FORM 10-Q

Securities and Exchange Commission

Washington, D.C. 20549

 

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

               SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended     June 30, 2003   

 

OR

 

o  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)

 

 

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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  ý  No  o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Yes  o  No  ý

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

                                        Number of shares of common stock, $2.50 par value,

                                        outstanding as of August 14, 2003:  71,264,947

 

The Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

 

Glossary

 

ACC — Arizona Corporation Commission

ACC Staff — Staff of the Arizona Corporation Commission

ALJ — Administrative Law Judge

APS — Arizona Public Service Company, the Company

APS Energy Services — APS Energy Services Company, Inc., a subsidiary of Pinnacle West

CAISO — California Independent System Operator

CC&N — Certificate of Convenience and Necessity

Citizens — Citizens Communications Company

Company — Arizona Public Service Company

EITF — the FASB’s Emerging Issues Task Force

ERMC —Energy Risk Management Committee

FASB — Financial Accounting Standards Board

FERC — United States Federal Energy Regulatory Commission

FIN — FASB Interpretation

Financing Order — ACC order issued on April 4, 2003 relating to our request to provide financing or credit support to Pinnacle West Energy or Pinnacle West

GAAP — accounting principles generally accepted in the United States of America

Interim Financing Order — ACC order issued on November 22, 2002 relating to our request to provide financing or credit support to Pinnacle West

IRS — United States Internal Revenue Service

March 2003 10-Q — Arizona Public Service Company Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003

Moody’s — Moody’s Investors Service

MW — megawatt, one million watts

MWh — megawatt-hours, one million watts per hour

Native Load — retail and wholesale sales supplied under traditional cost-based rate regulation

1999 Settlement Agreement — comprehensive settlement agreement related to the implementation of retail electric competition

NRC — United States Nuclear Regulatory Commission

OCI — other comprehensive income

Palo Verde — Palo Verde Nuclear Generating Station

PG&E — PG&E Corp.

Pinnacle West — Pinnacle West Capital Corporation, parent company of the Company

Pinnacle West Energy — Pinnacle West Energy Corporation, a subsidiary of Pinnacle West

PWEC Dedicated Assets — the following Pinnacle West Energy power plants, each of which is currently dedicated to our customers:  Redhawk Units 1 and 2, West Phoenix Units 4 and 5, and Saguaro Unit 3

PX — California Power Exchange

 

1

 

Rules — ACC retail electric competition rules

SCE — Southern California Edison Company

SEC — United States Securities and Exchange Commission

SFAS — Statement of Financial Accounting Standards

SNWA — Southern Nevada Water Authority

SPE — special-purpose entity

Standard & Poor’s — Standard & Poor’s Corporation

SunCor — SunCor Development Company, a subsidiary of Pinnacle West

System — non-trading energy related activities

T&D — transmission and distribution

Track A Order — ACC order dated September 10, 2002 regarding generation asset transfers and related issues

Track B Order — ACC order dated March 14, 2003 regarding competitive solicitation requirements for power purchases by Arizona’s investor-owned electric utilities

Trading — energy-related activities entered into with the objective of generating profits on changes in market prices

2002 10-K — the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002

UniSource — UniSource Energy Corporation

VIE — variable interest entity

 

2

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ARIZONA PUBLIC SERVICE COMPANY

CONDENSED STATEMENTS OF INCOME

(Unaudited)

 

		Three Months Ended June 30,
		2003			2002
		(Dollars in Thousands)
ELECTRIC OPERATING REVENUES:
Regulated electricity segment		$	512,461		$	507,711
Marketing and trading segment		107,992			2,369
Total		620,453			510,080
PURCHASED POWER AND FUEL COSTS:
Regulated electricity segment		156,345			116,357
Marketing and trading segment		103,693			2,268
Total		260,038			118,625
OPERATING REVENUES LESS PURCHASED POWER AND FUEL COSTS		360,415			391,455
OTHER OPERATING EXPENSES:
Operations and maintenance excluding purchased power and fuel costs		130,543			122,945
Depreciation and amortization		96,557			99,190
Income taxes		29,193			44,140
Other taxes		27,864			27,625
Total		284,157			293,900
OPERATING INCOME		76,258			97,555
OTHER INCOME (DEDUCTIONS):
Income taxes		294			2,005
Other income (Note 16)		3,362			929
Other expense (Note 16)		(3,743		)	(5,630		)
Total		(87		)	(2,696		)
INCOME BEFORE INTEREST DEDUCTIONS		76,171			94,859
INTEREST DEDUCTIONS:
Interest on long-term debt		35,166			32,301
Interest on short-term borrowings		1,463			1,162
Debt discount, premium and expense		829			698
Capitalized interest		(4,462		)	(3,741		)
Total		32,996			30,420
NET INCOME		$	43,175		$	64,439

 

See Notes to Condensed Financial Statements.

 

3

 

 

ARIZONA PUBLIC SERVICE COMPANY

CONDENSED STATEMENTS OF INCOME

(Unaudited)

 

		Six Months Ended June 30,
		2003			2002
		(Dollars in Thousands)
ELECTRIC OPERATING REVENUES:
Regulated electricity segment		$	899,629		$	891,452
Marketing and trading segment		199,550			13,062
Total		1,099,179			904,514
PURCHASED POWER AND FUEL COSTS:
Regulated electricity segment		245,727			184,643
Marketing and trading segment		189,633			12,367
Total		435,360			197,010
OPERATING REVENUES LESS PURCHASED POWER AND FUEL COSTS		663,819			707,504
OTHER OPERATING EXPENSES:
Operations and maintenance excluding purchased power and fuel costs		252,380			232,266
Depreciation and amortization		192,114			196,812
Income taxes		40,159			65,274
Other taxes		56,078			54,376
Total		540,731			548,728
OPERATING INCOME		123,088			158,776
OTHER INCOME (DEDUCTIONS):
Income taxes		798			2,370
Other income (Note 16)		4,825			3,859
Other expense (Note 16)		(6,259		)	(9,219		)
Total		(636		)	(2,990		)
INCOME BEFORE INTEREST DEDUCTIONS		122,452			155,786
INTEREST DEDUCTIONS: