SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                  ----------
                                  FORM 10-K

(Mark One)
   X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
 ----- OF THE SECURITIES EXCHANGE ACT OF 1934
       FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
                                      OR
       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
 ----- OF THE SECURITIES EXCHANGE ACT OF 1934
       FOR THE TRANSITION PERIOD FROM            TO 
                                     -----------    ------------
                        COMMISSION FILE NUMBER 1-4473

                        ARIZONA PUBLIC SERVICE COMPANY
            (Exact name of registrant as specified in its charter)
                                   
                 ARIZONA                               86-0011170
      (State or other jurisdiction          (I.R.S. Employer Identification No.)
   of incorporation or organization)
 400 North Fifth Street, P.O. Box 53999
      Phoenix, Arizona 85072-3999                    (602) 250-1000
(Address of principal executive offices,      (Registrant's telephone number,
           including zip code)                    including area code)
                    
-----------------------------------------------------------------------------
Securities registered pursuant to 
   Section 12(b) of the Act:                        Name of each exchange on
      Title of each class                                which registered
-----------------------------------------------------------------------------

 Adjustable Rate Cumulative Preferred Stock,  ........New York Stock Exchange
   Series Q, $100 Par Value
 $1.8125 Cumulative Preferred Stock, .................New York Stock Exchange
   Series W, $25 Par Value
 10% Junior Subordinated Deferrable Interest .........New York Stock Exchange
   Debentures, Series A, Due 2025

Securities registered pursuant to Section 12(g) of the Act:

                           Cumulative Preferred Stock
                                (Title of class)
             (See Note 4 of Notes to Financial Statements in Item 8
        for dividend rates, series designations (if any), and par values)

   Indicate  by check mark  whether  the  registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.   Yes    X           No
                                               ----------        ----------

   Indicate by check mark if disclosure of  delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

                                                         Aggregate Market Value
                                                         of Voting Stock Held by
                                                          Non-affiliates of the
  Title of Each Class               Shares Outstanding      Registrant as of
   of Voting Stock                  as of March 1, 1996      March 1, 1996
-------------------------------------------------------------------------------
  Cumulative Preferred Stock ...........5,022,814           $245,000,000(a)
-----------------------------------------------------------------------------
(a) Computed,  with respect to shares listed on the New York Stock Exchange,  by
reference  to the  closing  price on the  composite  tape on March 1,  1996,  as
reported by The Wall Street Journal,  and with respect to non-listed  shares, by
determining  the  yield  on  listed  shares  and  assuming  a market  value  for
non-listed shares which would result in that same yield.

     As of March 1, 1996, there were issued and outstanding 71,264,947 shares of
the  registrant's  common  stock,  $2.50  par  value,  all of  which  were  held
beneficially and of record by Pinnacle West Capital Corporation.

                     Documents Incorporated by Reference

     Portions of the  registrant's  definitive  proxy statement  relating to its
annual meeting of shareholders  to be held on May 21, 1996, are  incorporated by
reference into Part III hereof.


<PAGE>
                              TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                       --------
<S>                                                                                       <C>
GLOSSARY ................................................................................. 1
PART I
     Item 1. Business .................................................................... 2
     Item 2. Properties .................................................................. 9
     Item 3. Legal Proceedings ...........................................................13
     Item 4. Submission of Matters to a Vote of Security Holders .........................13
     Supplemental Item.
           Executive Officers of the Registrant ..........................................13
PART II
     Item 5. Market for Registrant's Common Stock and Related Security Holder Matters  ...15
     Item 6. Selected Financial Data .....................................................16
     Item 7. Management's Discussion and Analysis of Financial Condition
             and Results of Operations ...................................................17
     Item 8. Financial Statements and Supplementary Data .................................19
     Item 9. Changes In and Disagreements with Accountants on Accounting
             and Financial Disclosure ....................................................39
PART III
     Item 10. Directors and Executive Officers of the Registrant .........................39
     Item 11. Executive Compensation .....................................................39
     Item 12. Security Ownership of Certain Beneficial Owners and Management  ............39
     Item 13. Certain Relationships and Related Transactions .............................39
PART IV
     Item 14. Exhibits, Financial Statements, Financial Statement Schedules,
              and Reports on Form 8-K ....................................................40
SIGNATURES ...............................................................................54
</TABLE>

                                        i


<PAGE>
                                   GLOSSARY

ACC -- Arizona Corporation Commission
ACC STAFF -- Staff of the Arizona Corporation Commission
AFUDC -- Allowance for Funds Used During Construction
AMENDMENTS -- Clean Air Act Amendments of 1990
ANPP -- Arizona Nuclear Power Project, also known as Palo Verde
APS -- Arizona Public Service Company
CHOLLA -- Cholla Power Plant
CHOLLA 4 -- Unit 4 of the Cholla Power Plant
COMPANY -- Arizona Public Service Company
DOE -- United States Department of Energy
EPA -- United States Environmental Protection Agency
ENERGY ACT -- National Energy Policy Act of 1992
FASB -- Financial Accounting Standards Board
FERC -- Federal Energy Regulatory Commission
FOUR CORNERS -- Four Corners Power Plant
GAAP -- Generally accepted accounting principles
ITC -- Investment Tax Credit
KW -- Kilowatt, one thousand watts
KWH -- Kilowatt-hour, one thousand watts per hour
MORTGAGE -- Mortgage and Deed of Trust, dated as of July 1, 1946, as
supplemented and amended
MWH -- Megawatt hours, one million watts per hour
1935 ACT -- Public Utility Holding Company Act of 1935
NGS -- Navajo Generating Station
NRC -- Nuclear Regulatory Commission
PACIFICORP -- An Oregon-based utility company
PALO VERDE -- Palo Verde Nuclear Generating Station
PINNACLE WEST -- Pinnacle West Capital Corporation, an Arizona corporation,
the Company's parent
SEC -- Securities and Exchange Commission
SFAS NO. 71 -- Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation"
SFAS NO. 121 -- Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of"
SFAS NO. 123 -- Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation"
SRP -- Salt River Project Agricultural Improvement and Power District
USEC -- United States Enrichment Corporation

                                        

<PAGE>
                                     PART I

                                ITEM 1. BUSINESS

The Company

   The Company was incorporated in 1920 under the laws of Arizona and is engaged
principally  in  serving  electricity  in the State of  Arizona.  The  principal
executive offices of the Company are located at 400 North Fifth Street, Phoenix,
Arizona  85004  (telephone  602-250-1000).  At December  31,  1995,  the Company
employed 6,484 people, which includes employees assigned to joint projects where
the Company is project manager.

   The Company serves  approximately  705,000 customers in an area that includes
all or part of 11 of Arizona's 15 counties.  During 1995, no single purchaser or
user of energy accounted for more than 3% of total electric revenues.

   Pinnacle  West owns all of the  outstanding  shares of the  Company's  common
stock.  Pursuant to a Pledge  Agreement,  dated as of January 31, 1990,  between
Pinnacle West and Citibank,  N.A., as Collateral Agent (the "Pledge Agreement"),
and  as  part  of a  restructuring  of  substantially  all  of  its  outstanding
indebtedness,  Pinnacle West granted certain of its lenders a security  interest
in all of the Company's outstanding common stock. Until the Collateral Agent and
Pinnacle West receive notice of the occurrence and  continuation  of an Event of
Default  (as  defined in the Pledge  Agreement),  Pinnacle  West is  entitled to
exercise  or refrain  from  exercising  any and all voting and other  consensual
rights  pertaining to the common stock. As to matters other than the election of
directors,  Pinnacle West agreed not to exercise or refrain from  exercising any
such rights if, in the  Collateral  Agent's  judgment,  such action would have a
material  adverse  effect on the value of the common  stock.  After notice of an
Event of Default,  the Collateral  Agent would have the right to vote the common
stock.

Industry and Company Issues

   The  utility  industry  continues  to  experience  a  number  of  challenges.
Depending on the  circumstances of a particular  utility,  these may include (i)
competition in general from numerous  sources (see  "Competition"  below);  (ii)
difficulties in meeting government imposed environmental requirements; (iii) the
necessity to make substantial  capital outlays for transmission and distribution
facilities;  (iv) uncertainty  regarding projected electrical demand growth; (v)
controversies over  electromagnetic  fields;  (vi) controversies over the safety
and use of nuclear power; (vii) issues related to spent fuel and low-level waste
(see  "Generating  Fuel"  below);  and  (viii)  increasing  costs of  wages  and
materials.

Competition

   Although  the  Company  currently  serves  electricity  in  particular  areas
pursuant to certain retail service territorial rights, the Company is subject to
varying  degrees of  competition  in certain  territories  adjacent to or within
areas that it serves which are also currently  served by other  utilities in its
region (such as Tucson Electric Power Company,  Southwest Gas  Corporation,  and
Citizens Utility Company) as well as  cooperatives,  municipalities,  electrical
districts and similar types of governmental organizations  (principally SRP). In
addition,  the Company is competing for large commercial and industrial projects
which move into Arizona,  and faces challenges from low cost hydroelectric power
and natural gas fuel and the access of some utilities to preferential low-priced
federal power and other subsidies.

   Partly as a result of the  National  Energy  Policy Act of 1992 (the  "Energy
Act"),  the  electric  utility  industry  is  moving  toward a more  competitive
environment.  The  Energy  Act is  designed,  among  other  things,  to  promote
competition among utility and non-utility generators. The Energy Act also amends
the Federal Power Act to allow the FERC to order electric utilities to transmit,
or  "wheel,"  wholesale  power for  others.  Presently,  the  Company's  primary
competitors  are the major  utilities in its region as competition for wholesale
transactions  in electricity  is already  intense in the West. As competition in
the electric utility industry  continues to evolve, the Company will continue to
pursue strategies to enhance its competitive position.

                                      
<PAGE>

   The FERC has been encouraging  increased competition in the wholesale market,
and a proposed FERC rule would require each utility that markets wholesale power
to provide  access over its  transmission  system to other  energy  providers at
prices and terms  comparable to those which the utility  applies to itself.  The
FERC has also  encouraged  the  formation  of  regional  transmission  groups to
enhance coordinated transmission planning and comparable access, as the Company,
other  utilities in the Southwest and several power marketers are doing with the
Southwestern  Regional  Transmission  Association.  All of the  members  of this
association will file  comparability  and market base tariffs with the FERC this
summer.

   In 1995,  the  Company  and the ACC Staff  proposed a  regulatory  settlement
agreement  which the Company  believes  lays the  groundwork  for a  responsible
transition to a competitive future. See "1995 Regulatory Agreement" in Note 3 of
Notes to Financial Statements in Item 8. 

CAPITAL STRUCTURE

   The capital  structure  of the Company  (which,  for this  purpose,  includes
short-term  borrowings and current  maturities of long-term debt) as of December
31, 1995 is tabulated below.

                                                       Amount      Percentage
                                                    ------------   ----------
                                                    (Thousands
                                                    of Dollars)
Long-Term Debt Less Current Maturities:
 First mortgage bonds .............................  $1,604,317
 Other ............................................     527,704
                                                     ----------
  Total long-term debt less current maturities  ...   2,132,021      50.7%
                                                     ----------
Non-Redeemable Preferred Stock ....................     193,561       4.6
                                                     ----------
Redeemable Preferred Stock ........................      75,000       1.8
                                                     ----------
Common Stock Equity:
 Common stock, $2.50 par value, 100,000,000 shares
  authorized; 71,264,947 shares outstanding  ......     178,162
 Premiums and expenses ............................   1,039,550
 Retained earnings ................................     403,843
                                                     ----------
  Total common stock equity .......................   1,621,555      38.6
                                                     ----------
   Total capitalization ...........................   4,022,137
Current Maturities of Long-Term Debt ..............       3,512        .1
Short-Term Borrowings .............................     177,800       4.2
                                                     ----------     -----
   Total ..........................................  $4,203,449     100.0%
                                                     ==========     =====

See Notes 4, 5, and 6 of Notes to Financial Statements in Item 8.

   So long as any of the Company's  first  mortgage bonds are  outstanding,  the
Company is required for each calendar year to deposit with the trustee under its
Mortgage,  cash  in a  formularized  amount  related  to  net  additions  to the
Company's mortgaged utility plant;  however,  the Company may satisfy all or any
part of this  "replacement  fund"  requirement by utilizing  redeemed or retired
bonds,  net  property  additions,   or  property  retirements.   For  1995,  the
replacement  fund  requirement  amounted to  approximately  $128 million.  Many,
though  not all,  of the bonds  issued by the  Company  under the  Mortgage  are
redeemable at their par value plus accrued  interest with cash  deposited by the
Company in the replacement fund, subject in many cases to a period of time after
the  original  issuance  of the bonds  during  which they may not be so redeemed
and/or to other restrictions on any such redemption.

Rates

   State. The ACC has regulatory  authority over the Company in matters relating
to retail electric rates and the issuance of securities.  See Note 3 of Notes to
Financial Statements in Item 8 for a discussion of the 1995 regulatory agreement
between the Company and the ACC Staff.

                                        
<PAGE>
   Federal.  The  Company's  rates for  wholesale  power sales and  transmission
services are subject to regulation by the FERC. During 1995, approximately 6% of
the Company's  electric operating revenues resulted from such sales and charges.
For most wholesale  transactions regulated by the FERC, a fuel adjustment clause
results  in monthly  adjustments  for  changes  in the  actual  cost of fuel for
generation and in the fuel component of purchased power expense.

1935 Act

   Pinnacle  West and its  subsidiaries,  including  the Company,  are currently
exempt from registration under the 1935 Act; however,  the SEC has the authority
to revoke or condition an exemption if it appears that any question exists as to
whether the exemption may be detrimental to the public  interest or the interest
of investors  or  consumers.  On June 20,  1995,  the SEC issued a Report on the
Regulation  of Public  Utility  Holding  Companies  in which,  as its  preferred
option, the SEC recommended to the Congress  conditional repeal of the 1935 Act,
with an adequate transition period. The SEC further recommended that legislation
repealing  the 1935 Act should  include  provision for state access to books and
records of all companies in the holding  company  system,  and for federal audit
authority and oversight of affiliate  transactions.  The Company  cannot predict
what  action,  if  any,  the  Congress  may  take  with  respect  to  the  SEC's
recommendation.

Construction Program

   During the years 1993 through 1995, the Company incurred  approximately  $807
million in capitalized  expenditures.  Utility capitalized  expenditures for the
years 1996 through 1998 are expected to be primarily for expanding  transmission
and  distribution  capabilities  to meet  customer  growth,  upgrading  existing
facilities and for environmental purposes.  Capitalized expenditures,  including
expenditures for environmental  control  facilities,  for the years 1996 through
1998 have been estimated as follows:

                            (Millions of Dollars)
By Year                                    By Major Facilities
------------------------------------       ------------------------------------

 1996                           $246       Electric Generation              $244
 1997                            242       Electric Transmission              29
 1998                            244       Electric distribution             352
                               -----       General facilities                107
                                $732                                       -----
                               =====                                        $732
                                                                           =====
   The amounts for 1996  through  1998 exclude  capitalized  interest  costs and
include  capitalized  property taxes and about $30 million each year for nuclear
fuel expenditures.  The Company conducts a continuing review of its construction
program.

Environmental Matters

   EPA  Environmental  Regulation.  Pursuant  to the Clean Air Act,  the EPA has
adopted   regulations   that   address   visibility    impairment   in   certain
federally-protected  areas  which  can  be  reasonably  attributed  to  specific
sources.  In September 1991, the EPA issued a final rule that would limit sulfur
dioxide  emissions  at NGS.  Compliance  with the  emission  limitation  becomes
applicable to NGS Units 3, 2, and 1 in 1997, 1998, and 1999, respectively.  SRP,
the NGS operating agent,  has estimated a capital cost of $500 million,  most of
which will be incurred through 1998, and annual operations and maintenance costs
of  approximately  $14  million  for all  three  units,  for  NGS to meet  these
requirements. The Company will be required to fund 14% of these expenditures.

   The Clean Air Act Amendments of 1990 (the "Amendments")  address, among other
things,   "acid  rain,"  visibility  in  certain  specified  areas,   toxic  air
pollutants,  and the  nonattainment of national  ambient air quality  standards.
With respect to "acid rain," the Amendments establish a system of sulfur dioxide
emissions  "allowances."  Each existing utility unit is granted a certain number
of

                                        
<PAGE>
"allowances."  On March 5, 1993,  the EPA  promulgated  rules listing  allowance
allocations  applicable to Company-owned plants, which allocations will begin in
the year 2000.  Based on those  allocations,  the Company  will have  sufficient
allowances to permit continued operation of its plants at current levels without
installing additional equipment.  In addition, the Amendments require the EPA to
set nitrogen oxides emissions  limitations which would require certain plants to
install additional  pollution control  equipment.  In March 1995, the EPA issued
revised rules for nitrogen oxides emissions  limitations,  which may require the
Company to install  additional  pollution control equipment at Four Corners.  In
the year 2000,  Four Corners must comply with either these or recently  proposed
requirements  which the EPA published in January 1996. The EPA has until 1997 to
finalize  these  proposed  requirements.  Based on its initial  evaluation,  the
Company  currently  estimates its capital cost of complying  with the March 1995
rules may be  approximately  $20 million,  the incurrence of which began in 1995
and will continue  through 1999, with the highest  expenditures  expected during
1998.

   With respect to  protection of visibility  in certain  specified  areas,  the
Amendments  require the EPA to conduct a study,  which the EPA estimates will be
completed  in late 1996,  concerning  visibility  impairment  in those areas and
identification of sources  contributing to such impairment.  Interim findings of
this study have indicated  that any beneficial  effect on visibility as a result
of the Amendments  would be offset by expected  population and industry  growth.
The EPA has  established a "Grand Canyon  Visibility  Transport  Commission"  to
complete a study by May 1996 on visibility  impairment in the "Golden  Circle of
National  Parks" in the  Colorado  Plateau.  NGS,  Cholla,  and Four Corners are
located near the "Golden Circle of National Parks." Based on the recommendations
of the Commission,  the EPA may require additional emissions controls at various
sources causing  visibility  impairment in the "Golden Circle of National Parks"
and may limit economic development in several western states. The Company cannot
currently estimate the capital expenditures,  if any, which may be required as a
result of the EPA studies and the Commission's recommendations.

   With respect to hazardous air  pollutants  emitted by electric  utility steam
generating units, the Amendments  require two studies.  The results of the first
study  indicated  an impact from  mercury  emissions  from such units in certain
unspecified areas;  however, the EPA has not yet stated whether or not emissions
limitations will be imposed. Next, the EPA will complete a general study in late
1996 concerning the necessity of regulating such units under the Amendments. Due
to the lack of historical  data, and because the Company cannot  speculate as to
the ultimate  requirements by the EPA, the Company cannot currently estimate the
capital  expenditures,  if any,  which  may be  required  as a  result  of these
studies.

   Certain  aspects of the Amendments may require  related  expenditures  by the
Company,  such as permit  fees,  none of which  the  Company  expects  to have a
material impact on its financial position.

