ARIZONA PUBLIC SERVICE CO

Previous wording

Pinnacle West derives essentially all of our revenues and earnings from our principal subsidiary, APS. APS is Arizona’s largest and longest-serving electric company and generates safe, affordable and reliable electricity for approximately 1.4 million retail customers in 11 of Arizona’s 15 counties. APS is also the operator and co-owner of Palo Verde Generating Station (“Palo Verde”) — a primary source of electricity for the southwestern United States.

Current wording

Pinnacle West is an investor-owned electric utility holding company based in Phoenix, Arizona with consolidated assets of approximately $31 billion. We derive essentially all of our revenues and earnings from our principal subsidiary, APS. Since 1886, APS and its affiliates have provided energy and energy-related products to people and businesses throughout Arizona. APS is Arizona’s largest and longest-serving electric company and generates safe, affordable and reliable electricity for approximately 1.5 million retail customers in 11 of Arizona’s 15 counties. APS is also the operator and co-owner of Palo Verde — a primary source of electricity for the southwestern United States. Our other active subsidiaries are El Dorado and PNW Power.

Previous wording

As energy demand in Arizona continues to grow, we remain committed to delivering reliable service to our customers. We have a goal of achieving top quartile reliability as compared to peers. Key elements to delivering reliable service include resource and transmission planning to secure resource adequacy, planning and procuring resources to ensure sufficient reserve margins, distribution automation and resiliency investments, predictive and preventative maintenance programs, seasonal readiness programs, emergency preparedness, and securing a reliable supply chain. Securing a reliable grid requires ongoing infrastructure investments in addition to investments to support new customer growth.

Current wording

As energy demand in Arizona continues to grow, we remain committed to delivering reliable service to our customers. We have a goal of achieving top quartile reliability as compared to peers. Key elements to delivering reliable service include resource and transmission planning to maintain resource adequacy, distribution automation and resiliency investments, predictive and preventative maintenance programs, seasonal readiness programs, emergency preparedness, and securing a reliable supply chain. Securing a reliable grid requires ongoing infrastructure investments in addition to investments to support new customer growth.

Previous wording

Balanced Energy Mix. APS strives to procure a balanced energy mix, and we believe this provides the greatest reliability at the lowest cost possible while increasing resiliency. We achieve reliability, in part, through a blend of dispatchable resources, such as natural gas and battery storage, that can provide energy when intermittent resources, such as wind and solar, are unavailable. In its all-source request for proposal (“ASRFP”) issued in 2023, APS contracted for 3,606 megawatts (“MW”) of battery storage, 517 MW of natural gas, 2,649 MW of solar, and 500 MW of wind resources. APS regularly evaluates the best mix of resources based on a changing operating environment, including changes in generation technology, economics, and policy impacts.

Current wording

Balanced Energy Mix. APS strives to procure a balanced energy mix, and we believe this provides the greatest reliability at the lowest cost possible while increasing resiliency. We achieve reliability, in part, through a blend of dispatchable resources, such as natural gas and battery storage, that can provide energy when intermittent resources, such as wind and solar, are unavailable. APS regularly evaluates the best mix of resources based on a changing operating environment, including changes in generation technology, economics, and policy impacts.

Previous wording

There is a need for additional natural gas to support reliability for customers and meet increasing energy needs and existing natural gas pipelines into Arizona are currently 100% committed. As a result, in July 2025, APS executed a gas transportation precedent agreement to secure a long-term supply of natural gas. The new pipeline is expected to be operational by late 2029 and will be owned and operated by a third-party. APS also plans to develop a site near Gila Bend, Arizona that is capable of adding up to 2,000 MW of generation to the state’s energy portfolio. The Desert Sun Power Plant will be a natural gas facility designed to meet Arizona’s rapidly growing needs and support unprecedented demand from large load energy users. This project is planned in two phases, with the first phase expected to serve existing customers and business-as-usual growth through our competitive ASRFP process, and the second phase to enable a new subscription model for large load customers, like data centers and large manufacturers. This subscription model is a commercial construct designed to ensure growth pays for growth while protecting affordability for other customers.

Current wording

Additional natural gas capacity is necessary to support reliable service and meet increasing energy needs. However, existing natural gas pipelines into Arizona are currently committed. As a result, in July 2025, APS executed a gas transportation precedent agreement to secure a long-term supply of natural gas. The new pipeline is expected to be operational by late 2029 and will be owned and operated by a third-party. APS plans to add up to 2,000 MW of flexible natural gas generation to its portfolio, designed to help meet the growing around-the-clock energy needs in Arizona. APS continues to explore additional development opportunities to meet Arizona’s growing needs.

Previous wording

Palo Verde, one of the nation’s largest carbon-free energy resources, serves as a foundational part of APS’s resource portfolio. The plant is a critical asset to the Southwest, generating more than 32 million megawatt-hours annually – enough power for roughly 3.4 million households, or approximately 8.5 million people. Its continued operation is important to a carbon-neutral future for Arizona and the region, as a reliable, continuous, affordable resource and as a large contributor to the local economy. APS owns or leases 29.1% of Units 1, 2, and 3 Palo Verde. In June 2025, APS entered into agreements to purchase two of the three leased interests in Unit 2. The two subject leased interests represented approximately 7% or 94 MW of Unit 2. The transaction closed in September 2025, leaving one remaining lease for approximately 5.2% of Unit 2 that expires in 2033. See Note 8 for more information. The 2025 Rate Case (as defined below) includes pro forma adjustments to account for these acquisitions. APS continues to evaluate and pursue options for reliably serving growing customer energy needs and demand.

