<PAGE>

                                                                    Exhibit 10.1

      UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO PINNACLE WEST
ENERGY CORPORATION (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

      THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.

      THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER
THIS NOTE NOR ANY INTEREST HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS NOT A "U.S. PERSON" (AS DEFINED IN REGULATION S
("REGULATION S") UNDER THE SECURITIES ACT) AND IS ACQUIRING THIS NOTE OUTSIDE
THE UNITED STATES, (2) AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE
PRIOR TO THE DATE WHICH IS 40 DAYS AFTER THE ORIGINAL ISSUE DATE OF THE NOTES
(THE "REGULATION S RESTRICTED PERIOD") EXCEPT (A) TO PINNACLE WEST ENERGY
CORPORATION OR PINNACLE WEST CAPITAL CORPORATION, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A ("RULE 144A")
UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,

<PAGE>

(D) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT PINNACLE WEST
ENERGY, PINNACLE WEST CAPITAL AND THE FISCAL AGENT SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (E) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM.

THIS NOTE AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER
TRANSFERS OF THIS NOTE TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR
THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER
OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE SHALL BE DEEMED BY
THE ACCEPTANCE OF THIS NOTE TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

                        PINNACLE WEST ENERGY CORPORATION

                           Floating Rate Note due 2007

         Unconditionally Guaranteed by Pinnacle West Capital Corporation

No. 2                                                                      $0.00
                                                CUSIP No. U72353AA0/USU72353AA03

      Pinnacle West Energy Corporation, a corporation duly organized and
existing under the laws of Arizona (herein called the "Company" which term
includes any successor person), for value received, hereby promises to pay to
Cede & Co., as nominee of The Depository Trust Company, or registered assigns,
the principal sum of Zero Dollars on April 1, 2007 (the "Maturity Date"), and to
pay interest at the rate set forth below on the outstanding principal amount
hereof from time to time from and including April 11, 2005 or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or duly provided for, quarterly in arrears on April 1, July 1, October 1 and
January 1 of each year prior to the Maturity Date, commencing July 1, 2005, and
on the Maturity Date (each, an "Interest Payment Date"), until the principal
hereof is paid or made available for payment and at the same per annum rate set
forth below on any overdue principal and on any overdue installment of interest.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date shall, as provided herein, be paid to the person in whose
name this Note (or one or more predecessor Notes) is registered at the close of
business on the fifteenth calendar day

                                       2
<PAGE>

preceding each Interest Payment Date (each a "Regular Record Date"); PROVIDED,
HOWEVER, that interest payable on the Maturity Date, or any redemption date,
shall be payable to the person to whom the principal amount of this Note is
payable. Any interest payable on any Interest Payment Date other than the
Maturity Date and not so punctually paid or duly provided for shall forthwith
cease to be payable to the person in whose name this Note is registered at the
close of business on such Regular Record Date and shall instead be payable to
the person in whose name this Note (or one or more predecessor Notes) is
registered at the close of business on a special record date for the payment of
such interest to be fixed by the Company, notice whereof shall be given to the
registered holder of this Note (or one or more predecessor Notes) not less than
ten days prior to such special record date. Principal of this Note shall be
payable against surrender hereof at the corporate trust office of the Fiscal
Agent (as defined below) or at such other office or agency of the Company as may
be designated by it for such purpose in the Borough of Manhattan, The City of
New York.

      "Business Day" means any day other than a Saturday or a Sunday or a day on
which banking institutions in The City of New York or London, England are
authorized or required by law or executive order to remain closed or a day on
which the corporate trust office of the Fiscal Agent is closed for business.

      "Calculation Agent" means The Bank of New York Trust Company, N.A. or its
successor appointed by the Company, acting as calculation agent.

      "Interest Determination Date" means the second London Business Day
immediately preceding the first day of the relevant Interest Period.

      "Interest Period" means the period commencing on an Interest Payment Date
for this Note (or commencing on the issue date for this Note, if no interest has
been paid or duly made available for payment since that date) and ending on the
day before the next succeeding Interest Payment Date or the Maturity Date, as
the case may be, for this Note.

