Just as Pinnacle West’s previous planning efforts played a vital role in 2003, today‘s planning will help ensure the successes and manage the challenges of 2008.

As required by a 1999 Settlement Agreement approved by the Arizona Corporation Commission, APS filed a general rate case in mid-2003 – our first in well over a decade. That filing requested a 9.8 percent retail revenue increase, which would be the company’s first price increase in more than 13 years. Even with the requested increase, APS’ rates would be about 6 percent below what they were in 1993.

Through the regulatory process, our goal is to find a workable structure that helps ensure long-term reliability and price stability for our customers, and supports continuing growth in the state of Arizona while providing a reasonable return for our shareholders.

In 2003, APS implemented the last of a series of rate reductions that have lowered customer prices an average of 16 percent since 1993. This decrease represented the largest cumulative price decrease among investor-owned utilities nationwide during that time period, and saved our customers well over $1 billion.

Providing reliable electricity is at the top of our agenda as we plan for Arizona’s energy future. As APS’ customer base has grown, individual energy usage has also risen dramatically. From 1991 to 2003, household usage of electricity in Arizona has increased an average of 23 percent. In 2003, APS’ peak energy load demand rose more than 9 percent over the previous year. APS’ peak load, over the last two years, has grown more than 600 megawatts, approximately equal to the output of one of our units at our new Redhawk Power Plant.

We completed a large-scale maintenance project at the Palo Verde Nuclear Generating Station in the fall of 2003, to improve the efficiency and reliability of our lowest-cost power source. Two 800-ton steam generators were successfully replaced in Unit 2, completing more than five years of planning and careful management of the manufacture and transportation of the generators from Italy. During the replacement process, plant employees set a world record for the lowest collective radiation exposure during a steam generator replacement.