PHOENIX – New power plants built by the Company’s generating subsidiary will be essential to keeping the lights on for Arizona Public Service (APS) customers, Pinnacle West Chairman Bill Post told shareholders at the Company’s Annual Meeting held today in Phoenix.

"Our industry, like most things, moves in cycles. Particularly when it comes to matching new generation with growing energy requirements," said Post. "Without Pinnacle West Energy’s new plants, APS would not be able to meet this summer’s electric load in Phoenix."

And despite construction of several other power plants in the Southwest over the past few years, Post cautioned against the belief that Arizona has a surplus of generating capacity.

"Even if all the construction currently under way is able to be financed and construction is completed, we will have about two years of new capacity available. In our business, two years is not a long time."

In addition to building new power plants, he said the Company has added more than 5,800 miles of transmission and distribution lines, and enhanced existing systems where needed – all designed to meet the highest reliability standards and ensure that the lights stay on for APS customers.

In his remarks to shareholders, Post also laid the groundwork for a general rate case that APS is required to file with the Arizona Corporation Commission (ACC) under terms of its 1999 settlement agreement. As part of the filing, APS will update its cost of service and rate design to reflect: the building of new power plants that ensure customer reliability; the increased day-to-day costs of serving APS customers; and other expenses associated directly with producing and delivering electric power. The company also will ask for recovery of costs associated with preparation for – and the reversal of – the movement toward competition.

Post said APS acted responsibly and protected customers during the "power market debacle" over the past two years, avoiding the turmoil of blackouts and price shocks that swept through the region.

Post also cited a number of key highlights for the past year:

• APS lowered its retail prices for the eighth time in nine years, with a 1.5 percent price decrease that became effective July 1, 2002. APS plans to decrease its retail prices another 1.5 percent this July, completing a 10-year commitment of reducing prices a total of 16 percent for residential and small commercial customers.

• Pinnacle West increased its annual dividend by 10 cents per share of common stock for the ninth year in a row. For the five-year period 1998-2002, its dividend grew at an average annual rate of 7.2 percent, ranking first among U.S. electric utilities.

• Last year’s operating earnings were relatively strong despite a sub-par economy, some one-time charges and the impact of lower market prices and margins resulting from the collapse of the western wholesale electricity market.

• APS was rated among the leaders in customer satisfaction by residential and midsize business customers in the western region, according to a study conducted by J.D. Power and Associates.

• For the 11th consecutive year, Palo Verde was the number one electric producer in the country, and the Company’s fossil plant performance ranked in the top quartile in plant availability, while meeting high environmental standards.

At the business portion of the annual meeting, Pinnacle West shareholders re-elected four directors to the Company’s Board of Directors: Jack E. Davis (56), president of Pinnacle West and president and CEO of APS and a director since 2001; Pamela Grant (64), former president of Tablescapes, Inc. and a director since 1985; Martha O. Hesse (60), president of Hesse Gas Co. and a director since 1991; and William S. Jamieson, Jr. (59), president of the Institute for Servant Leadership of Asheville, North Carolina, and a director since 1991.

Pinnacle West is a Phoenix-based company with consolidated assets of approximately $8.5 billion. Through its subsidiaries, the Company generates, sells and delivers electricity and sells electricity and energy-related products and services to retail and wholesale customers in the western United States. It also develops residential, commercial, and industrial real estate projects.

Contacts

Media:
Alan Bunnell, (602) 250-3376

Analyst:
Rebecca Hickman, (602) 250-5668