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                                                                   EXHIBIT 10.98

                 PERFORMANCE ACCELERATED STOCK OPTION AGREEMENT

                                      UNDER
                     PINNACLE WEST CAPITAL CORPORATION 2002
                            LONG-TERM INCENTIVE PLAN

      THIS AWARD AGREEMENT is made and entered into as of _________ __, 20___
(the "Date of Grant"), by and between Pinnacle West Capital Corporation (the
"Company"), and (Name) ("Employee").

                                   BACKGROUND

      A.    The Board of Directors of the Company (the "Board of Directors") has
            adopted, and the Company's shareholders have approved, the Pinnacle
            West Capital Corporation 2002 Long-Term Incentive Plan (the "Plan"),
            pursuant to which options to purchase shares of the common stock of
            the Company may be granted to employees of the Company and its
            subsidiaries and to certain other individuals.

      B.    The Company desires to grant to Employee the option to purchase
            certain shares of its stock under the terms of the Plan.

      C.    Pursuant to the Plan, the Company and Employee agree as follows:

                                    AGREEMENT

            1.    GRANT OF OPTION. Pursuant to action of the Committee (as
                  defined herein), which was taken on the Date of Grant, the
                  Company grants to Employee the option (the "Option") to
                  purchase all or any part of (Shares) shares of the Company's
                  Common Stock. This Option is not intended as, nor will it be
                  treated as, an "incentive stock option" under Section 422 of
                  the Code.

            2.    GRANT SUBJECT TO PLAN. This Option is granted under and is
                  expressly subject to, all the terms and provisions of the
                  Plan, which terms are incorporated herein by reference, and
                  this Award Agreement. The Committee referred to in Section 4
                  of the Plan (the "Committee") has been appointed by the Board
                  of Directors, and designated by it, as the Committee to make
                  grants of options.

            3.    PURCHASE PRICE. The price at which Employee will be entitled
                  to purchase the Common Stock covered by the Option is
                  $_________ per share.

            4.    VESTING OF OPTION. The Option will vest and become exercisable
                  as follows:

                  (a)   On or after the first anniversary of the Date of Grant,
                        or _________ ___, 20___, Employee may purchase up to
                        one-third (1/3) of the total number of shares of Common
                        Stock subject to this Option.

                  (b)   On or after the second anniversary of the Date of Grant,
                        or _________ ___, 20___, Employee may purchase up to an
                        additional one-third (1/3) of the total number of shares
                        of Common Stock subject to this Option; provided,
                        however, that if the Company has achieved the "First
                        Year Target" (as defined in Section 5(a) below),
                        Employee may purchase the shares of Common Stock
                        described in this Section 4(b) on or after the date
                        which is eighteen months after the Date of Grant, or
                        _________ ___, 20___.

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Performance Accelerated Stock Option

                  (c)   On or after the third anniversary of the Date of Grant,
                        or _________ ___, 20___, Employee may purchase up to an
                        additional one-third (1/3) of the total number of shares
                        of Common Stock subject to this Option; provided,
                        however, that:

                        (i)   If the Company has achieved the First Year Target
                              OR the "Second Year Target" (as defined in Section
                              5(b) below), Employee may purchase the shares of
                              Common Stock described in this Section 4(c) on or
                              after the date which is thirty months after the
                              Date of Grant, or _________ ___, 20___; and

                        (ii)  If the Company has achieved the First Year Target
                              AND the Second Year Target, Employee may purchase
                              the shares of Common Stock described in this
                              Section 4(c) on or after the second anniversary of
                              the Date of Grant, or _________ ___, 20___.

                  (d)   Notwithstanding the foregoing, if Employee has entered
                        into a KEESA with the Company, Employee may purchase
                        100% of the number of shares subject to this Option at
                        any time during the three (3) month period beginning on
                        Employee's Termination Date, as defined in the KEESA, in
                        the event the Employee's termination is described in
                        Section 11 of the KEESA.

                  (e)   If any Option vesting date is not a business day on
                        which the New York Stock Exchange ("NYSE") is open, such
                        vesting date will be deemed to be the next succeeding
                        business day on which the NYSE is open. In no event will
                        this Option be re-priced, or deemed to be re-priced, as
                        a result of any acceleration of vesting periods, as
                        described in this Section 4.

                  (f)   Attachment A provides generic examples of the operation
                        of a performance accelerated stock option.

