Exhibit 10.1

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT executed this 11 day of October, 2002, and
effective as of October 1, 2002, by and between ARIZONA PUBLIC SERVICE COMPANY,
an Arizona corporation (hereinafter referred to as the "Company" or "Employer")
and JAMES M. LEVINE (hereinafter referred to as the "Employee");

                                    RECITALS

     A.   The Company  desires to employ  Employee in the  position of Executive
          Vice President APS Generation.

     B.   The  Company  desires to insure,  insofar  as  possible,  that it will
          continue  to have the  benefit  of the  Employee's  services  over the
          Employment Term and to protect its  confidential  information and good
          will.

     C.   Employer is engaged in the business of generation,  construction,  and
          acquisition of electrical power, and the transmission and distribution
          of electrical power.

     NOW,  THEREFORE,  in  consideration  of the  foregoing  and  of the  mutual
covenants and agreements  hereinafter  set forth,  the parties  hereto  mutually
covenant and agree as follows:

                                   AGREEMENTS

     1. TITLE.  The Company does hereby  employ the  Employee as Executive  Vice
President APS Generation,  and the Employee does hereby accept and agree to such
employment.

     2. EMPLOYMENT TERM.

     (a) The Employee shall be employed by the Company in the position set forth
in Section 1 for a five (5) year period commencing on October 1, 2002 and ending
on October 1, 2007 (the "Employment Term").

     (b) The parties may renew this Employment  Agreement for additional periods
on mutually  acceptable  terms and  conditions,  but neither the Company nor the
Employee is under any obligation to agree to such extensions.

     (c) In the event of a "Change of Control" [as defined in the Employee's Key
Executive  Employment  Severance Agreement ("KEESA")] the terms of the KEESA are
controlling.

     3.  COMPENSATION.  Employer  agrees to pay Employee an annual salary in the
amount of $550,000.00.

     4. BONUSES AND OTHER COMPENSATION.

     All incentive  plans are subject to change or  termination  at the Board of
Director's sole discretion.
<PAGE>
     (a) INCENTIVE PAY.  Employer agrees to award Employee an incentive bonus of
up to 60% of base  salary with a target  level of 40% of base  salary  under the
Officer  Incentive Plan if corporate,  departmental  and individual  targets are
met, all in accordance with the terms of that Plan.

     (b)  PERFORMANCE  SHARES AND STOCK OPTIONS.  Employer agrees to request the
Human Resources Committee ("the Committee") to grant Employee Performance Shares
in an amount  equivalent  to 65% - 85% of the amount  awarded to a member of the
Office of the President under the Stock Incentive Plan. The Employer also agrees
to request the Committee to grant  Performance  Accelerated  Stock Options under
the Stock  Incentive Plan equal to five times the number of  Performance  Shares
granted under this Paragraph (b).

     (c)  ADDITIONAL  PERFORMANCE  SHARES.  In addition  to (b) above,  Employer
agrees to request the Committee to grant Employee 2000  Performance  Shares each
year under the 2002 Stock  Incentive Plan (the "2002 Plan") without any matching
requirement, all in accordance with the terms of the 2002 Plan and as previously
agreed upon by the parties.

     (d) PENSION.  Employee's  pension  benefit  that was agreed upon  effective
January 1, 2002 will remain the same.

     (e) OTHER PAYMENTS.

          i.  Employee is eligible for  incentive  payments  based on Palo Verde
     Nuclear  Generating  Station  maintenance of specified  federal and nuclear
     oversight  program  ratings,  nuclear  safety,  and for  successful  outage
     results.

          ii.  The  Company  agrees to pay for a  Country  Club  membership  for
     Employee's  use. The Company will purchase the membership and Employee will
     assume payment of the monthly dues.

     5. BENEFITS AND OBLIGATIONS.

     (a) The  Employee  shall be included to the extent  eligible in any and all
plans providing  general benefits to the Company's  employees and which shall be
made  available  on the same  terms  and  conditions  as to other  employees  of
comparable status and position.

     (b) The Employee agrees that if, during the Employment  Period, the Company
terminates his employment or he voluntarily quits, the Employee shall not, for a
period  commencing on the date of termination and ending after one (1) year, (i)
directly own, manage, operate, control, be employed by, participate in, finance,
consult,  advise,  or be connected in any manner  whatsoever with the ownership,
management,   operation,   control  or  financing  of  any   business,   person,
corporation,  partnership,  or other entity which directly or indirectly engages
in electric power generation, in competition with the Company, or (ii) engage in
any other  activity  involving  competition  with the  Company in the  foregoing
industry without the prior written approval of the Company's Board of Directors;
provided, however, that nothing in this Section shall prohibit the Employee from
owning stock or other  securities of a competitor  amounting to less than twenty

                                       2
<PAGE>
percent  (20%) of the stated  capital of such  competitor.  For purposes of this
provision,  if a Court of competent jurisdiction should rule that a one (1) year
period is unenforceable then the period shall be six (6) months.

