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                                                                    Exhibit 10.3

                 GUARANTEE OF PINNACLE WEST CAPITAL CORPORATION

1.    FOR VALUE RECEIVED, PINNACLE WEST CAPITAL CORPORATION, an Arizona
corporation (the "Guarantor"), hereby fully, unconditionally and irrevocably
guarantees to the holder of the Note upon which this guarantee is endorsed the
due and punctual payment of any and all amounts required to be paid upon said
Note according to its terms, when, where and as the same shall become due and
payable, whether on an interest payment date, at maturity, upon redemption or
purchase or otherwise, in accordance with the terms thereof (the "Guaranteed
Obligations"). Terms defined in the Fiscal and Paying Agency Agreement, dated as
of April 1, 2005, as it may be further amended or supplemented from time to
time, among Pinnacle West Energy Corporation (the "Company"), the Guarantor, and
The Bank of New York Trust Company, N.A., as fiscal and paying agent (the
"Fiscal Agency Agreement") shall have the same meanings herein, except as
otherwise defined herein or unless there is something in the subject matter or
context inconsistent therewith.

2.    (a)   In case of failure by the Company punctually to pay any of the
Guaranteed Obligations, the Guarantor hereby agrees to cause such payment to be
made punctually when, where and as the same shall become due and payable,
whether at maturity, upon redemption or purchase or otherwise, and as if such
payment were made by the Company. The Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
legality or enforceability of the Note, the absence of any action to enforce the
same, the waiver or consent by the holder of the Note with respect to any
provisions thereof, the recovery of any judgment against the Company or any
action to enforce the same, any termination of or change in any relationship
between the Company and the Guarantor, including any resulting from a change in
ownership of the Company, or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.

      (b)   The Guarantor shall be subrogated to all rights of the holder of the
Note against the Company in respect of any amounts paid by the Guarantor
pursuant to the provisions of this Guarantee, provided that the Guarantor shall
not be entitled to enforce or receive any payment arising out of, or based upon,
such right of subrogation until all amounts due on or to become due on or in
respect of all of the Notes shall have been paid in full or duly provided for.

      (c)   The Guarantor hereby waives notice of acceptance of this Guarantee
and waives notice of nonpayment of any and all amounts payable in respect of
said Note or any part thereof. The Guarantor also waives any right to require a
proceeding first against the Company or any other person before proceeding
against the Guarantor.

      (d)   This Guarantee is unsecured and ranks equally with all other
unsecured and unsubordinated debt of the Guarantor from time to time
outstanding.

      (e)   This Guarantee is a guarantee of payment and not of collection.

3.    The Guarantor will cause this Guarantee to be endorsed on any Note issued
for exchange or registration of transfer pursuant to Section 1 of the Note
(REGISTRATION; REGISTRATION OF

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TRANSFER AND EXCHANGE) and on any newly-issued Note issued pursuant to Section
10 of the Note (MUTILATED, DESTROYED, LOST AND STOLEN NOTES).

4.    (a)   The Guarantor covenants that it will not merge or consolidate with
any other corporation or sell or convey all or substantially all of its assets
to any person, firm or corporation, except that the Guarantor may merge or
consolidate with, or sell or convey all or substantially all of its assets to
any person, firm or corporation, provided that (i) either the Guarantor shall be
the continuing corporation, or the successor corporation (if other than the
Guarantor) shall be a corporation organized and existing under the laws of the
United States of America or a State thereof or the District of Columbia and such
corporation shall expressly assume the due and punctual performance and
observance of all of the covenants and conditions of this Guarantee to be
performed by the Guarantor, by supplemental agreement in form reasonably
satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by
such corporation, and (ii) the Guarantor or such successor corporation, as the
case may be, shall not, immediately after such merger, consolidation, sale or
conveyance, be in default in the performance of any such covenant or condition.

      (b)   Upon any consolidation of the Guarantor with, or merger of the
Guarantor into, any other person or any sale or conveyance of all or
substantially all of the assets of the Guarantor in accordance with this Section
4, the successor person formed by such consolidation or into which the Guarantor
is merged or to which such sale or conveyance is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Guarantor under
this Guarantee with the same effect as if such successor person had been named
as the Guarantor herein, and thereafter, except in the case of a lease, the
predecessor person shall be relieved of all obligations and covenants under this
Guarantee.

5.    The Guarantor hereby certifies and warrants that all acts, conditions and
things required to be done and performed and to have happened precedent to the
creation and issuance of this Guarantee, and to constitute the same the legal,
valid and binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except that enforcement may be limited by
bankruptcy, insolvency, liquidation, reorganization and other laws of general
application relating to or affecting the rights of creditors or by general
principles of equity, including the limitation that specific performance, being
an equitable remedy, is discretionary and may not be ordered, have been done and
performed and have happened in due and strict compliance with all applicable
laws.

6.    This Guarantee shall terminate upon the payment in full of the Notes.
Notwithstanding the foregoing, this Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Notes must
restore payment of any sums paid under such Notes or under this Guarantee or any
payment, observance or performance of any of the Guaranteed Obligations is
otherwise recovered from or paid over by or for the account of any holder of
Notes for any reason, including as a preference or fraudulent transfer, whether
effected by judgment, decree or, order of any governmental authority, by any
plan of reorganization or by any settlement or compromise.

7.    This Guarantee shall be interpreted in accordance with and governed by the
internal laws of the State of New York, United States of America.

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8.    This Guarantee is dated the date of the Note upon which it is endorsed.

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      IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed.

                                               PINNACLE WEST CAPITAL CORPORATION

                                               By: /s/ Barbara M. Gomez
                                                   -----------------------------
                                               Name: Barbara M. Gomez
                                               Its: Vice President and Treasurer