            5.    TARGETS.

                  (a)   FIRST YEAR TARGET. For purposes of this Award Agreement,
                        the Company will have achieved the "First Year Target"
                        if its "Earnings Per Share Growth" (as defined in
                        Section 5(c)) equals or exceeds the Earnings Per Share
                        Growth of the S&P Electric Utilities Index for the
                        fiscal year which includes the Date of Grant, or 20___.

                  (b)   SECOND YEAR TARGET. For purposes of this Award
                        Agreement, the Company will have achieved the "Second
                        Year Target" if its Earnings Per Share Growth equals or
                        exceeds the Earnings Per Share Growth of the S&P
                        Electric Utilities Index for the fiscal year immediately
                        following the fiscal year which includes the Date of
                        Grant, or 20___.

                  (c)   EARNINGS PER SHARE GROWTH.

                        (i)   "Earnings Per Share Growth" for a given fiscal
                              year is the percentage increase, if any, of the
                              Company's earnings per share from continuing
                              operations, on a fully-diluted basis, as of the
                              end of the relevant fiscal year, over the earnings
                              per share from continuing operations, on a
                              fully-diluted basis, as of the end of the
                              immediately preceding fiscal year.

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                        (ii)  The "Earnings Per Share Growth of the S&P Electric
                              Utilities Index" for a given Fiscal Year is the
                              percentage increase, if any, of the S&P Electric
                              Utilities Index earnings per share, as of the end
                              of the relevant fiscal year, over the earnings per
                              share as of the end of the immediately preceding
                              fiscal year. The Earnings Per Share Growth of the
                              S&P Electric Utilities Index will be determined
                              using the S&P Compustat system. The S&P Electric
                              Utilities Index earnings per share is a weighted
                              average number provided in the S&P Compustat
                              system. If the S&P Compustat system is no longer
                              in use, the Committee will replace it with the
                              most comparable third party data system then in
                              use. If the S&P Electric Utilities Index is
                              discontinued, the S&P comparable replacement index
                              for the sector will be used for computing Earnings
                              Per Share Growth of the S&P Electric Utilities
                              Index. If S&P no longer computes an index for the
                              electric utility sector, the Committee shall
                              select the most comparable index then in use for
                              the sector comparison. In addition, if the sector
                              comparison is no longer representative of the
                              Company's industry or business, the Committee
                              shall replace the index with the most
                              representative index then in use.

                        (iii) All results will be verified by the Company's
                              independent auditors using generally accepted
                              accounting principles, consistently applied.

            6.    TERM OF OPTION. This Option will be in full force and effect
                  for a period of ten (10) years from the Date of Grant, through
                  and including the close of business of the Company on
                  _________ ___, 20___; however, this Option will terminate
                  earlier upon the occurrence of the events described in this
                  Section 6, with no continuation of vesting.

                  (a)   TERMINATION-GENERAL. Any vested Option will terminate
                        and be of no further force and effect ninety (90) days
                        after the date that Employee is no longer actively
                        employed by the Company or any of its subsidiaries (the
                        "Termination Date") unless:

                        (i)   The Termination Date results from Employee's
                              Retirement, in which case this Option will
                              terminate at the time described in Section 6(b)
                              below;

                        (ii)  The Termination Date results from Employee's
                              Disability, in which case this Option will
                              terminate at the time described in Section 6(c)
                              below; or

                        (iii) The Termination Date results from Employee's
                              death, in which case this Option will terminate at
                              the time described in Section 6(d) below.

                  (b)   RETIREMENT OF EMPLOYEE. If the Termination Date results
                        from Employee's "Retirement" (as hereinafter defined),
                        any vested Option will terminate fifteen (15) months
                        after the Termination Date. Any options that have not
                        vested will expire upon Retirement. If Employee's
                        Retirement occurs on or after Employee's 60th birthday,
                        this Option will also become fully vested, to the extent
                        not already fully vested.

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                  (c)   DISABILITY OF EMPLOYEE. If the Termination Date results
                        from Employee's "Disability" (as hereinafter defined),
                        any vested Option will terminate fifteen (15) months
                        after the Termination Date. If the Termination Date
                        results from Employee's Disability, and Employee dies
                        within one (1) year of the Termination Date, this Option
                        may be exercised, to the extent that Employee was
                        entitled to exercise it at the date of Employee's death,
                        by a legatee or legatees of Employee under Employee's
                        last will, or by Employee's personal representatives or
                        distributees (or by a transferee under Section 9), at
                        any time within a period of fifteen (15) months after
                        Employee's date of death.

