POWERING GROWTH DELIVERING VALUE Investor Meetings l January 16-18, 2019      Powering Growth, Delivering Value
 FORWARD LOOKING STATEMENTS AND         NON-GAAP FINANCIAL MEASURES   This presentation contains forward-looking statements based on current expectations, including statements regarding our earnings guidance and financial outlook and goals. These forward-looking statements are often identified by words such             as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume,” “project” and similar words. Because actual results may differ materially from          expectations, we caution you not to place undue reliance on these statements. A number of factors could cause future results to differ materially from      historical results, or from   outcomes currently expected or sought by Pinnacle West or           APS. These factors include, but are not limited to: our ability to manage capital expenditures and operations and maintenance costs while maintaining high reliability                  and customer service levels; variations in demand for electricity, including those due to weather seasonality, the general economy, customer and sales growth (or decline), and the effects of energy conservation measures and distributed generation; power plant and               transmission system     performance and outages; competition in retail and wholesale power markets; regulatory and judicial decisions, developments and proceedings; new               legislation, ballot initiatives and regulation, including those relating to environmental requirements, regulatory policy, nuclear plant operations and potential          deregulation of retail electric markets; fuel and water supply availability; our ability to achieve timely and adequate rate recovery of our costs, including returns on and of debt and equity capital investments; our ability to meet renewable energy and energy efficiency mandates and       recover related   costs; risks inherent in     the operation    of nuclear facilities, including   spent fuel disposal uncertainty; current and         future economic conditions in Arizona, including in real estate markets; the development of new              technologies which may affect electric sales or delivery; the cost of debt and equity capital and the ability to access capital markets when            required; environmental, economic and other concerns surrounding coal-fired generation, including regulation of greenhouse gas emissions; volatile fuel and purchased power costs; the investment performance of the assets of our nuclear decommissioning trust, pension, and other postretirement benefit plans and the resulting impact on future funding requirements; the liquidity of wholesale power markets and the use of derivative  contracts in    our business; potential shortfalls in      insurance   coverage; new      accounting    requirements or new       interpretations of existing    requirements; generation, transmission and distribution facility and system         conditions  and operating costs; the ability to meet the anticipated future need for additional generation and associated transmission facilities in our region; the willingness or ability of our counterparties, power plant participants and power plant land owners to meet contractual or other obligations or extend the rights for continued power plant operations; and restrictions on dividends or other provisions in our                     credit agreements and ACC orders. These and other factors are discussed in Risk Factors described in Part I, Item              1A of the Pinnacle West/APS Annual Report on Form           10-K for  the fiscal year ended December 31, 2017, which you should review              carefully before placing any reliance on our financial statements, disclosures or earnings outlook.               Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law.  In this presentation, references to earnings per share (EPS) refer to amounts attributable to common shareholders.  We present “adjusted income taxes" that shows the impact of tax reform. Adjusted income taxes is a “non-GAAP financial measure,” as defined in accordance with SEC rules. The appendix contains a reconciliation to show the impact of tax reform. We believe the information provided in the reconciliation provides investors with useful indicators of our results that are comparable among periods because they exclude the effects of unusual items that may occur on an irregular basis, such as tax reform impacts.        2     Powering Growth, Delivering Value
 PINNACLE WEST:                                We are making clean energy and                                                 infrastructure investments to   OUR FUTURE                                    support Arizona’s growth  Our future includes: •  More clean energy •  A healthier environment •  Palo Verde Generating Station, the largest clean energy     producer in the country •  Infrastructure to power Arizona’s growth                               To get there we will:                             •  Continue Arizona’s solar leadership                             •  Invest in battery storage and other clean technologies                             •  Invest in infrastructure to support electric vehicles                             •  Partner with customers to achieve their clean-energy goals        We expect 340,000 new customers and a 30% increase in our                         customer’s energy needs by 2030.   3  Powering Growth, Delivering Value
 APS’s vision is to create a     SUSTAINABILITY                                                sustainable energy future for                                                                   Arizona                                      Progress and Achievements  Five critical areas of our sustainability efforts                                              Board of Directors                                                                                               Nuclear and Operating   Carbon Management                                                                             Committee Charter                                                                                              was amended in 2018   •  Plan to reduce carbon intensity by 23% over the next 15 years                                                                                             to assign oversight of   •  MSCI Environmental Sustainability and Governance A rating1                                                                                            sustainability initiatives   Energy Innovation                                                                                and strategy  •  More than 1,300 MW of installed solar capacity  •  Plan to add over 500 MW of energy storage in next 15 years                                 We continue to be  Safety & Security                                                                             recognized for our                                                                                            sustainability leadership  •  Yucca Power Plant team achieved 10 years OSHA injury free  •  Remain top decile for safety performance in U.S. electric utilities industry  Water Resources                                                                           Obtained a “Leadership”   •  16% reduction in groundwater use since 2014                                               rating from CDP for   •  20 billion gallons of water recycled each year to cool Palo Verde                     climate change and water                                                                                              management —        one of   People                                                                                    only two U.S. utilities to   •  Average employee tenure of 13 years due to strong talent strategy                      earn the highest rating   •  More than 20% of our employees are veterans                                               in both categories      1 As of November 6, 2018    4   Powering Growth, Delivering Value