      "LIBOR" for any Interest Determination Date will be the London interbank
offered rate for deposits in U.S. dollars having an index maturity of three
months for a period commencing on the second London Business Day immediately
following such Interest Determination Date (the "Three Month Deposits") in
amounts of not less than $1,000,000, as such rate appears on Telerate Page 3750,
at approximately 11:00 a.m., London time, on such Interest Determination Date.

      "London Business Day" means a day on which dealings in deposits in U.S.
dollars are transacted, or with respect to any future date, are expected to be
transacted, in the London interbank market.

      "Telerate Page 3750" means the display designated on page "3750" on
Moneyline Telerate (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits).

                                       3
<PAGE>

      Payment of the principal of and any interest on this Note will be made at
the corporate trust office of the Fiscal Agent, or at such other office or
agency of the Company as may be designated by it for such purpose, in the
Borough of Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; PROVIDED, HOWEVER, that, at the option of the
Company payment of interest may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the Note Register; and
PROVIDED, FURTHER, HOWEVER, that in the case of Notes held by a depository (as
defined in Section 1 hereof) or its nominee, payments of principal and interest
shall be made by wire transfer of immediately available funds to an account
designated by such depository.

      If any Interest Payment Date, other than the Maturity Date, falls on a day
that is not a Business Day, the Interest Payment Date will be the next
succeeding Business Day, except if that Business Day is in the next succeeding
calendar month, the Interest Payment Date will be the next preceding Business
Day, in either case, without any interest or other payment in respect of such
adjustment. If the Maturity Date of the Notes or any redemption date falls on a
day that is not a Business Day, the payment of principal and interest (to the
extent payable with respect to the principal amount being redeemed if on a
redemption date) will be made on the next succeeding Business Day, and no
interest on such payment shall accrue for the period from and after the Maturity
Date or such redemption date.

      This Note is one of a duly authorized series of securities of the Company,
issued under a Fiscal and Paying Agency Agreement, dated as of April 1, 2005
(the "Fiscal Agency Agreement"), duly executed and delivered by the Company and
Pinnacle West Capital Corporation (the "Guarantor") to The Bank of New York
Trust Company, N.A., a national banking association, as Fiscal and Paying Agent
(the "Fiscal Agent"). All terms that are used but not defined in this Note and
that are defined in the Fiscal Agency Agreement shall have the meanings set
forth therein.

      This Note is entitled to the benefits of the Guarantee endorsed on this
Note (the "Guarantee"). Reference is hereby made to the Guarantee for a
statement of the rights, duties, and obligations thereunder of the Guarantor and
the holders of the Notes.

      The Notes are not redeemable prior to October 1, 2005. The Notes will be
redeemable at the Company's option in whole or in part, beginning on October 1,
2005 and on the first day of each month thereafter, prior to maturity of the
Notes, at a redemption price equal to 100% of the principal amount of the Notes
to be redeemed plus accrued and unpaid interest thereon to the date of
redemption (the "Redemption Amount").

      If the Company elects to redeem less than all the Notes and the Notes are
at the time represented by a global security, then the depository shall select
by lot the particular interest to be redeemed. If the Company elects to redeem
less than all of the Notes, and the Notes are not represented by a global
security, then the Fiscal Agent shall select the particular Notes to be redeemed
in a manner it deems appropriate. In order to redeem the

                                       4
<PAGE>

Notes, the Company will give not less than 15 days prior notice mailed to each
holder of Notes to be redeemed at its registered address by first-class mail.

      If at the time of mailing of any notice of redemption the Company shall
not have deposited with the Fiscal Agent an amount in cash sufficient to redeem
all of the Notes called for redemption and any accrued interest to such date
fixed for redemption, such notice shall state that it is subject to the receipt
of the redemption moneys from the Company by the Fiscal Agent on or before the
date fixed for redemption and such notice shall be of no effect unless such
moneys are so received on or before such date. In the event the Company does not
provide such moneys, the notice of redemption shall be of no force and effect,
and the Guarantor will not be required to provide such moneys for the redemption
of the Notes.

      If notice has been given as provided herein and funds for the redemption
of the Notes called for redemption shall have been made available on the
redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the holders of such Notes will be to receive payment of the
redemption price.

