I'm looking for some REAL information on Arizona Public Service (parent company is Pinnacle West Capital Corporation). I have received their standard letter which says nothing other than they've been working on it for over a year and other very general info. Perhaps the 10Q report? Any suggestions greatly appreciated....

-- Anonymous, November 24, 1998

Answers

Janet, here's the Year 2000 information from Arizona Public Service's latest SEC 10Q filing. It's as much "real" information as you can get unless you happen to personally know someone in their IT department who will talk openly to you. Keep in mind that these SEC filings are basically for shareholders, and it's in a company's best interests to put any information in the best light possible. Best wishes to you.

YEAR 2000 READINESS DISCLOSURE

As the year 2000 approaches many companies face problems because most software application and operational programs will not properly recognize calendar dates beginning with the year 2000. The Company initiated a comprehensive Company-wide Year 2000 program over a year ago to review and resolve all Year 2000 issues in critical systems and equipment in a timely manner to avoid impacting the reliability of electric service to its customers. This included a Company-wide awareness program of the Year 2000 issue.

The Company has been actively implementing and replacing new systems and technology since 1995 for reasons unrelated to the year 2000, and these actions have resulted in substantially all of its major information technology (IT) systems becoming Year 2000 compliant. The Company has made, and will continue to make, certain modifications to its computer hardware and software systems and applications to ensure they are capable of handling changing business needs, including dates in the year 2000 and thereafter. In addition, other IT systems and non-IT systems, including embedded technology and real-time process control systems, are being analyzed for potential modifications. To date, the Company has inventoried and assessed all IT and non-IT systems and any renovation, validation and implementation of these systems will be completed by mid-1999, except for those items that can only be completed during maintenance outages at Palo Verde, which will be completed for the last unit during the last half of 1999. The Company has also designated an internal audit/quality review team that is periodically reviewing the individual Year 2000 projects and their Year 2000 readiness.

The Company is communicating with its significant suppliers, business partners, other utilities and large customers to determine the extent to which it may be affected by these third parties' plans to remediate their own Year 2000 issues in a timely manner. The Company has been interfacing with suppliers of systems, services and materials in order to assess whether their schedules for analysis and remediation of Year 2000 issues are timely and to assess their ability to continue to supply required services and materials. The Company is also working with the North American Electric Reliability Council (NERC) through the Western Systems Coordinating Council (WSCC) to develop operational plans for stable grid operation that will be utilized by the Company and other utilities in the western United States. However, the Company cannot currently predict the effect on the Company if the systems of these other companies are not Year 2000 compliant.

The Company currently estimates that it will spend approximately $5 million relating to Year 2000 issues, about half of which has been spent to date. This does not include expenditures incurred since 1995 to implement and replace systems for reasons unrelated to the Year 2000, as discussed above. Costs incurred to address the Year 2000 issue are charged to operating expenses as incurred and are expected to be funded by available cash balances and cash provided by operations.

The Company currently expects that its most reasonably likely worst case Year 2000 scenario would be intermittent loss of power, similar to an outage during a severe weather disturbance. In this situation the Company would restore power as soon as possible by, among other things, re-routing power flows. The Company does not currently expect that this scenario would have a material effect on its financial position, cash flows or results of operations.

The Company is working to develop its own contingency plans to handle Year 2000 issues, and expects these plans to be completed by mid-1999. As discussed above, the Company is also working with NERC and WSCC to develop contingency plans related to grid operation.

-- Anonymous, November 24, 1998