 Clean energy plays an important      CLEAN ENERGY                                  role in meeting Arizona’s energy                                                    needs today   Looking ahead to Arizona’s growing population and expanding economic activity, APS   continues supporting resources and technology to ensure our energy is clean, reliable                                and affordable for all Arizonans                                                                         The Palo Verde Generating                                                                       Station provides more than                                                                       70% of Arizona’s carbon-free  Today, we serve customers with                                        energy and uses recycled  an energy mix that is 50% clean    Our 10 grid-scale solar plants    wastewater to cool the plant                                     are powered by more than                                                1 million solar panels    We are accomplishing this through innovative customer programs, next-generation     energy efficiency programs, energy storage, the APS Solar Partner and APS Solar                            Communities programs and microgrids      5  Powering Growth, Delivering Value
 We have already retired 849 MWs  COAL EXIT STRATEGY                                       of coal-fired generation                           Navajo                        315 MW                       By end of           Cholla                          2019            387 MW                                         By 2025                                                          Remaining                                                            970 MW                                                           By 2038           2018             2019              2025              2038   •   Pinnacle West has a long history of transitioning to clean energy resources that reduce carbon       emissions.  •   Since 2005, baseline carbon emissions have been reduced by more than six million tons per year, which       represents a 35% reduction.   6  Powering Growth, Delivering Value
 CARBON AVOIDANCE                                                                   APS has reduced carbon dioxide     AND EMISSION                                                  emissions by 35% since 2005    REDUCTIONS  Carbon Avoidance Metric                                                      Cumulative Carbon Avoidance • Metric used to measure our overall                             15   carbon reduction, not just generation                                                                     13.6   but Company wide                                              ) Carbon Avoidance Opportunities                                   10 • Retiring coal plants                                                                          8.5 • Renewable energy generation • Purchase power agreements                                                                   5 • Energy efficiency programs for customers                    CO2 Emissions                                                                                     3.8 • Energy efficient buildings                                    (MillionTons Metric  • Fleet electrification                                                                   0   Since 2015 APS has avoided 13.6 million                         2014         2015        2016         2017         2018    metric tons of carbon dioxide emissions                                             Emission Reductions  that would have been emitted – equivalent                                                                   40,000   of removing almost 3 million automobiles                     from the road                                                                               2005                                                                  30,000                                        2017 Clean Energy  • Since 2005 we have reduced   o  CO2 emissions by 35%                                        20,000                                                               Tons CO2   o  SO2 emissions by 78%                                        tons) (‘000   o  NOx emissions by 56%  • As a result of the recent emission controls                    10,000   added to our Four Corners Plant, NOx emission    have been reduced by 88% compared to 2005                                                                      0                                                                               CO2            NOx             SO2    7   Powering Growth, Delivering Value
 We are leading the solar-plus-                                                battery-storage effort,   STORAGE PROJECTS                              advancing innovation and                                                 conducting ground-breaking                                                 research                                      2018 Battery Storage RFP                                    • Up to 106 MW located on APS solar plant sites                                    • Utility owned                                    • Anticipated in-service by June 2020                                     Punkin Center Battery Storage Project                                   • 2 MW/8 MWH lithium ion battery                                    • Placed in service March 2018                                   • Deferred the rebuild of around 20 miles of 21 kV                                      distribution line for approximately 5-10 years                                   • Acts as generating capacity to the system                                   • Helps regulate the voltage on the feeder                                     APS, First Solar Battery Storage Project                                    • 50 MW battery energy storage; 65 MW solar                                     • 15-year power purchase agreement                                     • Anticipated in-service 2021                                    • APS will be able to store power and deliver                                      energy during peak hours (3-8 p.m.)   8  Powering Growth, Delivering Value
 RENEWABLE RESOURCES                                                                                                       APS Solar Portfolio*      APS currently has 1,683 MW       of renewable resources:                                                                               Owned             PPA                                                                                                           239 MW          310 MW      •  Solar*                            1,364 MW      •  Wind                                  289 MW                                                                 DG                                                                                                                  815 MW      •  Biomass                                 14 MW      •  Geothermal                              10 MW      •  Biogas                                    6 MW                                                                                   Owned solar includes 170 MW AZ Sun Program, 25 MW of APS                                                                                    owned Distributed Generation (DG), 4 MW of other APS owned                                                                                    utility scale solar and 40 MW Red Rock Solar Plant;                                                                                   PPA is primarily 250 MW Solana Concentrated Solar Facility        Yuma Foothills                Aragonne Mesa                      Snowflake                       Salton Sea                  Glendale Landfill            Solar                          Wind                         Biomass                       Geothermal                          Biogas           35 MW                          90 MW                          14 MW                           10 MW                            3MW   * As of 9/30/18 as reported in the Third Quarter 2018 Form 10-Q – with additional 110 MW under development  9    Powering Growth, Delivering Value
 Residential DG (MWdc) Annual Additions                                                                                                                                                150                                                                                                                                         133           133       RESIDENTIAL PV                                                                                                               74                                                                                                                            57                                                                                                              44     51                                                       1                                               22      APPLICATIONS                                                                        10     18                                                                                         2009                 2012         2014          2016          2018  YTD   4,000                                                                             3718                                                                                                      3432 3,500  3,000                                                               2464 2,500                                                                                    2143                                                                                                      2125                                                    1944 2,000                                 1818                          1561                                                                        2033         1602              1426                                                                                                             1442                      1434                                                                             1413       1364 1,500                                 1267                     1291                                                                        1283                                                                                              1342                   1245   1189              1153                                  1001                 1195                                                                                          1349                                                  1077        1168 1,000                                 903                  1157                           773                                               1158                     1141              746                                 919            1011                                               1002                    1023            902                       759                                                                                                     865                                        832   500                     680                      715                                                                                      629         614                                                                                                                                 538              484                                                                                                  321      0              Jan          Feb          Mar         Apr          May          Jun          Jul         Aug         Sep          Oct         Nov          Dec                            2015 Applications              2016 Applications               2017 Applications              2018 Applications        1 Monthly data equals applications received minus cancelled applications. As of December 31, 2018, approximately 88,800 residential       grid-tied solar photovoltaic (PV) systems have been installed in APS’s service territory, totaling approximately 710 MWdc of installed       capacity.  Excludes APS Solar Partner Program residential PV systems.      Note:  www.arizonagoessolar.org      logs total residential application volume, including cancellations.  Solar water heaters can also be found       on the site, but are not included in the chart above.      10   Powering Growth, Delivering Value
 ECONOMIC                                                                       Arizona’s focus on economic                                                                                   development continues to support    DEVELOPMENT                                                                    growth in the state           Arizona is the 4th                    fastest-growing state in the U.S. according to                                                          new Census data.1   2018       – APS partnered with Greater Phoenix Economic Council and Arizona   Commerce Authority to welcome 17 new companies to the state, adding an   estimated:         •    43 MW         •    3,800 new jobs         •    $1.3B in capital investment         •    Notable corporations include Anderson Windows, Nikola Motors               and Seattle Box Company             Arizona is now ranked No. 1 in construction growth and No. 2                                                          in manufacturing.2    1 “Arizona one of the fastest-growing states, Census says,” Phoenix Business Journal, https://www.bizjournals.com/phoenix/news/2018/12/20/arizona-one-of-the- fastest-growing-states-census.html?ana=e_phx_bn_breakingnews&u=pcR1pSxgF6wglCVQko3euQ02582bd6&t=1546012673&j=85664821, by Tim Gallen. 2 “Arizona economy to shine in 2019,” Chamber Business News, http://chamberbusinessnews.com/2018/11/30/arizona-economy-to-shine-in-2019/, by Victoria Harker.   11   Powering Growth, Delivering Value