      The Notes will not be subject to any sinking fund.

      The Notes will bear interest for each Interest Period at a per annum rate
determined by the Calculation Agent as described below (the "Rate of Interest").
The per annum interest rate will be equal to LIBOR on the relevant Interest
Determination Date plus 0.50%; PROVIDED, HOWEVER, that in certain circumstances
described below, the interest rate will be determined by the Calculation Agent
in an alternative manner without reference to LIBOR. Promptly upon such
determination, the Calculation Agent will notify the Fiscal Agent of the
interest rate for the new Interest Period. The interest rate determined by the
Calculation Agent, absent manifest error, shall be binding and conclusive upon
the beneficial owners and holders of the Notes, the Company, the Guarantor, and
the Fiscal Agent.

      If the following circumstances exist on any Interest Determination Date,
the Calculation Agent shall determine the interest rate for the Notes as
follows:

            (1)   In the event LIBOR cannot be determined from the Moneyline
      Telerate service as described herein as of approximately 11:00 a.m. London
      time on such Interest Determination Date, the Calculation Agent shall
      request the principal London offices of each of four major banks in the
      London interbank market selected by the Calculation Agent (after
      consultation with the Company) to provide a quotation of the rate (the
      "Rate Quotation") at which Three Month Deposits in amounts of not less
      than $1,000,000 are offered by it to prime banks in the London interbank
      market, at approximately 11:00 a.m. London time on such Interest
      Determination Date, that is representative of single transactions at such
      time (the "Representative Amounts"). If at least two Rate Quotations are
      provided, the interest rate will be the arithmetic mean of the Rate
      Quotations obtained by the Calculation Agent, plus 0.50%.

                                       5
<PAGE>

            (2)   In the event LIBOR cannot be determined from the Moneyline
      Telerate service as described herein and fewer than two Rate Quotations
      are available as provided in (1) above, the interest rate will be the
      arithmetic mean of the rates quoted at approximately 11:00 a.m. New York
      City time on such Interest Determination Date, by three major banks in New
      York City, selected by the Calculation Agent (after consultation with the
      Company), for loans in Representative Amounts in U.S. dollars to leading
      European banks, having an index maturity of three months for a period
      commencing on the second London Business Day immediately following such
      Interest Determination Date, plus 0.50% PROVIDED, HOWEVER, that if fewer
      than three banks selected by the Calculation Agent are quoting such rates,
      the interest rate for the applicable Interest Period will be the same as
      the interest rate in effect for the immediately preceding Interest Period.

      Interest on the Notes will be calculated on the basis of the actual number
of days for which interest is payable in the relevant Interest Period, divided
by 360. All dollar amounts resulting from such calculations will be rounded, if
necessary, to the nearest cent with one-half cent rounded upward.

      Upon the request of a holder of the Notes, the Calculation Agent will
provide to such holder the interest rate in effect on the date of such request
and, if determined, the interest rate for the next Interest Period.

      No liability shall (in the absence of gross negligence, willful misconduct
or bad faith) attach to the Calculation Agent in connection with the exercise or
non-exercise by it of its powers, duties and discretions.

      1.    REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Company
shall cause to be kept at an office or agency to be maintained by the Company a
register (the register maintained in such office being herein referred to as the
"Note Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes. The corporate trust department of the Fiscal Agent is hereby
appointed "Note Registrar" for the purpose of registering Notes and transfers of
Notes as herein provided. The Company may appoint co-registrars and may change
any Note Registrar or co-registrar without notice.

      Notes shall be exchangeable pursuant to this Section 1 for Notes
registered in the name of, and a transfer of a Note may be registered to, any
person other than DTC or its successor depository (DTC or such successor being
referred to as a "depository") for such Note or its nominee only if (i) such
depository notifies the Company that it is unwilling or unable to continue as
depository for such Note or if at any time such depository ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, and a successor depository is not appointed by the Company within 90
days, (ii) there shall have occurred and be continuing an Event of Default (as
defined below) with respect to the Notes or (iii) the Company, in its sole
discretion, elects to terminate the book-entry system. Upon the occurrence of
any one or more of the conditions specified in clauses (i), (ii) or (iii) of the
preceding sentence, such Note shall

                                       6
<PAGE>

be exchanged for Notes registered in the names of, and the transfer of such Note
shall be registered to, such persons (including persons other than the
depository with respect to such Notes and its nominee) as such depository shall
direct, in each case subject to Section 3 hereof.

