PERFORMANCE SHARE AGREEMENT UNDER THE PINNACLE WEST CAPITAL CORPORATION 2007 LONG-TERM INCENTIVE PLAN

A.

The Board of Directors of the Company has adopted, and the Company’s shareholders have approved, the Pinnacle West Capital Corporation 2007 Long-Term Incentive Plan (the “Plan”), pursuant to which Performance Share Awards may be granted to employees of the Company and its Subsidiaries and certain other individuals.

B.

The Company desires to grant to Employee a Performance Share Award under the terms of the Plan. 

C.

Pursuant to the Plan, the Company and Employee agree as follows:

1.

Grant of Award . Pursuant to action of the Committee, which was taken on the Date of Grant, the Company grants to Employee                                          (___) Performance Shares and Dividend Equivalents. The Performance Shares granted under this Section 1 are referred to in this Award Agreement as the “ Base Grant .”

2.

Award Subject to Plan . This Performance Share Award is granted under and is expressly subject to all of the terms and provisions of the Plan, which terms are incorporated herein by reference, and this Award Agreement.

3.

Performance Period . The Performance Period for this Award begins January 1, 2009 and ends December 31, 2011.

4.

Payment .

related to the Performance Metrics will be made on or about November 30, 2012. In no event will the Stock payouts described in this Subsection 5(a) be made later than December 31, 2012.

(b)

Retirement . In the case of Employee’s Retirement (as defined herein) during the Performance Period, Employee shall be deemed to have been employed by the Company through the end of the Performance Period and Employee will receive the Stock and Dividend Equivalents, if any, to which Employee is entitled at the time specified in this Section. For purposes of this Award Agreement, “ Retirement ” means a termination of employment which constitutes an “ Early Retirement ” or a “ Normal Retirement ” under the Pinnacle West Capital Corporation Retirement Plan.

(c)

Dividend Equivalents . In satisfaction of the Dividend Equivalent Award made pursuant to Section 1 , at the time of the Company’s delivery of Stock to Employee pursuant to Subsection 4(a) above, the Company also will deliver to Employee a cash payment equal to the amount of dividends, if any, declared on the number of shares of Stock equal to the number of shares of Stock delivered to Employee from the Date of Grant to the date of the payment, plus interest on such amount at the rate of 5% percent, compounded quarterly, as determined pursuant to the Plan.

(a)

Adjustment of Base Grant for Earnings Per Share Growth Rate . Fifty percent (50%) of the Base Grant will increase or decrease based upon the Company’s “Earnings Per Share Growth Rate” as compared to the Earnings Per Share Growth Rates of the companies in the Growth Index during the Performance Period, as follows:

If the Company’s Earnings Per Share

Compound Growth Rate Over The

Performance Period As Compared to the

The Number of

Earnings Per Share Growth Rates of the

Performance Shares

Companies in the Growth Index is:

will be:

.75 X Base Grant

0.5 X Base Grant

0.25 X Base Grant

None

(b)

Adjustment of Base Grant for Performance Metrics . Fifty percent (50%) of the Base Grant will increase or decrease based upon the Company’s “Average Performance” with respect to the “Performance Metrics,” as follows:

The Number of

Performance Shares will

If the Company’s Average Performance is:

be:

.75 X Base Grant

0.5 X Base Grant

0.25 X Base Grant

None

6.

Definitions.

(b)

Performance Metrics . The “ Performance Metrics ” for the Performance Period are (i) the JD Power Residential Survey for investor-owned utilities in the Western Regi