 APPENDIX      Powering Growth, Delivering Value
 SENIOR                                                                         Our management team has                                                                                       more than 100 combined years        MANAGEMENT                                                                     of creating shareholder value in        TEAM                                                                           the energy industry  Don Brandt                                               Jim Hatfield Chairman of the Board, President and                     Executive Vice President and  Chief Executive Officer, Pinnacle West and               Chief Financial Officer, Pinnacle West & APS Chairman and Chief Executive Officer, APS                                                                             We maintain a robust                      • Joined Pinnacle West in 2002                          • Joined as SVP and CFO in             pipeline of talent to serve                       from Ameren                                             2008 from OGE Energy                   our complex operations                     • Elected to Pinnacle West                                Corp.                                   and facilitate effective                       Board and named Chairman,                             • Responsible for corporate                       CEO in 2009                                             functions including finance,          succession planning in a                     • Recognized industry leader                              investor relations, and risk          highly competitive talent                       with 30+ years in the nuclear                           management                      and energy industries                                 • 38+ years of financial                           environment                    • Vice Chairman of the                                    experience in the utility and                       Institute of Nuclear Power                              energy business                      Operations and Chairman of                       the Nuclear Energy Institute  Jeff Guldner                                           Daniel Froetscher                                        Bob Bement  President, APS                                         Executive Vice President of Operations, APS              Executive Vice President and                                                                                                                   Chief Nuclear Officer, APS                    • Joined APS in 2004 from                              • Joined APS in 1980                                    • Joined APS in 2007 from                      Snell & Wilmer                                       • Appointed EVP of Operations,                            Arkansas Nuclear One                    • Promoted to President in                               February 2018                                         • Promoted from SVP of Site                      2018                                                 • Responsible for overseeing                              Operations to EVP and Chief                    • Responsible for all areas of                           T&D, fossil generation,                                 Nuclear Officer in 2016                     APS excluding nuclear                                  resource management,                                  • Responsible for all nuclear-                   • Significant experience in                              sustainability, supply chain,                           related activities associated                      public utility and energy law                          security and customer service                           with Palo Verde                      and regulation                                       • Significant leadership and                            • Seasoned nuclear industry                                                                             industry experience                                     expert serving on several                                                                                                                                     industry committees       13   Powering Growth, Delivering Value
 Pinnacle West’s indicated annual                                                                 dividend is $2.95 per share;   DIVIDEND GROWTH                                               targeting ~6% annual dividend                                                                 growth                                           Dividend Growth Goal                                    Indicated Annual Dividend Rate at Year-End                                                                                   $2.95                                                                         $2.78                                                               $2.62                                                     $2.50                                         $2.38                               $2.27                     $2.18           $2.10             2011      2012      2013      2014      2015      2016       2017      2018      2019      2020                                                                                              Targeted  Future dividends subject to declaration at Board of Directors’ discretion.  14  Powering Growth, Delivering Value
 APS CAPITAL                                                   Capital expenditures will support                                                                 our growing customer base and   EXPENDITURES                                                  utilization of advanced technology   ($ Millions)                                                                                                            Other      $1,341         $99                                                                       $1,211                               $1,206                    $1,153                                             Distribution                                  $74                                               $139                                                           $125         $419                                                                                                Transmission                                  $467                                                                                                             Clean                                                           $518                      $598         $174                                                                                                Generation         $137                     $147                                                                                                             Environmental                                 $151         $193                                              $201                      $167                                   $80                                                                       New Gas                                                           $158                                  $119                                               $149                    Generation       $235                                                          $30   $13                   $43                                  $168         $84                                               $108                      $115                    Traditional                                                                                                             Generation       2017                     2018                      2019                     2020                                                        Projected   •  The chart does not include capital expenditures related to 4CA’s 7% interest in the Four Corners Power Plant      Units 4 and 5 of $29 million in 2017 and $10 million in 2018.   •  2018 – 2020 as disclosed in the Third Quarter 2018 Form 10-Q.  15  Powering Growth, Delivering Value