      Subject to the terms of the Fiscal Agency Agreement and the limitations
applicable to Book-Entry Global Notes, Notes may be presented for exchange or
for registration of transfer (duly endorsed or with the form of transfer
endorsed thereon duly executed) at the office of the Fiscal Agent or at the
office of any other transfer agent designated by the Company for such purpose.
Such transfer or exchange shall be effected upon the Fiscal Agent or such other
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. The Company may at any time
designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts;
PROVIDED, HOWEVER, that there shall at all times be a transfer agent in the
Borough of Manhattan, The City of New York. No service charge will be made for
any registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.

      The Notes and any certificates for Notes issued in exchange for Notes or a
beneficial interest therein will bear the third and fourth legends set forth in
this Note. The holder of a certificated Note may transfer such Note, subject to
compliance with the provisions of such legends, as provided in the preceding
paragraph. Upon the transfer, exchange or replacement of Notes bearing such
legends, or upon specific request for removal of such legends on a Note, the
Company will deliver only Notes bearing such legends, or will refuse to remove
such legends, as the case may be, unless there is delivered to the Company such
satisfactory evidence, which may include an opinion of counsel, as may
reasonably be required by the Company, that neither such legend nor the
restrictions on transfer set forth therein are required to ensure compliance
with the provisions of the Securities Act and other applicable laws.

      2.    ACTS BY HOLDERS.

            (a)   Any request, demand, authorization, direction, notice,
      consent, waiver or other action provided by the Notes or the Fiscal Agency
      Agreement to be given or taken by holders may be embodied in and evidenced
      by one or more instruments of substantially similar tenor signed by such
      holders in person or by an agent duly appointed in writing; and, except as
      otherwise expressly provided in the Notes or the Fiscal Agency Agreement,
      such action shall become effective when such instrument or instruments are
      delivered to the Fiscal Agent and, where it is hereby expressly required,
      to the Company. Such instrument or instruments (and the action embodied
      therein and evidenced thereby) are herein sometimes referred to as the
      "Act" of the holders signing such instrument or instruments. Proof of
      execution of any such instrument or of a writing appointing any such agent
      shall be sufficient for any purpose of the Notes and the Fiscal Agency

                                       7
<PAGE>

      Agreement and conclusive in favor of the Fiscal Agent and the Company, if
      made in the manner provided in this Section.

            (b)   The fact and date of the execution by any person of any such
      instrument or writing may be proved by the affidavit of a witness of such
      execution or by a certificate of a notary public or other officer
      authorized by law to take acknowledgments of deeds, certifying that the
      individual signing such instrument or writing acknowledged to him the
      execution thereof. Where such execution is by a signer acting in a
      capacity other than his or her individual capacity, such certificate or
      affidavit shall also constitute sufficient proof of his or her authority.
      The fact and date of the execution of any such instrument or writing, or
      the authority of the person executing the same, may also be proved in any
      other manner which the Fiscal Agent deems sufficient.

            (c)   The Company may set any day as the record date for the purpose
      of determining the holders of outstanding Notes entitled to make any
      request or demand or give any authorization, direction, notice, consent or
      waiver or take other action, provided or permitted by the Notes and the
      Fiscal Agency Agreement to be made, given or taken by holders of the
      Notes.

