PINNACLE WEST CAPITAL CORPORATION SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN OF 2005

Exhibit 10.3.2

PINNACLE WEST CAPITAL CORPORATION

SUPPLEMENTAL EXCESS BENEFIT

RETIREMENT PLAN OF 2005

TABLE OF CONTENTS

PINNACLE WEST CAPITAL CORPORATION

SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN OF 2005

ARTICLE ONE — PREAMBLE

          Effective January 1, 1987, PINNACLE WEST CAPITAL CORPORATION (the “Company”) adopted the PINNACLE WEST CAPITAL CORPORATION SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN (the “Prior Plan”) for the purpose of paying retirement benefits to certain employees in excess of the benefits permitted to be paid under the Pinnacle West Capital Corporation Retirement Plan (the “Retirement Plan”) by reason of Section 415 of the Internal Revenue Code (the “Code”). The Prior Plan was thereafter amended several times to provide additional benefits, thereby changing the Prior Plan from an “excess benefit plan” under the Employee Retirement Income Security Act of 1974, as amended (the “Act”), to a “top hat” plan under the Act.

          Effective January 1, 1982, ARIZONA PUBLIC SERVICE COMPANY (“APS”) adopted the ARIZONA PUBLIC SERVICE COMPANY SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN (the “APS Plan”) for the purpose of paying retirement benefits to certain employees in excess of the benefits permitted to be paid under the Arizona Public Service Company Employees’ Retirement Plan (the “APS Retirement Plan”) by reason of Section 415 of the Code. The APS Plan was thereafter amended several times to provide additional benefits, thereby changing the APS Plan from an “excess benefit plan” under the Act to a “top hat” plan under the Act.

          Effective January 1, 2000, the Company and APS amended and restated the Prior Plan and the APS Plan to merge the APS Plan into the Prior Plan and to make other technical changes. The Prior Plan was amended several times thereafter.

          Effective January 1, 2003, the Company amended the Prior Plan to add a new benefit structure.

          Effective December 31, 2004, the Company amended the Prior Plan to “grandfather” from the application of Code Section 409A benefits with respect to only those participants who neither earned nor became vested in a supplemental excess benefit after December 31, 2004. Only the benefits of such participants are provided under the terms of the Prior Plan.

          This Plan applies to the entire benefit of any participant who either earned or became vested in all or any portion of his or her benefits on or after January 1, 2005.

ARTICLE TWO

CONSTRUCTION

          Terms capitalized in this Plan shall have the meaning given in Article Two of the Retirement Plan, governing definitions and construction, except where such terms are otherwise defined in this Plan. If any provision of this Plan is determined to be invalid or unenforceable for any reason, the remaining provisions shall continue in full force and effect. All of the provisions of this Plan shall be construed and enforced according to the laws of the State of Arizona, and shall be administered according to the laws of such state, except as otherwise required by the Act, the Code or other applicable federal law. It is the intention of the Company that the Plan, as adopted by the Company, shall constitute an “unfunded plan of deferred compensation for a select group of management and highly compensated employees” within the meaning of Sections 201(2) and 301(3) of the Act. Benefits under this Plan shall be paid from the Company’s general assets, and not from any trust fund or other segregated fund, unless paid out of a rabbi trust established by the Company. The assets of any such rabbi trust shall be subject to the claims of the general creditors of the Company. This Plan shall be construed in a manner consistent with the Company’s intention.

ARTICLE THREE

ELIGIBILITY AND PARTICIPATION

          Employees of the Company or its Affiliates who are individually designated as Plan participants by the Human Resources Committee of the Board of Directors of the Company (“Committee”), in its discretion, shall be eligible to participate in the Plan, and such designated individuals shall be considered “Eligible Employees.”

          (a)  Officers . Except as provided by the Committee, Eligible Employees who are officers of the Company or an Affiliate which is a participating employer under the Retirement Plan shall be entitled to the benefits described in Section 4(a); provided, however, that presidents and other officers of APS Energy Services and subsidiaries of SunCor are not eligible to participate in the Plan and are

therefore not considered officers for this purpose unless otherwise selected for participation by the Committee.

          (b)  SMG Participants . Except as provided by the Committee, Eligible Employees of the Company or an Affiliate which is a participating employer under the Retirement Plan who are not officers shall be entitled to the benefits described in Section 4(b).