Current wording

Palo Verde, one of the nation’s largest carbon-free energy resources, serves as a foundational part of APS’s resource portfolio. The plant is a critical asset to the Southwest, generating more than 32 million MWh – enough power for roughly 3.4 million households, or approximately 8.5 million people. Its continued operation is important to a carbon-neutral future for Arizona and the region, as a reliable, continuous, affordable resource and as a large contributor to the local economy. APS owns or leases 29.1% of Units 1, 2, and 3 Palo Verde. In June 2025, APS entered into agreements to purchase two of the three leased interests in Unit 2. The two subject leased interests represented approximately 7% or 94 MW of Unit 2. The transaction closed in September 2025, leaving one remaining lease for approximately 5.2% of Unit 2 that expires in 2033. See Note 9 for more information. The 2025 Rate Case includes pro forma adjustments to account for these acquisitions.

Previous wording

Wildfire Efforts. Wildfire safety remains a critical focus for APS and other utilities. APS has increased investment in fire mitigation efforts to clear defensible space around its infrastructure, continue ongoing system upgrades, build partnerships with government entities and first responders, and educate customers and communities. APS also increased spend on mitigating the risk associated with trees that could cause hazards, resulting in more of these trees being removed before they could cause outages or wildfires. These programs contribute to customer reliability, responsible forest management and safe communities. With wildfire events in Hawaii, California, and across North America over the last few years, APS has been devoting and intends to continue to devote substantial efforts to analyzing and developing enhancements to its systems and processes to mitigate fire risk within its service territory and communities, including by hardening our infrastructure, deploying new technologies where appropriate, increasing our awareness, implementing operational changes, and enhancing our wildfire response capabilities.

Current wording

Wildfire Efforts. Wildfire safety remains a critical focus for APS and other utilities. APS has increased investment in fire mitigation efforts to clear defensible space around its infrastructure, continue ongoing system upgrades, build partnerships with government entities and first responders, and educate customers and communities. APS also increased spend on grid technology to enable fast-trip relay response, also known as Enhanced Powerline Safety Settings. These programs contribute to customer reliability, fire ignition avoidance, responsible forest management, and safe communities. With wildfire events occurring across the U.S. and North America over the last few years, APS has been devoting and intends to continue to devote substantial efforts to analyzing and developing enhancements to its systems and processes to mitigate fire risk within its service territory and communities, including by hardening our infrastructure, deploying new technologies where appropriate, increasing situational awareness, implementing operational changes, and enhancing our wildfire response capabilities.

Previous wording

APS was selected by the U.S. Department of Energy’s (“DOE”) Grid Deployment Office (“GDO”) to receive up to $70 million in federal money for fire mitigation and grid infrastructure projects. This funding is part of the GDO’s Grid Resilience and Innovation Partnership Program and is contingent on APS negotiating and executing final grant agreements with GDO. Additionally, on May 12, 2025, Arizona Governor Hobbs signed into law a bill that requires Arizona electric utilities to develop and seek approval for wildfire mitigation plans and defines the standard of care with respect to wildfire-related claims by reference to such plans. APS continues to evaluate policy and regulatory options, as well as insurance programs, to mitigate the impact of wildfire events.

Current wording

APS was selected by DOE’s Grid Deployment Office (“GDO”) to receive up to $70 million in federal money for fire mitigation and grid infrastructure projects. This funding is part of the GDO’s Grid Resilience and Innovation Partnership Program and is contingent on APS negotiating and executing final grant agreements with GDO. Additionally, on May 12, 2025, Arizona Governor Hobbs signed into law a bill that requires Arizona electric utilities to develop and seek approval for wildfire mitigation plans and defines the standard of care with respect to wildfire-related claims by reference to such plans. Pursuant to that legislation, APS has submitted its Comprehensive Wildfire Mitigation Plan to the Arizona Department of Forestry and Fire Management for review and approval. APS anticipates that process will conclude sometime in the second quarter of 2026; however, APS cannot predict the outcome of this matter. APS continues to evaluate policy and regulatory options, as well as insurance programs, to mitigate the impact of wildfire events.

Previous wording

We are committed to keeping bills as low as possible for our customers while maintaining high levels of reliability. Inflation has dramatically impacted the cost of goods and services in recent years as shown by the Consumer Price Index for All Urban Consumers (“CPI-U”), which from 2018 through 2024 rose nationally 24.9% and 32.1% in Phoenix. Despite this, APS’s average residential rates remained well-below those inflation figures, rising 16.2% for the same period according to the U.S. Energy Information Administration. In recent months, inflationary impacts have eased, with the CPI-U growing 2.9% nationally and 1.4% in Phoenix over the 12 months ended August 2025. As a result of increased tariffs and supply chain constraints, APS amended several of its agreements from its ASRFP issued in 2023 to mitigate these cost impacts. However, APS remains cautious of potential price increases as a result of current and proposed tariffs, which could lead to higher costs and supply chain constraints.

Current wording

We are committed to keeping bills as low as possible for our customers while maintaining high levels of reliability. Inflation has dramatically impacted the cost of goods and services in recent years as shown by the Consumer Price Index for All Urban Consumers (“CPI-U”), which from 2018 through 2024 rose nationally 24.9% and 32.1% in Phoenix. Despite this, APS’s average residential rates remained well-below those inflation figures, rising 16.2% for the same period according to the U.S. Energy Information Administration. Inflation has moderated from earlier highs, with CPI-U rising 2.4% nationally and 1.7% in Phoenix over the 12 months ended February 2026. As a result of increased tariffs and supply chain constraints, APS amended several of its agreements from its ASRFP issued in 2023 to mitigate these cost impacts. However, APS remains cautious of potential price increases as a result of the ongoing Iranian conflict and current and proposed tariffs, which could lead to higher costs and supply chain constraints, while also continuing to monitor the outcome of the U.S. Supreme Court’s decision regarding the validity of certain tariffs and any other related executive or legislative action.