   Purported Navajo Environmental  Regulation.  Four Corners and NGS are located
on the Navajo  Reservation and are held under  easements  granted by the federal
government  as well as leases  from the Navajo  Nation.  The Company is the Four
Corners  operating agent and owns a 100% interest in Four Corners Units 1, 2 and
3, and a 15%  interest in Four  Corners  Units 4 and 5. The  Company  owns a 14%
interest  in NGS Units 1, 2 and 3. In July 1995 the Navajo  Nation  enacted  the
Navajo Nation Air Pollution  Prevention  and Control Act, the Navajo Nation Safe
Drinking  Water Act, and the Navajo  Nation  Pesticide  Act  (collectively,  the
"Acts").

   Pursuant to the Acts, the Navajo Nation  Environmental  Protection  Agency is
authorized to promulgate  regulations  covering air quality,  drinking water and
pesticide  activities,  including  those that occur at Four  Corners and NGS. By
separate  letters  dated  October 12 and  October  13,  1995,  the Four  Corners
participants and the NGS  participants  requested the United States Secretary of
the Interior to resolve their dispute with the Navajo Nation  regarding  whether
or not the Acts apply to  operations  of Four  Corners  and NGS.  On October 17,
1995,  the Four  Corners  participants  and the NGS  participants  each  filed a
lawsuit  in the  District  Court of the Navajo  Nation,  Window  Rock  District,
seeking,  among other things,  a declaratory  judgment that (i) their respective
leases and 

                                        
<PAGE>
federal easements preclude the application of the Acts to the operations of Four
Corners and NGS,  and (ii) the Navajo  Nation and its  agencies  and courts lack
adjudicatory jurisdiction to determine the enforceability of the Acts as applied
to Four  Corners and NGS. On October 18,  1995,  the Navajo  Nation and the Four
Corners  and NGS  participants  agreed  to  indefinitely  stay  the  proceedings
referenced  in the  preceding  two  sentences so that the parties may attempt to
resolve the dispute  without  litigation,  and the  Secretary and the Court have
stayed  these  proceedings  pursuant  to a request by the  parties.  The Company
cannot currently predict the outcome of this matter.

GENERATING FUEL

<TABLE>


    Coal,  nuclear,  gas,  and other  contributions  to total net  generation  of
electricity by the Company in 1995,  1994, and 1993, and the average cost to the
Company of those fuels (in dollars per MWh), were as follows:

<CAPTION>
                          Coal                 Nuclear                  Gas                   Other           All Fuels
                 ---------------------- ---------------------- ---------------------- ---------------------- -----------
                   Percent of   Average   Percent of   Average   Percent of   Average   Percent of   Average    Average
                   Generation    Cost     Generation    Cost     Generation    Cost     Generation    Cost       Cost
                 ------------ --------- ------------ --------- ------------ --------- ------------ --------- -----------
<S>                  <C>       <C>          <C>        <C>          <C>        <C>         <C>        <C>       <C>
1995 (estimate)..... 54.7%     $13.83       40.1%      $5.21        5.0%       $19.52      0.2%       $11.84    $10.66
1994 ............... 59.7       13.84       33.8        6.09        6.3         24.64      0.2         16.26     11.90
1993 ............... 62.3       12.95       32.4        6.17        5.1         31.53      0.2         18.32     11.70

</TABLE>

   Other includes oil and hydro generation.

   The Company  believes that Cholla has sufficient  reserves of low sulfur coal
committed to that plant for the next four years,  the term of the existing  coal
contract.  Sufficient  reserves  of low sulfur  coal are  available  to continue
operating  Cholla for its useful  life.  The  Company  also  believes  that Four
Corners and NGS have sufficient reserves of low sulfur coal available for use by
those  plants to continue  operating  them for their useful  lives.  The current
sulfur  content  of  coal  being  used at  Four  Corners,  NGS,  and  Cholla  is
approximately 0.8%, 0.6%, and 0.4%,  respectively.  In 1995, average prices paid
for coal supplied  from reserves  dedicated  under the existing  contracts  were
relatively stable, although applicable contract clauses permit escalations under
certain conditions.  In addition, major price adjustments can occur from time to
time as a result of contract renegotiation.


     NGS and Four Corners are located on the Navajo  Reservation  and held under
easements  granted by the federal  government  as well as leases from the Navajo
Nation.  See "Properties" in Item 2. The Company purchases all of the coal which
fuels Four Corners from a coal supplier with a long-term  lease of coal reserves
owned by the Navajo  Nation and for NGS from a coal  supplier  with a  long-term
lease with the Navajo  Nation and the Hopi Tribe.  The Company  purchases all of
the coal which fuels Cholla from a coal supplier who mines all of the coal under
a  long-term  lease of coal  reserves  owned by the Navajo  Nation,  the federal
government,  and  private  landholders.  See  Note  11  of  Notes  to  Financial
Statements in Item 8 for information regarding the Company's obligation for coal
mine reclamation.

   The Company is a party to contracts with  twenty-seven  natural gas operators
and marketers  which allow the Company to purchase  natural gas in the method it
determines  to be most  economic.  During  1995,  the  principal  sources of the
Company's natural gas generating fuel were 19 of these companies. The Company is
currently  purchasing the majority of its natural gas  requirements  from twelve
companies pursuant to contracts. The Company's natural gas supply is transported
pursuant to a firm  transportation  service  contract between the Company and El
Paso  Natural  Gas  Company.  The  Company  continues  to analyze  the market to
determine the source and method of meeting its natural gas requirements.

   The fuel cycle for Palo Verde is comprised of the following  stages:  (1) the
mining and  milling of uranium  ore to  produce  uranium  concentrates,  (2) the
conversion of uranium concentrates to uranium  hexafluoride,  (3) the enrichment
of  uranium  hexafluoride,  (4)  the  fabrication  of fuel  assemblies,  (5) the
utilization  of fuel  assemblies in reactors,  and (6) the storage of spent fuel
and the

                                        
<PAGE>
disposal thereof.  The Palo Verde  participants  have made arrangements  through
contract flexibilities to obtain quantities of uranium concentrates  anticipated
to be  sufficient  to  meet  operational  requirements  through  2000.  Existing
contracts  and  options  could  be  utilized  to  meet   approximately   80%  of
requirements  in 2001 and 2002 and 50% of  requirements  from 2003 through 2007.
Spot  purchases in the uranium market will be made, as  appropriate,  in lieu of
any uranium that might be obtained through contract  flexibilities  and options.
The Palo Verde participants have contracted for all conversion services required
through  2000  and with  options  for up to 70%  through  2002.  The Palo  Verde
participants,  including the Company,  have an enrichment services contract with
USEC  which  obligates  USEC to furnish  enrichment  services  required  for the
operation of the three Palo Verde units over a term expiring in September  2002,
with options to continue through September 2007. In addition, existing contracts
will provide fuel  assembly  fabrication  services  until at least 2003 for each
Palo Verde unit, and through contract options,  approximately fifteen additional
years are available.

   Pursuant to the  Nuclear  Waste  Policy Act of 1982,  as amended in 1987 (the
"Waste  Act"),  DOE is obligated to accept and dispose of all spent nuclear fuel
and  other  high-level  radioactive  wastes  generated  by  all  domestic  power
reactors.  The NRC,  pursuant to the Waste Act,  requires  operators  of nuclear
power  reactors to enter into spent fuel  disposal  contracts  with DOE, and the
Company,  on its own behalf and on behalf of the other Palo Verde  participants,
has done so.  Under the Waste Act, DOE was to develop the  facilities  necessary
for the storage and  disposal of spent  nuclear  fuel and to have the first such
facility in operation by 1998.  That facility was to be a permanent  repository,
but DOE has annouced that such a repository now cannot be completed before 2010.
Several bills have been introduced in Congress contemplating the construction of
a central interim  storage  facility which could be available in the latter part
of the current decade; however, there is resistance to certain features of these
bills both in Congress and the Administration.

   Facility funding is a further  complication.  While all nuclear utilities pay
into a so-called  nuclear  waste fund an amount  calculated  on the basis of the
output of their respective plants, the annual  Congressional  appropriations for
the permanent  repository  have been for amounts less than the amounts paid into
the waste  fund (the  balance of which is being  used for other  purposes)  and,
according  to DOE  spokespersons,  may now be at a level  less  than  needed  to
achieve a 2010 operational date for a permanent  repository.  No funding will be
available for a central interim facility until one is authorized by Congress.

   The Company has storage capacity in existing fuel storage pools at Palo Verde
which,  with certain  modifications,  could  accomodate  all fuel expected to be
discharged from normal  operation of Palo Verde through about 2005, and believes
it could augment that wet storage with new facilities for on-site dry storage of
spent fuel for an  indeterminate  period of operation  beyond  2005,  subject to
obtaining any required governmental  approvals.  One way or another, the Company
currently believes that spent fuel storage or disposal methods will be available
for use by Palo Verde to allow its continued operation beyond 2005.

   Currently  low-level  waste is being stored  on-site.  A new low-level  waste
facility  was  built  in 1995  on-site  which  could  store an  amount  of waste
equivalent to up to ten years of normal  operation at Palo Verde. The Company is
currently  evaluating whether to ship low-level waste to off-site  facilities or
to continue to store the waste  on-site.  The Company  currently  believes  that
interim low-level waste storage methods are or will be available for use by Palo
Verde to allow its continued operation and to safely store low-level waste until
a permanent disposal facility is available.

   While believing that scientific and financial  aspects of the issues of spent
fuel and low-level  waste  storage and disposal can be resolved  satisfactorily,
the Company acknowledges that their ultimate resolution in a timely fashion will
require political resolve and action on national and regional scales which it is
less able to predict.

                                       
<PAGE>
Palo Verde Nuclear Generating Station

   Regulatory.  Operation  of each of the three Palo  Verde  units  requires  an
operating  license from the NRC. Full power  operating  licenses for Units 1, 2,
and 3 were  issued by the NRC in June  1985,  April  1986,  and  November  1987,
respectively.  The full  power  operating  licenses,  each valid for a period of
approximately  40 years,  authorize  the Company,  as  operating  agent for Palo
Verde, to operate the three Palo Verde units at full power.

   Nuclear  Decommissioning  Costs. See Note 12 of Notes to Financial Statements
in Item 8 for a discussion of the Company's nuclear decommissioning costs.

   Steam Generators.  See "Palo Verde Nuclear Generating  Station" in Note 11 of
Notes to Financial  Statements in Item 8 for a discussion of issues  relating to
the Palo Verde steam generators.

   Palo  Verde  Liability  And  Insurance  Matters.   See  "Palo  Verde  Nuclear
Generating Station" in Note 11 of Notes to Financial  Statements in Item 8 for a
discussion of the insurance maintained by the Palo Verde participants, including
the Company, for Palo Verde.

   Department  of Labor  Matter.  On May 10, 1993, a Department of Labor ("DOL")
Administrative Law Judge ("ALJ") issued a Recommended Decision and Order finding
that the Company  discriminated against a former contract employee who worked at
Palo Verde because he engaged in protected  activities (as defined under federal
regulations).  The Company and the former  contract  employee who had raised the
DOL  claim  entered  into a  settlement  agreement  which  was  approved  by the
Secretary of Labor in June 1995.  By letter dated March 7, 1996,  the NRC sent a
Notice of Violation  and Proposed  Imposition  of Civil  Penalty  notifying  the
Company that the NRC proposes to impose a $100,000 civil penalty for a "Severity
Level  III"  violation  of  NRC  requirements   relating  to  the  circumstances
surrounding this matter. The NRC also concluded in its March 7, 1996 letter that
the Company's  actions  taken and planned to correct the violation  have already
been  addressed  and  therefore  the  Company is not  required to respond to the
Notice of Violation.  The Company  plans to pay the  associated  penalty  within
thirty days.

Water Supply

   Assured  supplies  of  water  are  important  both to the  Company  (for  its
generating  plants) and to its customers  and, at the present time,  the Company
has adequate  water to meet its needs.  However,  conflicting  claims to limited
amounts of water in the  southwestern  United  States have  resulted in numerous
court actions in recent years.

   Both  groundwater  and  surface  water in areas  important  to the  Company's
operations  have been the subject of inquiries,  claims,  and legal  proceedings
which will require a number of years to resolve.  The Company is one of a number
of  parties in a  proceeding  before a state  court in New Mexico to  adjudicate
rights to a stream  system from which water for Four Corners is derived.  (State
of New Mexico,  in the relation of S.E.  Reynolds,  State  Engineer  vs.  United
States of America,  City of Farmington,  Utah  International,  Inc., et al., San
Juan County, New Mexico,  District Court No. 75-184).  An agreement reached with
the  Navajo  Nation in 1985,  however,  provides  that if Four  Corners  loses a
portion of its rights in the adjudication, the Navajo Nation will provide, for a
then-agreed upon cost, sufficient water from its allocation to offset the loss.

   A summons served on the Company in early 1986 required all water claimants in
the Lower  Gila River  Watershed  in Arizona to assert any claims to water on or
before January 20, 1987, in an action pending in Maricopa County Superior Court.
(In re The  General  Adjudication  of All  Rights to Use Water in the Gila River
System  and  Source,   Supreme   Court  Nos.   WC-79-0001   through  WC  79-0004
(Consolidated) [WC-1, WC-2, WC-3 and WC-4 (Consolidated)],  Maricopa County Nos.
W-1,  W-2,  W-3 and W-4  (Consolidated)).  Palo  Verde  is  located  within  the
geographic  area  subject  to the  summons,  and the  rights  of the Palo  Verde
participants,  including the Company,  to the use of groundwater and effluent at
Palo Verde is  potentially  at issue in this  action.  The  Company,  as project
manager of Palo Verde,  filed claims that dispute the court's  jurisdiction over
the Palo Verde participants'  groundwater rights and their contractual rights to
effluent  relating to Palo Verde and,

                                        
<PAGE>
alternatively,  seek  confirmation  of  such  rights.  Three  of  the  Company's
less-utilized  power plants are also located within the geographic  area subject
to the summons.  The Company's claims dispute the  court's jurisdiction over the
Company's  groundwater  rights with respect to these plants and,  alternatively,
seek  confirmation  of such rights.  On December 10, 1992,  the Arizona  Supreme
Court heard oral argument on certain  issues in this matter which are pending on
interlocutory  appeal. Issues important to the Company's claims were remanded to
the trial court for further  action and the trial court  certified  its decision
for  interlocutory  appeal to the Arizona  Supreme Court. On September 28, 1994,
the Arizona Supreme Court granted review of the trial court  decision.  No trial
date  concerning  the water  rights  claims of the  Company has been set in this
matter.

   The  Company  has also  filed  claims to water in the Little  Colorado  River
Watershed in Arizona in an action pending in the Apache County  Superior  Court.
(In re The  General  Adjudication  of All  Rights  to Use  Water  in the  Little
Colorado  River System and Source,  Supreme Court No.  WC-79- 0006 WC-6,  Apache
County No.  6417).  The  Company's  groundwater  resource  utilized at Cholla is
within  the  geographic  area  subject  to the  adjudication  and  is  therefore
potentially  at issue in the case.  The  Company's  claims  dispute  the court's
jurisdiction  over the Company's  groundwater  rights and,  alternatively,  seek
confirmation  of such  rights.  The  parties  are in the  process of  settlement
negotiations  with respect to this matter.  No trial date  concerning  the water
rights claims of the Company has been set in this matter.

   Although the foregoing  matters  remain  subject to further  evaluation,  the
Company expects that the described litigation will not have a materially adverse
impact on its operations or financial position.

                              ITEM 2. PROPERTIES

   The Company's  present  generating  facilities  have an  accredited  capacity
aggregating 4,025,241 kW, comprised as follows:

                                                                    Capacity(kW)
                                                                    ------------
Coal:
Units 1, 2, and 3 at Four Corners, aggregating .....................  560,000
15% owned Units 4 and 5 at Four Corners, representing ..............  222,000
Units 1, 2, and 3 at Cholla Plant, aggregating .....................  615,000
14% owned Units 1, 2, and 3 at the Navajo Plant, representing  .....  315,000
                                                                    ---------
                                                                    1,712,000
                                                                    =========
Gas or Oil:
Two steam units at Ocotillo, two steam units at Saguaro, and one      
   steam unit at Yucca, aggregating ................................  463,400(1)
Eleven combustion turbine units, aggregating .......................  500,600
Three combined cycle units, aggregating ............................  253,500
                                                                    ---------
                                                                    1,217,500
                                                                    =========
Nuclear:
29.1% owned or leased Units 1, 2, and 3 at Palo Verde, representing 1,091,541
                                                                    =========
Other ..............................................................    4,200
                                                                    =========
----------

  (1) West Phoenix steam units (96,300 kW) are currently mothballed.
                                  ----------

   The  Company's  peak one-hour  demand on its electric  system was recorded on
July 28,  1995 at  4,420,400  kW,  compared  to the 1994  peak of  4,214,000  kW
recorded on June 29. Taking into account  additional  capacity then available to
it under purchase power  contracts as well as its own generating  capacity,  the
Company's  capability  of meeting  system  demand on July 28, 1995,  computed in
accordance with accepted  industry  practices,  amounted to 4,608,941 kW, for an
installed  reserve 
                                       
<PAGE>
margin of 6.4%. The power  actually  available to the Company from its resources
fluctuates  from  time to time  due in part to  planned  outages  and  technical
problems.  The available  capacity from sources actually operable at the time of
the 1995 peak amounted to 4,469,841 kW, for a margin of 1.3%.

   NGS and Four  Corners  are  located  on land held  under  easements  from the
federal  government and also under leases from the Navajo Nation.  The risk with
respect  to  enforcement  of these  easements  and  leases is not  deemed by the
Company to be material. The Company is dependent,  however, in some measure upon
the willingness and ability of the Navajo Nation to honor its  commitments.  The
lease for Four Corners  contains a waiver until 2001 of the requirement that the
Company  pay  certain  taxes to the Navajo  Nation.  The  Company and the Navajo
Nation are currently  negotiating  an agreement  regarding  taxes to be assessed
against the Company  after the  expiration  of the  waiver.  The Company  cannot
currently  predict  the  outcome  of  this  matter.  Certain  of  the  Company's
transmission  lines and  almost  all of its  contracted  coal  sources  are also
located on Indian reservations. See "Generating Fuel" in Item 1.

   On August 18, 1986 and December 19, 1986, the Company entered into a total of
three  sale and  leaseback  transactions  under  which it sold and  leased  back
approximately  42% of its 29.1%  ownership  interest  in Palo  Verde Unit 2. The
leases under each of the sale and  leaseback  transactions  have  initial  lease
terms expiring on December 31, 2015.  Each of the leases also allows the Company
to extend the term of the lease and/or to repurchase  the leased Unit 2 interest
under certain  circumstances  at fair market value.  The leases in the aggregate
require annual payments of approximately $40 million through 1999, approximately
$46 million in 2000, and  approximately  $49 million through 2015 (see Note 8 of
Notes to Financial Statements in Item 8).

   See "Water Supply" in Item 1 with respect to matters having  possible  impact
on the operation of certain of the Company's power plants, including Palo Verde.

