What Pinnacle West Capital Corporation told the SEC could break it.

Increased tariffs and supply-chain constraints led APS to amend several agreements from its 2023 All-Source RFP to mitigate cost impacts, and it remains cautious about further price increases from current/proposed tariffs that could raise generation-buildout costs and tighten supply chains.

“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.”

APS's fossil generation is subject to evolving EPA regulation — 2024 GHG power-plant rules requiring CCS/90% capture by 2032 for frequently-operated gas plants and coal-plant retirement-date subcategories, plus ELG and tightening ozone NAAQS — with a June 2025 EPA proposal to repeal the GHG rules adding uncertainty APS cannot yet quantify.

“The regulatory deadlines in 2032 by which new, frequently operated gas-fired power plants must install CCS and achieve 90% capture efficiency may not be feasible. Future resource plans and procurement efforts implicating the development of such new generation remain pending and, as such, at this time APS is not able to quantify the financial impact associated with EPA's existing GHG regulations for power plants.”

Pinnacle West/APS is exposed to market fluctuations in the commodity price and transportation costs of electricity and natural gas (a 10% gas-price move shifts mark-to-market regulatory asset/liability ~$58M), managed via futures/forwards/options/swaps and a risk-management committee; APS is also adding up to 2,000 MW of flexible gas generation.

“Commodity Price Risk We are exposed to the impact of market fluctuations in the commodity price and transportation costs of electricity and natural gas. Our risk management committee, consisting of officers and key management personnel, oversees company-wide energy risk management activities to ensure compliance with our stated energy risk management policies.”