Pinnacle West Capital Corp., the holding company for ArizonaPublic Service and 30% owner of the Palo Verde Nuclear GeneratingStation, is making the leap into natural gas in a big way,developing one of the largest gas-fired electric generatingfacilities alongside its Palo Verde switchyard.

The company’s new unregulated generating subsidiary, PinnacleWest Energy, will operate the 2,120 MW plant as a wholesalemerchant plant, said Bill Stewart, president of the company’sgeneration unit. The location was selected because the Palo Verdeswitchyard is a major transmission hub and provides access toenergy markets in Arizona, California and across the Southwest, aregion that has seen significant growth. Four major transmissionlines converge at the Palo Verde Switchyard, two going west toCalifornia, one north to Utah and one east to New Mexicoconnections. When fully operational, the plant could use up to 360MMcf/d. It will be connected to El Paso Natural Gas.

The state-of-the-art, four-unit combined cycle plant will bebuilt in phases, coming on line in 530-MW increments beginning in2003, with the final unit anticipated to be operational in 2007.Land has been acquired and environmental permit applications arebeing prepared and submitted for the project. Constructioncontracts will be on a fixed-price basis and total approximately $1billion. Work on the first unit is expected to begin in late 2000.

Pinnacle West, along with Calpine Corp. of San Jose, CA, alreadyis involved in a project to build a 530 MW natural gas-firedcombined cycle unit at the existing West Phoenix Power Station.Pinnacle West also will build a 130 MW combined cycle unit at WestPhoenix. The company operates the Palo Verde nuclear unit and islooking to add to its interest in that facility as part of itsoverall expansion plans.

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