          (c)  Commencement of Participation . An Eligible Employee shall commence participation in this Plan as of the first day of the Plan Year following the date the Committee designates him or her as a participant. Such participation shall continue until the date on which the participant is no longer designated as an Eligible Employee by the Committee.

          (d)  Status Change . Notwithstanding the foregoing, if the status of a participant changes for reasons other than separation from service with the Company or an Affiliate which is a participating employer under the Retirement Plan, so that he or she no longer is eligible to participate in the Plan, his or her participation in the Plan shall cease but his or her benefit under this Plan as of the date of his or her change of status shall not be canceled or distributed, but shall be determined upon his or her separation from service with the Company or an Affiliate.

          (e)  Rehires . In the event that a Participant terminates employment and is later rehired, he or she shall not be eligible to participate in the Plan again unless such individual is again individually designated as a Plan participant by the Committee following his or her rehire.

ARTICLE FOUR

BENEFITS

          A participant whose entire benefit was both earned and vested on December 31, 2004 (as determined under regulations issued under Code Section 409A) shall receive such benefit under the Prior Plan. All other participants shall receive their entire benefit under the terms outlined below.

          (a)  Officer Benefits .

          (1) Group A Participants . Subject to ARTICLE SEVEN, a participant who is eligible under Section 3(a) and who is a Group A Participant under the Retirement Plan shall be

entitled to a monthly benefit for life commencing at age 65 equal to the lesser of (i) or (ii), reduced by (iii), where

          (i) Equals three percent (3%) of the participant’s Average Monthly Compensation multiplied by the participant’s Years of Service, not to exceed ten (10) Years of Service, plus two percent (2%) of the participant’s Average Monthly Compensation multiplied by the participant’s Years of Service in excess of ten (10) Years of Service,

          (ii) Equals sixty percent (60%) of the participant’s Average Monthly Compensation, and

          (iii) Equals the amount of such participant’s monthly benefit for life at age 65 determined under the terms of the Retirement Plan.

          (2) Group B Participants . Subject to ARTICLE SEVEN, a participant who is eligible under Section 3(a) and who is a Group B Participant under the Retirement Plan shall be entitled to a monthly benefit for life commencing at age 65 equal to the sum of (i) and (ii), where

          (i) Equals the benefit determined under the formula set forth above in this Section 4(a)(1) for a Group A Participant in the Retirement Plan based on the participant’s Years of Service as of March 31, 2003 (March 31, 2006 in the case of a SunCor participant) and his or her Average Monthly Compensation as of the date of determination. Years of Service as of March 31, 2003 (March 31, 2006 in the case of a SunCor participant) shall equal his or her full Years of Service as of such date plus a partial Year of Service equal to the lesser of one (1) or a fraction, the numerator of which is the participant’s Hours of Service earned during the period beginning on the day after the last day of his or her Computation Period ending prior to March 31, 2003 (March 31, 2006 in the case of a SunCor participant) and ending on March 31, 2003 (March 31, 2006 in the case of a SunCor participant), and the denominator of which is 1,000, and

          (ii) Equals the monthly benefit for life payable at age 65 which is the Actuarial Equivalent of a lump sum benefit equal to the participant’s Supplemental Retirement Account Balance minus the participant’s Retirement Account Balance under the Retirement Plan. For the avoidance of doubt, if the amount under this Section 4(a)(2)(ii) is a negative number, it will serve as an offset against the amount payable under Section 4(a)(2)(i).

          (3) Group C Participants . Subject to ARTICLE SEVEN, a participant who is eligible under Section 3(a) and who is a Group C Participant under the Retirement Plan shall be entitled to a monthly benefit for life commencing at age 65 equal to the Actuarial Equivalent of a lump sum benefit equal to (i) reduced by (ii), where

          (i) Equals the participant’s Supplemental Retirement Account Balance, and

          (ii) Equals the participant’s Retirement Account Balance under the Retirement Plan.

          A participant’s Supplemental Retirement Account Balance shall be a notional account credited with Monthly Retirement Account Balance Credits and Interest Credits. For purposes of this Plan, Monthly Retirement Account Balance Credits shall be determined under the general methodology set forth in the Retirement Plan based on the participant’s Monthly Compensation for the month but using the following chart; provided that, except for a Group C Participant, a participant shall not receive a Monthly Retirement Account Balance Credit after the last day of the calendar year in which he or she is credited with twenty-five (25) Years of Service, with twenty-five years (25) Years of Service defined as twenty-five (25) full twelve (12) month periods in duration.