   In addition to that available from its own generating  capacity,  the Company
purchases  electricity from other utilities under various  arrangements.  One of
the most  important  of these is a  long-term  contract  with SRP  which  may be
canceled by SRP on three years' notice and which requires SRP to make available,
and the Company to pay for,  certain  amounts of  electricity  that are based in
large part on customer  demand  within  certain  areas now served by the Company
pursuant  to a related  territorial  agreement.  The Company  believes  that the
prices payable by it under the contract are fair to both parties. The generating
capacity  available  to the  Company  pursuant  to the  contract  was 313,000 kW
through May 1995,  at which time the capacity  decreased to 305,000 kW. In 1995,
the Company received  approximately 657,765 MWh of energy under the contract and
paid approximately $30 million for capacity availability and energy received.

   In September 1990, the Company and PacifiCorp entered into certain agreements
relating  principally  to sales and  purchases  of electric  power and  electric
utility assets, and in July 1991, after regulatory  approvals,  the Company sold
Cholla  4  to  PacifiCorp  for  approximately  $230  million.  As  part  of  the
transaction,  PacifiCorp  agreed to make a firm  system  sale to the Company for
thirty  years  during  the  Company's  summer  peak  season in the amount of 175
megawatts  for the first five years,  increasing  thereafter,  at the  Company's
option, up to a maximum amount equal to the rated capacity of Cholla 4. In April
1995 the Company gave  PacifiCorp the required  three-year  notice to change the
existing  175  megawatt  purchase  to  one-for-one  seasonal  capacity  exchange
beginning  in the  summer of 1998.  The  Company  has one  option  remaining  to
increase the firm  purchase to the rated  capacity of Cholla 4 (less the current
exchange  capacity)  and also to convert this increase to  one-for-one  seasonal
exchange by a three-year written notice prior to May 1, 1996. PacifiCorp has the
right to purchase  from the Company up to 125  average  megawatts  of energy per
year for thirty  years.  PacifiCorp  and the  Company  also  entered  into a 100
megawatt  one-for-one seasonal capacity exchange to be effective upon the latter
of May 15, 1997 or the  completion  of certain  new  transmission  projects.  In
addition,  PacifiCorp agreed to pay the Company (i) $20 million prior to January
15,  1997  and  (ii) $19  million  ($9.5  million  of  which  has been  paid) in
connection with the  construction  of transmission  lines and upgrades that will
afford PacifiCorp 150 megawatts of northbound  

                                       
<PAGE>
transmission   rights.   In  addition,   PacifiCorp   secured   additional  firm
transmission capacity of 30 megawatts,  for which approximately $0.5 million was
paid  during  1995.  In 1995,  the Company  received  386,350 MWh of energy from
PacifiCorp  under  these  transactions  and paid  approximately  $18 million for
capacity availability and the energy received.

   See "Management's  Discussion and Analysis of Financial Condition and Results
of Operations -- Capital Needs and  Resources" in Item 7 for a discussion of the
Company's construction plans.

   See Notes 5 and 8 of Notes to Financial  Statements in Item 8 with respect to
property  of the  Company  not  held  in  fee  or  held  subject  to  any  major
encumbrance.

                                       


<PAGE>
                                  [MAP PAGE]




                                       


<PAGE>
                          ITEM 3. LEGAL PROCEEDINGS

Property Taxes

   On June 29, 1990, a new Arizona state property tax law was enacted, effective
as of December 31, 1989, which adversely  impacted the Company's earnings before
income  taxes  in  tax  years  1990  through  1995  by an  aggregate  amount  of
approximately  $21  million  per year.  On  December  20,  1990,  the Palo Verde
participants, including the Company, filed a lawsuit in the Arizona Tax Court, a
division of the Maricopa County Superior Court,  against the Arizona  Department
of Revenue, the Treasurer of the State of Arizona, and various Arizona counties,
claiming,   among  other   things,   that  portions  of  the  new  tax  law  are
unconstitutional.  (Arizona Public Service Company,  et al. v. Apache County, et
al., No. TX 90-01686  (Consol.),  Maricopa County Superior  Court).  In December
1992, the court granted summary judgment to the taxing authorities, holding that
the law is  constitutional.  The Company  appealed  this decision to the Arizona
Court of Appeals.  In November 1995, the Arizona Court of Appeals  reversed that
decision, holding that the law is unconstitutional. The matter has been returned
to the Arizona Tax Court for determination of the appropriate  remedy consistent
with the Arizona Court of Appeals  decision.  Pursuant to the  provisions of the
Company's 1995 proposed regulatory  settlement agreement (see Note 3 of Notes to
Financial  Statements  in Item  8),  if any  overcollected  property  taxes  are
refunded to the  Company by the State of Arizona as a result of the  disposition
of this lawsuit,  the Company would refund all of the net jurisdictional  amount
of such refund to its retail customers. The Company cannot currently predict the
ultimate outcome of this matter.

   See  "Environmental  Matters," "Palo Verde Nuclear  Generating  Station," and
"Water Supply" in Item 1 in regard to pending or threatened litigation and other
disputes.
                      ITEM 4. SUBMISSION OF MATTERS TO A
                           VOTE OF SECURITY HOLDERS

   No matter  was  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year covered by this report,  through the  solicitation of
proxies or otherwise.

                    SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS
                              OF THE REGISTRANT

   The Company's executive officers are as follows:

                      Age At
Name               March 1, 1996         Position(s) At March 1, 1996
------------------ ------------- -----------------------------------------------
Richard Snell          65        Chairman of the Board of Directors (1)
O. Mark DeMichele      61        President and Chief Executive Officer(1)
William J. Post        45        Senior Vice President and Chief Operating 
                                   Officer(1)
Jaron B. Norberg       58        Executive Vice President and Chief Financial
                                   Officer(1)
William L. Stewart     52        Executive Vice President, Nuclear
Jack A. Bailey         42        Vice President, Nuclear Engineering
Jan H. Bennett         48        Vice President, Customer Service
Jack E. Davis          49        Vice President, Generation and Transmission
Edward Z. Fox          42        Vice President, Environmental, Health and 
                                   Safety
Armando B. Flores      52        Vice President, Human Resources
James M. Levine        46        Vice President, Nuclear Production
Leslie M. Mesh         49        Vice President, Marketing and Economic 
                                   Development
Gregg R. Overbeck      49        Vice President, Nuclear Support
William J. Hemelt      42        Controller
Nancy C. Loftin        42        Secretary and Corporate Counsel
Nancy E. Newquist      44        Treasurer
----------
   (1) Member of the Board of Directors.
                          -----------------------------

                                       
<PAGE>
   The executive officers of the Company are elected no less often than annually
and may be removed by the Board of  Directors  at any time.  The terms served by
the named officers in their current positions and the principal  occupations (in
addition to those stated in the table and  exclusive of  directorships)  of such
officers for the past five years have been as follows:

   Mr.  Snell was elected to his present  position as of February  1990.  He was
also elected Chairman of the Board,  President,  and Chief Executive  Officer of
Pinnacle West at that time. Previously, he was Chairman of the Board (1989-1992)
and Chief Executive Officer (1989-1990) of Aztar Corporation and Chairman of the
Board, President, and Chief Executive Officer of Ramada Inc.
(1981-1989).

   Mr.  DeMichele  was elected  President  in  September  1982 and became  Chief
Executive Officer as of January 1988.

   Mr. Post was elected to his present position in September 1994. Prior to that
time he was Senior Vice President,  Planning, Information and Financial Services
(since June 1993),  and Vice  President,  Finance & Rates (since April 1987). In
July 1995 Mr. Post was appointed Executive Vice President of Pinnacle West.

   Mr. Norberg was elected to his present position in July 1986.

   Mr.  Stewart was elected to his present  position in May 1994.  Prior to that
time he was Senior Vice President -- Nuclear for Virginia Power (since 1989).

   Mr. Bailey was elected to his present  position in April 1994.  Prior to that
time he was Assistant Vice  President,  Nuclear  Engineering  and Projects (July
1993-April 1994); Director, Nuclear Engineering (1991-1993); and Assistant Plant
Manager (1989 to 1991) at Palo Verde.

   Mr.  Bennett was elected to his present  position in May 1991.  Prior to that
time he was Director, Customer Service (September 1990 to May 1991).

   Mr.  Davis was  elected to his present  position in June 1993.  Prior to that
time he was Director,  Transmission Systems (January 1993-June 1993);  Director,
Fossil Generation (June  1992-December  1992); and Director,  System Development
and Power Operations (May 1990-May 1992).

   Mr. Fox was elected to his present  position in October  1995.  Prior to that
time he was Director,  Arizona Department of Environmental Quality and Chairman,
Wastewater Management Authority of Arizona (July 1991-September 1995) and Senior
Associate, Snell & Wilmer (October 1989-July 1991).

   Mr.  Flores was elected to his present  position in December  1991.  Prior to
that  time,  he was  Director  -- Human  Resources  (1990 to 1991)  and  Manager
-Employment (1989 to 1990) of GENCORP, Propulsion Division, Aerojet Group.

   Mr. Levine was elected to his present position in September 1989.

   Mr. Mesh was elected to his current  position in October 1995.  Prior to that
time he was Vice President, Marketing and Business Development,  Electronic Data
Systems (November 1993-October 1995) and Vice President,  Northern Telecom, Inc.
(April 1984-October 1993).

   Mr. Overbeck was elected to his current  position in July 1995. Prior to that
time he was Assistant to Vice President of the Company (January  1994-July 1995)
and Director,  Nuclear Production Site Technical Support of the Company (January
1991-January 1994).

   Mr.  Hemelt was elected to his present  position in June 1993.  Prior to that
time he was Treasurer and Assistant Secretary (since April 1987).

   Ms. Loftin was elected  Secretary in April 1987 and became Corporate  Counsel
in February 1989.

                                       
<PAGE>
   Ms. Newquist was elected to her present  position in June 1993. Prior to that
time she was Assistant  Treasurer  (since October  1992).  She is also Treasurer
(since June 1990) and Vice  President  (since  February  1994) of Pinnacle West.
From May 1987 to June 1990, Ms.  Newquist  served as Pinnacle West's Director of
Finance.

                                   PART II

                    ITEM 5. MARKET FOR REGISTRANT'S COMMON
                  STOCK AND RELATED SECURITY HOLDER MATTERS

   The Company's common stock is wholly-owned by Pinnacle West and is not listed
for trading on any stock exchange.  As a result,  there is no established public
trading market for the Company's common stock. See "The Company" in Part I, Item
1 for  information  regarding the Pledge  Agreement to which the common stock is
subject.

   The chart below sets forth the  dividends  declared on the  Company's  common
stock for each of the four quarters for 1995 and 1994.

                            COMMON STOCK DIVIDENDS
                            (THOUSANDS OF DOLLARS)
-------------------------------------------------------------------------------
              QUARTER                1995                1994
--------------------------------------------------------------------------------
          1st Quarter              $42,500             $42,500
          2nd Quarter               42,500              42,500
          3rd Quarter               42,500              42,500
          4th Quarter               42,500              42,500
--------------------------------------------------------------------------------

   After  payment  or setting  aside for  payment of  cumulative  dividends  and
mandatory sinking fund requirements, where applicable, on all outstanding issues
of preferred  stock,  the holders of common stock are entitled to dividends when
and as declared out of funds legally  available  therefor.  See Notes 4 and 5 of
Notes to Financial  Statements in Item 8 for  restrictions on retained  earnings
available for the payment of common stock dividends.

                                       
<PAGE>
                       ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                      1995          1994         1993           1992          1991
                                                      ----          ----         ----           ----          ----
                                                                           (Thousands of Dollars)
<S>                                              <C>           <C>           <C>           <C>           <C>        

Electric Operating Revenues ..................   $ 1,614,952   $ 1,626,168   $ 1,602,413   $ 1,587,582   $ 1,385,815
Fuel and Purchased Power .....................       269,798       300,689       300,546       287,201       273,771
Operating Expenses ...........................       963,400       957,046       929,379       908,123       782,788
                                                  ----------   -----------   -----------   -----------   -----------   
        Operating Income .....................       381,754       368,433       372,488       392,258       329,256
Other Income (Deductions) ....................        25,548        44,510        54,220        48,801      (324,922)
Interest Deductions-- Net ....................       167,732       169,457       176,322       194,254       226,983
                                                 -----------   -----------   -----------   -----------   -----------   
        Net Income (Loss) ....................       239,570       243,486       250,386       246,805      (222,649)
        Preferred Dividends ..................        19,134        25,274        30,840        32,452        33,404
                                                 -----------   -----------   -----------   -----------   -----------   
        Earnings (Loss) for Common Stock (a) .   $   220,436   $   218,212   $   219,546   $   214,353   $  (256,053)
                                                 ===========   ===========   ===========   ===========   ===========   
Total Assets .................................   $ 6,418,262   $ 6,348,261   $ 6,357,262   $ 5,629,432   $ 5,620,692
                                                 ===========   ===========   ===========   ===========   ===========   

Capital Structure:
        Common Stock Equity ..................   $ 1,621,555   $ 1,571,120   $ 1,522,941   $ 1,476,390   $ 1,433,463
        Non-Redeemable Preferred Stock .......       193,561       193,561       193,561       168,561       168,561
        Redeemable Preferred Stock ...........        75,000        75,000       197,610       225,635       227,278
        Long-Term Debt Less Current Maturities     2,132,021     2,181,832     2,124,654     2,052,763     2,185,363
                                                 -----------   -----------   -----------   -----------   -----------
                Total Capitalization .........     4,022,137     4,021,513     4,038,766     3,923,349     4,014,665
        Current Maturities of Long-Term Debt .         3,512         3,428         3,179        94,217       299,550
        Short-Term Debt ......................       177,800       131,500       148,000       195,000          --
                                                 -----------   -----------   -----------   -----------   -----------
                Total ........................   $ 4,203,449   $ 4,156,441   $ 4,189,945   $ 4,212,566   $ 4,314,215
                                                 ===========   ===========   ===========   ===========   ===========

</TABLE>
(a) Financial  results  for 1991  include  a $407  million  after-tax  write-off
    related to a rate case settlement. 

See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations"  in Item 7 for a discussion of certain  information in the foregoing
table.

                                       
<PAGE>
          ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                     CONDITION AND RESULTS OF OPERATIONS

Results of Operations

1995 Compared with 1994

    Earnings in 1995 were $220.4  million  compared with $218.2 million in 1994.
Earnings  increased  primarily  due to  customer  growth,  lower fuel  expenses,
accelerated  amortization  of  investment  tax  credits,  lower  operations  and
maintenance  expenses,  lower preferred stock dividends and a gain recognized on
the sale of a small subsidiary. Fuel expenses decreased due to lower fuel prices
and a more  favorable mix  resulting  from  increased  nuclear  generation.  The
Company  does not  have a fuel  adjustment  clause  as part of its  retail  rate
structure; therefore, changes in fuel and purchased power expenses are reflected
currently in earnings.  The  accelerated  amortization of investment tax credits
was a result  of a 1994  rate  settlement  (see  Note 3 of  Notes  to  Financial
Statements)  and is reflected  as a $21 million  decrease in income tax expense.
Operations and maintenance  expense  decreased as a result of lower fossil plant
overhaul  costs,  improved  nuclear  operations and severance  costs incurred in
1994.   Preferred  stock  dividends   decreased  due  to  less  preferred  stock
outstanding.

    Substantially offsetting these positive factors were the absence of non-cash
income related to a 1991 rate settlement,  milder weather,  the reversal in 1994
of certain  previously  recorded  depreciation,  a retail rate  reduction  which
became effective June 1, 1994, and in 1995 a $13 million pretax write-down of an
office building and an $8 million pretax write-down of certain inventory.

1994  Compared  with 1993  

    Earnings in 1994 were $218.2  million  compared with $219.5 million in 1993.
Electric operating  revenues  increased  primarily due to strong customer growth
and significantly  warmer weather in 1994, partially offset by lower interchange
sales and the 1994 rate reduction.  Substantially offsetting the earnings effect
of the 1994 rate reduction was a one-time depreciation reversal, also occasioned
by the 1994  rate  settlement  (see  Note 3 of Notes to  Financial  Statements).
Interest expense declined due to the Company's  refinancing activity in 1994 and
1993.

    Substantially  offsetting  these positive factors were the completion in May
1994 of the recording of non-cash  income related to a 1991 rate settlement (see
Note 1 of Notes to Financial  Statements);  increased operations and maintenance
expense due  primarily  to  employee  severance  costs;  and  increased  nuclear
decommissioning costs.

    Higher fuel and purchased power expenses in 1994 over 1993 to meet increased
retail  sales were about  offset by lower  fuel  costs for  reduced  interchange
sales.

Operating  Revenues  

    Operating  revenues  reflect  changes  in both the  volume of units sold and
price  per  kilowatt-hour  of  electric  sales.  An  analysis  of the  increases
(decreases) in 1995 and 1994 electric operating revenues compared with the prior
year follows (in millions of dollars):
                                                   1995       1994
                                                   ----       ----
              Volume variance:
                      Customer growth         $    48.4  $    56.4
                      Weather                     (42.0)      42.0
                      Other                         7.8      (11.7)
              1994 rate reduction                 (11.4)     (26.5)
              Interchange sales                    (7.2)     (19.5)
              Reversal of refund obligation        (9.3)     (12.1)
              Other operating revenues              2.5       (4.8)
                                              ---------  --------- 

              Total change                    $   (11.2) $    23.8
                                              =========  =========
Other Income

    Net income  reflects  accounting  practices  required for  regulated  public
utilities  and  represents  a composite of cash and  non-cash  items,  including
AFUDC,  accretion  income  on Palo  Verde  Unit 3 and the  reversal  of a refund
obligation  arising out of a 1991 rate  settlement (see Statements of Cash Flows
and Note 1 of Notes to Financial  

                                       
<PAGE>
Statements).  The accretion  income and refund  reversals,  net of income taxes,
totaled $25.9 million and $58.2 million in 1994 and 1993, respectively.  Also in
1994 was a one-time  depreciation  reversal of $15 million,  after income taxes,
which was included in "Other -- net" in the  Statements of Income (see Note 3 of
Notes to Financial Statements).

Capital Needs and Resources

    The Company's capital requirements consist primarily of capital expenditures
and optional and mandatory repayments of long-term debt and preferred stock. The
resources  available  to meet  these  requirements  include  funds  provided  by
operations and external financings.  

    Present  construction  plans  through the year 2005 do not include any major
baseload generating plants. In general, most of the capital expenditures are for
expanding  transmission and  distribution  capabilities to meet customer growth,
upgrading   existing   facilities  and  for  environmental   purposes.   Capital
expenditures are anticipated to be approximately $246 million,  $242 million and
$244 million for 1996, 1997 and 1998, respectively.  These amounts include about
$30 million each year for nuclear fuel expenditures.

    In the period 1993 through 1995, the Company funded all capital expenditures
with funds  provided  by  operations,  after the payment of  dividends.  For the
period 1996 through 1998, the Company estimates that it will fund  substantially
all capital  expenditures  in the same  manner.  Subject to approval of the 1995
regulatory agreement (see Note 3 of Notes to Financial Statements),  $50 million
annually  for the years 1996  through  1999 will be  invested  in the Company by
Pinnacle West.