 DISTRIBUTION GRID                                             Grid Operations and Investment                                                                   Projected to be $1.6 billion from     INVESTMENTS                                                   2018-2020          Customer Growth                                             Grid Modernization                                  Run and Maintain   Approximately 51% of distribution capex             Approximately 9% of distribution capex               Approximately 40% of distribution capex              R      T       Reclosers – Supervisory                    Advanced Distribution System           Cap Bank Controllers, Substation  Controlled Switches, Trip Savers                           Platform                    Regulators, Voltage Management     Average annual spend ~ $13M                      Project in planning phase                      Algorithms                                                                                            Average annual spend ~ $7M •  Automated switches controlled from        • Integrated operational platform    the Distribution Operations Center        • Increases efficiency and life of        •  Controls regulators and capacitor  •  Manage load without sending field           distribution system; improves safety       banks to manage power quality such     personnel to manually operate the           and communication; increases ability       as power factor and voltage    switch                                      to manage overall reliability; and                                                 enables Distributed Energy Resources         Monitors – Transformers,                   Communications Backhaul                    Sensors – Current, Voltage          Breakers, Bushings                     Average annual spend ~ $4M                Average annual spend ~ $2.5M     Average annual spend ~ $0.5M •  New technologies such as APS’s            •  Leveraging AMI for distribution        •  Line sensors to measure & identify fault     Transformer Oil Analysis & Notification      automation                                current, fault location and voltage    system leverage advances in               •  Strategically deploying Fiber for      •  Improves outage restoration time and     communications and sensing to remotely       communications backhaul                   operations efficiency    monitor health of transformers, enabling                                               •  Transitioning to Internet Protocol     proactive maintenance actions to prevent                                                  based networks for future growth &     critical failures and increase reliability                                                 scalability    16  Powering Growth, Delivering Value
 OPERATIONS &                                                                   Goal is to keep O&M per kWh flat,   MAINTENANCE                                                                    adjusted for planned outages    ($ Millions)                                                                                        $905 - $925                                                        $858                                                                  $865 - $885                  $848                                                                      75 - 85                                                                                                                                  50 - 60                    72                                    63                                                                                            830 - 840                   776                                   795                                                                    815 - 825                    20161                                 20171                                2018E1                               2019E                                     PNW Consolidated ex RES/DSM2                          Planned Fleet Outages   1 Reclassified to reflect the adoption of the new accounting requirements for presenting pension and other postretirement non-service costs   (“Pension & OPEB Presentation”).  Increases in O&M due to the Pension & OPEB Presentation change are approximately $20 million in 2016,   $25 million in 2017 and $35 million in 2018, which are offset in pension and other postretirement non-service credits on the income statement.  See Notes 5 and 13 in the Third Quarter 2018 Form 10-Q for additional information.  2 Excludes RES/DSM of $83 million in 2016, $91 million in 2017, $105 million in 2018E, and $80 million in 2019E.  17   Powering Growth, Delivering Value
 2019 PLANNED OUTAGE                                           Coal, Nuclear and Large Gas and    SCHEDULE                                                      Oil Planned Outages                   Q1                                           Q2                                         Q4                          Estimated                                   Estimated                                  Estimated  Plant         Unit      Duration            Plant          Unit    Duration in          Plant Unit              Duration                           in Days                                       Days                                      in Days Four                 4           12              Palo Verde      1           30              Palo Verde       344 Corners Four                                                                                    West                  5           12              Cholla*         1           16                               462 Corners                                                                                 Phoenix  Cholla*         1           30              Redhawk*        2           28  Redhawk*        2           29   *Outage duration spans Q1-Q2. Number of days noted per quarter.    18  Powering Growth, Delivering Value