          (4) Compensation . For purposes of this Section 4(a), Compensation and Monthly Compensation shall be determined without regard to the limitation set forth in Section 401(a)(17) of the Code and shall be increased by any cash payments made to the participant pursuant to “year-end” bonus or incentive plans maintained by the Company or an Affiliate which is a participating employer under the Retirement Plan for employees generally and by any amounts deferred by the participant under any of the Company’s or such an Affiliate’s deferred compensation plans for employees. Bonus or incentive payments made in a form other than cash, bonus or incentive payments which are not “year-end” bonus or incentive payments, bonus or incentive payments under individual agreements between the Company or such an Affiliate and a participant, and large asset bonus plan payments shall not be taken into account as Compensation and Monthly Compensation for purposes of this Plan unless the Company’s President or Chief Executive Officer determines, in his or her discretion, that such bonus or incentive payment shall be taken into account as Compensation and Monthly Compensation under this Plan. Subject to the foregoing, (a) eligible bonuses and incentive payments (including eligible bonuses and incentive payments paid after termination) shall be taken into account as Compensation and Monthly Compensation in the year in which such amounts are paid rather than in the year in which they are earned, provided that the Company’s President or Chief Executive Officer shall have the authority to determine, in his or her discretion, that such bonus or incentive payment shall be taken into account in the year in which such amounts are earned rather than in the year in which they are paid, (b) Retention Unit Awards granted in a calendar month which become

vested shall be counted as Compensation paid and earned in such calendar month; provided, however, that if Retention Unit Awards are taken into account in determining a participant’s Average Monthly Compensation with respect to benefits described in Sections 4(a)(1) or 4(a)(2)(i), no more than two other year-end bonus or incentive payments will be taken into account in determining such Average Monthly Compensation. Effective for SunCor bonuses earned in 2006 and later years, bonuses paid to the SunCor President and Executive Vice Presidents shall be included in Compensation or Monthly Compensation only to the extent of 100% of base pay, and the bonuses paid to SunCor Vice Presidents shall be included in Compensation or Monthly Compensation only to the extent of 70% of base pay. The Company’s President or Chief Executive Officer shall have the sole and absolute discretion to determine whether a bonus or incentive payment made to a participant constitutes Compensation or Monthly Compensation for purposes of this Section 4(a) and may differentiate among individuals in establishing the bonus or incentive payments that may be taken into account under the Plan.

          (5) Promotion to Officer Status . In the event that an Eligible Employee is promoted to officer status, his or her Traditional Benefit and Retirement Account Balance Benefit shall be retroactively calculated as if he or she had served as an officer during the entire period of his or her employment with the Company or any of its Affiliates.

          (b) SMG Participants .

          Subject to ARTICLE SIX and ARTICLE SEVEN, any participant who is designated for participation pursuant to Section 3(b) and who receives a benefit under the Retirement Plan, or such participant’s surviving spouse or beneficiary in the event of the participant’s death, shall be entitled to a benefit payable in accordance with this ARTICLE FOUR and with ARTICLE FIVE equal to (i) reduced by (ii), where

          (i) Equals the amount of such participant’s or surviving spouse’s or beneficiary’s benefit under the Retirement Plan computed under the provisions of the Retirement Plan but without regard to the cap on Compensation in Section 2.1(n) and the limitations in

Section 5.13 of the Retirement Plan and the provisions of Sections 401(a)(17) and 415 of the Code; and

          (ii) Equals the amount of such participant’s or surviving spouse’s or beneficiary’s benefit which would be payable under the terms of the Retirement Plan if the participant or his or her surviving spouse or beneficiary were to receive payment under the Retirement Plan at the same time and in the same form as benefits are payable under this Plan.

          For purposes of this Section 4(b), Compensation shall include any amount of the participant’s regular salary that the participant elects to defer under any deferred compensation plans for employees of the Company or an Affiliate which is a participating employer under the Retirement Plan (including amounts deferred before participation in the Plan commences) and shall exclude all bonus or incentive payments paid to the participant.

          (c)  Average Monthly Compensation .

          For purposes of computing a participant’s Average Monthly Compensation, such term shall