Previous wording

APS’s customer affordability initiative includes internal opportunities, such as training and mentoring employees on identifying efficiency opportunities; maintaining inventory to take advantage of lower pricing and avoid expediting fees; entering into long-term contracts to hedge against price volatility, which has allowed APS to mitigate against procurement spend on critical items such as transformers; and implementing automation technologies to enhance efficiencies and increase data-oriented decision making. APS is also seeking to reduce cross-subsidization of customer classes and ensure that growth pays for growth by requesting modifications to its cost allocation methodologies in the 2025 Rate Case. APS continues to seek opportunities to streamline its business processes, mitigate cost increases, increase employee retention, and improve customer satisfaction.

Current wording

APS’s customer affordability initiative includes internal opportunities, such as training and mentoring employees on identifying efficiency opportunities; maintaining inventory to take advantage of lower pricing and avoid expediting fees; entering into long-term contracts to hedge against price volatility, which has allowed APS to mitigate against procurement spend on critical items such as transformers; and implementing automation technologies to enhance efficiencies and increase data-oriented decision making. The customer affordability initiative also includes external opportunities, including a portfolio of customer programs designed to help customers reduce and manage their bills. In the 2025 Rate Case, APS is also seeking to reduce cross-subsidization of customer classes and ensure that growth pays for growth by requesting modifications to its cost allocation methodologies. APS continues to seek opportunities to streamline its business processes, mitigate cost increases, increase employee retention, and improve customer satisfaction.

Previous wording

APS’s Integrated Resource Plan (“IRP”) and competitive ASRFP processes serve important roles in providing reliable and affordable energy to APS’s customers. The IRP process helps identify the amount and type of resources required to reliably meet customer needs, while the ASRFP process seeks to meet those needs in a competitive manner based on cost, ability to meet system requirements, and commercial viability. See “Resource Planning—Prioritizing Reliability and Affordability” below for more information.

Current wording

APS’s IRP and competitive ASRFP processes serve important roles in providing reliable and affordable energy to APS’s customers. The IRP process helps identify the amount and type of resources required to reliably meet customer needs, while the ASRFP process seeks to meet those needs in a competitive manner based on cost, ability to meet system requirements, and commercial viability.

Previous wording

APS has seen increasing demand from large load customers in recent years. In the 2025 Rate Case, APS requested adjustments to rate designs and modification of cost allocation methodologies to ensure growth pays for growth. See “Regulatory Overview” below for more information. In line with the 2025 Rate Case, APS has developed a subscription model it believes will allow for these large load customers to fund the incremental infrastructure needed to serve them through long-term contracts where they cover capital costs and assume development risks, accelerating their path to service and ensuring those infrastructure costs are borne by those customers rather than residential or small business customers.

Current wording

APS has seen increasing demand from large load customers in recent years. In the 2025 Rate Case, APS requested adjustments to rate designs and modification of cost allocation methodologies to ensure growth pays for growth and reduce cross-subsidization by customer classes. In line with the 2025 Rate Case, APS has developed an approach it believes will allow for these large load customers to fund the incremental infrastructure needed to serve them through long-term contracts where they cover capital costs and assume development risks, accelerating their path to service and ensuring those infrastructure costs are borne by those customers rather than residential or small business customers.

Previous wording

There are also external opportunities that allow APS to deliver more affordable energy to customers, such as APS’s participation in western energy markets and programs. APS participated in market design and tariff development of Markets+, a day-ahead and real-time market offering from Southwest Power Pool (“SPP”). The Markets+ tariff was filed with the U.S. Federal Energy Regulatory Commission (“FERC”) on March 29, 2024 and was approved on January 16, 2025. APS is a funding party to the implementation phase of Markets+ and expects to go live in the market in October 2027. In addition, APS is participating in the Western Resource Adequacy Program administered by Western Power Pool and plans to transition to full-binding participation as early as summer 2027. These regional efforts are driven by the objectives of reducing customer cost and improving reliability. Until the transition to Markets+, APS will continue to participate in Western Energy Imbalance Market (“WEIM”) as a tool for creating savings for APS’s customers from the real-time only, voluntary market. APS expects that its participation in WEIM and future participation in Markets+ will lower its fuel and purchased-power costs, improve situational awareness for systems operations in the Western Interconnection, and improve integration of APS’s resources.

Current wording

There are also external opportunities that allow APS to deliver more affordable energy to customers, such as APS’s participation in western energy markets and programs. APS participated in market design and tariff development of Markets+, a day-ahead and real-time market offering from the Southwest Power Pool. The Markets+ tariff was filed with FERC on March 29, 2024 and was approved on January 16, 2025. APS is a funding party to the implementation phase of Markets+ and expects to go live in the market in October 2027. In addition, APS is participating in the Western Resource Adequacy Program administered by Western Power Pool and plans to transition to full-binding participation in 2027. These regional efforts are driven by the objectives of reducing customer cost and improving reliability. Until the transition to Markets+, APS will continue to participate in the Western Energy Imbalance Market (“WEIM”) as a tool for creating savings for APS’s customers from the real-time only, voluntary market. APS expects that its participation in the WEIM and future participation in Markets+ will lower its fuel and purchased-power costs, improve situational awareness for systems operations in the Western Interconnection, and improve integration of APS’s resources.