     (c) The Employee covenants and agrees,  during the Employee's employment by
the Company and following his Termination Date, to hold in strict confidence any
and all  information in the Employee's  possession as a result of the Employee's
employment;  provided  that  nothing  in  this  Employment  Agreement  shall  be
construed to prohibit the Employee from  reporting or  disclosing  any suspected
instance of illegal  activity of any nature,  any nuclear safety  concerns,  any
workplace  safety  concerns or any public  safety  concerns to the United States
Nuclear  Regulatory  Commission  ("NRC"),  United  States  Department  of  Labor
("DOL"),  or any federal,  state, or local  governmental  agency or court.  This
Employment  Agreement  shall not be  construed  to prohibit  the  Employee  from
providing   information  to  the  NRC,  DOL,  or  any  other  federal  or  state
governmental  agency or  governmental  officials,  or testifying in any civil or
criminal  proceedings,  even if such  information  or testimony  being  provided
relates to the claims or matters  covered  by this  Employment  Agreement.  This
Employment  Agreement  shall not be construed as a waiver or  withdrawal  of any
safety  concerns  which  Employee has or may have reported to the NRC or DOL, or
withdrawal  of any  participation  by  Employee  in any NRC or DOL  proceedings.
Notwithstanding  anything to the  contrary in this  paragraph,  Employee  hereby
waives and  releases  any right to receive any relief as a result of  Employee's
participation  in any  investigation  or  proceeding  of the  NRC,  DOL,  or any
federal, state or local government agency or court.

     6. TERMINATION.  This Employment Agreement shall automatically terminate on
the expiration of the initial  Employment Term described in Section 2(a) without
any notice from either party,  unless the parties  mutually agree to extend this
Employment  Agreement  in writing for  additional  periods of time.  The Company
retains the right to terminate this Agreement for cause at any time prior to the
expiration of the Employment Term.

     7. ARBITRATION.  All claims, disputes and other matters in question between
the parties  arising under this Employment  Agreement,  other than Sections 5(b)
and (c) which may be enforced by the Company through injunctive relief, shall be
decided by arbitration in accordance with the rules of the American  Arbitration
Association, unless the parties mutually agree otherwise. Such arbitration shall
take  place  in  Phoenix,  Arizona.  The  Company  shall  pay  the  cost of such
arbitration.  The award by the  arbitrator  shall be final,  and judgment may be
entered upon it in accordance  with applicable law in any state or Federal court
having jurisdiction thereof.

     8.  SEVERABILITY.  In the  event  that a court  of  competent  jurisdiction
determines that any portion of this Employment  Agreement is in violation of any
statute or public policy,  then only the portions of this  Employment  Agreement
which violate such statute or public  policy shall be stricken.  All portions of
this  Employment  Agreement  which do not violate  any statute or public  policy
shall continue in full force and effect.  Further,  any court order striking any
portion of this Employment Agreement shall modify the stricken terms as narrowly
as possible to give as much effect as possible to the  intentions of the parties
under this Employment Agreement.

                                       3
<PAGE>
     9.  GOVERNING  LAW.  This  Employment  Agreement  shall be  governed in all
respects,  whether  as to  validity,  construction,  capacity,  performance,  or
otherwise,  by the laws of the State of Arizona,  and no action  involving  this
Employment  Agreement may be brought  except in the Superior Court for the State
of Arizona or the Federal District Court for the District of Arizona, subject to
Section 7.

     10.  AMENDMENT OR  TERMINATION.  This  Employment  Agreement  and the KEESA
embody the entire  agreement of the parties  respecting  the matters  within its
scope and may be modified only in writing.

     11.  ASSIGNMENT.  This  Agreement  may be assigned by Employer and shall be
fully binding on any such assignee and shall not be assignable by Employee.

     IN WITNESS WHEREOF, the parties have executed this Agreement.


                                   ARIZONA PUBLIC SERVICE COMPANY


                                   By: William J. Post
                                       -----------------------------------------
                                       William J. Post
                                       Pinnacle West Capital Corporation
                                       Its Chief Executive Officer and
                                           Chairman of the Board
                                       Date: 10-11-02
                                             -----------------------------------


                                   EMPLOYEE
                                            James M. Levine
                                            ------------------------------------
                                            James M. Levine
                                            Date: 10-11-02
                                                  ------------------------------

                                       4