 APS’s revenues come from a  RATE BASE                                                       regulated retail rate base and                                                                  meaningful transmission business            APS Rate Base Growth                                          Total Approved Rate Base                      Year-End                  ACC         FERC                                  Generation & Distribution           Transmission               Rate Base Guidance:      6-7% Average Annual Growth Rate                                               17%                                               $1.8                                         83%                $1.5    $1.4                                                                                            ACC FERC                                                          Rate Effective Date           8/19/2017              6/1/2018                                             $9.1                                                          Test Year Ended              12/31/20151            12/31/20171    $6.8      $7.1                                                          Rate Base                        $6.8B                 $1.6B                                                          Equity Layer                    55.8%                  53.4%                                                          Allowed ROE                     10.0%                 10.75%   2016       2017      2018      2019      2020                               Projected                  1 Adjusted to include post test-year plant in rates    Rate base $ in billions, rounded   19  Powering Growth, Delivering Value
 Tax Cuts and Jobs Act provides       TAX REFORM                                                    benefits to both our customers                                                                     and shareholders  • TEAM   PHASE I: The ACC approved $119 million annual                                   EPS Impacts   rate  reduction  reflecting the  lower federal tax   rate.      •  The  impact of the    lower federal income    tax  rate is   Effective for the March 2018 billing cycle                         based on our quarterly pre-tax earnings • TEAM    PHASE    II: Filed  in August 2018, returns     an      •  The reduction to customers’ rates through the TEAM      is   additional $86.5    million in  “excess”  deferred   taxes         based on a per kWh sales credit   previously   collected  to   ACC   customers.    Currently   pending subject to ACC approval                                                                                           EPS Variances              APS Retail Customer Savings                                                       Q1       Q2        Q3      YTD                         (in millions)                               Gross Margin                                                                                             ($0.20)  ($0.20)  ($0.34)   ($0.74)                                                                     (Rate Refunds)           $250                                                                     Adjusted Income            $200                                                                               $0.00    $0.30    $0.48     $0.78                                                                     Taxes            $150            $100                                                                          Rate Base Growth                                                                      • Higher incremental rate base of $110 million in 2018             $50                                                                        and $150 million in 2019             $0                       2018             2019                                                 Cash Taxes                                                                      • Minimal cash tax payments in 2018 and 2019 due to                            TEAM I  TEAM II                                                                        utilization of existing tax credit carryforwards                                                                      • Cash taxes trend to normalized level in 2020 after tax  • FERC   FORMULA: In May 2018, APS         received approval                                                                        credit carryforward balance is fully utilized   from  FERC   to  provide  for a  $57   million annual rate   reduction, beginning June 1, 2018 through its wholesale   transmission rates      20  Powering Growth, Delivering Value
 BALANCE SHEET STRENGTH                                                                               Credit Ratings1        Long-Term Debt Maturity Schedule                                                            • APS Senior Unsecured: A- or equivalent ratings  ($Millions)                                                  or better at S&P, Moody’s and Fitch     $700                                                     • PNW Senior Unsecured: BBB+ or equivalent                                                               ratings or better at S&P, Moody’s and Fitch    $600                                                                  2018 Major Financing Activities    $500                                                     • $300 million 30-year 4.20% APS senior unsecured                                      $450                                                               notes issued August 2018   $400                                                            • $150 million PNW unsecured term loan due                                                               December 2020   $300                 $500                                             2019 Major Financing Activities   $200                                                     • Currently expect up to $950 million of term debt                                                               issuance at APS                                     $250    $100     $-                 2019                2020                    1 We are disclosing credit ratings to enhance understanding                                                              of our sources of liquidity and the effects of our ratings on                      APS            PNW                      our costs of funds.     21 Powering Growth, Delivering Value
 CREDIT RATINGS AND METRICS                                           Pinnacle                              APS                                                          2015        2016       2017                                           West       Corporate Credit Ratings1                                                  APS           Moody’s              A2              A3                          FFO / Debt    29.7%        26.5%      26.9%           S&P                  A-              A-                       FFO / Interest     5.8x        5.0x       5.2x                                                                                Debt /           Fitch                A-              A-                                        45.8%        47.7%      47.3%                                                                        Capitalization       Senior Unsecured1                                               Pinnacle West           Moody’s              A2              A3                          FFO / Debt    28.9%        25.1%      24.7%           S&P                  A-            BBB+                       FFO / Interest     5.6x        4.9x       4.8x                                                                                Debt /           Fitch                 A              A-                                        47.0%        49.0%      50.3%                                                                        Capitalization       Note: Moody’s, Fitch and S&P rate the       outlooks for APS and Pinnacle West as Stable.                  Source: Standard & Poor’s    1We are disclosing credit ratings to enhance understanding of our sources of liquidity and the effects of our ratings on    our costs of funds.   22  Powering Growth, Delivering Value