Previous wording

APS has a diverse portfolio of existing and planned resources, including biomass, biogas, coal, energy storage, geothermal, natural gas, nuclear, solar, and wind. Maintaining a balanced and diverse portfolio of resources will ensure continued reliable service to our customers in the most affordable manner possible. Every three years, APS performs an IRP, a comprehensive study to identify what resources will be necessary to safely, reliably, and affordably meet the demand and energy needs of its customers over the next 15 years. In November 2023, APS released its latest IRP, which identified forecasted customer demand and energy needs growing at an unprecedented rate. In developing the IRP, APS considered how factors such as forecasted economic growth, impacts from weather, and new resource technology availability impact the amount and type of resources required to reliably and affordably meet customer needs. These factors, among others, were used to develop a plan that identified a balanced mix of diverse energy-generating resources to reliably serve customers’ future energy needs. To help ensure competitive costs for resources procured by APS, APS regularly issues competitive bid solicitations through the ASRFP process, with the most recent ASRFP being issued in 2024. These ASRFPs are open to bids for all resource types, including customer-scale (behind the meter) and utility-scale (in front of the meter) resources.

Current wording

APS remains focused on providing reliable energy at the lowest cost possible while striving to lower emissions over time and continues to look for opportunities to support reliability through dispatchable resources, such as gas and the potential extension of coal beyond 2031. APS’s diverse portfolio of existing and planned resources includes biomass, biogas, coal, energy storage, geothermal, natural gas, nuclear, solar, and wind. Every three years, APS performs an IRP, a comprehensive study to identify what resources will be necessary to safely, reliably, and affordably meet the demand and energy needs of its customers over the next 15 years. In November 2023, APS released its latest IRP, which identified forecasted customer demand and energy needs growing at an unprecedented rate. In developing the IRP, APS considered how factors such as forecasted economic growth, impacts from weather, and new resource technology availability impact the amount and type of resources required to reliably and affordably meet customer needs. These factors, among others, were used to develop a plan that identified a balanced mix of diverse energy-generating resources to reliably serve customers’ future energy needs. APS expects to file its next IRP later in 2026, which will provide an updated view on the resource types and volumes necessary to maintain reliability for a rapidly expanding customer base. To help ensure competitive costs for resources procured by APS, APS regularly issues competitive bid solicitations through the ASRFP process, with the most recent ASRFP being issued in 2025. These ASRFPs are open to bids for all resource types, including customer-scale (behind the meter) and utility-scale (in front of the meter) resources.

Previous wording

APS selects projects out of ASRFPs based on cost, ability to meet system requirements, and commercial viability, taking into consideration timing and likelihood of successful contracting and development. Under current market conditions, APS must aggressively contract for resources that can withstand supply chain and other geopolitical pressures. Guided by IRP-established timelines and quantities, APS maintains a flexible approach that allows it to optimize system reliability and customer affordability through the ASRFP process. Agreements for the development and completion of future resources are subject to various conditions, including successful siting, permitting and interconnection to the electric grid.

Current wording

APS selects projects out of ASRFPs based on cost, ability to meet system requirements, and commercial viability, taking into consideration timing and likelihood of successful contracting and development. Guided by IRP-established timelines and quantities, APS maintains a flexible approach that allows it to optimize system reliability and customer affordability through the ASRFP process. Agreements for the development and completion of future resources are subject to various conditions, including successful siting, permitting and interconnection to the electric grid. Consistent with recent ASRFPs, APS remains focused on contracting for resources that can withstand supply chain pressures and volatility and seeks a balanced portfolio that is resilient to other external pressures, including those arising from the macroeconomic and geopolitical environment.

Previous wording

On June 30, 2023, APS issued an ASRFP pursuant to which APS procured 3,606 MW of battery storage, 517 MW of natural gas, 2,649 MW of solar, and 500 MW of wind resources expected to be in service from 2026 to 2028.

Current wording

In terms of recent solicitations, APS issued an ASRFP on June 30, 2023, pursuant to which APS procured 3,606 MW of battery storage, 517 MW of natural gas, 2,649 MW of solar, and 500 MW of wind resources expected to be in service from 2026 to 2028. APS issued another ASRFP on November 20, 2024, pursuant to which it signed an amendment and extension to each of two existing gas tolling agreements, securing 600 MW under each agreement through 2038 and 2046, respectively. The scope of projects being negotiated out of the 2024 ASRFP reflects both the expanse of the 2023 ASRFP and the reality of adjusting to tariffs and changing federal policy.

Previous wording

APS has an aspirational goal to be carbon-neutral by 2050. This means that for any greenhouse gas emissions still produced by our generation resources as of 2050, we will aim to offset these emissions elsewhere. This goal reflects APS’s interest in new innovation and market transformations that address carbon emissions, while relying on the IRP process to help determine the most responsible path forward. APS remains focused on providing reliable energy at the lowest cost possible while striving to lower emissions over time and continues to look for opportunities to support reliability through dispatchable resources, such as gas and the potential extension of coal beyond 2031.

Current wording

APS has an aspirational goal to be carbon-neutral by 2050. This means that for any GHG emissions still produced by our generation resources as of 2050, we will aim to offset these emissions elsewhere. This goal reflects APS’s interest in new innovation and market transformations that address carbon emissions, while relying on the IRP and ASRFP processes to help determine the path forward.

