Central to this effort is fortifying and maintaining positive relationships with customers, our workforce, external stakeholders, regulators and the financial community to ensure the resilience of the company’s financial health and longevity. The 10-Year Strategic Plan sets priorities while proactively focusing plans and resources. It is designed to ensure employees and other stakeholders are working toward common goals with established an understanding around envisioned outcomes. This encourages a clear and ambitious organizational direction in response to a changing environment.

The 10-Year Strategic Plan is designed to be the strategic instrument that articulates where we are headed, and the actions needed to progress. It also adopts the APS Culture Principles, which will guide us in how we measure success. Fundamentally, the 10-Year Strategic Plan will guide the disciplined efforts and essential decisions and actions taken to shape what we do, what we stand for, whom we serve, and what we strive to become.

To establish an effective strategy, the Officer team looked at numerous potential drivers of change (broader societal forces impacting the energy industry and utility sector) to understand which are most likely to transform the future of our business and the communities we serve. They identified six critical areas expected to greatly impact our business over the next 10 years. As the Officer team considered how to address the six identified Drivers of Change most likely to impact our business, five Long-Term Issues (LTI) emerged as priority areas of focus during the next 10 years.

These LTIs were established to identify our priority areas of focus to ensure employees and all stakeholders are effectively aligned toward common goals with established understanding around envisioned outcomes:

• Focus on Customer Experience and Community Stewardship
• Support an Evolving Workforce
• Decarbonize and Manage Generation Resources
• Achieve a Constructive Regulatory Environment
• Ensure Long-Term Financial Health

We are focused on integrating renewable resources, empowering customers with flexible energy efficiency options and incorporating advanced technology to produce 100% clean and affordable energy—all while ensuring reliability, maintaining affordability, and securing a clean, balanced energy mix. Arizona is in the midst of a transformation as the population continues to grow and at the same time customers needs and preferences are evolving. We have tested our plan against different future scenarios to ensure that resource selections are durable across a broad array of potential circumstances. .

Navigating this period of change and uncertainty while delivering on our commitment to provide safe, reliable, and affordable power to Arizona requires a strategy that includes adding new resources to our portfolio at a pace that is unprecedented for our system. Our Preferred Plan, which is the term we use for the selected path forward resulting from the IRP analysis, includes nearly 8,000 MW of new resources through 2027, and more than twice that over the full 15-year planning window horizon.

We collaborate with a broad group of stakeholders in the development of our IRP. In 2021, the Resource Planning Advisory Council (RPAC) was formed as a diverse set of stakeholders to collaborate with APS in the development of the 2023 IRP. In light of the rapidly changing energy environment evident across the country and in particular in Arizona, the RPAC was created to infuse additional group participation and transparency to the IRP process.

Learn more about our Integrated Resource Plan.

This decision was driven by growing stakeholder interest and a recognition that an informed sustainability strategy is critical to delivering business value. The assessment strengthened our existing commitment to sustainability and established a foundation on which to develop programs that address the most important sustainability issues. The project was designed to build on existing APS efforts to understand stakeholder interests; leverage EPRI expertise; inform future Sustainability and Corporate Responsibility Reports; and advance a robust sustainability perspective to drive performance.

We leveraged input from employees, large customers, limited-income advocates, economic development groups, environmental non-governmental organizations, leading sustainability academics and other stakeholders to identify and assess the sustainability issues that matter most. In total, 23 Priority Sustainability Issues (PSIs) were identified and prioritized. The most critical category, Integral Shared Value, includes four issues deemed most important and most able to be impacted by our actions: clean energy, customer experience, energy access and reliability, and safety and health. These Integral PSIs provide the foundation for informing our strategic direction, creating a framework for incorporating best practices and driving enterprise-wide alignment and accountability. We also focused on utility benchmarking best practices within these four Integral Shared Value PSIs. We are utilizing the benchmarking information to inform decisions about opportunities for improvement in our ESG performance. Keeping with best practices, we plan to update our PSIs in 2024 to gain an understanding if the sustainability issues that matter the most to the company and its stakeholders have shifted since our initial work in 2020.

Learn more about our Priority Sustainability Issues.

APS's Enterprise Risk Management (ERM) program is a hybrid based on the Committee of Sponsoring Organization and Internal Organization for Standardization 31000 frameworks and designed to identify, assess, mitigate, monitor, and report risks or events that may impede the company from meeting its operating and strategic objectives. The program is designed to manage risk in an integrated, cross-functional framework, rooted in established ERM industry standards, to assist management to make informed risk adjusted business decisions. Risks are identified, assessed, and prioritized based on the likelihood and impact of their occurrence. The enterprise-wide risk identification and assessment process also contemplates time horizons with risks classified as short-, medium- or longer-term risks. Each business area also maintains an inventory of its most significant risks and associated risk mitigation plans.

Governance. As a part of the enterprise risk oversight and governance process, business areas share this information annually in a prescribed format for analysis, categorization and prioritization of risks to support the development of an enterprise risk profile. The enterprise-wide risk profiles are reviewed by the officer team and the Enterprise Risk Committee comprised of the senior officers then presented to the Board of Directors to provide assurance that the company has a well-established framework for the review and treatment of the risks. Consistent with the NYSE rules (NYSE Rule 303A), the Audit Committee annually reviews the company’s “risk assessment and risk management” policies. For APS, climate change risks include long term water availability, severe drought conditions, occurrence of severe monsoon storms, micro-bursts and catastrophic wildfires.

Learn more about our risk assessment in our most recent 10K.