    During 1995, the Company  redeemed $147 million of long-term  debt, of which
$144 million was optional.  Refunding obligations for preferred stock, long-term
debt, a capitalized  lease obligation and certain  anticipated early redemptions
are expected to approximate  $75 million,  $164 million and $114 million for the
years 1996,  1997 and 1998,  respectively.  As of March 1, 1996, the Company had
redeemed  approximately  $46 million of its long-term debt and approximately $15
million of its preferred stock.

    Although   provisions  in  the  Company's   bond   indenture,   articles  of
incorporation,  and  financing  orders  from the ACC  restrict  the  issuance of
additional first mortgage bonds and preferred stock,  management does not expect
any of these  restrictions  to limit the  Company's  ability to meet its capital
requirements.

    As of December 31,  1995,  the Company had credit  commitments  from various
banks  totaling  approximately  $300  million,  which were  available  either to
support the issuance of commercial  paper or to be used as bank  borrowings.  At
the end of 1995,  there  were  $177.8  million of  commercial  paper and no bank
borrowings outstanding.

1995 Regulatory Agreement

    In December 1995, the Company and the ACC Staff announced an agreement which
includes  an  economic  proposal  to be heard  by the  full  ACC in April  1996.
Principal features include an annual rate reduction of approximately $48 million
($29  million  after  income  taxes) and  recovery of  substantially  all of the
Company's  present  regulatory assets through  accelerated  amortization over an
eight-year  period  beginning July 1, 1996,  increasing  annual  amortization by
approximately  $120 million ($72 million after income taxes). The agreement also
includes an industry  restructuring  element.  See Note 3 of Notes to  Financial
Statements for further discussion of this agreement.

Accounting Matters

    Note 2 of  Notes  to  Financial  Statements  describes  two  new  accounting
standards  related to asset impairment and stock-based  compensation,  which are
effective  in  1996.  These  standards  do not  have a  material  impact  on the
Company's  financial  position or results of operations at the time of adoption.
See Note 12 of Notes to Financial  Statements  for a  description  of a proposed
standard on accounting for certain  liabilities related to closure or removal of
long-lived assets.

                                       
<PAGE>
<TABLE>
                         ITEM 8. FINANCIAL STATEMENTS
                            AND SUPPLEMENTARY DATA

                        INDEX TO FINANCIAL STATEMENTS
<CAPTION>
                                                                                      PAGE
                                                                                     ------
<S>                                                                                    <C>
Report of Management ..................................................................20
Independent Auditors' Report ..........................................................21
Statements of Income for each of the three years in the period ended December 31, 1995 23
Balance Sheets -- December 31, 1995 and 1994 ..........................................24
Statements of Cash Flows for each of the three years in the period ended
 December 31, 1995 ....................................................................26
Statements of Retained Earnings for each of the three years in the period ended
 December 31, 1995 ....................................................................27
Notes to Financial Statements .........................................................27
</TABLE>

   See Note 13 of Notes  to  Financial  Statements  for the  selected  quarterly
financial data required to be presented in this Item.

                                       
<PAGE>
                             REPORT OF MANAGEMENT

   The primary  responsibility  for the  integrity  of the  Company's  financial
information rests with management, which has prepared the accompanying financial
statements and related information.  Such information was prepared in accordance
with generally accepted accounting principles  appropriate in the circumstances,
based on management's  best estimates and judgments and giving due consideration
to  materiality.  These  financial  statements  have been audited by independent
auditors and their report is included.

   Management maintains and relies upon systems of internal accounting controls.
A limiting factor in all systems of internal accounting control is that the cost
of the system should not exceed the benefits to be derived.  Management believes
that the Company's  system provides the  appropriate  balance between such costs
and benefits.

   Periodically the internal  accounting  control system is reviewed by both the
Company's internal auditors and its independent auditors to test for compliance.
Reports  issued by the internal  auditors are released to  management,  and such
reports, or summaries thereof,  are transmitted to the Audit Review Committee of
the Board of Directors and the independent auditors on a timely basis.

   The Audit  Review  Committee,  composed  solely of outside  directors,  meets
periodically  with the internal  auditors and  independent  auditors (as well as
management)  to review the work of each. The internal  auditors and  independent
auditors  have free access to the Audit  Review  Committee,  without  management
present, to discuss the results of their audit work.

   Management  believes  that the  Company's  systems,  policies and  procedures
provide  reasonable  assurance that  operations are conducted in conformity with
the law and with management's commitment to a high standard of business conduct.


O. Mark DeMichele         William J. Post            Jaron B. Norberg
O. Mark DeMichele         William J. Post            Jaron B. Norberg          
President and             Senior Vice President and  Executive Vice President  
Chief Executive Officer   Chief Operating Officer    and Chief Financial Officer
                                                       
                                       
<PAGE>
                         INDEPENDENT AUDITORS' REPORT

Arizona Public Service Company:

   We have audited the  accompanying  balance  sheets of Arizona  Public Service
Company as of December 31, 1995 and 1994 and the related  statements  of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1995.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

   We  conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our opinion,  such financial  statements  present fairly,  in all material
respects,  the  financial  position of the Company at December 31, 1995 and 1994
and the results of its operations and its cash flows for each of the three years
in the period ended  December 31, 1995 in  conformity  with  generally  accepted
accounting principles.


Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
March 1, 1996

                                       
<PAGE>
                       THIS PAGE INTENTIONALLY LEFT BLANK





                                       

<PAGE>
                         ARIZONA PUBLIC SERVICE COMPANY
                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                         Year Ended December 31,
                                                         -----------------------
                                                  1995           1994           1993
                                                  ----           ----           ----
                                                        (Thousands of Dollars)

<S>                                          <C>            <C>            <C>        
Electric Operating Revenues ..............   $ 1,614,952    $ 1,626,168    $ 1,602,413
                                             -----------    -----------    -----------

Fuel Expenses:
  Fuel for electric generation ...........       208,928        237,103        231,434
  Purchased power ........................        60,870         63,586         69,112
                                             -----------    -----------    -----------
    Total ................................       269,798        300,689        300,546
                                             -----------    -----------    -----------

Operating Revenues Less Fuel Expenses ....     1,345,154      1,325,479      1,301,867
                                             -----------    -----------    -----------

Other Operating Expenses:
  Operations excluding fuel expenses .....       284,842        292,292        282,660
  Maintenance ............................       115,972        119,629        118,556
  Depreciation and amortization ..........       242,098        236,108        222,610
  Income taxes (Note 9) ..................       178,865        168,202        168,056
  Other taxes ............................       141,623        140,815        137,497
                                             -----------    -----------    -----------
    Total ................................       963,400        957,046        929,379
                                             -----------    -----------    -----------

Operating Income .........................       381,754        368,433        372,488
                                             -----------    -----------    -----------

Other Income (Deductions):
  Allowance for equity funds used during
    construction .........................         4,982          3,941          2,326
  Income taxes (Note 9) ..................        37,598         (9,042)       (20,851)
  Palo Verde accretion income (Note 1) ...            --         33,596         74,880
  Other--net .............................       (17,032)        16,015         (2,135)
                                             -----------    -----------    ----------- 
    Total ................................        25,548         44,510         54,220
                                             -----------    -----------    -----------

Income Before Interest Deductions ........       407,302        412,943        426,708
                                             -----------    -----------    -----------

Interest Deductions:
  Interest on long-term debt .............       160,032        159,840        164,610
  Interest on short-term borrowings ......         8,143          6,205          6,662
  Debt discount, premium and expense .....         8,622          8,854          9,203
  Allowance for borrowed funds used during
    construction .........................        (9,065)        (5,442)        (4,153)
                                             -----------    -----------    ----------- 
    Total ................................       167,732        169,457        176,322
                                             -----------    -----------    -----------

Net Income ...............................       239,570        243,486        250,386
Preferred Stock Dividend Requirements ....        19,134         25,274         30,840
                                             -----------    -----------    -----------

Earnings for Common Stock ................   $   220,436    $   218,212    $   219,546
                                             ===========    ===========    ===========
</TABLE>

See Notes to Financial Statements.


                                       
<PAGE>
                         ARIZONA PUBLIC SERVICE COMPANY
                                 BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                   December 31,
                                                                ------------------
                                                                1995          1994
                                                                ----          ----
                                                                (Thousands of Dollars) 
<S>                                                         <C>            <C>        
Utility Plant (Notes 5, 7 and 8):
        Electric plant in service and held for future use   $ 6,544,860    $ 6,475,249
        Less accumulated depreciation and amortization ..     2,231,614      2,122,439
                                                            -----------    -----------
                Total ...................................     4,313,246      4,352,810
        Construction work in progress ...................       281,757        224,312
        Nuclear fuel, net of amortization of $68,275
                and $80,599 .............................        52,084         46,951
                                                            -----------    -----------

                Utility Plant--net ......................     4,647,087      4,624,073
                                                            -----------    -----------

Investments and Other Assets (Note 12) ..................        97,742         90,105
                                                            -----------    -----------
Current Assets:
        Cash and cash equivalents .......................        18,389          6,532
        Accounts receivable:
                Service customers .......................       100,433        103,711
                Other ...................................        28,107         27,008
                Allowance for doubtful accounts .........        (1,656)        (2,176)
        Accrued utility revenues (Note 1) ...............        53,519         55,432
        Materials and supplies (at average cost) ........        78,271         89,864
        Fossil fuel (at average cost) ...................        21,722         35,735
        Deferred income taxes (Note 9) ..................         5,653         19,114
        Other ...........................................        17,839         14,162
                                                            -----------    -----------
                Total Current Assets ....................       322,277        349,382
                                                            -----------    -----------

Deferred Debits:
        Regulatory asset for income taxes (Note 9) ......       548,464        557,049
        Palo Verde Unit 3 cost deferral (Note 1) ........       283,426        292,586
        Palo Verde Unit 2 cost deferral (Note 1) ........       165,873        171,936
        Unamortized costs of reacquired debt ............        63,518         60,942
        Unamortized debt issue costs ....................        17,772         17,673
        Other ...........................................       272,103        184,515
                                                            -----------    -----------
                Total Deferred Debits ...................     1,351,156      1,284,701
                                                            -----------    -----------
                Total ...................................   $ 6,418,262    $ 6,348,261
                                                            ===========    ===========
</TABLE>

See Notes to Financial Statements.


                                       
<PAGE>
                         ARIZONA PUBLIC SERVICE COMPANY
                                 BALANCE SHEETS
                                  LIABILITIES
<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                     ----------------------------
                                                                                        1995               1994
                                                                                        ----               ----
                                                                                         (Thousands of Dollars) 
<S>                                                                                 <C>                <C>       
Capitalization (Notes 4 and 5):
        Common stock ......................................................         $  178,162         $  178,162
        Premiums and expenses-- net .......................................          1,039,550          1,039,303
        Retained earnings .................................................            403,843            353,655
                                                                                     ---------          ---------
                Common stock equity .......................................          1,621,555          1,571,120
        Non-redeemable preferred stock ....................................            193,561            193,561
        Redeemable preferred stock ........................................             75,000             75,000
        Long-term debt less current maturities ............................          2,132,021          2,181,832
                                                                                     ---------          ---------
                Total Capitalization ......................................          4,022,137          4,021,513
                                                                                     ---------          ---------


Current Liabilities:
        Commercial paper (Note 6) .........................................            177,800            131,500
        Current maturities of long-term debt (Note 5) .....................              3,512              3,428
        Accounts payable ..................................................            106,583            110,854
        Accrued taxes .....................................................             82,827             89,412
        Accrued interest ..................................................             41,549             45,170
        Other .............................................................             53,880             50,487
                                                                                     ---------          ---------
                Total Current Liabilities .................................            466,151            430,851
                                                                                     ---------          ---------


Deferred Credits and Other:
        Deferred income taxes (Note 9) ....................................          1,429,482          1,436,184
        Deferred investment tax credit (Note 9) ...........................            115,353            142,994
        Unamortized gain-- sale of utility plant (Note 8) .................             91,514             98,551
        Customer advances for construction ................................             19,846             16,564
        Other .............................................................            273,779            201,604
                                                                                     ---------          ---------
                Total Deferred Credits and Other ..........................          1,929,974          1,895,897
                                                                                     ---------          ---------


Commitments and Contingencies (Note 11)

                Total .....................................................         $6,418,262         $6,348,261
                                                                                    ==========         ==========

</TABLE>
                                       
<PAGE>
                         ARIZONA PUBLIC SERVICE COMPANY
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                          Year Ended December 31,
                                                                                     --------------------------------
                                                                                     1995          1994          1993
                                                                                     ----          ----          ----
                                                                                          (Thousands of Dollars)

<S>                                                                            <C>         <C>           <C>          
Cash Flows from Operations:
        Net income ..........................................................  $   239,570 $     243,486 $     250,386
        Items not requiring cash:
                Depreciation and amortization ...............................      242,098       236,108       222,610
                Nuclear fuel amortization ...................................       31,587        32,564        32,024
                Allowance for equity funds used during construction .........       (4,982)       (3,941)       (2,326)
                Deferred income taxes -- net ................................       15,344        83,249       102,697
                Deferred investment tax credit -- net .......................      (27,641)       (6,825)       (6,948)
                Rate refund reversal ........................................         --          (9,308)      (21,374)
                Palo Verde accretion income .................................         --         (33,596)      (74,880)
        Changes in certain current assets and liabilities:
                Accounts receivable -- net ..................................        1,659        (7,276)       30,889
                Accrued utility revenues ....................................        1,913         4,924        (8,839)
                Materials, supplies and fossil fuel .........................       25,606         4,795         2,252
                Other current assets ........................................       (3,677)       (1,509)       (6,616)
                Accounts payable ............................................        6,333        21,666       (18,622)
                Accrued taxes ...............................................       (6,585)      (22,881)        8,826
                Accrued interest ............................................       (3,621)         (577)          241
                Other current liabilities ...................................        3,393            (9)        7,282
        Other-- net .........................................................       21,328          (418)       18,686
                                                                                 ---------     ---------     --------- 
                Net cash provided ...........................................      542,325       540,452       536,288
                                                                                 ---------     ---------     --------- 

Cash Flows from Investing:
        Capital expenditures ................................................     (295,772)     (245,925)     (228,465)
        Allowance for borrowed funds used during construction ...............       (9,065)       (5,442)       (4,153)
        Other ...............................................................      (22,645)       (7,251)       (4,522)
                                                                                 ---------     ---------     --------- 
                Net cash used ...............................................     (327,482)     (258,618)     (237,140)
                                                                                 ---------     ---------     --------- 

Cash Flows from Financing:
        Preferred stock .....................................................         --            --          72,644
        Long-term debt ......................................................       87,130       516,612       520,020
        Short-term borrowings -- net ........................................       46,300       (16,500)      (47,000)
        Dividends paid on common stock ......................................     (170,000)     (170,000)     (170,000)
        Dividends paid on preferred stock ...................................      (19,134)      (26,232)      (30,945)
        Repayment of preferred stock ........................................         --        (124,096)      (78,663)
        Repayment and reacquisition of long-term debt .......................     (147,282)     (462,643)     (558,799)
                                                                                 ---------     ---------     --------- 
                Net cash used ...............................................     (202,986)     (282,859)     (292,743)
                                                                                 ---------     ---------     --------- 


Net increase (decrease) in cash and cash equivalents ........................       11,857        (1,025)        6,405
Cash and cash equivalents at beginning of year ..............................        6,532         7,557         1,152
                                                                                 ---------     ---------     ---------

Cash and cash equivalents at end of year ....................................    $  18,389     $   6,532     $   7,557
                                                                                 =========     =========     =========

Supplemental Disclosure of Cash Flow Information:
        Cash paid during the year for:
                Interest (excluding capitalized interest) ...................    $ 163,592 $     161,294 $     161,843
                Income taxes ................................................    $ 164,261 $     121,578 $      88,239
</TABLE>
See Notes to Financial Statements.

                                       

<PAGE>
                         ARIZONA PUBLIC SERVICE COMPANY
                         STATEMENTS OF RETAINED EARNINGS

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                                ------------------------
                                                                1995      1994      1993
                                                                ----      ----      ----
                                                                 (Thousands of Dollars)

<S>                                                          <C>       <C>       <C>      
Retained earnings at beginning of year ..................... $ 353,655 $ 307,098 $ 259,899
Add: Net income ............................................   239,570   243,486   250,386
                                                             --------- --------- ---------
                Total ......................................   593,225   550,584   510,285
                                                             --------- --------- ---------


Deduct:
        Dividends:
                Common stock (Notes 4 and 5) ...............   170,000   170,000   170,000
                Preferred stock (at required rates) (Note 4)    19,134    25,274    30,840
        Premium paid on reacquisition of preferred stock ...       248     1,655     2,347
                                                             --------- --------- ---------
                Total deductions ...........................   189,382   196,929   203,187
                                                             --------- --------- ---------

Retained earnings at end of year ........................... $ 403,843 $ 353,655 $ 307,098
                                                             ========= ========= =========
</TABLE>
See Notes to Financial Statements.


                                      APS
                         NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Nature of  Operations  
APS is engaged  primarily in the  generation  and sale of
electricity.  The Company serves approximately 705,000 customers in an area that
includes all or part of 11 of Arizona's 15 counties.

Accounting  Records 
The  accounting  records are  maintained in accordance  with
generally  accepted  accounting  principles (GAAP). The preparation of financial
statements in accordance  with GAAP requires the use of estimates by management.
Actual  results could differ from those  estimates.  

The Company is regulated by the ACC and the FERC and the accompanying  financial
statements reflect the rate-making  policies of these  commissions.  The Company
prepares its financial statements in accordance with the provisions of Statement
of Financial  Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation."  SFAS No. 71 requires a cost-based  rate-regulated
enterprise  to  reflect  the impact of  regulatory  decisions  in its  financial
statements.

The Company's major  regulatory  assets are Palo Verde cost deferrals (see "Palo
Verde Cost  Deferrals"  in this  note) and  deferred  taxes (see Note 9).  These
items, combined with miscellaneous regulatory assets and liabilities, amounted
to  approximately  $1.2  billion and $1.1 billion at December 31, 1995 and 1994,
respectively,  most of which are  included in  "Deferred  Debits" on the Balance
Sheets.

The Company's current regulatory orders and regulatory  environment  support the
recognition  of  regulatory  assets.  If rate  recovery of these  costs  becomes
unlikely or uncertain,  whether due to  competition  or regulatory  action,  the
Company may no longer be able to apply the provisions of SFAS No. 71 to all or a
part of its operations.

Common  Stock  
All of the  outstanding  shares  of  common  stock of the  Company  are owned by
Pinnacle West. See Note 4 of Notes to Financial Statements.

Utility Plant and Depreciation 
Utility plant  represents the buildings,  equipment and other facilities used to
provide electric service.  The cost of utility plant includes labor,  materials,
contract  services,  other  related items and an allowance for funds used during
construction.  The cost of retired depreciable utility plant, plus removal costs
less salvage realized, is charged to accumulated  depreciation.  See Note 12 for
information  on a proposed  accounting  standard  which impacts  accounting  for
removal costs.