Previous wording

Additionally, APS offers a customer assistance program, including up to a 60% bill discount for vulnerable customers, flexible payment arrangements, and emergency utility bill assistance. To ensure customers in need are connected to these programs, we partner with more than one hundred community action agencies across our service territory to train representatives who serve our shared customers.

Current wording

Additionally, APS offers a customer assistance program, including up to a 60% bill discount for vulnerable customers, flexible payment arrangements, and emergency utility bill assistance. To ensure customers in need are connected to these programs, we partner with nearly one hundred community action agencies across our service territory to train representatives who serve our shared customers.

Previous wording

New Nuclear Generation. Along with other Arizona electric utilities, APS is exploring additional nuclear generation to provide around-the-clock carbon-free energy to meet rising energy demands in Arizona. APS has been monitoring emerging nuclear technologies, such as small modular nuclear reactors (“SMRs”). SMRs are typically designed to generate 300 MW or less of energy per unit compared to, for example, the 1,400 MW per unit generated at Palo Verde. The utilities have applied for a grant from DOE to begin preliminary exploration of a potential site for additional nuclear energy for Arizona. The grant could support a three-year site selection process and possible preparation of an early site permit application to U.S. Nuclear Regulatory Commission (“NRC”).

Current wording

New Nuclear Generation. Along with other Arizona electric utilities, APS is exploring additional nuclear generation to provide around-the-clock carbon-free energy to meet rising energy demands in Arizona. APS has been monitoring emerging nuclear technologies, ranging from newer proposed and installed versions of large-scale reactors to small modular nuclear reactors. Small modular nuclear reactors are typically designed to generate 300 MW or less of energy per unit compared to, for example, the 1,400 MW per unit generated at Palo Verde. The utilities have applied for a grant from DOE to begin preliminary exploration of a potential site for additional nuclear energy for Arizona. The grant could support a three-year site selection process and possible preparation of an early site permit application to NRC.

Previous wording

Carbon Capture. Carbon Capture Utilization and Storage (“CCUS”) technologies can isolate CO 2 and either sequester it permanently in geologic formations or convert it for use in products. Currently, almost all existing fossil fuel generators do not control carbon emissions the way they control emissions of other air pollutants such as sulfur dioxide or oxides of nitrogen. CCUS technologies are still in the demonstration phase and while they show promise, they are still being tested in real-world conditions. These technologies could potentially reduce carbon emissions from fossil fuel-fired generation.

Current wording

Carbon Capture. CCS technologies can isolate carbon dioxide and either sequester it permanently in geologic formations or convert it for use in products. Currently, almost all existing fossil fuel generators do not control carbon emissions the way they control emissions of other air pollutants such as sulfur dioxide or oxides of nitrogen. CCS technologies are still in the demonstration phase and while they show promise, they are still being tested in real-world conditions. These technologies could potentially reduce carbon emissions from fossil fuel-fired generation.

Previous wording

Artificial Intelligence. To address the rapid advancement of artificial intelligence (“AI”) technology risks and opportunities, APS has developed an AI strategy to responsibly utilize AI to advance our business strategy, enhance customer and employee experiences, and optimize operational reliability. At the core of our AI strategy is a robust governance model that develops guidance, policies, and relevant sub-strategies for the execution of AI projects at the Company. To ensure compliance with data security, reliability requirements, and our Code of Ethical Conduct, governance and oversight are provided by leadership and experts from our information technology, cybersecurity, human resources, ethics, supply chain, legal, and nuclear generation teams.

Current wording

Artificial Intelligence. To address the rapid advancement of AI technology risks and opportunities, APS has developed an AI strategy to responsibly utilize AI to advance our business strategy, enhance customer and employee experiences, and optimize operational reliability. At the core of our AI strategy is a robust governance model that develops guidance, policies, and relevant sub-strategies for the execution of AI projects at the Company. To ensure compliance with data security, reliability requirements, and our Code of Ethical Conduct, governance and oversight are provided by leadership and experts from our information technology, cybersecurity, human resources, ethics, supply chain, legal, and nuclear generation teams.

Previous wording

On June 13, 2025, APS filed an application with the ACC (the “2025 Rate Case”) seeking a net base rate increase of $579.5 million, which represents a 13.99% net increase. The requested net increase addresses a total base revenue deficiency of $662.4 million, offset by proposed adjustor transfers of cost recovery to base rates.

Current wording

On June 13, 2025, APS filed the 2025 Rate Case application with the ACC seeking a net base rate increase of $579.5 million, which represents a 13.99% net increase. The requested net increase addresses a total base revenue deficiency of $662.4 million, offset by proposed adjustor transfers of cost recovery to base rates.

Previous wording

•a rate of $0.043881 per kilowatt-hour (“kWh”) for the portion of APS’s base rates attributable to fuel and purchased power costs;

Current wording

•a rate of $0.043881 per kWh for the portion of APS’s base rates attributable to fuel and purchased power costs;

Previous wording

•adjustments to rate designs to reduce cross-subsidization by certain customer classes;

Current wording

•adjustments to rate designs, including direct assignment of costs, to reduce cross-subsidization by certain customer classes;

Previous wording

•implementation of a “Formula Rate Adjustment Mechanism” (“FRAM”) to assist with reducing regulatory lag and allow for rate gradualism;

Current wording

•implementation of a FRAM to assist with reducing regulatory lag and allow for rate gradualism;

Previous wording

•elimination of the Lost Fixed Cost Recovery Adjustment Mechanism (“LFCR”) following the first annual adjustment pursuant to the FRAM; and

Current wording

•elimination of the LFCR following the first annual adjustment pursuant to the FRAM; and

Previous wording

•modification to the System Reliability Benefit Mechanism (“SRB”) due to the Formula Rate Adjustment Mechanism proposal.