            With regard to any record date set pursuant to the immediately
      preceding paragraph, the holders of outstanding Notes on such record date
      (or their duly appointed agents), and only such persons, shall be entitled
      to take relevant action, whether or not such holders remain holders after
      such record date. With regard to any action that may be taken hereunder
      only by holders of a requisite principal amount of outstanding Notes (or
      their duly appointed agents) and for which a record date is set pursuant
      to the immediately preceding paragraph, the Company, may at its option,
      set an expiration date after which no such action purported to be taken by
      any holder shall be effective unless taken on or prior to such expiration
      date by holders of the requisite principal amount of outstanding Notes on
      such record date (or their duly appointed agents). On or prior to any
      expiration date set pursuant to this paragraph, the Company may, on one or
      more occasions at its option, extend such expiration date to any later
      date. Nothing in this paragraph shall prevent any holder (or any duly
      appointed agent thereof) from taking, after any expiration date, any
      action identical to, or, at any time, any action contrary to or different
      from, any action previously taken, or purported to have been previously
      taken hereunder by such holder, in which event the Company may set a
      record date in respect thereof pursuant to this paragraph. Notwithstanding
      the foregoing, the Company shall not set a record date for, and the
      provisions of this paragraph shall not apply with respect to, any action
      to be taken by holders pursuant to Section 6 hereof.

            Upon receipt by the Fiscal Agent of notice of any default, any
      declaration of acceleration, or any rescission and annulment of any such
      declaration, or of any direction in accordance with Section 6 hereof, a
      record date shall automatically and without any other action by any person
      be set for the purpose of determining the holders of outstanding Notes
      entitled to join in such notice, declaration, or

                                       8
<PAGE>

      rescission and annulment, or direction, as the case may be, which record
      date shall be the close of business on the date the Fiscal Agent receives
      such notice, declaration, rescission and annulment or direction, as the
      case may be. The holders of outstanding Notes on such record date (or
      their duly appointed agent), and only such persons, shall be entitled to
      join in such notice, declaration, rescission and annulment, or direction,
      as the case may be, whether or not such holders remain holders after such
      record date; PROVIDED, THAT, unless such notice, declaration, rescission
      and annulment, or direction, as the case may be, shall have become
      effective by virtue of holders of the requisite principal amount of
      outstanding Notes on such record date (or their duly appointed agents)
      having joined therein on or prior to the 90th day after such record date,
      such notice of default, declaration, or rescission and annulment or
      direction given or made by the holders, as the case may be, shall
      automatically and without any action by any person be canceled and of no
      further effect. Nothing in this paragraph shall prevent a holder (or a
      duly appointed agent thereof) from giving, before or after the expiration
      of such 90-day period, a notice of default, a declaration of acceleration,
      a rescission and annulment of a declaration of acceleration or a
      direction, contrary to or different from, or, after the expiration of such
      period, identical to, a previously given notice, declaration, rescission
      and annulment, or direction, as the case may be, that has been canceled
      pursuant to the proviso to the preceding sentence, in which event a new
      record date in respect thereof shall be set pursuant to this paragraph.

            (d)   The ownership of the Notes shall be proved by the Note
      Register.

            (e)   Any request, demand, authorization, direction, notice,
      consent, waiver, or other Act of the holder of any Note shall bind every
      future holder of the same Note and the holder of every Note issued upon
      the registration of transfer thereof or in exchange therefor or in lieu
      thereof in respect of anything done, omitted or suffered to be done by the
      Fiscal Agent or the Company in reliance thereon, whether or not notation
      of such action is made upon such Note.

      3.    DENOMINATIONS. The Notes are issuable only in registered form
without coupons in denominations of $100,000 and integral multiples of $1,000 in
excess thereof.

      4.    PERSONS DEEMED OWNERS. The Company, the Fiscal Agent and any agent
of the Company or the Fiscal Agent may treat the person in whose name this Note
is registered as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes whatsoever, whether or not this Note shall
be overdue, and neither the Company, the Fiscal Agent nor any such agent shall
be affected by notice to the contrary.

      5.    AMENDMENTS AND WAIVERS. Without the consent of any holder of the
Notes, the Company or, as applicable, the Guarantor, and the Fiscal Agent, at
any time and from time to time, may modify or amend the terms of the Notes or
the Guarantee and enter into one or more agreements supplemental to the Fiscal
Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the
following purposes:

                                       9
<PAGE>

            (a)   to evidence the succession of another person to the Company or
      the Guarantor and the assumption by any such successor of the covenants of
      the Company herein or of the Guarantor in the Guarantee and of the Company
      or the Guarantor, as the case may be, in the Fiscal Agency Agreement; or

