EXHIBIT 99.7

LAST UPDATE: 4/26/05

Pinnacle West Capital Corporation
Earnings Variance Explanations
for Periods Ended March 31, 2005 and 2004

     This discussion explains the changes in our consolidated earnings for the three-month periods ended March 31, 2005 and 2004. Condensed Consolidated Statements of Income for the three months ended March 31, 2005 and 2004 follow this discussion. We will file our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2005 on or before May 10, 2005. Additional operating and financial statistics and a glossary of terms are available on our website (www.pinnaclewest.com).

EARNINGS CONTRIBUTION BY BUSINESS SEGMENT

     We have three principal business segments (determined by services and the regulatory environment):

•   our regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses (primarily electric service to “Native Load” customers) and related activities and includes electricity generation, transmission and distribution;

•   our marketing and trading segment, which consists of our competitive energy business activities, including wholesale marketing and trading and APS Energy Services’ commodity-related energy services; and

•   our real estate segment, which consists of SunCor’s real estate development and investment activities.

     The following table summarizes net income for the three months ended March 31, 2005 and the comparable prior-year period (dollars in millions):

	2005		2004
Regulated electricity	$	13	$	18
Marketing and trading		1		10
Real estate		9		2
Other		1		1
Net income	$	24	$	31

General

     Throughout the following explanations of our results of operations, we refer to “gross margin.” With respect to our regulated electricity segment and our marketing and trading segment, gross margin refers to electric operating revenues less purchased power and fuel costs. “Gross margin” is a “non-GAAP financial measure,” as defined in accordance with SEC rules. Exhibit 99.10 reconciles this non-GAAP financial measure to operating income, which is the most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America. We view gross margin as an important performance measure of the core profitability of our operations. This measure is a key component of our internal financial reporting and is used by our management in analyzing our business segments. We believe that investors benefit from having access to the same financial measures that our management uses. In addition, we have reclassified certain prior period amounts to conform to our current period presentation.

Operating Results – Three-month period ended March 31, 2005 compared with the three-month period ended March 31, 2004

     Our consolidated net income for the three months ended March 31, 2005 was $24 million compared with $31 million for the prior-year period. The $7 million decrease in the period-to-period comparison reflected the following changes in earnings by segment:

•   Regulated Electricity Segment – Net income decreased approximately $5 million primarily due to higher operations and maintenance costs primarily related to customer service, generation and benefit costs; lower other income, net of other expense, primarily due to gains on asset sales in the prior year period; increased property taxes due to increased plant in service; and the effects of milder weather on retail sales. These negative factors were partially offset by the absence of regulatory asset amortization; higher retail sales volumes due to customer growth and usage; decreased purchased power and fuel costs due to lower hedged gas and power prices; and lower replacement power costs due to fewer unplanned outages.

•   Marketing and Trading Segment – Net income decreased approximately $9 million primarily due to increased costs related to the Silverhawk Power Station, which was placed in service in mid-2004 and lower margins on competitive retail sales in California by APS Energy Services.

•   Real Estate Segment – Net income increased approximately $7 million primarily due to increased land sales.

2

Additional details on the major factors that increased (decreased) net income are contained in the following table (dollars in millions).

	Increase (Decrease)
	Pretax			After Tax
Regulated electricity segment gross margin:
Higher retail sales volumes due to customer growth, excluding weather effects	$	7		$	4
Decreased purchased power and fuel costs due to lower hedged gas and power prices		5			3
Lower replacement power costs due to fewer unplanned outages		4			3
Effects of weather on retail sales		(5	)		(3	)
Net increase in regulated electricity segment gross margin		11			7
Marketing and trading segment gross margin:
Lower competitive retail unit margins in California by APS Energy Services		(6	)		(4	)
Lower realized margins on wholesale sales primarily due to lower unit margins		(1	)		(1	)
Increase in generation sales other than Native Load due to higher sales volumes		3			2
Net decrease in marketing and trading segment gross margin		(4	)		(3	)
Net increase in gross margin for regulated electricity and marketing and trading segments		7			4
Higher real estate segment contribution primarily related to increased land sales		12			7
Higher operations and maintenance expense primarily related to customer service, generation and benefit costs		(19	)		(11	)
Depreciation and amortization decreases (increases):
Absence of regulatory asset amortization		9			5
Increased delivery and other assets		(2	)		(1	)
Higher property taxes due to increased plant in service		(5	)		(3	)
Lower other income net of other expense primarily due to gain on asset sales and higher interest income in prior-year period		(9	)		(5	)
Miscellaneous items, net		(1	)		(3	)
Net decrease in net income	$	(8	)	$	(7	)

     The increase in net costs (primarily depreciation, interest expense, property taxes and operations and maintenance expense, net of gross margin contributions) related to the Silverhawk Power Station, which was placed in service in mid-2004 by Pinnacle West Energy totaled approximately $4 million after income taxes in the three months ended March 31, 2005 compared with the prior-year period.

Regulated Electricity Segment Revenues

     Regulated electricity segment revenues were $1 million higher for the three months ended March 31, 2005 compared with the prior-year period primarily as a result of:

•   a $13 million increase in retail revenues related to customer growth, excluding weather effects;

•   a $13 million decrease in retail revenues related to milder weather; and

•   a $1 million increase due to miscellaneous factors.

3

Marketing and Trading Segment Revenues

     Marketing and trading segment revenues were $29 million higher for the three months ended March 31, 2005 compared with the prior-year period primarily as a result of:

•   a $36 million increase from generation sales other than Native Load primarily due to higher sales volumes, including sales from the Silverhawk Power Station, and higher wholesale market prices;

•   $1 million of higher energy trading revenues on realized sales of electricity primarily due to higher electricity prices; and

•   an $8 million decrease from lower competitive retail sales and prices in California by APS Energy Services.

Real Estate Revenues

     Real estate revenues were $20 million higher for the three months ended March 31, 2005 compared with the prior-year period primarily due to higher land and home sales.

4

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)

	THREE MONTHS ENDED
	MARCH 31,						Increase (Decrease)
	2005			2004			Amount			Percent
Operating Revenues
Regulated electricity segment	$	416,030		$	415,464		$	566			0.1	%	B
Marketing and trading segment		116,866			88,383			28,483			32.2	%	B
Real estate segment		72,056			51,593			20,463			39.7	%	B
Other revenues		10,135			10,905			(770	)		7.1	%	W
Total		615,087			566,345			48,742			8.6	%	B
Operating Expenses
Regulated electricity segment purchased power and fuel		78,423			88,611			(10,188	)		11.5	%	B
Marketing and trading segment purchased power and fuel		100,641			67,764			32,877			48.5	%	W
Operations and maintenance		156,496			137,386			19,110			13.9	%	W
Real estate segment operations		56,476			47,690			8,786			18.4	%	W
Depreciation and amortization		94,231			101,616			(7,385	)		7.3	%	B
Taxes other than income taxes		35,190			30,330			4,860			16.0	%	W
Other expenses		8,374			8,750			(376	)		4.3	%	B
Total		529,831			482,147			47,684			9.9	%	W
Operating Income		85,256			84,198			1,058			1.3	%	B
Other
Allowance for equity funds used during construction		2,603			2,002			601			30.0	%	B
Other income		1,744			11,412			(9,668	)		84.7	%	W
Other expense		(5,309	)		(5,945	)		636			10.7	%	B
Total		(962	)		7,469			(8,431	)		112.9	%	W
Interest Expense
Interest charges		49,195			50,319			(1,124	)		2.2	%	B
Capitalized interest		(3,289	)		(4,911	)		1,622			33.0	%	W
Total		45,906			45,408			498			1.1	%	W
Income From Continuing Operations Before Income Taxes		38,388			46,259			(7,871	)		17.0	%	W
Income Taxes		14,732			15,468			(736	)		4.8	%	B
Income From Continuing Operations		23,656			30,791			(7,135	)		23.2	%	W
Income From Discontinued Operations
Net of Income Tax Expense		792			635			157			24.7	%	B
Net Income	$	24,448		$	31,426		$	(6,978	)		22.2	%	W
Weighted-Average Common Shares Outstanding — Basic		91,962			91,294			668			0.7	%
Weighted-Average Common Shares Outstanding — Diluted		92,045			91,376			669			0.7	%
Earnings Per Weighted-Average Common Share Outstanding
Income From Continuing Operations — Basic	$	0.26		$	0.34		$	(0.08	)		23.5	%	W
Net Income — Basic	$	0.27		$	0.34		$	(0.07	)		20.6	%	W
Income From Continuing Operations — Diluted	$	0.26		$	0.34		$	(0.08	)		23.5	%	W
Net Income — Diluted	$	0.27		$	0.34		$	(0.07	)		20.6	%	W

Certain prior-year amounts have been reclassified to conform to the 2005 presentation.

B — Better

W — Worse