Current wording

•modification to the SRB due to the FRAM proposal.

Previous wording

On October 28, 2022, APS filed an application with the ACC (the “2022 Rate Case”) for an increase in retail base rates, and on January 25, 2024, an Administrative Law Judge issued a Recommended Opinion and Order (“ROO”), as corrected on February 6, 2024 (the “2022 Rate Case ROO”).

Current wording

On October 28, 2022, APS filed an application with the ACC (the “2022 Rate Case”) for an increase in retail base rates, and on January 25, 2024, an Administrative Law Judge issued a ROO, as corrected on February 6, 2024 (the “2022 Rate Case ROO”).

Previous wording

On February 22, 2024, the ACC approved the 2022 Rate Case ROO with certain amendments that resulted in, among other things, (i) an approximately $491.7 million increase in the annual base revenue requirement, (ii) a 9.55% return on equity, (iii) a 0.25% return on the increment of fair value rate base greater than original cost, (iv) an effective fair value rate of return of 4.39%, (v) a return set at the Company’s weighted average cost of capital on the net prepaid pension asset and net other post-employment benefit liability in rate base, (vi) an adjustment to generation maintenance and outage expense to reflect a more reasonable level of test year costs, (vii) approval of the SRB mechanism with modifications to customer notifications, procedural timelines and the inclusion of any qualifying technology and fuel source bid received through an ASRFP, and (viii) recovery of all Demand Side Management (“DSM”) costs through the DSM Adjustment Charge (“DSMAC”) rather than through base rates.

Current wording

On February 22, 2024, the ACC approved the 2022 Rate Case ROO with certain amendments that resulted in, among other things, (i) an approximately $491.7 million increase in the annual base revenue requirement, (ii) a 9.55% return on equity, (iii) a 0.25% return on the increment of fair value rate base greater than original cost, (iv) an effective fair value rate of return of 4.39%, (v) a return set at the Company’s weighted average cost of capital on the net prepaid pension asset and net other post-employment benefit liability in rate base, (vi) an adjustment to generation maintenance and outage expense to reflect a more reasonable level of test year costs, (vii) approval of the SRB mechanism with modifications to customer notifications, procedural timelines and the inclusion of any qualifying technology and fuel source bid received through an ASRFP, and (viii) recovery of all DSM costs through the DSM Adjustment Charge (“DSMAC”) rather than through base rates.

Previous wording

Six intervenors and the Attorney General of Arizona requested rehearing on various issues included in the ACC’s decision, such as the grid access charge (“GAC”) for solar customers, the SRB, and Coal Community Transition funding. On April 15, 2024, the ACC granted, in part, the rehearing applications of the Attorney General, Arizona Solar Energy Industries Association (“AriSEIA”), Solar Energy Industries Association (“SEIA”), and Vote Solar specifically to review whether the GAC rate is just and reasonable, including whether it should be higher or lower, whether the GAC rate constitutes a discriminatory fee to solar customers, and whether omission of a GAC charge is discriminatory to non-solar customers. All other applications for rehearing were denied. A limited rehearing was held October 28 through November 1, 2024. Following the limited rehearing, an Administrative Law Judge issued a ROO (the “Limited Rehearing ROO”) on December 3, 2024. The Limited Rehearing ROO recommended affirming the GAC as just and reasonable and that the GAC is not discriminatory to solar customers and the absence of a GAC is not discriminatory to non-solar customers. On December 17, 2024, the ACC approved the Limited Rehearing ROO with an amendment that requires APS in its next rate case to propose a revenue allocation based on a site-load cost of service study in order to bring further parity in revenue collection between solar and non-solar customers. SEIA, AriSEIA, Vote Solar, the Arizona Attorney General, and two individual customers have filed requests for rehearing of the ACC’s December 17, 2024 decision on the rehearing. The ACC has taken no action on these requests. In addition, each of these parties has subsequently filed an appeal to the Arizona Court of Appeals seeking review of the ACC’s decisions regarding the GAC and on rehearing. APS cannot predict the outcome of these proceedings.

Current wording

Six intervenors and the Attorney General of Arizona requested rehearing on various issues included in the ACC’s decision, such as the GAC for solar customers, the SRB, and Coal Community Transition funding. On April 15, 2024, the ACC granted, in part, the rehearing applications of the Attorney General, AriSEIA, SEIA, and Vote Solar specifically to review whether the GAC rate is just and reasonable, including whether it should be higher or lower, whether the GAC rate constitutes a discriminatory fee to solar customers, and whether omission of a GAC charge is discriminatory to non-solar customers. All other applications for rehearing were denied. A limited rehearing was held October 28 through November 1, 2024. Following the limited rehearing, an Administrative Law Judge issued the Limited Rehearing ROO on December 3, 2024, which recommended affirming the GAC as just and reasonable and that the GAC is not discriminatory to solar customers and the absence of a GAC is not discriminatory to non-solar customers. On December 17, 2024, the ACC approved the Limited Rehearing ROO with an amendment that requires APS in its next rate case to propose a revenue allocation based on a site-load cost of service study in order to bring further parity in revenue collection between solar and non-solar customers. SEIA, AriSEIA, Vote Solar, the Arizona Attorney General, and two individual customers have filed requests for rehearing of the ACC’s December 17, 2024 decision on the rehearing. The ACC has taken no action on these requests. In addition, each of these parties has subsequently filed an appeal to the Arizona Court of Appeals seeking review of the ACC’s decisions regarding the GAC and on rehearing. On February 25, 2026, parties provided oral arguments before the Court of Appeals. APS cannot predict the outcome of these proceedings.

