Recent federal legislation, New york Stock Exchange (NYSE) proposals and Securities and Exchange Commission (SEC) pronouncements are changing the way many companies do business. Pinnacle West welcomes these changes, many of which affirm the practices we've had in place for many years. At Pinnacle West, we remain committed to sound corporate governance practices and financial integrity. Key corporate governance information is available to the public on our Web site. These discuss Board responsibilities, independence of board members, compensation, committee responsibilities and other key corporate governance issues at the Company: (the below links are to information located on our PNW Web site)

• Corporate Governance Guidelines
• Committee Summary
• Audit Committee/Charter
• Corporate Governance Committee/Charter
• Finance, Nuclear and Operating Committee/Charter
• Human Resources Committee/Charter
• Code of Ethics for Financial Professionals
• Ethics Policy and the Standards of Business Practices
• Director Independence Standards

Independent Directors
The Board of Directors consists of 11 directors, nine of which are independent under the applicable criteria. See page 3 of the 2007 Proxy Statement under “Do we have independent directors” and “How did the Board make its independence determinations” for a discussion of the elements for independence and the determinations.

The Chairman of the Board of Directors is William J. Post. His biography appears on page 11 of the 2007 Proxy Statement. The Corporate Governance Committee has considered separating the Chairman and CEO roles but concluded that the Company is best served by a structure in which the CEO also serves as Chairman

Board Diversity
Two women and one minority serve on the company's 11-member board of directors.

Director Qualification and Compensation
Director qualifications and compensation are discussed starting on page 5 and 16 of our 2007 Proxy Statement.

Mechanisms for shareholders and employees to provide recommendations or direction to the Board of Directors
Please see page 5 of the 2007 Proxy Statement, “Shareholder Nominations”; page 8 of the 2007 Proxy Statement, “How can Shareholders communicate with the Board”; and page 49, “How do we submit shareholder proposals or director nominations for the next Annual Meeting?”

Code of Conduct and Ethics
Pinnacle West has specific policies in place to ensure a high level of corporate conduct and ethics. These Pinnacle West Ethics Policies and Standards of Business Practices are summarized in an internal booklet called "Doing the Right Thing."    

All Company officers, Board Members, and employees (including full-time, part-time, supplementals, and interns) are required to take annual training on corporate conduct and ethics, and to pass an online test on that training.

Some key sections of the "Doing the Right Thing" booklet include:

• Corporate Ethics Policy (Page 5)
• Supplier/Contractor Relationships (Page 6)
• Giving & Accepting Gifts (Page 6)
• Conflict of Interest (Page 9)
• Reporting Violations of the Ethics Policy (Page 12)
• Employment (Page 14)
• Labor Management Relations/right to organize and collective bargain (Page 16)
• Health and Safety (Page 18)
• Environmental Protection (Page 20)
• Dealings with Public Officials (Page 27)
• Political Participation (Page 28)
• Antitrust (Page 29)
• Sarbanes-Oxley Act of 2002 (Page 31)
• ACC Code of Conduct (Page 34)
• FERC Codes and Standards of Conduct (Page 34)
• Compliance (Page 35)

APS employees are encouraged to report any questions or concerns related to our Ethics and Standards of Business Practices to our Business Practices Department or the company's Help Line. The Help Line is administered by an outside third party that is set up to receive employee concerns and allegations, and is available 24 hours a day, seven days a week. Employees can report questions and concerns anonymously if desired. A quote from our internal Employee Concerns procedure to our employees clarifies:

“Concerns/allegations are reported either confidentially or anonymously. Confidentially means that those with a business need-to-know may be informed of the concerned individual’s identity or the details of the allegation and investigation. Anonymously means that the concerned individual’s identity is unknown because the concerned individual does not identify himself/herself at any time."

Public Affairs
Electricity is critical to our economy. We believe that the electricity dialogue is a key policy issue, and that shaping an effective public policy is crucial to building a reliable energy future. Every year it becomes more important to inform our community leaders and elected and appointed officials about the importance of electricity to jobs, growth and economic efficiency.

Our ethics policy, described in the Doing the Right Thing book above, describes how our employees and our company interact with public officials. PNW has a Government Affairs Department which takes the lead on PNW's interactions with State and Federal officials. In addition, Pinnacle West has a formal Political Action Committee (PAC) for employees of the company who elect to join the PAC. Pinnacle West maintains strict adherence to the laws governing campaign contributions and PACs.

Involvement with pesticides, GMOs, fur, alcohol, tobacco, firearms, nuclear weapons, military products, pornography or gambling products
We do not have any business involvement/revenues in these product areas

Military contracts and percentage of total revenue
Pinnacle West does not have any specific military related contracts. However, as a public service utility, we provide electric services to all customers within our service territory, including military facilities.