                  (d)   DEATH OF EMPLOYEE. If the Termination Date results from
                        Employee's death, any vested Option may be exercised, to
                        the extent that Employee was entitled to exercise it at
                        the date of Employee's death, by a legatee or legatees
                        of Employee under Employee's last will, or by Employee's
                        personal representatives or distributees (or by a
                        transferee under Section 9), at any time within a period
                        of fifteen (15) months after the Termination Date. If
                        Employee dies within ninety (90) days of Employee's
                        Termination Date, this Option may be exercised, to the
                        extent that Employee was entitled to exercise it at the
                        date of Employee's death, by a legatee or legatees of
                        Employee under Employee's last will, or by Employee's
                        personal representatives or distributees (or by a
                        transferee under Section 9), at any time within a period
                        of fifteen (15) months after Employee's date of death.

                  (e)   Notwithstanding the foregoing, (i) except as otherwise
                        provided in Section 6(b) above, this Option will cease
                        vesting as of the Termination Date and (ii) in no event
                        may this Option be exercised after the tenth (10th)
                        anniversary of the Date of Grant.

            7.    OPTION EXERCISE.

                  (a)   NOTICE TO COMPANY OF OPTION EXERCISE. Employee may
                        exercise this Option, in whole or in part, by providing
                        written notice to the Company, accompanied by payment of
                        the Option purchase price, as set forth below.

                  (b)   PAYMENT OF OPTION PURCHASE PRICE. The price at which
                        shares of Common Stock may be purchased under this
                        Option will be paid in full in cash at the time of
                        exercise or, if permitted by the Committee, by means of
                        tendering Common Stock or surrendering another Award (as
                        defined in the Plan), or any combination thereof, on
                        such terms and conditions as the Committee deems
                        appropriate. In addition, Employee may effect a
                        "cashless exercise" of this Option in which all or a
                        portion of the shares subject to this Option are sold
                        through a broker and a portion of the proceeds to cover
                        the exercise price is paid to the Company.

            8.    TAX WITHHOLDING. Employee must pay, or make arrangements
                  acceptable to the Company for the payment of, any and all
                  federal, state, and local income and payroll tax withholding
                  that in the opinion of the Company is required by law. Unless
                  Employee satisfies any such tax withholding obligation by
                  paying the amount in cash or by check, the Company will
                  withhold shares of Common Stock having a Fair Market Value on
                  the date of withholding sufficient to cover the withholding
                  obligation.

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            9.    NON-TRANSFERABILITY. Neither this Option nor any rights under
                  this Award Agreement may be assigned, transferred or in any
                  manner encumbered except by will or the laws of descent and
                  distribution, and any attempted assignment, transfer,
                  mortgage, pledge or encumbrance, except as herein authorized,
                  will be void and of no effect. This Option may be exercised
                  during Employee's lifetime only by Employee. Notwithstanding
                  the foregoing, this Option may be transferred by gift or
                  otherwise to a member of Employee's immediate family and/or
                  trusts whose beneficiaries are members of Employee's immediate
                  family, or to such other persons or entities as may be
                  approved by the Committee.

            10.   DEFINITIONS: COPY OF PLAN AND PLAN PROSPECTUS. For the
                  purposes of this Award Agreement, the following terms shall
                  have the following meanings:

                  (a)   "Disability" shall mean a period of disability during
                        which Employee qualifies for benefits under employer's
                        long-term disability plan, or, if Employee does not
                        participate in such a plan, a period of disability
                        during which Employee would have qualified for benefits
                        under such a plan, as determined by the Committee, had
                        Employee been a participant in such a plan. The
                        Committee may require such medical or other evidence, as
                        it deems necessary to judge the nature of Employee's
                        condition.

                  (b)   "KEESA" means the Key Executive Employment and Severance
                        Agreement, as the same may be amended from time to time.

                  (c)   "Retirement" means a termination of employment under
                        which Employee is immediately eligible to receive
                        payments under the Company's qualified pension plan.

                        To the extent not specifically defined in this Award
                        Agreement, all capitalized terms used in this Award
                        Agreement will have the same meanings ascribed to them
                        in the Plan. By signing this Award Agreement, Employee
                        acknowledges receipt of a copy of the Plan and the
                        related Plan Prospectus.