Previous wording

On January 5, 2023, the ACC opened a new docket to explore the possibility of modifications to the ACC’s historical test year rules. The ACC requested comments and held two workshops exploring ways to reduce regulatory lag, including alternative ratemaking structures such as future test years, hybrid test years, and formula rates. On December 3, 2024, the ACC approved a policy statement regarding formula rate plans. The policy statement provides regulated utilities with the opportunity to propose formula rate plans in future rate cases. On March 28, 2025, the Residential Utility Consumer Office (“RUCO”), the Arizona Large Customer Group (“ALCG”), and an individual customer filed a lawsuit challenging the ACC’s authority to issue the formula rate policy statement outside of Arizona’s formula rulemaking process. On June 13, 2025, the lawsuit challenging the ACC’s formula rate policy was dismissed by the Superior Court of Maricopa County. Following the dismissal, the plaintiffs filed an appeal with the Arizona Court of Appeals as well as a Petition for Special Action with the Arizona Supreme Court. The Supreme Court declined to exercise jurisdiction on the Petition for Special Action. The plaintiffs have also filed a Petition for Special Action with the Arizona Court of Appeals, which has accepted jurisdiction to determine whether the case should be remanded back to the Superior Court for expedited consideration of the merits. Further special action proceedings remain pending at this time. APS cannot predict the outcome of this matter.

Current wording

On January 5, 2023, the ACC opened a new docket to explore the possibility of modifications to the ACC’s historical test year rules. The ACC requested comments and held two workshops exploring ways to reduce regulatory lag, including alternative ratemaking structures such as future test years, hybrid test years, and formula rates. On December 3, 2024, the ACC approved a policy statement regarding formula rate plans. The policy statement provides regulated utilities with the opportunity to propose formula rate plans in future rate cases. On March 28, 2025, RUCO, ALCG, and an individual customer filed a lawsuit challenging the ACC’s authority to issue the formula rate policy statement outside of Arizona’s formula rulemaking process. On June 13, 2025, the lawsuit challenging the ACC’s formula rate policy was dismissed by the Superior Court of Maricopa County. Following the dismissal, the plaintiffs filed an appeal with the Arizona Court of Appeals as well as a Petition for Special Action with the Arizona Supreme Court. The Supreme Court declined to exercise jurisdiction on the Petition for Special Action. The plaintiffs also filed a Petition for Special Action with the Arizona Court of Appeals, which has accepted jurisdiction to determine whether the case should be remanded back to the Superior Court for expedited consideration of the merits. On November 21, 2025, the Arizona Court of Appeals ruled that the issue should be remanded back to the Superior Court to determine whether the ACC’s formula rate policy must go through a formal rulemaking process. In response, APS, the ACC, and several other Arizona utility companies filed petitions for review of the Court of Appeals decision with the Arizona Supreme Court, which is pending at this time. APS cannot predict the outcome of this matter.

Previous wording

Pinnacle West is the primary beneficiary of a protected cell captive insurance cell (the “Captive”). The Captive provides insurance coverage to Pinnacle West and our subsidiaries that supplements commercial and mutual insurance coverage. The Captive insures Pinnacle West and its subsidiaries for terrorism coverage, excess liability including certain wildfire coverage, excess property insurance, and excess employment practice liability. The Captive policies exclude nuclear liability at Palo Verde. See Note 8. The Captive may hold investment assets in cash, cash equivalents, and equity and fixed income instruments.

Current wording

Pinnacle West is the primary beneficiary of a protected cell captive insurance cell. The Captive provides insurance coverage to Pinnacle West and our subsidiaries that supplements commercial and mutual insurance coverage. The Captive insures Pinnacle West and its subsidiaries for terrorism coverage, excess liability including certain wildfire coverage, excess property insurance, and excess employment practice liability. The Captive policies exclude nuclear liability at Palo Verde. See Note 9. The Captive may hold investment assets in cash, cash equivalents, and equity and fixed income instruments.

Previous wording

The Inflation Reduction Act of 2022 (“IRA”) significantly expanded the availability of tax credits for investments in clean energy generation technologies and energy storage. Key provisions included (i) an extension of tax credits for solar and wind generation, including a new option for solar investments to claim a Production Tax Credit (“PTC”) in lieu of the Investment Tax Credit (“ITC”) beginning in 2022; (ii) expansion of the ITC to cover stand-alone energy storage technology beginning in 2023; (iii) introduction of technology neutral clean energy ITCs and PTCs beginning in 2025; and (iv) introduction of a new PTC for nuclear energy produced by existing nuclear energy plants, available from 2024 through 2032.

Current wording

The IRA significantly expanded the availability of tax credits for investments in clean energy generation technologies and energy storage. Key provisions included (i) an extension of tax credits for solar and wind generation, including a new option for solar investments to claim a PTC in lieu of the ITC beginning in 2022; (ii) expansion of the ITC to cover stand-alone energy storage technology beginning in 2023; (iii) introduction of technology neutral clean energy ITCs and PTCs beginning in 2025; and (iv) introduction of a new Nuclear PTC, available from 2024 through 2032.

Previous wording

The Company believes that its projects which are currently under construction will continue to qualify for IRA tax credits. The Company is continuing to analyze the OBBBA and is awaiting regulations and other guidance as to the application of these new rules to projects not currently under construction.

