                                                                    Exhibit 99.1

                            TRACK "A" APPEALS ISSUES
                            PRINCIPLES FOR RESOLUTION

     In conjunction with resolution of Docket No. E-01345A-02-0707 (the "APS
Financing Application"), Commission Staff and APS (hereinafter sometimes
referred to as "the Parties") agree to limit the scope and elements of the
pending APS appeals of the Commission's Decision No. 65154 (the "Track A
Order"). This agreement is entered into in recognition that the proposed APS
Financing is an "extraordinary event" in that the Utility is seeking approval to
secure financing of and for non-utility assets, owned and operated by a
non-utility affiliate.

     The Parties acknowledge that the Track A Order appropriately resolves
issues that posed a risk to Arizona consumers. Specifically, the Order protects
customers from the volatile wholesale market.

     The Parties acknowledge that the Track A Order prohibits the transfer of
certain APS assets to its non-utility affiliate, which transfer had been
contemplated by earlier Commission decisions.

     The Parties further acknowledge that the Track A Order constitutes a change
in Commission restructuring policy with respect to the divestiture of utility
generating assets, which change can only be seen as a partial readjustment of
the regulatory treatment of generating assets, under the 1999 Settlement.

     The Parties acknowledge that the Track A Order does not resolve all of the
regulatory issues that remain as a result of the Track A Order's amendment to
Decision No. 61973, the Commission Order approving the APS Settlement.

     The Parties recognize that the issues raised by the APS appeals of the
Track A Order are partially resolved to APS's satisfaction by resolution of the
APS Financing Application.

     The Parties agree that it is appropriate to dismiss certain claims and to
limit the scope of others in APS' appeal of the Track A Order upon successful
resolution of the APS Financing Application.

     The Parties further recognize that all remaining elements and claims under
the APS appeals of the Track A Order are appropriately the subject of certain
regulatory proceedings before the Commission, all of which are presently
contemplated by the Parties.

     Accordingly, the Parties agree to execute a Stipulation, or other binding
Agreement with the following provisions:

     1.   Upon the issuance of a final Commission Decision no longer subject to
appeal approving the APS Financing Application, with appropriate conditions, the
APS appeals of the Track A Order shall be limited to consideration of the issues

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described in the subsequent paragraphs of this Agreement. The Parties agree that
those issues shall each be presented to the Commission for consideration in the
appropriate regulatory proceeding, as described herein, prior to final
resolution by a court.

     2.   The Parties agree that it is appropriate for the Commission to
consider what generating assets should be included in APS's rate base,
specifically including the question of whether Redhawk 1 and 2, West Phoenix
Combined Cycle 4 and 5, and Saguaro Combustion Turbine 3, should be included in
rate base. This issue should be considered in the upcoming APS general rate
case, anticipated to be filed before June 30, 2003. The Parties expressly
recognize that the Commission will consider prudence, used and usefulness, and
reasonable operating costs in the course of considering rate base treatment for
the assets. The rate case will also require consideration of the appropriate
rates to be adopted to compensate APS for its reasonable operating expenses and
a fair return on the fair value of its property devoted to public service.

     3.   The Parties agree that it is appropriate for the Commission to
consider the appropriate treatment and amounts of so-called "stranded
investment". Specifically, APS should have the opportunity to present evidence
and argument to support a differing regulatory treatment for the "234 million
write-off". The issues surrounding the $234 million write-off should be
presented to the Commission in the upcoming APS general rate case, along with
any other relevant issues or adjustments associated with the appropriate
treatment and amounts of so-called "stranded investment".

     4.   The Parties agree that it is appropriate for the Commission to
consider the appropriate treatment of costs incurred by APS in preparation for
the previously anticipated transfer of generation assets to a non-utility
affiliate. Specifically, APS should have the opportunity to present evidence and
argument to support a specific dollar amount and recovery percentage for such
costs. Issues surrounding the amount and recovery of so-called "transition
costs" should be presented in the upcoming rate case.

     5.   All issues and claims which are or may be construed as being raised by
the APS Track A appeals shall be deemed to be resolved, other than as expressly
described in Paragraphs 2 through 4 above. The issues described in Paragraphs 2
through 4 above shall be considered by the Commission in the described
regulatory proceedings prior to final resolution in any judicial proceeding. No
Party waives their right to judicial review of those Commission decisions by
this agreement. Notwithstanding the provisions of the succeeding paragraph, APS
will retain all of its causes of action with regard to the matters in paragraphs
2 through 4. Any relief that APS seeks in the aforementioned causes of action
shall be limited to authorizing the specific regulatory treatment sought by APS
in connection with paragraphs 2 through 4.

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     6.   Claims which are specifically resolved include the following:

          a) The allegation that APS is entitled to recovery of allegedly lost
     revenues associated with rate reductions;

          b) The allegation that APS is entitled to recover alleged losses
     associated with legal claims that APS previously dismissed;

          c) Alleged business damages resulting from increased financing costs
     and other costs incurred by Pinnacle West Capital Corporation ("PWCC") and
     Pinnacle West Energy Corporation ("PWEC"), as well as any alleged damages
     associated with possible ratings downgrades of APS alleged to occur or have
     occurred as a result of Commission action.

          d) Alleged loss of opportunities relating to supposed reliance on the
     Settlement Agreement Order, including but not limited to foregone power
     sales by PWEC, as well as alleged damages associated with loss of
     opportunity to pursue the APS appeals of the Electric Competition Rules.

          e) Alleged loss of the opportunity to recover higher sales costs due
     to the rate moratorium, as well as any allegations of damages caused by
     increased costs incurred to maintain reliability during 2000 and 2001;

          f) Any other miscellaneous alleged losses.

          g) Alleged violations of A.R.S. ss. 40-252;

          h) Alleged violations of the Arizona Procedures Act;

          i) Alleged controversies that might support a declaratory judgment;

          j) An alleged lack of substantial evidence to support the Decision and
     alleged abuses of discretion;

          k) Alleged violations of due process;

          l) Alleged violations of equal protection;

          m) Alleged Supremacy clause violations;

          n) Alleged Contracts Clause violations;

          o) Alleged takings of private property claims;

          p) Alleged breach of contract claims.

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     7.   This agreement is not intended to limit the scope and purpose of the
upcoming general rate case, or the adjustment mechanism proceeding, except as
explicitly described herein.

AGREED IN PRINCIPLE:


Jack Davis                                     Ernest Johnson
---------------------------------              ---------------------------------
Jack Davis                                     Ernest Johnson
Arizona Public Service Company                 Arizona Corporation Commission
President and CEO                              Director of Utilities

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