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

Depreciation  on utility  property  is recorded on a  straight-line  basis.  The
applicable  rates for 1993 through 1995 ranged from 1.77% to 15%, which resulted
in an annual composite rate of 3.44% for 1995.

Allowance for Funds Used During  Construction
AFUDC represents the cost of debt and equity funds used to finance  construction
of utility plant.  Plant construction  costs,  including AFUDC, are recovered in
authorized rates through  depreciation  when completed  projects are placed into
commercial operation.  AFUDC does not represent current cash earnings. 

AFUDC has been calculated  using  composite  rates of 8.52% for 1995;  7.70% for
1994; and 7.20% for 1993. The Company compounds AFUDC semiannually and ceases to
accrue  AFUDC when  construction  is  completed  and the  property  is placed in
service.

Revenues  
Operating  revenues are  recognized on the accrual  basis and include  estimated
amounts for service rendered but unbilled at the end of each accounting period.

In 1991, a refund  obligation of $53.4 million  ($32.3  million after taxes) was
recorded as a result of a 1991 rate settlement.  The refund  obligation was used
to reduce  the  amount of a 1991  rate  increase  granted  rather  than  require
specific  customer  refunds and was  reversed  over the thirty  months ended May
1994. The after-tax refund  obligation  reversals that were recorded as electric
operating revenues amounted to $5.6 million in 1994 and $12.9 million in 1993.

Palo Verde Accretion Income 
In 1991,  the carrying  value of Palo Verde Unit 3 was discounted to reflect the
present value of lost cash flows resulting from a 1991 rate settlement agreement
deeming a portion of the unit to temporarily be excess  capacity.  In accordance
with generally  accepted  accounting  principles,  accretion income was recorded
over a  thirty-month  period  ended  May  1994 in the  aggregate  amount  of the
original discount.  The after-tax accretion income recorded in 1994 and 1993 was
$20.3 million and $45.3 million, respectively.

Palo Verde Cost Deferrals
As authorized by the ACC,  operating costs  (excluding fuel) and financing costs
of Palo Verde Units 2 and 3 were deferred  from the  commercial  operation  date
(September  1986 and January 1988,  respectively)  until the date the units were
included  in a rate order  (April 1988 and  December  1991,  respectively).  The
deferrals are being amortized and recovered  through rates over thirty-five year
periods.

Nuclear Fuel 
Nuclear  fuel is charged to fuel  expense  using the  unit-of-production  method
under which the number of units of thermal energy produced in the current period
is related to the total thermal units expected to be produced over the remaining
life of the fuel.

Under federal law, the DOE is  responsible  for the permanent  disposal of spent
nuclear fuel and assesses $0.001 per kWh of nuclear  generation.  This amount is
charged  to  nuclear  fuel  expense.  See  Note 12 for  information  on  nuclear
decommissioning costs.

Reacquired Debt Costs 
The Company  amortizes  gains and losses on  reacquired  debt over the remaining
life of the original debt, consistent with ratemaking.

Cash and Cash Equivalents
For purposes of the statements of cash flows,  the Company  considers all highly
liquid debt  instruments  purchased with an initial  maturity of three months or
less to be cash equivalents.

Reclassifications  
Certain  prior  year  balances  have  been  restated  to  conform  to  the  1995
presentation.

2.  Accounting  Matters 

In March 1995,  the Financial  Accounting  Standards  Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of," which is  effective  in 1996.  This  statement  requires  that
long-lived  assets be  reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that the  carrying  amount may not be  recoverable.  An
impairment  loss  would  be  recognized  if  the  sum of  the  estimated  future
undiscounted  cash flows to be  generated  by an asset is less than its carrying
value.  The amount of the loss would be based on a  comparison  of book value to
fair value.  The standard  also amends SFAS No. 71 to require the write-off of a
regulatory  asset if it is no longer  probable that future revenues will recover
the cost of the asset. SFAS No. 121 does not have a material impact on financial
position or results of operations upon adoption.

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

In October 1995, the Financial  Accounting  Standards Board issued SFAS No. 123,
"Accounting  for  Stock-Based  Compensation,"  which is effective in 1996.  This
statement  establishes  a  fair-value  based  method  of  accounting  for  stock
compensation  plans. The statement  encourages but does not require companies to
recognize  compensation  expense based on the new fair value method. The Company
will not apply the  recognition  and  measurement  approach in SFAS No. 123 upon
adoption.

See Note 12 for discussion of a proposed  standard on accounting for liabilities
related to closure or removal of long-lived assets.


3. Regulatory  Matters 

1995 Regulatory Agreement
In December  1995,  the Company and the ACC Staff  announced an agreement  which
includes an economic  proposal to be heard by the full ACC beginning on April 9,
1996. In recognition of evolving  competition in the electric  utility  industry
and an ongoing investigation by the ACC Staff into industry  restructuring in an
open competition  docket involving many parties,  the agreement also includes an
element setting out a number of issues which the Company and the ACC Staff agree
the ACC should be requested to consider in developing restructuring policies.

Economic Proposal 
The major provisions of the economic proposal are:

o  An annual rate  reduction of  approximately  $48 million  ($29 million  after
   income taxes), or 3.25% on average, effective no earlier than July 1, 1996.

o  Recovery of  substantially  all of the Company's  present  regulatory  assets
   through accelerated  amortization over an eight-year period beginning July 1,
   1996,  increasing  annual  amortization  by  approximately  $120 million ($72
   million after income taxes). See Note 1.

o  A formula for sharing future cost savings between  customers and shareholders
   referencing a return on equity (as defined) of 11.25%.

o  A moratorium on filing for permanent  rate changes,  except under the sharing
   formula and under certain other limited circumstances, prior to July 2, 1999.

o  Infusion of $200 million of common equity into the Company by Pinnacle  West,
   in annual increments of $50 million starting in 1996.

Industry Restructuring 
The issues listed by the Company and the ACC Staff in the industry restructuring
element of their agreement include the legal nature of utilities' service rights
and  responsibilities,  including  the  obligation  to serve  in a  restructured
environment;  compensation for  restructuring,  taking into account (among other
matters) stranded investment; ACC jurisdiction over market entrants; reciprocity
of access among electricity  providers;  maintenance of system reliability;  the
utility  tax  structure;  and  clarification  of  federal-state   jurisdictional
uncertainties.

The  Company  believes  that,  after a series of  hearings  on these and related
issues in the competition  docket, the ACC could produce a set of regulatory and
legislative  reforms for  presentation to the appropriate  bodies in 1997. Bills
for industry  restructuring  or studies  thereof have already been introduced in
Congress and the Arizona  legislature;  the Arizona bill,  which is supported by
the Company,  would establish a committee to study the issues and to report back
to the legislature by the end of 1997.

Assuming timely  resolution of the issues and approval of the economic  proposal
in the agreement,  the Company therein proposes (independently of the ACC Staff)
a plan whereby it would request the ACC to authorize  access by retail customers
of Arizona public service  corporations to the broad generation  market starting
in the year 2000 for large  customers,  and thereafter in phased steps up to all
customers in about 2004.  Other parties may submit other plans, and the ultimate
outcome is not predictable.

1994 Settlement Agreement 
In May 1994, the ACC approved a retail rate settlement  agreement which provided
for a net annual retail rate reduction of 2.2% on average,  or approximately $32
million  ($19  million  after  taxes),  effective  June 1, 1994.  As part of the
settlement,   in  1994  the  Company  reversed   approximately  $20  million  of

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

depreciation  ($15  million  after  income  taxes)  related to a 1991 Palo Verde
write-off.   The  1994  rate   settlement  also  provided  for  the  accelerated
amortization  of  substantially  all  deferred  ITCs  over  a  five-year  period
beginning in 1995.

4.  Common and Preferred Stocks

Non-redeemable  preferred  stock is not  redeemable  except at the option of the
Company.   Redeemable   preferred  stock  is  redeemable  through  sinking  fund
obligations in addition to being  callable by the Company.  Common and preferred
stock balances at December 31 are shown below:
<TABLE>
<CAPTION>

                                     Number of Shares                              Par Value                       
                                     ----------------                              ---------                        
                                                                                                                    Call
                                                Outstanding                                 Outstanding            Price
                                         ----------------------           Per          ---------------------        Per
                            Authorized       1995        1994            Share         1995            1994       Share(a)
                            ----------   ----------  ----------          -----         ------         ------     --------
                                                                                       (Thousands of Dollars)

<S>                        <C>           <C>         <C>             <C>            <C>             <C>         <C>     
Common Stock ............  100,000,000   71,264,947  71,264,947      $   2.50       $ 178,162       $ 178,162         --
                                         ==========  ==========                     =========       =========           

Preferred Stock:
   Non-Redeemable:
   $1.10 ................      160,000      155,945     155,945         25.00       $   3,898       $   3,898   $  27.50
   $2.50 ................      105,000      103,254     103,254         50.00           5,163           5,163      51.00
   $2.36 ................      120,000      40,000       40,000         50.00           2,000           2,000      51.00
   $4.35 ................      150,000      75,000       75,000        100.00           7,500           7,500     102.00
   Serial preferred          1,000,000                
        $2.40 Series A...                   240,000     240,000         50.00          12,000          12,000      50.50
        $2.625 Series C..                   240,000     240,000         50.00          12,000          12,000      51.00
        $2.275 Series D..                   200,000     200,000         50.00          10,000          10,000      50.50
        $3.25 Series E...                   320,000     320,000         50.00          16,000          16,000      51.00
   Serial preferred .....    4,000,000(b)                
      Adjustable rate --                             
   Series Q .............                   500,000     500,000        100.00          50,000          50,000         (c)
   Serial preferred .....   10,000,000                   
   $1.8125 Series W .....                 3,000,000   3,000,000         25.00          75,000          75,000         (d)
                                          ---------   ---------                     ---------       ---------         
   Total ................                 4,874,199   4,874,199                     $ 193,561       $ 193,561
                                          =========   =========                     =========       =========
                                                     
   Redeemable:                                       
   Serial preferred:                                 
    $10.00 Series U .....                   500,000     500,000        100.00          50,000          50,000
    $7.875 Series V .....                   250,000     250,000        100.00          25,000          25,000         (e)
                                          ---------  ----------                     ---------       ---------           
        Total                               750,000     750,000                     $  75,000       $  75,000
                                          =========  ==========                     =========       =========
                                          
----------

(a) In each case plus accrued dividends.

(b) This authorization also covers all outstanding redeemable preferred stock.

(c)Dividend  rate adjusted  quarterly to 2% below that of certain  United States
   Treasury  securities,  but in no event less than 6% or  greater  than 12% per
   annum. Redeemable at par.

(d) Redeemable at par after December 1, 1998.

(e)Redeemable at $105.51  through May 31, 1996,  and  thereafter  declining by a
   predetermined amount each year to par after May 31, 2002.
</TABLE>

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

If there were to be any arrearage in dividends on any of its preferred  stock or
in the sinking fund requirements  applicable to any of its redeemable  preferred
stock,  the Company  could not pay  dividends on its common stock or acquire any
shares  thereof for  consideration.  The redemption  requirements  for the above
issues for the next five years are: $0 in 1996 and $10.0  million in each of the
years 1997 through 2000.

Redeemable  preferred stock  transactions  during each of the three years in the
period ended December 31 are as follows:
<TABLE>
<CAPTION>

                                             Number of Shares                            Par Value
                                                Outstanding                             Outstanding
                                  -------------------------------------    -------------------------------------
                                                                                  (Thousands of Dollars)
      Description                   1995          1994          1993         1995          1994          1993
      -----------                   -----         ----          ----         ----          ----          ----
<S>                               <C>          <C>           <C>           <C>           <C>         <C>       
Balance, January 1 ............   750,000      1,976,100     2,256,350     $75,000  $     197,610    $  225,635
   Retirements:
           $8.80 Series K .....        --       (142,100)      (45,000)         --        (14,210)       (4,500)
           $11.50 Series R ....        --       (284,000)      (35,250)         --        (28,400)       (3,525)
           $8.48 Series S .....        --       (300,000)     (200,000)         --        (30,000)      (20,000)
           $8.50 Series T .....        --       (500,000)           --          --        (50,000)         --
                                  -------       --------     ---------     -------  -------------    ----------
Balance, December 31 ..........   750,000        750,000     1,976,100     $75,000  $      75,000    $  197,610
                                  =======       ========     =========     =======  =============    ==========
</TABLE>


5. Long-Term Debt

The following table presents long-term debt outstanding:
<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                                          ------------
                                                  Maturity Dates    Interest Rates      1995         1994
                                                  --------------    --------------      ----         ----
                                                                                     (Thousands of Dollars)

<S>                                                 <C>             <C>              <C>          <C>       
First mortgage bonds                                1997-2028       5.5%-13.25%(a)   $1,604,317   $1,740,071
Pollution control indebtedness                      2024-2029       Adjustable(b)       433,280      418,824
Debentures(c)                                            2025               10%          75,000         --
Capitalized lease obligation(d)                     1995-2001             7.48%          22,936       26,365
                                                                                     ----------   ----------
        Total long-term debt                                                          2,135,533    2,185,260
Less current maturities                                                                   3,512        3,428
                                                                                     ----------   ----------
        Total long-term debt less current maturities                                 $2,132,021   $2,181,832
                                                                                     ==========   ==========
</TABLE>

----------

(a)The weighted-average  rate at December 31, 1995 and 1994 was 7.79% and 8.04%,
   respectively. The weighted-average years to maturity at December 31, 1995 and
   1994 was 19 years.

(b)The  weighted-average  rates for the years ended  December  31, 1995 and 1994
   were 4.31% and 3.91%,  respectively.  Changes in  short-term  interest  rates
   would affect the costs associated with this debt.

(c)Junior subordinated  deferrable  interest debentures due in 2025,  redeemable
   at the option of the  Company as a whole or in part on or after  January  31,
   2000 at par plus accrued interest.

(d)Represents  the present  value of future  lease  payments  (discounted  at an
   interest  rate of 7.48%) on a combined  cycle plant sold and leased back from
   the independent owner-trustee formed to own the facility (see Note 8).

Aggregate annual  principal  payments due on long-term debt and for sinking fund
requirements  through 2000 are as follows:  1996,  $3.5  million;  1997,  $153.8
million;  1998, $104.1 million;  1999, $104.4 million; and 2000, $104.7 million.
See Note 4 for redemption and sinking fund requirements of redeemable  preferred
stock of the Company.  

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

Substantially  all  utility  plant  (other  than  nuclear  fuel,  transportation
equipment  and the combined  cycle plant) is subject to the lien of the mortgage
bond  indenture.  The mortgage bond indenture  includes  provisions  which would
restrict the payment of common stock  dividends under certain  conditions  which
did not exist at December 31, 1995.

6. Lines of Credit 
The Company had committed  lines of credit with various banks of $300 million at
December 31, 1995 and 1994,  which were available either to support the issuance
of commercial  paper or to be used for bank  borrowings.  The commitment fees at
December  31, 1995 and 1994 on $200  million of these lines were 0.15% and 0.20%
per annum,  respectively,  and on $100  million  were 0.10% and 0.15% per annum,
respectively.  The Company had commercial paper borrowings outstanding of $177.8
million at  December  31,  1995 and $131.5  million at December  31,  1994.  The
weighted  average  interest rate on  commercial  paper  borrowings  was 6.06% on
December  31, 1995 and 6.25% on  December  31,  1994.  By Arizona  statute,  the
Company's  short-term  borrowings  cannot exceed 7% of its total  capitalization
without the consent of the ACC.

7. Jointly-Owned Facilities
At December 31, 1995, the Company owned interests in the following jointly-owned
electric generating and transmission facilities.  The Company's share of related
operating and maintenance expenses is included in operating expenses.
<TABLE>
<CAPTION>
                                            Percent                           Construction
                                            Owned by   Plant in     Accumulated  Work in
                                            Company    Service     Depreciation  Progress
                                            -------    -------     ------------  --------
                                                       (Thousands of Dollars)
<S>                                         <C>      <C>          <C>          <C>       
Generating Facilities:
  Palo Verde Nuclear Generating Station
    Units 1 and 3 .....................     29.1%    $1,823,062   $  477,569   $   18,743
  Palo Verde Nuclear Generating Station
    Unit 2 (see Note 8) ...............     17.0%       556,236      149,837        9,925
  Four Corners Steam Generating Station
    Units 4 and 5 .....................     15.0%       142,449       54,349        1,208
  Navajo Steam Generating Station
    Units 1, 2 and 3 ..................     14.0%       139,607       78,490       38,633
  Cholla Steam Generating Station
    Common Facilities (a) .............     62.8%(b)     70,761       35,900          734
Transmission Facilities:
  ANPP 500KV System ...................     35.8%(b)     62,607       16,589        1,106
  Navajo Southern System ..............     31.4%(b)     26,737       15,561           23
  Palo Verde-Yuma 500KV System ........     23.9%(b)     11,375        3,483            9
  Four Corners Switchyards ............     27.5%(b)      3,068        1,561           53
  Phoenix-Mead System .................     17.1%(b)       --           --         39,918
</TABLE>
----------

(a)The  Company  is the  operating  agent for  Cholla  Unit 4, which is owned by
   PacifiCorp. The common facilities at the Cholla Plant are jointly-owned.
(b) Weighted average of interests.

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

8. Leases

In 1986, the Company entered into sale and leaseback transactions under which it
sold  approximately  42% of its share of Palo  Verde Unit 2 and  certain  common
facilities.  The gain of  approximately  $140.2 million has been deferred and is
being  amortized to operations  expense over the original lease term. The leases
are being  accounted for as operating  leases.  The amounts to be paid each year
approximate  $40.1 million through 1999, $46.3 million in 2000 and $49.0 million
through  2015.  Options to renew for two  additional  years and to purchase  the
property at fair market  value at the end of the lease terms are also  included.
Consistent  with the ratemaking  treatment,  an amount equal to the annual lease
payments is included in rent expense. A regulatory asset (totaling approximately
$56.9  million at December 31,  1995) has been  established  for the  difference
between lease  payments and rent expense  calculated on a  straight-line  basis.
Lease expense for 1995, 1994 and 1993 was $41.7 million, $42.2 million and $41.8
million, respectively. 

The  Company  has a capital  lease on a combined  cycle  plant which it sold and
leased back. The lease requires semiannual payments of $2.6 million through June
2001, and includes renewal and purchase options based on fair market value. This
plant is included  in plant in service at its  original  cost of $54.4  million;
accumulated amortization at December 31, 1995 was $42.4 million.

In  addition,  the  Company  leases  certain  land,  buildings,   equipment  and
miscellaneous  other items  through  operating  rental  agreements  with varying
terms, provisions and expiration dates. Rent expense for 1995, 1994 and 1993 was
approximately  $9.9  million,  $10.1  million and $11.1  million,  respectively.
Annual future minimum rental commitments,  excluding the Palo Verde and combined
cycle leases, for the period 1996 through 2000 range between $12 million and $13
million.  Total  rental  commitments  after the year 2000 are  estimated at $115
million.