Current wording

The Company believes that its projects which are currently under construction will continue to qualify for IRA tax credits. See Note 5 for information on Palo Verde’s Nuclear PTC. The Company is continuing to analyze the OBBBA and is awaiting regulations and other guidance as to the application of these new rules to projects not currently under construction.

Previous wording

PNW Power’s investments include TransCanyon, a 50/50 joint venture that was formed in 2014 with BHE U.S. Transmission LLC, a subsidiary of Berkshire Hathaway Energy Company. TransCanyon is pursuing independent electric transmission opportunities within the 11 U.S. states that comprise the Western Interconnection, excluding opportunities related to transmission service that would otherwise be provided under the tariffs of the retail service territories of the TransCanyon partners’ utility affiliates. The DOE’s GDO selected TransCanyon to enter into capacity contract negotiations for up to 25% of the Cross-Tie 500-kilovolt transmission line (“Cross-Tie”) as part of the Transmission Facilitation Program. The agreement was executed on June 12, 2024; however, on September 5, 2025, TransCanyon sent a notice to terminate the agreement that will be effective November 4, 2025. The proposed Cross-Tie project includes a 214-mile transmission line connecting Utah and Nevada that is intended to help improve grid reliability and relieve congestion on other transmission lines.

Current wording

PNW Power holds certain investments and assets that were previously held by BCE, a former subsidiary of Pinnacle West that was sold in 2024. PNW Power’s investments include TransCanyon, a 50/50 joint venture that was formed in 2014 with BHE U.S. Transmission LLC, a subsidiary of Berkshire Hathaway Energy Company. TransCanyon is pursuing independent electric transmission opportunities within the 11 U.S. states that comprise the Western Interconnection, excluding opportunities related to transmission service that would otherwise be provided under the tariffs of the retail service territories of the TransCanyon partners’ utility affiliates. These opportunities include the proposed 500-kV Cross-Tie transmission project (the “Cross-Tie Project”), which includes a 214-mile transmission line connecting Utah and Nevada that is intended to help improve grid reliability and relieve congestion on other transmission lines. On December 18, 2025, the Department of Interior Bureau of Land Management issued a Record of Decision permitting the development of Cross-Tie Project, which became non-appealable in late January 2026.

Previous wording

PNW Power’s investments also include minority ownership positions in two wind farms operated by Tenaska Energy, Inc. and Tenaska Energy Holdings, LLC, the 242 MW Clear Creek and the 250 MW Nobles 2 wind farms. Clear Creek achieved commercial operation in May 2020; however, in the fourth quarter of 2022, PNW Power’s equity method investment was fully impaired. Nobles 2 achieved commercial operation in December 2020. Both wind farms deliver power under long-term power purchase agreements. PNW Power indirectly owns 9.9% of Clear Creek and 5.1% of Nobles 2.

Current wording

PNW Power’s investments also include minority ownership positions in two wind farms operated by Tenaska Energy, Inc. and Tenaska Energy Holdings, LLC, the 242 MW Clear Creek and the 250 MW Nobles 2 wind farms. Clear Creek achieved commercial operation in May 2020; however, in the fourth quarter of 2022, PNW Power’s equity method investment was fully impaired. Nobles 2 achieved commercial operation in December 2020. Both wind farms deliver power under long-term PPAs. PNW Power indirectly owns 9.9% of Clear Creek and 5.1% of Nobles 2.

Previous wording

El Dorado is a wholly-owned subsidiary of Pinnacle West. El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures. In particular, El Dorado has committed to and/or holds the following:

Current wording

El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures. In particular, El Dorado has committed to and/or holds the following:

Previous wording

•$25 million investment in the Energy Impact Partners fund, of which approximately $20 million has been funded as of September 30, 2025. Energy Impact Partners is an organization that focuses on fostering innovation and supporting the transformation of the utility industry.

Current wording

•$25 million investment in the Energy Impact Partners fund, of which approximately $21 million has been funded as of March 31, 2026. Energy Impact Partners is an organization that focuses on fostering innovation and supporting the transformation of the utility industry.

Previous wording

•$25 million investment in AZ-VC Fund I, LLC (formerly invisionAZ Fund) (“AZ-VC”), of which approximately $14.3 million has been funded as of September 30, 2025. AZ-VC is a fund focused on analyzing, investing, managing, and otherwise dealing with investments in privately-held early stage and emerging growth technology companies and businesses primarily based in Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in Arizona.

Current wording

•$25 million investment in Copper Sky, previously AZ-VC, of which approximately $17 million has been funded as of March 31, 2026. Copper Sky is a fund focused on analyzing, investing, managing, and otherwise dealing with investments in privately-held early stage and emerging growth technology companies and businesses primarily based in Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in Arizona.

Previous wording

•$7.5 million investment in Westly Seed Fund, of which approximately $1.5 million has been funded as of September 30, 2025. Westly Seed Fund is focused on supporting entrepreneurs involved in the energy, mobility, building, and industrial sectors.

Current wording

•$7.5 million investment in Westly Seed Fund, of which approximately $2 million has been funded as of March 31, 2026. Westly Seed Fund is focused on supporting entrepreneurs involved in the energy, mobility, building, and industrial sectors.

Previous wording

•Equity investment in SAI Advanced Power Solutions, Inc. (“SAI”), a private corporation that manufactures electrical switchgear equipment used by data centers. El Dorado accounts for this investment under the equity method and has an investment carrying value of $16.7 million as of September 30, 2025.

Current wording

•Equity investment in SAI, a private corporation that manufactures electrical switchgear equipment used by data centers. El Dorado accounts for this investment under the equity method and has an investment carrying value of approximately $26 million as of March 31, 2026.