 OCOTILLO MODERNIZATION PROJECT AND       FOUR CORNERS SCRs       •  Included in the 2017 Rate Review Order1, APS has been granted Accounting Deferral Orders for         two large generation-related capital investments           –  Ocotillo Modernization Project: Retiring two aging, steam-based, natural gas units, and               replacing with 5 new, fast-ramping, combustion turbine units           –  Four Corners Power Plant: Installed Selective Catalytic Reduction (SCR) equipment to comply               with Federal environmental standards                                     Ocotillo Modernization Project                     Four Corners SCRs                                          Units 6, 7 – Fall 2018                        Unit 5 – Late 2017 In-Service Dates                                     Units 3, 4 and 5 – Spring 2019                    Unit 4 – Spring 2018  Total Cost (APS)                              $500 million                                $400 million  Estimated Cost Deferral               $45 million (through 2019)                   $30 million (through 2018)                                 • Cost deferral from date of commercial     •  Cost deferral from time of installation                                   operation to the effective date of rates     to incorporation of the SCR costs in                                   in next rate case                            rates using a step increase beginning  Accounting Deferral                                • Includes depreciation, O&M, property         in 2019                                  taxes, and capital carrying charge2       •  Includes depreciation, O&M, property                                                                                taxes, and capital carrying charge2    1 The ACC’s decision is subject to appeals.   2 APS will calculate the capital carrying charge using the 5.13% embedded cost of debt established in the 2017 Rate Review Order.       23 Powering Growth, Delivering Value
 FOUR CORNERS SCR                                       The Administrative Law Judge                                                          issued a Recommended Opinion   STEP INCREASE                                          and Order on November 27, 20182                              Key Components of APS’s Filed Request            Financial                         Cost of Capital                         Bill Impact   • Consistent with prior               • 7.85% Return on Rate               • Rate rider applied as a     disclosed estimates                   Base1                                percentage of base rates                                           – Weighted Average Cost              for all applicable customers                                            of Capital (WACC)   • $390 million direct costs           • 5.13% Return on Deferral1          • $67.5 million revenue     vs. $400 million1                     – Embedded Cost of Debt              requirement2    contemplated in APS’s     recent rate case   • $40 million in indirect             • 5% Depreciation Rate               • ~2% bill impact    costs (overhead, AFUDC)               – 20-year useful life                                             (2038-depreciation                                             study)                                         • 5-year Deferral                                           Amortization  1 Based on 2017 Rate Review Order 2 Arizona Corporation Commission Staff recommended a $58.5 million revenue increase and the Administrative  Law Judge issued a Recommended Opinion and Order consistent with Commission Staff’s requests.  24 Powering Growth, Delivering Value
 ARIZONA CORPORATION COMMISSION            Terms to January 2023                                        Terms to January 2021            Sandra               Justin                          Bob                  Boyd               Andy       Kennedy (D)            Olson (R)                     Burns (R)*            Dunn (R)            Tobin (R)            Other State Officials      ACC Executive Director – Matthew Neubert      RUCO Director – David Tenney      *Term limited - elected to four-year terms (limited to two consecutive)   25  Powering Growth, Delivering Value
 2019 KEY DATES  ACC Key Dates / Docket #                                      Q1                             Q2                              Q3                           Q4  Power Supply Adjustor (PSA)                                                    Implementation: Feb 1 E-01345A-16-0036 Lost Fixed Cost Recovery                                                      To be Filed: Feb 15 E-01345A-16-0036  Transmission Cost Adjustor                                                           To be Filed: May 1 E-01345A-16-0036                                                                  Implementation: Jun 1  2020 DSM/EE Implementation Plan                                                                                   2020 To be Filed: Jun 1 New Docket to be Assigned  2020 RES Implementation Plan                                                                                                                      To be Filed: Jul 1 New Docket to be Assigned  APS Rate Review/                                                   Rate Review Expected to          Rate Review Expected  Four Corners SCR Step Increase                                                             Begin                     Completion: May E-01345A-16-0036  Resource Planning and Procurement                                                   Preliminary 2020 IRP New Docket to be Assigned                                                             To be Filed: Apr 1  Tax Expense Adjustor (TEAM) E-01345A-18-0003  Resource Comparison Proxy (RCP)                                                      Year 3 To be Filed:          Year 3 Implementation  New Docket to be Assigned                                                                   May 1                    Anticipated: Sep 1  Possible Modification to Commission’s  Energy Rules RU-00000A-18-0284  Modification to Retail Competition Rules RE-00000A-18-0405  Customer Complaint – Stacey Champion E-01345A-18-0002          26   Powering Growth, Delivering Value