9. Income Taxes 

The Company is included in the consolidated income tax returns of Pinnacle West.
Income taxes are allocated to the Company based on its separate  company taxable
income or loss. Beginning in 1995, substantially all of the unamortized ITCs are
being  amortized  over a  five-year  period  in  accordance  with the 1994  rate
settlement  agreement  (see  Note 3).  Prior to 1995,  ITCs  were  deferred  and
amortized  to other  income over the  estimated  lives of the related  assets as
directed by the ACC.

The Company  follows the liability  method of accounting  for income taxes which
requires  that deferred  income taxes be recorded for all temporary  differences
between the tax bases of assets and liabilities  and the amounts  recognized for
financial  reporting.  Deferred taxes are recorded using  currently  enacted tax
rates. In accordance with SFAS No. 71, a regulatory  asset has been  established
for certain  temporary  differences,  primarily  AFUDC  equity,  that are flowed
through for regulatory purposes. This regulatory asset is being amortized as the
related differences reverse.

The components of income tax expense are as follows:

                                            Year Ended December 31,
                                       -----------------------------
                                       1995         1994        1993
                                       ----         ----        ----
                                          (Thousands of Dollars)
Current:
  Federal ........................  $ 120,196  $   74,272    $ 69,243
  State ..........................     33,368      26,447      23,915
                                    ---------  ----------    --------
      Total current ..............    153,564     100,719      93,158

Deferred .........................     17,933      83,350     102,697
Change in valuation allowance ....     (2,589)         --          --
Investment tax credit amortization    (27,641)     (6,825)     (6,948)
                                    ---------  ----------    -------- 
      Total expense ..............  $ 141,267  $  177,244    $188,907
                                    =========  ==========    ========


                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

Income tax  expense  differed  from the amount  computed by  multiplying  income
before  income  taxes  by the  statutory  federal  income  tax  rate  due to the
following:
<TABLE>
<CAPTION>

                                                                  Year Ended December 31,
                                                                --------------------------
                                                                1995       1994       1993
                                                                ----       ----       ----
                                                                  (Thousands of Dollars)

<S>                                                         <C>        <C>        <C>       
Federal income tax expense at statutory rate, 35% ..........$  133,293 $  147,256 $  153,753
Increase (reductions) in tax expense resulting from:
        Tax under book depreciation ........................    18,186     17,236     17,671
        ITC amortization ...................................   (27,641)    (6,825)    (6,922)
        State income tax-- net of federal income tax benefit    21,770     24,947     27,005
        Other ..............................................    (4,341)    (5,370)    (2,600)
                                                            ---------- ---------- ---------- 
                Income tax expense .........................$  141,267 $  177,244 $  188,907
                                                            ========== ========== ==========
</TABLE>

The components of the net deferred income tax liability were as follows:

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                    ------------------
                                                                    1995          1994
                                                                    ----          ----
                                                                 (Thousands of Dollars)
<S>                                                           <C>            <C>
Deferred tax assets:
Deferred gain on Palo Verde Unit 2 sale/leaseback .........   $    60,686    $    63,720
Alternative minimum tax ...................................          --           14,089
Other .....................................................        78,021         73,084
Valuation allowance .......................................       (12,483)       (15,072)
                                                              -----------    ----------- 
        Total deferred tax assets .........................       126,224        135,821
                                                              -----------    -----------

Deferred tax liabilities:
        Plant related .....................................       813,229        802,645
        Income taxes recoverable through future rates-- net       548,464        557,049
        Palo Verde deferrals ..............................       148,395        153,410
        Other .............................................        39,965         39,787
                                                              -----------    -----------
                Total deferred tax liabilities ............     1,550,053      1,552,891
                                                              -----------    -----------

Accumulated deferred income taxes-- net ...................   $ 1,423,829    $ 1,417,070
                                                              ===========    ===========
</TABLE>


10. Pension Plan and Other Benefits

Pension Plan
The Company  sponsors a defined  benefit  pension plan  covering
substantially  all  employees.  Benefits  are  based  on years  of  service  and
compensation  utilizing a final average pay benefit formula.  The funding policy
is to  contribute  the  net  periodic  cost  accrued  each  year.  However,  the
contribution will not be less than the minimum required contribution nor greater
than the maximum tax-deductible  contribution.  Plan assets consist primarily of
domestic and  international  common  stocks and bonds and real  estate.  Pension
cost,  including  administrative cost, for 1995, 1994 and 1993 was approximately
$21.1  million,  $25.4  million  and  $14.0  million,   respectively,  of  which
approximately $9.6 million,  $11.9 million and $6.5 million,  respectively,  was
charged to expense. The remainder was either capitalized or billed to others.

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

The  components of net periodic  pension costs  (excluding  the costs of special
termination benefits of $1.4 million in 1994) are as follows:


                                                    1995       1994       1993
                                                    ----       ----       ----
                                                      (Thousands of Dollars)

Service cost-benefits earned during the period   $ 16,038   $ 20,345   $ 16,754
Interest cost on projected benefit obligation      39,328     39,377     34,724
Return on plan assets ........................    (82,209)     6,105    (51,597)
Net amortization and deferral ................     45,976    (44,000)    13,420
                                                 --------   --------   --------
Net periodic pension cost ....................   $ 19,133   $ 21,827   $ 13,301
                                                 ========   ========   ========


A reconciliation  of the funded status of the plan to the amounts  recognized in
the balance sheet is presented below:
<TABLE>
<CAPTION>

                                                                             1995          1994
                                                                             ----          ----
                                                                           (Thousands of Dollars)

<S>                                                                      <C>           <C>       
Plan assets at fair value .............................................  $  469,820    $  388,010
                                                                         ----------    ----------
Less:
        Accumulated benefit obligation, including vested benefits
                of $396,138 and $308,474 in 1995 and 1994, respectively     428,258       333,564
        Effect of projected future compensation increases .............     149,836       112,780
                                                                          ---------     --------- 
Total projected benefit obligation ....................................     578,094       446,344
                                                                          ---------     ---------
Plan assets less than projected benefit obligation ....................    (108,274)      (58,334)
Plus:
        Unrecognized net loss (gain) from past experience
                different from that assumed ...........................      44,614        (9,372)
        Unrecognized prior service cost ...............................      23,800        25,527
        Unrecognized net transition asset .............................     (32,809)      (36,025)
                                                                          ---------     --------- 
Accrued pension liability .............................................   $ (72,669)    $ (78,204)
                                                                          =========     ========= 

Principal actuarial assumptions used were:
        Discount rate .................................................       7.25%         8.75%
        Rate of increase in compensation levels .......................       4.50%         5.00%
        Expected long-term rate of return on assets ...................       9.00%         9.00%

</TABLE>

In addition to the defined  benefit  pension  plan,  the Company  also  sponsors
qualified  defined   contribution   plans.   Collectively,   these  plans  cover
substantially  all employees.  The plans provide for employee  contributions and
partial employer matching  contributions after certain eligibility  requirements
are met. The cost of these plans for 1995, 1994 and 1993 was $6.9 million,  $6.8
million and $6.3 million,  respectively, of which $3.1 million, $3.2 million and
$3.0 million,  respectively,  was charged to expense.  

Postretirement Plans 
The  Company  provides  medical  and  life  insurance  benefits  to its  retired
employees.  Employees may become eligible for these retirement benefits based on
years of service and age. The retiree medical  insurance plans are contributory;
the retiree life  insurance  plan is  noncontributory.  In  accordance  with the
governing plan  documents,  the Company retains the right to change or eliminate
these benefits.

Funding  is  based  upon  actuarially  determined  contributions  that  take tax
consequences into account.  Plan assets consist primarily of domestic stocks and
bonds. The postretirement benefit cost for 1995, 1994 and 1993 was approximately
$23 million, $28 million and $34 million,  respectively,  of which approximately
$13 million,  $13 million and $17 million was charged to expense.  The remainder
was either capitalized or billed to others.

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

The components of net periodic postretirement benefit costs are as follows:
                                                     1995       1994       1993
                                                     ----       ----       ----
                                                      (Thousands of Dollars)

Service cost-benefits earned during the period    $  6,735   $  8,785   $  9,510
Interest cost on accumulated benefit obligation     13,743     14,026     15,630
Return on plan assets .........................    (15,133)    (6,459)       --
Net amortization and deferral .................     17,142     11,619      9,146
                                                  --------   --------   --------
Net periodic postretirement benefit cost ......   $ 22,487   $ 27,971   $ 34,286
                                                  ========   ========   ========


A reconciliation  of the funded status of the plan to the amounts  recognized in
the balance sheet is presented below:
<TABLE>
<CAPTION>

                                                                                       1995         1994
                                                                                       ----         ----
                                                                                     (Thousands of Dollars)

<S>                                                                                <C>           <C>      
Plan assets at fair value ......................................................   $  81,309     $  49,666
                                                                                   ---------     ---------
Less accumulated postretirement benefit obligation:
        Retirees ...............................................................      90,222        65,552
        Fully eligible plan participants .......................................      15,497         9,128
        Other active plan participants .........................................     106,568        87,201
                                                                                   ---------     ---------
                   Total accumulated postretirement benefit obligation .........     212,287       161,881
                                                                                   ---------     ---------
Plan assets less than accumulated benefit obligation ...........................    (130,978)     (112,215)
Plus:
        Unrecognized transition obligation .....................................     155,481       164,627
        Unrecognized net gain from past experience different from that
                assumed ........................................................     (24,561)      (52,470)
                                                                                   ---------     --------- 
Accrued postretirement liability ...............................................   $     (58)    $     (58)
                                                                                   =========     ========= 

Principal actuarial assumptions used were:
        Discount rate ..........................................................        7.25%         8.75%
        Annual salary increases for life insurance obligation ..................        4.50%         5.00%
        Weighted average expected long-term rate of return on assets-- after tax        7.64%         7.71%
        Initial health care cost trend rate-- under age 65 .....................        9.50%        11.50%
        Initial health care cost trend rate-- age 65 and over ..................        8.50%         8.50%
        Ultimate health care cost trend rate (reached in the year 2002) ........        5.50%         5.50%
</TABLE>

Assuming a one percent  increase  in the health  care cost trend rate,  the 1995
cost  of   postretirement   benefits  other  than  pensions  would  increase  by
approximately $4.5 million and the accumulated benefit obligation as of December
31, 1995 would increase by approximately $33.3 million.

11. Commitments and Contingencies

Litigation  
The Company is a party to various claims,  legal actions and complaints  arising
in the ordinary course of business.  In the opinion of management,  the ultimate
resolution  of these  matters  will not have a  material  adverse  effect on the
operations or financial position of the Company.

Palo Verde Nuclear Generating Station 
The Company has encountered tube cracking in steam generators and has taken, and
will continue to take, remedial actions that it believes have slowed the rate of
tube  degradation.  The  projected  service  life  of the  steam  generators  is
reassessed  periodically in conjunction  with  inspections made during scheduled
outages at the Palo Verde units. The Company's ongoing analyses indicate that it
will be  economically  desirable  for the  Company to  replace  the Unit 2 steam
generators,  which  have been most  affected  by tube  

                                       
<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS

cracking,  in five to ten years.  The Company  expects that the steam  generator
replacement can be accomplished within financial  parameters  established before
replacement was a consideration, and the Company estimates that its share of the
replacement  costs (in 1995 dollars and including  installation  and replacement
power costs) will be between $30 million and $50 million,  most of which will be
incurred after the year 2000. The Company expects that the replacement  would be
performed  in  conjunction  with a  normal  refueling  outage  in order to limit
incremental  outage time to approximately 50 days. Based on the latest available
data, the Company  estimates that the Unit 1 and Unit 3 steam generators  should
operate for the license  periods (until 2025 and 2027,  respectively),  although
the  Company  will  continue  its  normal  periodic  assessment  of these  steam
generators.

The Palo  Verde  participants  have  insurance  for  public  liability  payments
resulting  from  nuclear  energy  hazards to the full limit of  liability  under
federal law. This potential  liability is covered by primary liability insurance
provided by commercial  insurance carriers in the amount of $200 million and the
balance by an industry-wide  retrospective  assessment program. If losses at any
nuclear power plant  covered by this program  exceed the  accumulated  funds for
this program, the Company could be assessed  retrospective  premium adjustments.
The maximum  assessment per reactor under the program for each nuclear  incident
is  approximately  $79  million,  subject to an annual  limit of $10 million per
incident. Based upon the Company's 29.1% interest in the three Palo Verde units,
the Company's maximum  potential  assessment per incident for all three units is
approximately $69 million, with an annual payment limitation of approximately $9
million.

The Palo Verde  participants  maintain "all risk"  (including  nuclear  hazards)
insurance for property damage to, and decontamination of, property at Palo Verde
in the aggregate  amount of $2.75 billion,  a substantial  portion of which must
first be applied to  stabilization  and  decontamination.  The  Company has also
secured  insurance  against  portions of any  increased  cost of  generation  or
purchased power and business interruption resulting from a sudden and unforeseen
outage of any of the three units. The insurance  coverage  discussed in this and
the previous paragraph is subject to certain policy conditions and exclusions.

Construction  Program 
Total capital expenditures in 1996 are estimated at $246 million.

Fuel and Purchased Power Commitments 
The Company is a party to various fuel and purchased  power contracts with terms
expiring from 1996 through 2020 that include required purchase  provisions.  The
Company  estimates  its  1996  contract  requirements  to be  approximately  $99
million.  However,  this  amount  may vary  significantly  pursuant  to  certain
provisions in such  contracts  which permit the Company to decrease its required
purchases under certain circumstances.

Additionally,  the Company is contractually  obligated to reimburse certain coal
providers for amounts incurred for coal mine reclamation. The Company's share of
the total obligation is estimated at $123 million.  The portion of the coal mine
reclamation  obligation  related to coal already  burned was recorded in 1995 on
the  Balance  Sheets  as  "Deferred  Credits  --  Other"  with  a  corresponding
regulatory asset for approximately $74 million.

12. Nuclear Decommissioning Costs

In 1995, the Company  recorded $11.7 million for  decommissioning  expense.  The
Company estimates it will cost  approximately $2.0 billion ($421 million in 1995
dollars),  over a fourteen year period  beginning in 2024, to  decommission  its
29.1% interest in Palo Verde.  Decommissioning costs are charged to expense over
the respective unit's operating license term and are included in the accumulated
depreciation balance until each unit is retired.  Nuclear  decommissioning costs
are currently recovered in rates.

The Company is utilizing a 1995 site-specific study for Palo Verde, prepared for
the   Company  by  an   independent   consultant,   that   assumes   the  prompt
removal/dismantlement  method of  decommissioning.  The  Company is  required to
update the study every three years.

As required by regulation,  the Company has established  external trust accounts
into which quarterly deposits are made for  decommissioning.  As of December 31,
1995, the Company had deposited a total of $56.7 million. The trust accounts are
included in  "Investments  and Other  Assets" on the Balance  Sheets at a market
value of $74.5  million on  December  31,  1995.  The trust  funds are  invested
primarily in  fixed-income  securities  and domestic 

                                       

<PAGE>
                                      APS
                         NOTES TO FINANCIAL STATEMENTS


stock and are classified as available for sale.  Realized and  unrealized  gains
and losses are reflected in accumulated depreciation.

In  1994,  FASB  added  a  project  to its  agenda  on  accounting  for  nuclear
decommissioning obligations.  FASB recently issued an exposure draft "Accounting
for  Certain  Liabilities  Related to Closure or Removal of  Long-Lived  Assets"
(formerly  Nuclear  Decommissioning)  which would require the estimated  present
value of the cost of  decommissioning  and  certain  other  removal  costs to be
recorded  as  a  liability,   along  with  an  offsetting  plant  asset  when  a
decommissioning  or other  removal  obligation  is incurred.  FASB has requested
comments on its proposed  statement.  The expected  effective  date is 1997. The
Company is unable at this time to determine what impact the final  statement may
have on its financial position or results of operation.

13. Selected Quarterly Financial Data (Unaudited)
Quarterly financial information for 1995 and 1994 is as follows:
                        Electric
                        Operating     Operating        Net       Earnings for
Quarter                 Revenues      Income(a)       Income     Common Stock
-------                 --------      ---------       ------     ------------
                                         (Thousands of Dollars)
1995
        First       $     336,968 $     73,214  $     37,832  $     33,025 
        Second            380,178       88,719        53,452        48,676 
        Third             549,082      162,602       128,345       123,570 
        Fourth            348,724       57,219        19,941        15,165 
1994                                                                       
        First       $     346,049 $     67,147  $     38,468  $     30,958 
        Second            397,156       83,607        65,851        58,879 
        Third             540,883      155,115       116,267       110,359 
        Fourth            342,080       62,564        22,900        18,016 
----------          

(a)The Company's operations are subject to seasonal fluctuations  primarily as a
   result of weather  conditions.  The results of operations for interim periods
   are not  necessarily  indicative  of the results to be expected  for the full
   year.

14. Fair Value of Financial Instruments

The Company  estimates  that the carrying  amounts of its cash  equivalents  and
commercial  paper are reasonable  estimates of their fair values at December 31,
1995 and 1994 due to their  short  maturities.  Investments  in debt and  equity
securities are held for purposes  other than trading.  The December 31, 1995 and
1994 fair  values of debt and equity  investments,  determined  by using  quoted
market values or by discounting  cash flows at rates equal to the Company's cost
of capital, approximate their carrying amounts.

The carrying value of long-term debt (excluding a capitalized  lease obligation)
on December 31, 1995 and 1994 was $2.11 billion and $2.16 billion, respectively,
and the estimated fair value was $2.14 billion and $1.99 billion,  respectively.
The fair  value  estimates  are  based on  quoted  market  prices of the same or
similar issues.

                                      
<PAGE>
     ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                           AND FINANCIAL DISCLOSURE

   None.
                                   PART III

                       ITEM 10. DIRECTORS AND EXECUTIVE
                          OFFICERS OF THE REGISTRANT

   Reference is hereby made to "Election of Directors"  in the  Company's  Proxy
Statement  relating to the annual meeting of  shareholders to be held on May 21,
1996 (the "1996 Proxy  Statement")  and to the  Supplemental  Item -- "Executive
Officers of the Registrant" in Part I of this report.

                       ITEM 11. EXECUTIVE COMPENSATION

   Reference is hereby made to the fourth paragraph under the heading "The Board
and  its  Committees,"  and  to  "Executive  Compensation"  in  the  1996  Proxy
Statement.

                        ITEM 12. SECURITY OWNERSHIP OF
                   CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   Reference  is hereby made to  "Principal  Holders of Voting  Securities"  and
"Ownership  of  Pinnacle  West  Securities  by  Management"  in the  1996  Proxy
Statement.

           ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   Reference is hereby made to the last  paragraph  under the heading "The Board
and its Committees" in the 1996 Proxy Statement.

                                       
<PAGE>
                                   PART IV

         ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
                      SCHEDULES, AND REPORTS ON FORM 8-K


FINANCIAL STATEMENTS

   See the Index to Financial Statements in Part II, Item 8 on page 19       .