            11.   CHOICE OF LAW. This Award Agreement will be governed by the
                  laws of the State of Arizona, excluding any conflicts or
                  choice of law rule or principle that might otherwise refer
                  construction or interpretation of this Agreement to another
                  jurisdiction.

      An authorized representative of the Company has signed this Award
Agreement, and Employee has signed this Award Agreement to evidence Employee's
acceptance of the Option on the terms specified in this Award Agreement, all as
of the Date of Grant.

                                   PINNACLE WEST CAPITAL CORPORATION

                                   By: _________________________________________

                                   Its: Vice President and Treasurer

                                   _____________________________________________
                                   Employee

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                                  ATTACHMENT A

                                 GENERIC EXAMPLE
                     (PERFORMANCE ACCELERATED STOCK OPTION)

ASSUMPTION:

On _________ ___, 20___, Employee is granted an Option to purchase 750 shares of
Common Stock. Unless accelerated, the option will vest in 1/3 increments over 3
separate 12-month periods:

      -     250 shares will vest on _________ ___, 20___;

      -     250 shares will vest on _________ ___, 20___; and

      -     250 shares will vest on _________ ___, 20___.

SCENARIO #1:

      -     The Company's Earnings Per Share Growth for fiscal year 20___ is
            greater than the Earnings Per Share Growth of the S&P Electric
            Utilities Index for fiscal year 20___. (The First Year Target is
            met.)

      -     The Company's Earnings Per Share Growth for fiscal year 20___ is
            greater than the Earnings Per Share Growth of the S&P Electric
            Utilities Index for fiscal year 20___. (The Second Year Target is
            met.)

      Vesting of Options under Scenario # 1:

      -     1/3 of the Option (250 shares) vests on _________ ___, 20___.

      -     Based on the achievement of the First Year Target, the remaining
            Options vest on _________ ___, 20___ and _________ ___, 20___ (the
            achievement of the First Year Target accelerates the standard
            vesting period by 6 months).

      -     Based on the achievement of the Second Year Target, the remaining
            Options vest on _________ ___, 20___ (the achievement of the Second
            Year Target accelerates the vesting period by another 6 months).

SCENARIO #2:

      -     The Company's Earnings Per Share Growth for fiscal year 20___ is
            greater than the Earnings Per Share Growth of the S&P Electric
            Utilities Index for fiscal year 20___. (The First Year Target is
            met.)

      -     The Company's Earnings Per Share Growth for Fiscal Year 20___ is
            less than the Earnings Per Share Growth of the S&P Electric
            Utilities Index for fiscal year 20___. (The Second Year Target is
            not met.)

      Vesting of Options Under Scenario #2:

      -     1/3 of the Option (250 shares) vests on _________ ___, 20___.

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      -     Based on the achievement of the First Year Target, the remaining
            Options vest on _________ ___, 20___ and _________ ___, 20___ (the
            achievement of the First Year Target accelerates the standard
            vesting period by 6 months.)

      -     Based on the failure to achieve the Second Year Target, the
            remaining Options vest on _________ ___, 20___ (the failure to
            achieve the Second Year Target results in the remaining standard
            vesting period for the final 250 shares.)

SCENARIO #3:

      -     The Company's Earnings Per Share Growth for fiscal year 20___ is
            less than the Earnings Per Share Growth of the S&P Electric
            Utilities Index for fiscal year 20___. (The First Year Target is not
            met.)

      -     The Company's Earnings Per Share Growth for fiscal year 20___ is
            greater than the Earnings Per Share Growth of the S&P Electric
            Utilities Index for fiscal year 20___. (The Second Year Target is
            met.)

      Vesting of Options Under Scenario #3:

      -     1/3 of the Option (250 shares) vests on _________ ___, 20___.

      -     Based on the failure to achieve the First Year Target, the remaining
            Options vests on _________ ___, 20___ and _________ ___, 20___ (the
            failure to achieve the First Year Target results in a standard
            vesting period).

      -     Based on the achievement of the Second Year Target, the remaining
            Options (the final 250 shares) vest on _________ ___, 20___ (the
            achievement of the Second Year Target accelerates the standard
            vesting period and _________ ___, 20___ vesting date by 6 months).

W:/Performance Accelerated Stock Option