 Distributed generation is changing       THE “DUCK CURVE”                                              the load shape of the grid                   Current Spring Day                                                    Spring Day 2022            Excess renewables create over-generation                           ... and potentially for nuclear generation in             challenges ...                                                       the future 5,000                                                            5,000  4,500                                                            4,500  4,000                                                            4,000  3,500                                                            3,500  3,000                                                            3,000  2,500                                                            2,500  2,000                                                            2,000     Generation Minimum                                                                                   Output                 Generation  1,500        Minimum Output                                      1,500  1,000                                                            1,000               Nuclear Output                                                  Nuclear Output    500                                               Over-                500                                           Over-                                           Generation                                                         Generation     -                                                                -           1   3   5    7   9  11   13  15  17  19  21  23                  1   3    5   7    9   11131517192123                                 Hour                                                              Hour      27  Powering Growth, Delivering Value
 Strategic transmission investment                                                    is essential to maintain reliability      APS TRANSMISSION                              and deliver diversified resources                                                    to customers                                                    •  10-Year Transmission Plan filed January                                                       2018 (115 kV and above)                                                      – 52 miles of new lines                                                      – 13 bulk transformer additions                              Flagstaff                                                   •  Also includes:                                                      – Sun Valley-Morgan 500kV (2018)                                                      – North Gila-Orchard 230kV (2021)                                                      – Cholla Synchronous Condenser (2019)                            Phoenix                  •  Transmission investment diversifies                                                       regulatory risk                                                      – Constructive regulatory treatment                                                      – FERC formula rates and retail adjustor   Legend                           Tucson    Planned lines    Existing lines    Solar potential area    Wind potential area     28 Powering Growth, Delivering Value
 NON-GAAP MEASURE RECONCILIATION                                                                                                           Three Months Ended                                                                                                             September 30,                                                                                                       Tax Benefit                                                                                            Four         of Lower                                                                               RES/       Corners        Pre-Tax          2018                       RES/         2017             EPS                                                                         1                         2                                          1,3 $ millions pretax, except per share amounts                      2018        DSM        Deferral        Income        Adjusted         2017         DSM       Adjusted         Impact    Operating revenues$ 1,268                                                $    (27)   $             - $             - $     1,241 $ 1,183        $    (28) $     1,155     Fuel and purchased power expenses                                (390)             -                -                -          (390)      (310)           -          (310) Gross margin                                                         878      (27)                  -                -            851       873      (28)             845      $  0.04   Operations and maintenance    247                                                (26)                -                -         221          231        (28)           203     $ (0.12)    Allowance for equity funds used     during construction                                                 (12)           -                -                -           (12)        (13)           -           (13)    Interest charges                                                   62              -              (5)                -             57         56           -             56    Allowance for borrowed funds used     during construction                                                   (6)           -               -                -             (6)         (6)           -            (6)  Interest expense, net of AFUDC                                         44            -            (5)               -           39           37             -           37     $ (0.01)     Other expenses (operating)                                             1           -               -                -              1          3           -              3    Other income                                                          (7)          -                5                -             (2)         (1)           -            (1)     Other expense                                                          5           -               -                -              5          5           -              5    Renewable energy and demand side management     and similar regulatory programs, net                                   -          (1)                -                -             (1)           -           -              - Other                                                                   (1)         (1)              5               -             3           7            -             7    $  0.03  Income taxes                                                           84            -              -              6            90         144              -          144     $  0.48      1 Line items from Consolidated Statements of Income.    2 See Note 4, Regulatory Matters, in Form 10-Q for the period ended September 30, 2018, for total Four Corners deferral impacts.    3 No impact to 2017 Consolidated Statements of Income related to Four Corners deferral.     29    Powering Growth, Delivering Value                                              Numbers may not foot due to rounding.
 INVESTOR RELATIONS CONTACTS                                       Stefanie Layton                                Director, Investor Relations                                      (602) 250-4541                             stefanie.layton@pinnaclewest.com                                     Michelle Clemente                                      (602) 250-3752                           michelle.clemente@pinnaclewest.com                              Pinnacle West Capital Corporation                             P.O. Box 53999, Mail Station 9998                              Phoenix,  Arizona  85072-3999                          Visit us online at: www.pinnaclewest.com   30 Powering Growth, Delivering Value