<TABLE>

EXHIBITS FILED

<CAPTION>
 EXHIBIT NO.                                     DESCRIPTION
-----------                                      -----------
<S>          <C> <C>
 3.1         --  Bylaws, amended as of February 20, 1996
10.1(a)      --  1996 Senior Management Variable Pay Plan
10.2(a)      --  1996 Officers Variable Pay Plan
10.3         --  Amendment No. 1 dated April 5, 1995 to the Long-Term Power Transactions Agreement
                 and Asset Purchase and Power Exchange Agreement between PacifiCorp and the
                 Company
10.4         --  Restated Transmission Agreement between PacifiCorp and the Company dated April 5,
                 1995
10.5         --  Contract among PacifiCorp, the Company and United States Department of Energy
                 Western Area Power Administration, Salt Lake Area Integrated Projects for Firm
                 Transmission Service dated May 5, 1995
10.6         --  Reciprocal Transmission Service Agreement between the Company and PacifiCorp
                 dated as of March 2, 1994
10.7(a)      --  Letter Agreement dated as of January 1, 1996 between the Company and Kenneth M.
                 Carr for consulting services
10.8(a)      --  Letter  Agreement  dated as of  January  1,  1996  between  the
                 Company and Robert G.
                 Matlock & Associates, Inc. for consulting services
10.9(a)      --  First Amendment to the Arizona Public Service Company Severance Plan as adopted
                 on August 19, 1994
10.10(a)     --  Pinnacle West Capital Corporation, Arizona Public Service Company, SunCor
                 Development Company and El Dorado Investment Company Deferred Compensation Plan
                 as amended and restated effective January 1, 1996
10.11(a)     --  Arizona Public Service Company Supplemental Excess Benefit Retirement Plan as
                 amended and restated on December 20, 1995
23.1         --  Consent of Deloitte & Touche LLP
27.1         --  Financial Data Schedule
</TABLE>


<TABLE>

   In addition to those  Exhibits shown above,  the Company hereby  incorporates
the  following  Exhibits  pursuant  to Exchange  Act Rule 12b-32 and  Regulation
Section 201.24 by reference to the filings set forth below:

<CAPTION>

 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
 <S>          <C>                                 <C>                            <C>         <C>
 3.2          Resolution of Board of              3.2 to 1994 Form 10-K          1-4473      3-30-95
              Directors temporarily               Report 
              suspending Bylaws in part   
                                           
 3.3          Articles of Incorporation,          4.2 to Form S-3                1-4473      9-29-93
              restated as of May 25, 1988         Registration Nos. 
                                                  33-33910 and 33-55248                       
                                                  by means of September 24,                   
                                                  1993 Form 8-K Report
                                         
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
 <S>          <C>                                 <C>                            <C>        <C>
 3.4          Certificates pursuant to            4.3 To Form S-3 Registration   1-4473      9-29-93
              Sections 10-152.01 and 10-016,      Nos. 33-33910 and 33-55248    
              Arizona Revised Statutes,           by means of September 24,     
              establishing Series A               1993 Form 8-K Report          
              through V of the Company's      
              Serial Preferred Stock           

 3.5          Certificate pursuant to             4.4 to Form S-3 Registration   1-4473      9-29-93  
              Section 10-016, Arizona             Nos. 33-33910 and 33-55248                          
              Revised Statutes,                   by means of September 24,                           
              establishing Series W               1993 Form 8-K Report                                
              of the Company's Serial             
              Preferred Stock

 4.1          Mortgage and Deed of Trust          4.1 to September 1992 Form     1-4473      11-9-92 
              Relating to the Company's First     10-Q Report                                        
              Mortgage Bonds, together with       
              forty-eight indentures              
              supplemental thereto                

 4.2          Forty-ninth Supplemental            4.1 to 1992 Form 10-K Report   1-4473      3-30-93
              Indenture                           

 4.3          Fiftieth Supplemental Indenture     4.2 to 1993 Form 10-K Report   1-4473      3-30-94

 4.4          Fifty-first Supplemental            4.1 to August 1, 1993 Form
              Indenture                           8-K Report                     1-4473      9-27-93

 4.5          Fifty-second Supplemental           4.1 to September 30, 1993      1-4473     11-15-93 
              Indenture                           Form 10-Q Report               

  4.6          Fifty-third Supplemental            4.5 to Registration            1-4473       3-1-94 
              Indenture                           Statement No. 33-61228 by                          
                                                  means of February 23, 1994                         
                                                  Form 8-K Report                                    
                                                  
 4.7          Agreement, dated March 21,          4.1 to 1993 Form 10-K Report   1-4473      3-30-94
              1994, relating to the filing of
              instruments defining the rights
              of holders of long-term debt
              not in excess of 10% of the
              Company's total assets              

 4.8          Indenture dated as of January       4.6 to Registration            1-4473      1-11-95
              1, 1995 among the Company and       Statement Nos. 33-61228 and
              The Bank of New York,               33-55473 by means of January
              as Trustee                          1, 1995 Form 8-K Report        

 4.9          Agreement of Resignation,           4.1 to September 25, 1995                             
              Appointment, Acceptance and         Form 8-K Report                1-4473     10-24-95
              Assignment dated as of August       
              18, 1995 by and among the
              Company, Bank of America
              National Trust and Savings
              Association and The Bank of   
              New York                      

10.12         Two separate Decommissioning        10.2 to September 1991 Form    1-4473     11-14-91 
              Trust Agreements (relating to       10-Q                                                   
              PVNGS  Units 1 and 3,               
              respectively),  each  
              dated  July 1,  1991,
              between the Company
              and Mellon Bank, N.A., as       
              Decommissioning Trustee         
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>         <C>
10.13         Amendment No. 1 to                  10.1 to 1994 Form 10-K         1-4473      3-30-95
              Decommissioning Trust Agreement     Report                                        
              (PVNGS Unit 1) dated as of          
              December 1, 1994                

10.14         Amendment No. 1 to                  10.2 to 1994 Form 10-K         1-4473      3-30-95   
              Decommissioning Trust Agreement     Report                                                
              (PVNGS Unit 3) dated as of          
              December 1, 1994                

10.15         Amended and Restated                10.1 to Pinnacle West 1991     1-8962      3-26-92
              Decommissioning Trust Agreement     Form 10-K Report                               
              (PVNGS Unit 2) dated as of          
              January 31, 1992, among the
              Company, Mellon Bank, N.A., as
              Decommissioning Trustee, and
              State Street Bank and Trust
              Company, as successor to The
              First National Bank of Boston,
              as Owner Trustee under two
              separate Trust Agreements, each
              with a separate Equity
              Participant, and as Lessor
              under two separate Facility
              Leases, each relating to an
              undivided interest in PVNGS     
              Unit 2                          

10.16         First Amendment to Amended and      10.2 to 1992 Form 10-K         1-4473      3-30-93
              Restated Decommissioning Trust      Report                                         
              Agreement (PVNGS Unit 2), dated     
              as of November 1, 1992          

10.17         Amendment No. 2 to Amended and      10.3 to 1994 Form 10-K         1-4473      3-30-95 
              Restated Decommissioning Trust      Report                                          
              Agreement (PVNGS Unit 2) dated      
              as of November 1, 1994              

10.18         Asset Purchase and Power            10.1 to June 1991 Form 10-Q    1-4473       8-8-91   
              Exchange Agreement dated            Report                                            
              September 21, 1990 between the      
              Company and PacifiCorp, as
              amended as of October 11, 1990      
              and as of July 18, 1991             

10.19         Long-Term Power Transactions        10.2 to June 1991 Form 10-Q    1-4473       8-8-91  
              Agreement dated September 21,       Report                                           
              1990 between the Company and        
              PacifiCorp, as amended as of
              October 11, 1990 and as of July     
              8, 1991                             

10.20         Contract, dated July 21, 1984,      10.31 to Pinnacle West's       2-96386     3-13-85 
              with DOE providing for the          Form S-14 Registration                          
              disposal of nuclear fuel and/or     Statement                                       
              high-level radioactive waste,       
              ANPP                                

10.21         Indenture of Lease with Navajo      5.01 to Form S-7               2-59644      9-1-77  
              Tribe of Indians, Four Corners      Registration Statement                             
              Plant                               
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>         <C>
10.22         Supplemental and Additional         5.02 to Form S-7               2-59644      9-1-77  
              Indenture of Lease, including       Registration Statement                           
              amendments and supplements to       
              original lease with Navajo
              Tribe of Indians, Four Corners  
              Plant                           

10.23         Amendment and Supplement No. 1      10.36 to Registration           1-8962     7-25-85  
              to Supplemental and Additional      Statement on Form 8-B of                         
              Indenture of Lease, Four            Pinnacle West                                    
              Corners, dated April 25, 1985       

10.24         Application and Grant of            5.04 to Form S-7               2-59644      9-1-77  
              multi-party rights-of-way and       Registration Statement                           
              easements, Four Corners Plant       
              Site                            

10.25         Application and Amendment No. 1     10.37 to Registration           1-8962     7-25-85  
              to Grant of multi-party             Statement on Form 8-B of                         
              rights-of-way and easements,        Pinnacle West                                    
              Four Corners Power Plant Site,      
              dated April 25, 1985            

10.26         Application and Grant of            5.05 to Form S-7               2-59644      9-1-77 
              Arizona Public Service Company      Registration Statement                          
              rights-of-way and easements,        
              Four Corners Plant Site             

10.27         Application and Amendment No. 1     10.38 to Registration           1-8962     7-25-85  
              to Grant of Arizona Public          Statement on Form 8-B of                         
              Service Company rights-of-way       Pinnacle West                                    
              and easements, Four Corners         
              Power Plant Site, dated April   
              25, 1985                        

10.28         Indenture of Lease, Navajo          5(g) to Form S-7               2-36505     3-23-70
              Units 1, 2, and 3                   Registration Statement       
     
10.29         Application and Grant of            5(h) to Form S-7               2-36505     3-23-70 
              rights-of-way and easements,        Registration Statement                          
              Navajo Plant                        
     
10.30         Water Service Contract              5(l) to Form S-7               2-39442     3-16-71  
              Assignment with the United          Registration Statement                           
              States Department of Interior,      
              Bureau of Reclamation, Navajo   
              Plant                           
     
10.31         Arizona Nuclear Power Project       10.1 to 1988 Form 10-K          1-4473     3-8-89  
              Participation Agreement, dated      Report                                           
              August 23, 1973, among the          
              Company, Salt River Project
              Agricultural Improvement and
              Power District, Southern
              California Edison Company,
              Public Service Company of New
              Mexico, El Paso Electric
              Company, Southern California
              Public Power Authority, and
              Department of Water and Power
              of the City of Los Angeles, and     
              amendments 1-12 thereto             

</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>         <C>
10.32         Amendment  No. 13 dated as of       10.1 to March 1991 Form 10-Q    1-4473      5-15-91  
              April 22, 1991,  to Arizona         Report                                                 
              Nuclear Power  Project              
              Participation  Agreement,  
              dated  August 23, 1973,
              among the Company, Salt River 
              Project Agricultural Improvement
              and Power District, Southern 
              California Edison Company, 
              Public Service Company  of  
              New  Mexico,  El  Paso  Electric  
              Company, Southern California 
              Public Power Authority, and
              Department of Water and Power  
              of the City of Los Angeles     

10.33(b)      Facility Lease,  dated as of        4.3 to Form S-3 Registration   33-9480     10-24-86                     
              August 1, 1986,  between State      Statement                      
              Street Bank and Trust Company, as           
              successor to The First National 
              Bank of Boston, in its capacity 
              as Owner Trustee, as Lessor, 
              and the Company, as Lessee                            

10.34(b)      Amendment No. 1, dated as of        10.5 to September 1986 Form     1-4473     12-4-86                    
              November 1, 1986, to Facility       10-Q Report by means of                           
              Lease, dated as of August 1,        Amendment No. 1 on December                       
              1986, between State Street          Form 8                        
              Bank and Trust Company, as                                                            
              successor to The First              
              National Bank of Boston, in    
              its capacity as Owner Trustee, 
              as Lessor, and the Company,    
              as 3, 1986 Lessee              

10.35(b)      Amendment No. 2 dated as of         10.3 to 1988 Form 10-K          1-4473      3-8-89 
              June 1, 1987 to Facility Lease      Report                        
              dated as of August 1, 1986                                                           
              between State Street Bank and       
              Trust Company, as successor to
              The First National Bank of
              Boston, as Lessor, and APS, as      
              Lessee                              

10.36(b)      Amendment No. 3, dated as of        10.3 to 1992 Form 10-K          1-4473     3-30-93 
              March 17, 1993, to Facility         Report                                             
              Lease,  dated as of August 1,       
              1986,  between State Street 
              Bank and Trust Company,  
              as successor to The First 
              National Bank of Boston, as
              Lessor, and the Company, as         
              Lessee                              
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
10.37         Facility Lease, dated as of         10.1 to November 18, 1986      1-4473      1-20-87                      
              December 15, 1986, between          Form 8-K Report                
              State Street Bank and Trust         
              Company, as successor to The
              First National Bank of Boston,
              in its capacity as Owner
              Trustee, as Lessor, and the    
              Company, as Lessee             

10.38         Amendment No. 1, dated as of       4.13 to Form S-3               1-4473      8-24-87                         
              August 1, 1987, to Facility         Registration Statement No.                          
              Lease, dated as of December         33-9480 by means of August                          
              15, 1986, between State Street      1, 1987 Form 8-K Report        
              Bank and Trust Company, as          
              successor to The First         
              National Bank of Boston, as    
              Lessor, and the Company, as    
              Lessee                         

10.39         Amendment No. 2, dated as of        10.4 to 1992 Form 10-K         1-4473      3-30-93                   
              March 17, 1993, to Facility         Report                         
              Lease, dated as of December         
              15, 1986, between State Street
              Bank and Trust Company, as
              successor to The First
              National Bank of Boston, as
              Lessor, and the Company, as    
              Lessee                         

10.40(a)      Directors' Deferred                 10.1 to June 1986 Form 10-Q    1-4473      8-13-86  
              Compensation Plan, as               Report                                             
              restated, effective January 1,      
              1986                           

10.41(a)      Second Amendment to the             10.2 to 1993 Form 10-K         1-4473      3-30-94
              Arizona Public Service Company      Report                                          
              Directors' Deferred                 
              Compensation Plan, effective   
              as of January 1, 1993          

10.42(a)      Third Amendment to the Arizona      10.1 to September 1994 Form    1-4473     11-10-94  
              Public Service Company              10-Q                                              
              Directors' Deferred                 
              Compensation Plan effective as 
              of May 1, 1993                 

10.43(a)      Arizona Public Service Company      10.4 to 1988 Form 10-K         1-4473       3-8-89     
              Deferred Compensation Plan, as      Report                                               
              restated, effective January 1,      
              1984, and the second and third
              amendments thereto, dated
              December 22, 1986, and
              December 23, 1987,             
              respectively                   
</TABLE>

                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
10.44(a)      Third Amendment to the Arizona      10.3 to 1993 Form 10-K         1-4473      3-30-94                         
              Public Service Company Deferred     Report                         
              Compensation Plan, effective as     
              of January 1, 1993              

10.45(a)      Fourth Amendment to the Arizona     10.2 to September 1994 Form    1-4473     11-10-94  
              Public Service Company Deferred     10-Q Report                                       
              Compensation Plan effective as      
              of May 1, 1993                  

10.46(a)      Pinnacle West Capital               10.7 to 1994 Form 10-K         1-4473      3-30-95   
              Corporation and Arizona Public      Report                                             
              Service Company Directors'          
              Retirement Plan effective as of 
              January 1, 1995                 

10.47(a)      Letter Agreement dated December     10.6 to 1994 Form 10-K         1-4473      3-30-95 
              21, 1993, between the Company       Report                                           
              and William L. Stewart              

10.48(a)      Agreement for Utility               10.6 to 1988 Form 10-K         1-4473       3-8-89 
              Consulting Services, dated          Report                                           
              March 1, 1985, between the          
              Company and Thomas G. Woods,
              Jr., and Amendment No. 1        
              thereto, dated January 6, 1986  

10.49(a)      Letter Agreement, dated April       10.7 to 1988 Form 10-K         1-4473       3-8-89  
              3, 1978, between the Company        Report                                            
              and O. Mark DeMichele,              
              regarding certain retirement
              benefits granted to Mr.         
              DeMichele                       

10.50(a)      Letter Agreement dated July 28,     10.1 to September 1995 10-Q    1-4473     11-14-95 
              1995, between the Company and       Report                                           
              Jaron B. Norberg regarding          
              certain of Mr. Norberg's        
              retirement benefits             

10.51(a)(c)   Key Executive Employment and        10.3 to 1989 Form 10-K         1-4473       3-8-90      
              Severance Agreement between the     Report                                                
              Company and certain executive       
              officers of the Company         

10.52(a)(c)   Revised form of Key Executive       10.5 to 1993 Form 10-K         1-4473      3-30-94   
              Employment and Severance            Report                                             
              Agreement between the Company       
              and certain executive officers  
              of the Company                  
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                          ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
10.53(a)(c)   Second revised form of Key          10.9 to 1994 Form 10-K         1-4473      3-30-95     
              Executive Employment and            Report                                               
              Severance Agreement between the     
              Company and certain executive   
              officers of the Company         

10.54(a)(c)   Key Executive Employment and        10.4 to 1989 Form 10-K         1-4473       3-8-90      
              Severance Agreement between the     Report                                                
              Company and certain managers of     
              the Company                     

10.55(a)(c)   Revised form of Key Executive       10.4 to 1993 Form 10-K         1-4473      3-30-94   
              Employment and Severance            Report                                             
              Agreement between the Company       
              and certain key employees of    
              the Company                     

10.56(a)(c)   Second revised form of Key          10.8 to 1994 Form 10-K         1-4473      3-30-95   
              Executive Employment and            Report                                             
              Severance Agreement between the     
              Company and certain key         
              employees of the Company        

10.57(a)      Arizona Public Service Company      10.5 to 1989 Form 10-K         1-4473       3-8-90    
              Performance Review Severance        Report                                              
              Pay Plan, effective January 1,      
              1990                            

10.58(a)      Arizona Public Service Company      10.1 to September 30, 1993     1-4473     11-15-93  
              Severance Plan as adopted on        Form 10-Q Report                                  
              June 22, 1993                       

10.59(a)      Pinnacle West Capital               10.1 to 1992 Form 10-K         1-4473      3-30-93  
              Corporation Stock Option and        Report                                            
              Incentive Plan                      

10.60(a)      Pinnacle West Capital               A to the Proxy Statement for   1-8962      4-16-94
              Corporation 1994 Long-Term          the Plan Report Pinnacle
              Incentive Plan effective as of      West 1994 Annual Meeting of
              March 23, 1994                      Shareholders                 

10.61(a)      Pinnacle West Capital               10.7 to 1993 Form 10-K         1-4473      3-30-94  
              Corporation, Arizona Public         Report                                            
              Service Company, SunCor             
              Development Company, and El
              Dorado Investment Company
              Supplemental Executive Benefit
              Plan as amended and restated on
              December 31, 1992 effective as  
              of January 1, 1992              

