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                                                                    EXHIBIT 10.1

2005 OFFICER AND CEO VARIABLE INCENTIVE PLANS

      On December 14, 2004, the Human Resources Committee (the "Committee") of
the Pinnacle West Capital Corporation (the "Company") Board of Directors
approved the Chairman and CEO Variable Incentive Plan (the "CEO Incentive
Plan"). The Company's Chairman of the Board and CEO, William J. Post, is
eligible to receive an incentive award under the CEO Incentive Plan. Incentive
award funding under the CEO Incentive Plan is triggered by the attainment of
specified 2005 Company earnings. The amount of the award to Mr. Post is in the
sole discretion of the Committee. Accordingly, the Committee may consider
factors other than 2005 Company earnings to measure Mr. Post's performance.

      On December 15, 2004, the Company's Board of Directors, acting on the
recommendation of the Committee, approved the 2005 Officer Variable Incentive
Plan (the "Officer Incentive Plan"). Each of the Company's officers, as well as
the officers of Arizona Public Service Company ("APS") (currently 19 officers),
are eligible to participate in the Officer Incentive Plan, including the
following four most highly-compensated current executive officers (excluding the
CEO) named in the Company's proxy statement relating to its May 19, 2004 annual
meeting: Jack E. Davis, President and Chief Operating Officer of the Company;
Donald E. Brandt, Executive Vice President and Chief Financial Officer of the
Company; James M. Levine, Executive Vice President, Generation of APS; and
Steven M. Wheeler, Executive Vice President, Customer Service and Regulation of
APS (the "Named Executive Officers").

      The Officer Incentive Plan is composed of two components, one of which is
based on the Company's 2005 earnings and the other on the achievement of
specified business unit results. Once a specified earnings threshold is met, the
achievement of the level of earnings and business unit results generally
determines what award, if any, the officer receives. However, the amount of the
award, if any, to each officer under the Officer Incentive Plan is in the sole
discretion of the Committee. Accordingly, the Committee may consider factors
other than Company earnings and the achievement of business unit results to
measure performance, including input from the CEO about each officer's 2005
achievements.

      Subject to the foregoing, award opportunities (expressed as a percentage
of the officer's base salary) for the Chairman and CEO and the Named Executive
Officers will be based on the following performance measures (weighted according
to the indicated percentages):


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<TABLE>
<CAPTION>
   OFFICER                   PERFORMANCE MEASURE(S)                      AWARD OPPORTUNITY
   -------                   ----------------------                      -----------------
<S>                 <C>                                          <C>
William J. Post     Company Earnings                             Threshold (63%)
                                                                 Midpoint (125%)
                                                                 Maximum (200%)

Jack E. Davis       Company Earnings                             Threshold (37.5%)
                                                                 Midpoint   (75%)
                                                                 Maximum  (150%)

Donald E. Brandt    -Company Earnings (50%)                      -Company Earnings:
                    -Shared Services Business Unit Results         Threshold (0%)
                    (Combined Generation Business Unit, Palo       Midpoint  (25%)
                    Verde Business Unit, and Delivery Business     Maximum (50%)
                    Unit Performance; Meeting or Exceeding       -Shared Services Business Unit
                    Budget Targets; and Preventable Recordable   Results (up to 50%)
                    Injuries) (50%)

James M. Levine     -Company Earnings (50%)                      -Company Earnings:
                    -Generation Business Unit Results              Threshold (0%)
                    (Preventable Recordable Injuries; Coal &       Midpoint  (25%)
                    Nuclear Production Cost; APS Gas Units'        Maximum (50%)
                    Annual Equivalent Availability Factor;       -Generation Business Unit Results
                    Coal and Nuclear Capacity Factor; and        (up to 50%)
                    Environmental) (50%)

Steven M. Wheeler   -Company Earnings (50%)                      -Company Earnings:
                    -Delivery Unit Results (Preventable            Threshold (0%)
                    Recordable Injuries; Customer                  Midpoint  (25%)
                    Satisfaction; Business Performance Trends;     Maximum (50%)
                    Customer Reliability; and Environmental      -Delivery Business Unit Results
                    Incidents) (50%)                             (up to 50%)
</TABLE>

      Award opportunities for other executive vice presidents and senior vice
presidents are up to 100% of base salary (up to 50% based on Company earnings
and up to 50% based on the achievement of business unit results). Award
opportunities for other officers are up to 70% of base salary (up to 35% based
on Company earnings and up to 35% based on the achievement of business unit
results).