APS Seeks Approval of Power Supply Adjustor Surcharge; Increase in Natural Gas and Purchased Power Costs Spur Request.

PHOENIX -- Responding to dramatically higher natural gas prices, APS today asked approval of the Arizona Corporation Commission (ACC) to implement a temporary power supply adjustor surcharge to recover the higher costs of fuel and purchased power that are not included in current rates. If approved, the surcharge would begin this fall, and conclude two years later. The surcharge of $0.001770 per kilowatt-hour would add about $2.74, or 2.1 percent, to the average monthly residential bill.

"Just as gasoline prices have soared at the pumps, the cost of natural gas and other fuels we buy to run APS' power plants have increased and remain stubbornly high," said Steve Wheeler, APS executive vice president, customer service and regulation. "Despite our cost control and risk management efforts, our fuel and purchased power expenses have exceeded what is currently being collected in rates, and we need timely recovery of these costs to continue providing quality service to our customers."

Wheeler noted that current power supply costs exceed those included in present APS rates by about 24 percent. By August, the Company could see a shortfall in its fuel-costs collection of about $100 million.

"Fuel is the largest single cost of providing electricity to our customers," he said. "And, since we only charge our customers for what the fuel costs us, our rates need to reflect the true prices we pay."

If the surcharge is approved, APS' prices will still be lower than they were in 1991. APS rates now average 8.1 cents per kilowatt-hour; after the surcharge, the average rate will be 8.3 cents. In 1991, the rate was 8.75 cents per kilowatt-hour. By comparison, the Consumer Price Index has increased by 43 percent over the same period.

However, Wheeler added that "if our fuel and purchased power costs continue to increase, we could expect to see further price adjustments."

Under an ACC decision issued this past spring, APS is required to request a surcharge before the under-collection of fuel costs reaches a predetermined level. A power supply adjustor is a commonly-used regulatory mechanism to send timely price signals, and to ensure customers pay only for the actual and reasonable costs of power supplies by allowing upward or downward revisions to the fuel portion of customers' bills.

"Using energy wisely makes good sense for all of us," Wheeler stressed. "So we encourage our customers to adopt energy-efficient practices. Conservation helps keep our fuel costs down, and helps customers lower their power bills."

To learn more about conservation tips or the power supply adjustor, log on to APS' web site at www.aps.com. Once at the site, customers will find various tools to help reduce energy usage and lower their electricity bills.

APS, Arizona's largest and longest-serving electric utility, serves more than 989,500 customers in 11 of the state's 15 counties. With headquarters in Phoenix, APS is the largest subsidiary of Pinnacle West Capital Corporation (NYSE: PNW).