10.62         Agreement No. 13904 (Option and     10.3 to 1991 Form 10-K         1-4473      3-19-92   
              Purchase of Effluent) with          Report                                             
              Cities of Phoenix, Glendale,        
              Mesa, Scottsdale, Tempe, Town
              of Youngtown, and Salt River
              Project Agricultural
              Improvement and Power District, 
              dated April 23, 1973            
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
10.63         Agreement for the Sale and          10.4 to 1991 Form 10-K         1-4473     3-19-92   
              Purchase of Wastewater              Report                                            
              Effluent with City of Tolleson      
              and Salt River Agricultural
              Improvement and Power
              District, dated June 12, 1981,
              including Amendment No. 1
              dated as of November 12, 1981
              and Amendment No. 2 dated as   
              of June 4, 1986                

99.1          Collateral Trust Indenture          4.2 to 1992 Form 10-K Report   1-4473     3-30-93    
              among PVNGS II Funding Corp.,       
              Inc., the Company and Chemical
              Bank, as Trustee               

99.2          Supplemental Indenture to           4.3 to 1992 Form 10-K Report   1-4473     3-30-93     
              Collateral Trust Indenture          
              among PVNGS II Funding Corp.,
              Inc., the Company and Chemical
              Bank, as Trustee               

99.3(b)       Participation Agreement, dated      28.1 to September 1992 Form    1-4473     11-9-92      
              as of August 1, 1986, among         10-Q Report                                          
              PVNGS Funding  Corp.,  Inc.,        
              Bank of America  National  
              Trust and Savings  Association,  
              State  Street  Bank and Trust  
              Company,  as successor to 
              The First National Bank of 
              Boston,  in its individual
              capacity and as Owner  Trustee,  
              Chemical  Bank, in its individual
              capacity and as Indenture Trustee, 
              the Company, and the Equity    
              Participant named therein      

99.4(b)       Amendment  No. 1 dated as of        10.8 to September 1986 Form    1-4473     12-4-86   
              November 1, 1986, to Participation  10-Q Report by means of                           
              Agreement,  dated as of August 1,   Amendment No. 1, on December                      
              1986, among PVNGS Funding Corp.,    3, 1986 Form 8                                    
              Inc.,  Bank of America  National    
              Trust and  Savings  Association,
              State  Street Bank and Trust  
              Company,  as  successor to The First
              National Bank of Boston,  
              in its individual  capacity 
              and as Owner Trustee, Chemical Bank,
              in its individual capacity and 
              as Indenture Trustee, the      
              Company, and the Equity        
              Participant named therein      
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
99.5(b)       Amendment  No. 2,  dated as         28.4 to 1992 Form 10-K         1-4473      3-30-93   
              of March 17,  1993,  to             Report                                             
              Participation Agreement,            
              dated as of August 1, 1986, 
              among PVNGS Funding Corp.,
              Inc.,  PVNGS II Funding Corp.,
              Inc.,  State Street Bank 
              and Trust Company, as successor
              to The First National Bank 
              of Boston, in its individual 
              capacity and as Owner  
              Trustee,  Chemical Bank, 
              in its individual capacity and 
              as Indenture Trustee, 
              the Company, and the  Equity 
              Participant named              
              therein                        

99.6(b)       Trust Indenture,  Mortgage,         4.5 to Form S-3 Registration   33-9480    10-24-86  
              Security  Agreement and             Statement                                                
              Assignment of                       
              Facility Lease,  dated as 
              of August 1, 1986,  between 
              State Street Bank and Trust 
              Company, as successor to 
              The First National Bank of
              Boston, as Owner Trustee, and
              Chemical Bank, as Indenture    
              Trustee                        

99.7(b)       Supplemental Indenture No. 1,       10.6 to September  1986 Form   1-4473      12-4-86      
              dated as of November 1, 1986        10-Q Report by means of                                
              to Trust Indenture, Mortgage,       Amendment  No.  1 on                           
              Security Agreement and              December 3, 1986 Form 8                                         
              Assignment of Facility Lease,       
              dated as of August 1, 1986,
              between State Street Bank and
              Trust  Company,  as successor 
              to The First  National  Bank of 
              Boston,  as Owner Trustee,  and 
              Chemical  Bank,  as Indenture 
              Trustee                        

99.8(b)       Supplemental Indenture No. 2        4.4 to 1992 Form 10-K Report   1-4473      3-30-93
              to Trust Indenture, Mortgage,       
              Security Agreement and
              Assignment of Facility Lease,  
              dated as of August 1, 1986, 
              between State  Street Bank 
              and Trust Company,  as  successor 
              to The First National Bank of 
              Boston,  as Owner Trustee,  
              and Chemical Bank, as Indenture
              Trustee                        

99.9(b)       Assignment, Assumption and          28.3 to Form S-3               33-9480    10-24-86    
              Further Agreement, dated as of      Registration Statement                              
              August 1, 1986, between the        
              Company and State Street Bank  
              and Trust Company, as successor  
              to The First National Bank of 
              Boston, as Owner Trustee       
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
99.10(b)      Amendment No. 1, dated as of        10.10 to September 1986 Form   1-4473     12-4-86  
              November 1, 1986, to                10-Q Report by means of                          
              Assignment, Assumption and          Amendment No. 1 on December                      
              Further Agreement, dated as of      3, 1986 Form 8                                   
              August 1, 1986, between the       
              Company and State Street Bank   
              and Trust Company, as successor 
              to The First National Bank of   
              Boston, as Owner Trustee        
              
99.11(b)      Amendment No. 2, dated as of        28.6 to 1992 Form 10-K         1-4473     3-30-93   
              March 17, 1993, to Assignment,      Report                                            
              Assumption and Further              
              Agreement, dated as of August
              1, 1986, between the
              Company and State Street Bank  
              and Trust Company, as successor
              to The First National Bank of     
              Boston, as Owner Trustee          
              
99.12         Participation Agreement, dated      28.2 to September 1992 Form    1-4473     11-9-92 
              as of December 15, 1986, among      10-Q Report                                     
              PVNGS Funding Corp., Inc., State    
              Street Bank and Trust Company, as
              successor to The First National 
              Bank of Boston,  in its individual
              capacity and as Owner  Trustee,  
              Chemical  Bank, in its individual
              capacity and as Indenture  Trustee
              under a Trust  Indenture,  the
              Company, and the Owner 
              Participant named therein      
                                             

99.13         Amendment No. 1, dated as of        28.20 to Form S-3              1-4473     8-10-87    
              August 1, 1987, to                  Registration Statement No.                          
              Participation Agreement, dated      33-9480 by means of a                               
              as of December 15, 1986, among      November 6, 1986 Form 8-K                           
              PVNGS Funding Corp., Inc. as        Report                                              
              Funding Corporation, State          
              Street Bank and Trust Company,
              as successor to The First
              National Bank of Boston, as    
              Owner Trustee, Chemical Bank,  
              as Indenture Trustee, the      
              Company, and the Owner         
              Participant named therein      
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
99.14         Amendment  No. 2,  dated as         28.5 to 1992 Form 10-K         1-4473     3-30-93 
              of March 17,  1993,  to             Report                                          
              Participation Agreement,            
              dated as of December  15,  1986,  
              among PVNGS  Funding Corp.,  
              Inc., PVNGS II Funding Corp.,  
              Inc., State Street Bank and
              Trust Company,  as successor to 
              The First National Bank of Boston,
              in its individual capacity and as
              Owner Trustee, Chemical Bank, in
              its individual capacity and as 
              Indenture Trustee, the Company, 
              and the Owner Participant named        
              therein                                

99.15         Trust Indenture,  Mortgage,         10.2 to November 18, 1986      1-4473     1-20-87     
              Security  Agreement and Assignment  Form 8-K Report                                     
              of Facility  Lease,  dated as       
              of December  15,  1986,  between
              State Street Bank and Trust 
              Company,  as successor to The 
              First National Bank of Boston, 
              as Owner Trustee, and
              Chemical Bank, as Indenture    
              Trustee                        

99.16         Supplemental Indenture No. 1,       4.13 to Form S-3               1-4473     8-24-87   
              dated as of August 1, 1987, to      Registration Statement No.                        
              Trust Indenture, Mortgage,          33-9480 by means of August                        
              Security Agreement and              1, 1987 Form 8-K Report                           
              Assignment of Facility Lease,       
              dated as of December 15, 1986,
              between State Street Bank and
              Trust Company, as successor to
              The First National Bank of     
              Boston, as Owner Trustee, and  
              Chemical Bank, as Indenture    
              Trustee                        

99.17         Supplemental Indenture No. 2        4.5 to 1992 Form 10-K Report   1-4473     3-30-93
              to Trust Indenture, Mortgage,
              Security Agreement and
              Assignment  of  Facility  
              Lease,  dated as of December  
              15,  1986, between State Street
              Bank and Trust  Company,  as 
              successor to The First  National
              Bank of Boston,  as Owner  Trustee,
              and Chemical Bank, as Indenture
              Trustee                        

99.18         Assignment, Assumption and          10.5 to November 18, 1986      1-4473     1-20-87   
              Further Agreement, dated as of      Form 8-K Report                                   
              December 15, 1986, between the      
              Company and State Street Bank
              and Trust Company, as
              successor to The First
              National Bank of Boston, as    
              Owner Trustee                  
</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT NO.  DESCRIPTION                         ORIGINALLY FILED AS EXHIBIT:   FILE NO.  DATE EFFECTIVE
 -----------  -----------                         ---------------------------    -------   --------------
<S>           <C>                                 <C>                            <C>        <C>
99.19         Amendment No. 1, dated as of        28.7 to 1992 Form 10-K         1-4473      3-30-93   
              March 17, 1993, to                  Report                                             
              Assignment, Assumption and          
              Further Agreement, dated as
              of December 15, 1986, between
              the Company and State Street
              Bank and Trust Company, as
              successor to The First
              National Bank of Boston, as   
              Owner Trustee                 

99.20(b)      Indemnity Agreement dated as        28.3 to 1992 Form 10-K         1-4473      3-30-93  
              of March 17, 1993 by the            Report                                            
              Company                             

99.21         Extension Letter, dated as of       28.20 to Form S-3              1-4473      8-10-87
              August 13, 1987, from the           Registration Statement No.
              signatories of the                  33-9480 by means of a
              Participation Agreement to          November 6, 1986 Form 8-K
              Chemical Bank                       Report                       

99.22         Pledge Agreement dated as of        28.1 to January 21, 1990       1-4473      2-15-90      
              January 31, 1990, between           Form 8-K Report                                       
              Pinnacle West Capital Report        
              Corporation as Pledgor and
              Citibank, N.A. as Collateral  
              Agent                         

99.23         Arizona Corporation                 28.1 to 1991 Form 10-K         1-4473      3-19-92           
              Commission Order dated              Report                                                     
              December 6, 1991                    

99.24         Arizona Corporation                  10.1 to June Form 10-Q        1-4473      8-12-94   
              Commission Order dated               Report                                             
              June 1, 1994                                                                            
                                                  
99.25         Rate Reduction Agreement             10.1 to December 4, 1995      1-4473     12-14-95   
              dated December 4, 1995               Form 8-K Report                                    
              between the Company and the         
              ACC Staff                    

<FN>
----------

  (a) Management  contract or  compensatory  plan or arrangement  required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.


  (b) An additional document,  substantially  identical in all material respects
to this  Exhibit,  has been  entered  into,  relating  to an  additional  Equity
Participant.  Although  such  additional  document may differ in other  respects
(such as  dollar  amounts,  percentages,  tax  indemnity  matters,  and dates of
execution),  there are no material  details in which such document  differs from
this Exhibit.

  (c) Additional agreements, substantially identical in all material respects to
this Exhibit have been entered into with  additional  officers and key employees
of the Company.  Although such additional documents may differ in other respects
(such as dollar amounts and dates of execution),  there are no material  details
in which such agreements differ from this Exhibit.
</FN>
</TABLE>
                                       
<PAGE>
REPORTS ON FORM 8-K

   During the quarter  ended  December 31, 1995,  and the period ended March 29,
1996, the Company filed the following Reports on Form 8-K:

   Report filed October 24, 1995  regarding the  resignation  of Bank of America
National Trust and Savings  Association as trustee under the Company's  Mortgage
and Deed of Trust dated as of July 1, 1946,  and the  appointment of The Bank of
New York as the successor trustee.


   Report  filed  December  14, 1995  regarding  the  Company's  Rate  Reduction
Agreement with the ACC Staff dated December 4, 1995.

                                       
<PAGE>
                                  SIGNATURES

   Pursuant  to the  requirements  of  Section  13 or  15(d)  of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                  ARIZONA PUBLIC SERVICE COMPANY
                                           (Registrant)


Date: March 29, 1996                       O. MARK DEMICHELE
                                 --------------------------------------
                                     (O. Mark DeMichele, President
                                      and Chief Executive Officer)

<TABLE>

   Pursuant to the  requirements  of the Securities  Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

<CAPTION>
                    SIGNATURE                                 TITLE                      DATE
----------------------------------------------- -------------------------------- ------------------
 <S>                                               <C>                              <C>
                O. MARK DEMICHELE
 -----------------------------------------------   Principal Executive Officer
          (O. Mark DeMichele, President)                   and Director             March 29, 1996

                 WILLIAM J. POST
 -----------------------------------------------
     (William J. Post, Senior Vice President       Principal Accounting Officer
           and Chief Operating Officer)                    and Director             March 29, 1996

                JARON B. NORBERG
 -----------------------------------------------
   (Jaron B. Norberg, Executive Vice President     Principal Financial Officer
           and Chief Financial Officer)                    and Director             March 29, 1996

                 KENNETH M. CARR
 -----------------------------------------------
                (Kenneth M. Carr)                            Director               March 29, 1996

                 MARTHA O. HESSE
 -----------------------------------------------
                (Martha O. Hesse)                            Director               March 29, 1996

             MARIANNE MOODY JENNINGS
 -----------------------------------------------
            (Marianne Moody Jennings)                        Director               March 29, 1996

                ROBERT G. MATLOCK
 -----------------------------------------------
               (Robert G. Matlock)                           Director               March 29, 1996

               JOHN R. NORTON III
 -----------------------------------------------
               (John R. Norton III)                          Director               March 29, 1996

                 DONALD M. RILEY
 -----------------------------------------------
                (Donald M. Riley)                            Director               March 29, 1996

</TABLE>
                                       
<PAGE>
<TABLE>
<CAPTION>
                    SIGNATURE                                 TITLE                      DATE
----------------------------------------------- -------------------------------- ------------------
 <S>                                                         <C>                    <C>
                HENRY B. SARGENT
 -----------------------------------------------
                (Henry B. Sargent)                           Director               March 29, 1996

                WILMA W. SCHWADA
 -----------------------------------------------
                (Wilma W. Schwada)                           Director               March 29, 1996

                 VERNE D. SEIDEL
 -----------------------------------------------
                (Verne D. Seidel)                            Director               March 29, 1996

                  RICHARD SNELL
 -----------------------------------------------
                 (Richard Snell)                             Director               March 29, 1996

                DIANNE C. WALKER
 -----------------------------------------------
                (Dianne C. Walker)                           Director               March 29, 1996

              BEN F. WILLIAMS, JR.
 -----------------------------------------------
              (Ben F. Williams, Jr.)                         Director               March 29, 1996

              THOMAS G. WOODS, JR.
 -----------------------------------------------
              (Thomas G. Woods, Jr.)                         Director               March 29, 1996

</TABLE>
                                       
<PAGE>
                                   APPENDIX

     In accordance  with Item 304 of Regulation S-T of the  Securities  Exchange
Act of 1934, the Company's  Service Territory map contained in this Form 10-K is
a map of the State of Arizona  showing the Company's  service area, the location
of its major power plants and principal  transmission lines, and the location of
transmission  lines  operated by the Company for others.  The major power plants
shown on such map are the Navajo Generating  Station located in Coconino County,
Arizona;  the Four Corners Power Plant located near Farmington,  New Mexico; the
Cholla Power Plant,  located in Navajo County,  Arizona;  the Yucca Power Plant,
located  near Yuma,  Arizona;  and the Palo Verde  Nuclear  Generating  Station,
located  about 55 miles  west of  Phoenix,  Arizona  (each  of which  plants  is
reflected on such map as being jointly owned with other  utilities),  as well as
the  Ocotillo  Power Plant and West  Phoenix  Power  Plant,  each  located  near
Phoenix, Arizona, and the Saguaro Power Plant, located near Tucson, Arizona. The
Company's  major  transmission  lines shown on such map are reflected as running
between the power  plants  named above and certain  major cities in the State of
Arizona.  The  transmission  lines  operated  for  others  shown on such map are
reflected as running from the Four Corners  Plant  through a portion of northern
Arizona to the California border.
<PAGE>
                                                 COMMISSION FILE NUMBER 1-4473
================================================================================





                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                  ----------

                                 EXHIBITS TO

                                  FORM 10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                     THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

                                  ----------

                        ARIZONA PUBLIC SERVICE COMPANY
              (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
    





================================================================================
<PAGE>
<TABLE>
                              INDEX TO EXHIBITS
<CAPTION>
  EXHIBIT NO.    DESCRIPTION
  -----------    -----------
<S>          <C> <C>
 3.1         --  Bylaws, amended as of February 20, 1996

10.1(a)      --  1996 Senior Management Variable Pay Plan

10.2(a)      --  1996 Officers Variable Pay Plan

10.3         --  Amendment No. 1 dated April 5, 1995 to the Long-Term Power Transactions
                 Agreement and Asset Purchase and Power Exchange Agreement between PacifiCorp
                 and the Company

10.4         --  Restated Transmission Agreement between PacifiCorp and the Company dated April
                 5, 1995

10.5         --  Contract among PacifiCorp, the Company and United States Department of Energy
                 Western Area Power Administration, Salt Lake Area Integrated Projects for Firm
                 Transmission Service dated May 5, 1995

10.6         --  Reciprocal Transmission Service Agreement between the Company and PacifiCorp
                 dated as of March 2, 1994

10.7(a)      --  Letter Agreement dated as of January 1, 1996 between the Company and Kenneth M.
                 Carr for consulting services

10.8(a)      --  Letter  Agreement  dated as of  January  1,  1996  between  the
                 Company and Robert G. Matlock & Associates, Inc. for consulting services

10.9(a)      --  First Amendment to the Arizona Public Service Company Severance Plan as adopted
                 on August 19, 1994

10.10(a)     --  Pinnacle West Capital Corporation, Arizona Public Service Company, SunCor
                 Development Company and El Dorado Investment Company Deferred Compensation Plan
                 as amended and restated effective January 1, 1996

10.11(a)     --  Arizona Public Service Company Supplemental Excess Benefit Retirement Plan as
                 amended and restated on December 20, 1995

23.1         --  Consent of Deloitte & Touche LLP

27.1         --  Financial Data Schedule

<FN>

----------
  (a) Management  contract or  compensatory  plan or arrangement  required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.

</FN>
</TABLE>

   For a description of the Exhibits  incorporated  in this filing by reference,
see Part IV, Item 14.