Revenue

3 Months Ended

Mar. 31, 2026

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Sources of Revenue

The following table provides detail of Pinnacle West’s consolidated revenues disaggregated by revenue sources (dollars in thousands):

	Three Months Ended March 31,
	2026		2025
Retail Electric Service
Residential	$	493,701	$	448,923
Non-Residential	601,733		524,857
Wholesale Energy Sales	14,976		24,824
Transmission Services for Others	32,027		25,547
Other Sources	7,160		8,129
Total Operating Revenues	$	1,149,597	$	1,032,280

Retail Electric Service

All of Pinnacle West’s retail electric revenues are generated by APS. Retail electric revenue is generated by the sale of electricity to our customers within the regulated authorized service territory at tariff rates approved by the ACC and based on customer usage. Revenues related to the sale of electricity are generally recognized when service is rendered, or electricity is delivered to customers. The billing of electricity sales to individual customers is based on the reading of their meters. We obtain customers’ meter data on a systematic basis throughout the month, and generally bill customers within a month from when service was provided. Customers are generally required to pay for services within 21 days of when the services are billed. See “Allowance for Doubtful Accounts” discussion below for additional details regarding payment terms. In addition, see the section titled “2025 Rate Case” in Note 7 for details related to proposed adjustments to rate design and modifications of cost allocation methodologies to reduce cross-subsidization by ensuring customers causing increased production costs are covering those costs through rates.

Wholesale Energy Sales and Transmission Services for Others

All of Pinnacle West’s revenues from wholesale energy sales and transmission services for others are generated by APS and represent energy and transmission sales to wholesale customers. These activities consist of managing fuel and purchased power risks and transmission needs in connection with the cost of serving our retail customers’ energy requirements. We may also sell into the wholesale markets generation that is not needed for APS’s retail load. Our wholesale activities and tariff rates are regulated by FERC.

In the electricity business, some contracts to purchase energy are settled by netting against other contracts to sell electricity. This is referred to as a book-out, and usually occurs in contracts that have the same terms (product type, quantities, and delivery points) and for which power does not flow. We net these book-outs, which reduces both wholesale revenues and fuel and purchased power costs.

Revenue Activities

Our revenues primarily consist of activities that are classified as revenues from contracts with customers. We derive our revenues from contracts with customers primarily from sales of electricity to our retail customers within our regulated service area. Revenues from contracts with customers also include wholesale and transmission activities. Our revenues from contracts with customers for the three months ended March 31, 2026 and 2025 were $1,124 million and $1,019 million, respectively.

We have certain revenues that do not meet the specific accounting criteria to be classified as revenues from contracts with customers. For the three months ended March 31, 2026 and 2025 our revenues that do not qualify as revenue from contracts with customers were $26 million and $13 million, respectively. This amount includes revenues related to certain regulatory cost recovery mechanisms that are considered alternative revenue programs. We recognize revenue associated with alternative revenue programs when specific events permitting recognition are completed. Certain amounts associated with alternative revenue programs will subsequently be billed to customers; however, we do not reclassify billed amounts into revenue from contracts with customers. See Note 7 for a discussion of our regulatory cost recovery mechanisms.

Allowance for Doubtful Accounts

The allowance for doubtful accounts represents our best estimate of customer and other receivables and accrued unbilled revenues that will ultimately be uncollectible due to credit loss risk. The allowance includes a write-off component that is calculated by applying an estimated write-off factor to retail electric revenues. The write-off factor used to estimate uncollectible accounts is based upon consideration of historical collections experience, the current and forecasted economic environment, changes to our collection policies, and management’s best estimate of future collections success. We continue to monitor the impacts of our disconnection policies, payment arrangements, among other considerations impacting our estimated write-off factor, and allowance for doubtful accounts.

The following table provides a rollforward of Pinnacle West’s allowance for doubtful accounts (dollars in thousands):

	Three Months Ended		Year Ended
	March 31, 2026		December 31, 2025
Balance at beginning of period	$	25,495	$	24,849
Bad debt expense	5,728		28,603
Actual write-offs	(6,597)		(27,957)
Balance at end of period	$	24,626	$	25,495