviews this policy and recommends to the Board any revisions it deems necessary. Our Board's oversight of our governmental affairs strategy ensures compliance with applicable law and alignment with our policies and Code of Ethics and Business Practices.

3.2. Corporate contribution decisions are made primarily by our Vice President, Federal Affairs and Vice President, State and Local Affairs, based on the guidelines and objectives described in this policy and the strategy reviewed with the Corporate Governance Committee of our Board. These executives typically receive input from other members of our senior management team, including our Chief Executive Officer.

3.3. The PNWPAC is directed by a board comprised solely of employees, which makes and approves all decisions regarding political contributions and budget. Potential contributions to candidates and/or political committees are reviewed by a five-member PNWPAC executive committee, which makes recommendations for contributions to be considered by the PNWPAC board of directors. The articles of organization of the PNWPAC can be found here.

4. RELATED DOCUMENTS AND LINKS

4.1. Here is a list of Company contributions made in 2015 to section 527 organizations equal to or in excess of $25,000.

Organization Contribution
Arizona Democratic Party $50,000
Arizona Republican Party $110,000
Dodie Londen Series $25,000
Democratic Attorneys General Association $25,000
Republican Governor’s Association $50,000
Senate Leadership Fund $30,000

4.2. Here is a list of Company payments made in 2015 to trade associations used for lobbying-related activities.

Organization Lobbying Portion of Dues/Payments
Edison Electric Institute $132,150
Nuclear Energy Institute $81,499
U.S. Chamber of Commerce $2,000
Greater Phoenix Chamber of Commerce $11,250
Arizona Chamber of Commerce $42,728
Electric Drive Transportation Association $5,670
New Mexico Utilities Shareholder’s Alliance $3,960

4.3. Contributions to federal elections may be found on the Federal Elections Commission website at www.fec.gov.

4.4. Contributions to Arizona state and local elections can be found on the Arizona Secretary of State’s website at www.azsos.gov/election.

3.5. Reports on the Company’s federal lobbying activity can be found on the websites of the U.S. House of Representatives at www.house.gov and the U.S. Senate at www.senate.gov.