Item 8.01. Other Events
Interim Rate Recommended Order
On November 12, 2008, an administrative law judge ("ALJ") with the Arizona Corporation Commission ("ACC") issued a recommended order in connection with Arizona Public Service Company's ("APS") request for an interim base rate surcharge. The surcharge requested by APS would produce approximately $115 million in annual pretax retail revenues. In the recommended order, the ALJ recommended that the ACC:
• Deny APS' interim rate request because, in her opinion, "emergency" conditions do not exist to support such an increase;

• Address in the pending general rate case the appropriateness of the current 90/10 sharing provision in APS' power supply adjustor, and consider eliminating such a sharing provision on an interim basis pending the conclusion of the general rate proceeding, because "APS' cash flow is diminished" by such provision;

• Require APS to file monthly reports on APS' and Pinnacle West Capital Corporation's ("Pinnacle West") cash position and financial ratios, including their projected cash flows, until the pending general rate proceeding is resolved; and

• Require APS to present an analysis in the general rate case of what steps it has taken to improve certain financial ratios, including information regarding steps taken, or that may be taken in the future, to reduce costs and thereby increase available cash.

APS is currently evaluating the recommended order and expects to file exception comments by the due date of November 21, 2008. The ACC is expected to consider the matter thereafter. APS cannot predict the outcome of this matter. (For more information regarding the motion requesting the interim base rate surcharge and the general retail rate proceeding, see "Motion for Approval of Interim Rate" and "2008 General Rate Case" in Note 5 of Notes to Condensed Consolidated Financial Statements in the Pinnacle West/APS Quarterly Report for the fiscal quarter ended September 30, 2008.)

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