APS submitted an application to the ACC requesting to increase Pinnacle West's permitted yearly equity infusions to equal up to 2.5% of Pinnacle West's consolidated assets each calendar year on a three-year rolling average basis. This indicates a strategic move to strengthen APS's capital structure.

APS is exploring regional market solutions as part of the Western Markets Exploratory Group to identify market solutions that can help achieve carbon reduction goals while supporting reliable, affordable service for customers. This shows a commitment to adapting to evolving market dynamics.

APS plans to install more than 2,700 MW of utility scale energy storage by 2026, including through energy storage projects under PPAs and AZ Sun Program retrofits as well as through resources solicited through current and future RFPs. This demonstrates a commitment to clean energy.

APS has implemented a variety of financial assistance programs to assist customers struggling to pay their energy bills, including a new tier with larger discounts added for APS's lowest income customers added in the second quarter of 2024. This shows a commitment to customer affordability.

APS employees have delivered an enhanced customer experience in recent years through a number of past and ongoing initiatives, including improving the ease-of-use of APS's automated phone system and advancing phone advisor soft skill development through updated training curriculum. This indicates a focus on customer satisfaction.

APS is managing through significant growth in the Phoenix metropolitan area while experiencing supply chain issues similar to those experienced in other industries. This suggests effective operational management in a challenging environment.

APS is subject to numerous environmental laws and regulations affecting many aspects of its present and future operations, including air emissions of both conventional pollutants and greenhouse gases, water quality, wastewater discharges, solid waste, hazardous waste, and coal combustion residuals. These laws and regulations can change from time to time, imposing new obligations on APS resulting in increased capital, operating, and other costs.

APS is a PRP in the Motorola 52nd Street Superfund Site, Operable Unit 3 (“OU3”) in Phoenix, Arizona. APS has facilities that are within this Superfund site. APS and Pinnacle West have agreed with EPA to perform certain investigative activities of the APS facilities within OU3.

EPA announced on January 23, 2024, that it was proposing to add Arizona and New Mexico (along with two other additional states) to EPA's NOx emission allowance trading program finalized last year. That proposal involves adding these states to the Good Neighbor Plan and disapproving the corresponding provisions of each state's State Implementation Plan.

APS continues to focus on mitigating the cost pressures related to the current inflationary environment. Overall inflation grew by 2.7% in Phoenix and 3.0% nationally over the twelve months ended June 2024. While inflationary impacts to APS have begun to slow in 2024, select categories have seen increases up to 24% in the quarter ended June 30, 2024, due to increased labor costs and costs of certain materials.

There are also external opportunities under APS's customer affordability initiative, such as APS's participation in the Western Energy Imbalance Market (“WEIM”). WEIM continues to be a tool for creating savings for APS's customers from the real-time, voluntary market.

On top of these existing growth trends, APS is also now receiving unprecedented incremental requests for service from extra-large commercial energy users (over 25 MW) with very high energy demands that persist virtually around-the-clock. These incremental requests for service by extra-large energy users far exceed available generation and transmission resource capacity in the Southwest region for the foreseeable future.

Operations and maintenance expenses decreased $5 million for the three months ended June 30, 2024, compared with the prior-year period, primarily due to a decrease of $4 million related to nuclear generation costs.

APS's customer affordability initiative includes internal opportunities, such as training and mentoring employees on identifying efficiency opportunities; maintaining an 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 areas such as transformers; and implementing automation technologies to enhance efficiencies and increase data-oriented decision making.

APS went live with a new Energy Management System (“EMS”) in April 2024. APS expects the new EMS to provide a better foundation which will improve future integration of the renewable and energy storage assets into APS's generation resource portfolio, allowing APS to maximize the flexibility of its resources and fully engage in the Energy Imbalance Market.

APS went live with a new Energy Management System (“EMS”) in April 2024. APS expects the new EMS to provide a better foundation which will improve future integration of the renewable and energy storage assets into APS's generation resource portfolio, allowing APS to maximize the flexibility of its resources and fully engage in the Energy Imbalance Market.

To address the rapid advancement of artificial intelligence technology risk and opportunities, APS has developed a cross functional governance structure with leadership and experts from our information technology, cybersecurity, human resources, ethics, supply chain, legal, and nuclear generation teams.

APS is exploring regional market solutions as part of the Western Markets Exploratory Group to identify market solutions that can help achieve carbon reduction goals while supporting reliable, affordable service for customers.

In June 2024, Pinnacle West issued $525 million of 4.75% convertible senior notes due 2027 (the "Convertible Notes”), which are senior unsecured obligations of Pinnacle West, and will mature on June 15, 2027. Proceeds from the Convertible Notes were used to repay APS's 364-day $350 million term loan facility that matures on December 10, 2024 and commercial paper borrowings.

Additionally, in June 2024, Pinnacle West completed the sale of $350 million Floating Rate Notes due 2026 (the "Floating Rate Notes"). Proceeds were used to repay a portion of Pinnacle West's $450 million term loan maturing in December 2024 and the full amount of Pinnacle West's $175 million term loan maturing in December 2024.

APS submitted an application to the ACC requesting to increase Pinnacle West's permitted yearly equity infusions to equal up to 2.5% of Pinnacle West's consolidated assets each calendar year on a three-year rolling average basis. APS cannot predict the outcome of this matter.

APS has a 2050 goal to provide 100% clean, carbon-free electricity. Achieving this 2050 goal will require, among other things, innovative thinking, emergent clean energy and storage technologies, upgrades and expansions to the grid, and supportive public policy.

APS has a 2030 target to achieve a resource mix that is 65% clean energy, with 45% of the generation portfolio coming from renewable energy. “Clean” is measured as percent of energy mix, which includes all carbon-free resources like nuclear, renewables, and demand-side management.

APS is committed to exit from coal-fired generation by 2031. The plan to exit coal-fired generation by 2031 will require APS to stop relying on coal-generation at the Four Corners Power Plant (“Four Corners”).

APS continues to focus on mitigating the cost pressures related to the current inflationary environment. Overall inflation grew by 2.7% in Phoenix and 3.0% nationally over the twelve months ended June 2024.

APS will continue to monitor this emerging technology, particularly in regard to the U.S. Environmental Protection Agency's (“EPA”) proposed Greenhouse Gas (“GHG”) rule.

APS is monitoring the regulatory environment. The company is awaiting guidance from the U.S. Treasury Department related to the definition of “gross receipts” from nuclear sales for purposes of the credit phase-out applicable to the nuclear PTC.