            (b)   to add to the covenants of the Company or of the Guarantor for
      the benefit of the holders of the Notes; or

            (c)   to add any additional Events of Default; or

            (d)   to secure the Notes; or

            (e)   to evidence and provide for the acceptance of appointment by a
      successor Fiscal Agent with respect to the Notes; or

            (f)   to amend the restrictions on transfer applicable to the Notes;
      or

            (g)   to cure any ambiguity or to correct or supplement any
      provision which may be inconsistent with any other provision herein, in
      the Guarantee, or in the Fiscal Agency Agreement, or to correct or
      supplement any defective provision contained herein, in the Guarantee, or
      in the Fiscal Agency Agreement, provided that such action pursuant to this
      clause (g) shall not adversely affect the interests of the holders of the
      Notes.

      With the consent of the holders of not less than a majority of the
aggregate principal amount of the outstanding Notes, by Act of said holders
delivered to the Company and the Fiscal Agent, the Company or, as applicable,
the Guarantor, and the Fiscal Agent, at any time and from time to time, may
amend the terms of the Notes or the Guarantee or the rights of the holders of
the Notes or enter into an agreement supplemental to the Fiscal Agency
Agreement; PROVIDED, HOWEVER, that no such amendment or supplemental agreement
shall, without the consent of the holder of each outstanding Note affected
thereby,

                  (1)   change the stated maturity of the principal of, or any
            installment of interest on, any Note, or reduce the principal amount
            thereof or the rate of interest thereon, or change any place of
            payment where, or the coin or currency in which, any Note or
            interest thereon is payable, or impair the right to institute suit
            for the enforcement of any such payment on or after the stated
            maturity thereof,

                  (2)   reduce the percentage in principal amount of the
            outstanding Notes, the consent of whose holders is required for any
            such amendment or supplemental agreement or the consent of whose
            holders is required for any waiver of compliance provided for herein
            or in the Fiscal Agency Agreement,

                  (3)   change the Guarantor's payment obligations under the
            Guarantee; or

                                       10
<PAGE>

                  (4)   modify any of the provisions of this Section 5 or
            Section 7, except to increase any such percentage or to provide that
            certain other provisions of the Notes cannot be modified or waived
            without the consent of the holder of each outstanding Note affected
            thereby.

      It shall not be necessary for any Act of holders under this Section 5 to
approve the particular form of any proposed amendment or supplemental agreement,
but it shall be sufficient if such Act shall approve the substance thereof.

      Upon the execution of any agreement supplement to the Fiscal Agency
Agreement, the Notes, or the Guarantee as permitted by this Section 5, the
Fiscal Agency Agreement, the Notes, and the Guarantee shall be modified in
accordance therewith, and such supplemental agreement shall form a part of the
Fiscal Agency Agreement, the Notes, and the Guarantee as the same pertains to
the Notes, for all purposes, and every holder of the Notes theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.

      6.    DEFAULTS AND REMEDIES. The occurrence of any of the following events
shall constitute an Event of Default with respect to the Notes:

            (a)   default by the Company (or by the Guarantor under the
      Guarantee) in the payment of (i) the principal of any of the Notes when
      the same becomes due and payable or (ii) the Redemption Amount on the date
      fixed for redemption in the case of any Note called for redemption; or

            (b)   default by the Company (or by the Guarantor under the
      Guarantee) in the payment of any installment of interest upon any of the
      Notes when the same becomes due and payable, and continuance of such
      default for a period of 30 days; or

            (c)   default for 90 days after notice to the Company by the Fiscal
      Agent or to the Company and the Fiscal Agent by the holders of at least
      25% in aggregate principal amount of the Notes then outstanding in the
      performance of any of the other covenants or agreements in the Notes; or

            (d)   default for 90 days after notice to the Guarantor by the
      Fiscal Agent or to the Guarantor and the Fiscal Agent by the holders of at
      least 25% in aggregate principal amount of the Notes then outstanding in
      the performance of any covenants or agreements in the Guarantee (other
      than those related to payment as set forth above); or

            (e)   the Guarantee ceases to be in full force and effect (other
      than in accordance with its terms) or the Guarantor denies or disaffirms
      its obligations under the Guarantee; or

