Item 8.01. Other Events.
Interim Rate Order
On December 18, 2008, the Arizona Corporation Commission (the "ACC") voted to approve an emergency interim base rate surcharge for Arizona Public Service Company ("APS"), effective for all bills issued after December 31, 2008. This surcharge is expected to increase annual pretax retail revenues approximately $65.2 million, and is subject to refund with interest pending the final outcome of APS' general retail rate case. APS had requested an interim increase of approximately $115 million in annual pretax retail revenues. For a typical residential customer on APS' standard rate schedule, the surcharge will result in a monthly increase of $1.46 in the winter and $1.99 in the summer.
The decision requires that APS (a) examine its operations and expenses, targeting additional cuts of at least $20 million, and reinvest the savings and surcharge revenues "in infrastructure and technology necessary to serve APS customers and reduce the need for external debt financing"; (b) file with the ACC periodic reports of communications with credit ratings agencies; and
(c) post a $10 million bond or letter of credit until the ACC issues a final order in APS' general retail rate case. The ACC is expected to issue a written order reflecting the decision before year-end. Each party to the proceeding will have the option of filing a motion for reconsideration of the written order within 20 days of its issuance. Additionally, during the ACC open meeting in which the ACC approved the interim base rate surcharge, the director of the ACC Utilities Division stated that the Division's prepared testimony in APS' general rate case, which is scheduled to be filed with the ACC on December 19, 2008, will recommend an increase in annual pretax retail revenues that is more than the $65.2 million granted for the interim base rate surcharge. For more information regarding APS' request for an 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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