Summary of PINNACLE WEST CAPITAL CORP

ITEM 8.01. OTHER EVENTS
This Current Report on Form 8-K is limited to the disclosure of the reclassification of financial statements of Pinnacle West Capital Corporation
(the "Company" or "Pinnacle West") and of Arizona Public Service Company ("APS")
to reflect certain reclassifications of marketing and trading assets and liabilities to a net basis of reporting and to reflect reclassifications of certain activities of SunCor Development Company ("SunCor") to discontinued operations.
This report reflects the impacts of the reclassifications on portions of the following disclosures in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 ("2007 Form 10-K"):
• Item 1. Business;

• Item 6. Selected Financial Data;

• Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations;

• Item 8. Financial Statements and Supplementary Data; and

• Item 15. Exhibits and Financial Statement Schedules.

NO ATTEMPT HAS BEEN MADE IN THIS REPORT TO MODIFY OR UPDATE OTHER DISCLOSURES EXCEPT AS REQUIRED TO REFLECT THE EFFECTS OF THE RECLASSIFICATIONS DESCRIBED BELOW.
As previously disclosed in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008 ("March 2008 Form 10-Q"), we adopted Financial Accounting Standards Board ("FASB") Staff Position No. FIN 39-1, "Amendment of FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts" (FIN 39-1) on January 1, 2008. In accordance with this guidance, we elected to offset fair value amounts for derivative instruments, including collateral, executed with the same counterparty under a master netting agreement. FIN 39-1 requires retrospective application for all prior periods presented. Our March 2008 Form 10-Q, our Form 10-Q for the fiscal quarter ended June 30, 2008 ("June 2008 Form 10-Q"), and our Form 10-Q for the fiscal quarter ended September 30, 2008 ("September 2008 Form 10-Q"), previously filed with the Securities and Exchange Commission, reflect such reclassifications.
Also, as previously disclosed in our March 2008 Form 10-Q, June 2008 Form 10-Q and September 2008 Form 10-Q, certain activities related to SunCor were required to be reported as discontinued operations in accordance with Statement of Financial Accounting Standards ("SFAS") 144. Among other guidance, SFAS 144 prescribes accounting for discontinued operations and defines certain activities as discontinued operations. The March 2008 Form 10-Q, June 2008 Form 10-Q and September 2008 Form 10-Q reflect reclassifications related to certain SunCor discontinued activities for 2007.
This Current Report on Form 8-K provides updated information to substantially conform the 2007 Form 10-K to the presentation reported in our March 2008 Form 10-Q, June 2008 Form 10-Q and September 2008 Form 10-Q.

TABLE OF CONTENTS

Page GLOSSARY 3

Business 5 Selected Financial Data 24 Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Financial Statements and Supplementary Data 59 Financial Statements and Exhibits 142

GLOSSARY ACC - Arizona Corporation Commission
ADEQ - Arizona Department of Environmental Quality AFUDC - Allowance for Funds Used During Construction ALJ - Administrative Law Judge
ANPP - Arizona Nuclear Power Project, also known as Palo Verde APS - Arizona Public Service Company, a subsidiary of the Company APSES - APS Energy Services Company, Inc., a subsidiary of the Company Base Fuel Rate - the portion of APS' retail base rates attributable to fuel and purchased power costs
Cholla - Cholla Power Plant
Clean Air Act - Clean Air Act, as amended Company - Pinnacle West Capital Corporation DOE - United States Department of Energy EITF - FASB's Emerging Issues Task Force El Dorado - El Dorado Investment Company, a subsidiary of the Company EPA - United States Environmental Protection Agency ERMC - Energy Risk Management Committee
FASB - Financial Accounting Standards Board FERC - United States Federal Energy Regulatory Commission FIN - FASB Interpretation Number
FIP - Federal Implementation Plan
Fitch - Fitch, Inc.
Four Corners - Four Corners Power Plant
GAAP - accounting principles generally accepted in the United States of America IRS - United States Internal Revenue Service kW - kilowatt, one thousand watts
kWh - kilowatt-hour, one thousand watts per hour Moody's - Moody's Investors Service
MW - megawatt, one million watts
MWh - megawatt-hour, one million watts per hour NAC - collectively, NAC Holding Inc. and NAC International Inc., subsidiaries of El Dorado that were sold in November 2004 Native Load - retail and wholesale sales supplied under traditional cost-based rate regulation
Note - a Note to Pinnacle West's Consolidated Financial Statements in Item 8 of this report

NPC - Nevada Power Company
NRC - United States Nuclear Regulatory Commission OCI - other comprehensive income
Off-System Sales - sales of electricity from generation owned or contracted by the Company that is over and above the amount required to serve APS' retail customers and traditional wholesale contracts Palo Verde - Palo Verde Nuclear Generating Station Pinnacle West - Pinnacle West Capital Corporation, the Company Pinnacle West Energy (PWEC) - Pinnacle West Energy Corporation, a subsidiary of the Company, dissolved as of August 31, 2006 Pinnacle West Marketing & Trading - Pinnacle West Marketing & Trading Co., LLC, a subsidiary of the Company
PRP - potentially responsible parties under Superfund PSA - power supply adjustor approved by the ACC to provide for recovery or refund of variations in actual fuel and purchased power costs compared with the Base Fuel Rate
PWEC Dedicated Assets - the following power plants, each of which was transferred by Pinnacle West Energy to APS on July 29, 2005: Redhawk Units 1 and 2, West Phoenix Units 4 and 5 and Saguaro Unit 3 Salt River Project - Salt River Project Agricultural Improvement and Power District
SEC - United States Securities and Exchange Commission SFAS - Statement of Financial Accounting Standards Silverhawk - Silverhawk Power Station
Standard & Poor's - Standard & Poor's Corporation SunCor - SunCor Development Company, a subsidiary of the Company Sundance Plant - 420 megawatt generating facility located approximately 55 miles southeast of Phoenix, Arizona
Superfund - Comprehensive Environmental Response, Compensation and Liability Act