            (f)   a decree or order by a court having jurisdiction in the
      premises shall have been entered adjudging the Company or the Guarantor
      bankrupt or insolvent, or approving as properly filed a petition seeking
      reorganization of the

                                       11
<PAGE>

      Company or the Guarantor under the Federal Bankruptcy Code or any other
      similar applicable Federal or State law, and such decree or order shall
      have continued undischarged and unstayed for a period of 90 days; or a
      decree or order of a court having jurisdiction in the premises for the
      appointment of a receiver or liquidator or trustee or assignee in the
      bankruptcy or insolvency of the Company or the Guarantor or of its
      property, or for the winding up or liquidation of its affairs, shall have
      been entered, and such decree or order shall have continued undischarged
      and unstayed for a period of 90 days; or

            (g)   the Company or the Guarantor shall institute proceedings to be
      adjudicated bankrupt, or shall consent to the filing of a bankruptcy
      proceeding against it, or shall file a petition or answer or consent
      seeking reorganization under the Federal Bankruptcy Code or any other
      similar Federal or State law, or shall consent to the filing of any such
      petition or shall consent to the appointment of a receiver or liquidator
      or trustee or assignee in bankruptcy or insolvency of it or of its
      property, or shall make an assignment for the benefit of creditors or
      shall admit in writing its inability to pay its debts generally as they
      become due.

      If an Event of Default occurs and is continuing, the holders of at least
25% in principal amount of the Notes then outstanding may declare all the Notes
and interest accrued thereon to be due and payable immediately. Holders of a
majority in principal amount of the Notes then outstanding may waive an Event of
Default and rescind any related declaration except as provided in Section 7(a)
hereof. The Fiscal Agent may withhold from holders of Notes notice of any
continuing default, except in respect of a default in the payment of principal
of or interest on the Notes, if it determines that withholding such notice is in
their interest.

      7.    WAIVERS.

            (a)   The holders of not less than a majority in principal amount of
      the outstanding Notes may on behalf of the holders of all of the Notes
      waive any past default hereunder and/or in the Guarantee with respect to
      the Notes and its consequences, except a default not theretofore cured

                  (1)   in the payment of the principal of or interest on any
            Note, or

                  (2)   in respect of a covenant or provision which under
            Section 5 cannot be modified or amended without the consent of the
            holder of each outstanding Note affected.

      Upon any such waiver, such default shall cease to exist, and any Event of
      Default arising therefrom shall be deemed to have been cured, for every
      purpose of the Notes and the Guarantee; but no such waiver shall extend to
      any subsequent or other default or impair any right consequent thereon.

            (b)   The Company and the Guarantor may omit in any particular
      instance to comply with any term, provision or condition set forth in the
      Notes,

                                       12
<PAGE>

      the Guarantee or the Fiscal Agency Agreement with respect to the Notes if
      before the time for such compliance the holders of at least a majority in
      principal amount of the outstanding Notes shall, by act of such holders,
      either waive such compliance in such instance or generally waive
      compliance with such term, provision or condition, but (i) without the
      consent of the holder of each Note affected thereby, no such waiver shall
      extend to or affect any term, provision or condition which under Section 5
      cannot be modified or amended without the consent of the holder of each
      outstanding Note affected, and (ii) no such waiver shall extend to or
      affect any term, provision or condition except to the extent so expressly
      waived, and, until such waiver shall become effective, the obligations of
      the Company and the Guarantor and any duties of the Fiscal Agent in
      respect of any such term, provision or condition shall remain in full
      force and effect.

      8.    COMPANY MAY MERGE OR CONSOLIDATE ONLY ON CERTAIN TERMS. The Company
covenants that it will not merge or consolidate with any other corporation
except that the Company may merge or consolidate with any other corporation,
provided that (i) either the Company shall be the continuing corporation or the
successor corporation (if other than the Company) shall be a corporation
organized 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 payment of the principal of and interest on all the Notes, according to
their tenor, and the due and punctual performance and observance of all of the
covenants and conditions of this Note and the Fiscal Agency Agreement to be
performed by the Company, by supplemental agreement in form reasonably
satisfactory to the Fiscal Agent, executed and delivered to the Fiscal Agent by
such corporation, and (ii) the Company or such successor corporation, as the
case may be, shall not, immediately after such merger or consolidation be in
default in the performance of any such covenant or condition.