2005 Deferrals - PSA deferrals related to 2005 replacement power costs associated with Palo Verde outages
2006 Deferrals - PSA deferrals related to 2006 replacement power costs associated with outages or reduced power operations at Palo Verde VIE - variable-interest entity
West Phoenix - West Phoenix Power Plant

BUSINESS OVERVIEW General
Pinnacle West was incorporated in 1985 under the laws of the State of Arizona and owns all of the outstanding equity securities of APS, its major subsidiary. APS is a vertically-integrated electric utility that provides either retail or wholesale electric service to most of the state of Arizona, with the major exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.
Pinnacle West's other principal subsidiary is SunCor, which is engaged in real estate development activities in the western United States. See "Business of SunCor Development Company" in this Item 1. Pinnacle West's other first-tier subsidiaries, APSES, El Dorado and Pinnacle West Marketing & Trading are discussed in "Business of Other Subsidiaries" in this Item 1.
Pinnacle West Energy, which owned and operated unregulated generating plants, transferred the PWEC Dedicated Assets to APS on July 29, 2005 and sold its 75% ownership interest in Silverhawk to NPC on January 10, 2006. As a result, Pinnacle West Energy no longer owned any generating plants and was dissolved as of August 31, 2006.
Business Segments
Pinnacle West has two principal business segments (determined by products, services and the regulatory environment):
• the regulated electricity segment (accounting for 83% of operating revenues in 2007), which consists of traditional regulated retail and wholesale electricity businesses (primarily electric service to Native Load customers) and related activities, and includes electricity generation, transmission and distribution; and

• the real estate segment (accounting for 6% of operating revenues in 2007), which consists of SunCor's real estate development and investment activities.

See Note 17 for financial information about the business segments. APS ACC Proceedings
The key issue affecting Pinnacle West's and APS' financial outlook is adequate and timely retail rate treatment by the ACC. Note 3 discusses the results of APS' most recent retail rate case as well as other rate matters. Employees
At December 31, 2007, Pinnacle West employed approximately 7,600 people, including the employees of its subsidiaries. Of these employees, approximately 6,800 were employees of APS, including employees at jointly-owned generating facilities (approximately 3,000 employees) for which APS serves as the generating facility manager. Approximately 800 people were employed by

Pinnacle West and its other subsidiaries. Pinnacle West's principal executive offices are located at 400 North Fifth Street, Phoenix, Arizona 85004 (telephone 602-250-1000).
Available Information
Pinnacle West makes available free of charge on or through its internet site, (www.pinnaclewest.com) the following filings as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC: its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
Pinnacle West also has a Corporate Governance webpage. You can access Pinnacle West's Corporate Governance webpage through its internet site, www.pinnaclewest.com, by clicking on the "About Us" link to the heading "Corporate Commitments." Pinnacle West posts the following on its Corporate Governance webpage:
• Corporate Governance Guidelines;

• Board Committee Summary;

• Charters for Pinnacle West's Audit Committee, Corporate Governance Committee, Finance, Nuclear and Operating Committee and Human Resources Committee;

• Code of Ethics for Financial Professionals;

• Ethics Policy and Standards of Business Practices;

• Director Independence Standards;

• Executive Officer Stock Ownership Guidelines; and

• Restricted Stock Retention Policy.

Pinnacle West will post any amendments to the Code of Ethics and Ethics Policy and Standards of Business Practices, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange, on its internet site. The information on Pinnacle West's internet site is not incorporated by reference into this report.
You can request a copy of these documents, excluding exhibits, by contacting Pinnacle West at the following address: Pinnacle West Capital Corporation, Office of the Secretary, Station 9068, P.O. Box 53999, Phoenix, Arizona 85072-3999 (telephone 602-250-3252).
Forward-Looking Statements
This document contains forward-looking statements based on current expectations, and neither Pinnacle West nor APS assumes any obligation to update these statements or make any further statements on any of these issues, except as required by applicable law. These forward-looking statements are often identified by words such as "estimate," "predict," "hope," "may," "believe," "anticipate," "plan," "expect," "require," "intend," "assume" and similar words. Because actual results may differ materially from expectations, we caution readers not to place undue reliance on these statements. A number of factors could cause future results to differ materially from historical results, or from results or outcomes currently expected or sought by Pinnacle West or APS. In addition to the Risk Factors described in Item 1A of this report, these factors include, but are not limited to:

• state and federal regulatory and legislative decisions and actions, particularly those affecting our rates and our recovery of fuel and purchased power costs;

• the outcome of regulatory, legislative and judicial proceedings, both current and future, relating to the restructuring of the electric industry and environmental matters (including those related to climate change);

. . .