      Upon any consolidation of the Company with, or merger of the Company into,
any other person in accordance with this Section 8, the successor person formed
by such consolidation or into which the Company is merged shall succeed to, and
be substituted for, and may exercise every right and power of the Company under
this Note and the Fiscal Agency Agreement with the same effect as if such
successor person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor person shall be relieved of all obligations
and covenants under the Notes and the Fiscal Agency Agreement.

      As a condition to any merger or consolidation, the Guarantor must reaffirm
its obligations under the Guarantee.

      9.    UNCLAIMED AMOUNTS. Any money deposited with the Fiscal Agent in
trust for the payment of the principal of or interest on any Note and remaining
unclaimed for twelve months after such principal or interest has become due and
payable shall be paid to the Company upon its request; and the holder of such
Note shall thereafter, as an unsecured general creditor, look only to the
Company and the Guarantor pursuant to the Guarantee for payment thereof, and all
liability of the Fiscal Agent with respect to such money shall thereupon cease.

                                       13
<PAGE>

      10.   MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If any Note becomes
mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal
Agent shall, subject to the provisions of this Section 10, authenticate and
deliver a new Note in exchange and substitution for the mutilated or defaced
Note or in lieu of and in substitution for the apparently destroyed, lost or
stolen Note.

      Application for the authentication and delivery of a substitute Note
pursuant to this Section 10 may be made at the office of the Fiscal Agent. If
the applicant for any substitute Note shall furnish to the Company and the
Fiscal Agent (i) in the case of any such request in case of destruction, loss or
theft, such security or indemnity as may be required by the Company or the
Fiscal Agent in their sole discretion to indemnify and defend and to save each
of them and any agent of either of them harmless, and (ii) in the case of any
request for a substitute Note in case of destruction, loss or theft, evidence to
the satisfaction of the Company and the Fiscal Agent of the apparent
destruction, loss or theft of such Note and of the ownership thereof, then, in
the absence of notice to the Company or the Fiscal Agent that such Note has been
acquired by a bona fide purchaser, the Company shall execute and the Fiscal
Agent shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Note, a new Note of like tenor and principal amount and bearing a number
not contemporaneously outstanding.

      In case any such mutilated, destroyed, lost or stolen Note has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Note, pay such Note.

      Upon the issuance of any substitute Note under this Section 10, the
Company may require the payment of a sum sufficient to cover any tax, assessment
or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Fiscal Agent) connected
therewith.

      Every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of the Fiscal Agency Agreement equally and proportionately with any and
all other Notes.

      The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.

      11.   NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Fiscal Agency Agreement, or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each holder (and each beneficial owner) of a Note by accepting such
Note (or acquisition of a beneficial interest therein) waives and releases all
such liability. Such waiver and release are part of the consideration for the
issuance of the Notes.

                                       14
<PAGE>

      THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

      This Note shall not be valid or obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Fiscal Agent
under the Fiscal Agency Agreement.

                                       15
<PAGE>

      IN WITNESS WHEREOF, the Company has caused this instrument to be signed in
its corporate name, manually or by facsimile, by an authorized representative
and a facsimile of its corporate seal to be affixed hereunto or imprinted
hereon, attested by the manual or facsimile signature of its Secretary or one of
its Associate Secretaries.

                                                PINNACLE WEST ENERGY CORPORATION

Attest: /s/ Betsy A. Pregulman                  By: /s/ Barbara M. Gomez
        -------------------------                   ----------------------------
        Associate Secretary                     Name: Barbara M. Gomez
                                                Title: Treasurer

Dated: April 11, 2005

                  FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION

      This is one of the Notes referred to in the within-mentioned Fiscal Agency
Agreement.

                                                THE BANK OF NEW YORK TRUST
                                                COMPANY, N.A., as Fiscal Agent

                                                By: /s/ Sandee' Parks
                                                    ----------------------------
                                                       Authorized Signatory

                                       16