Fitch affirms Pinnacle West

Fitch Ratings said it affirmed the BBB- issuer default ratings and F3 short-term issuer default and commercial paper ratings of Pinnacle West Capital Corp. and its core operating utility subsidiary, Arizona Public Service Co. Also affirmed were Arizona Public's BBB senior unsecured debt and PVNGS II Funding Corp.'s BBB secured lease obligation bonds.

The outlooks for Pinnacle and Arizona Public are negative and stable, respectively.

On Tuesday, the administrative law judge in Arizona Public's pending general rate case indicated that she would delay a procedural hearing until April 21 to allow more time for Arizona Public and the relevant parties to the proceeding to negotiate a mutually acceptable agreement, Fitch said.

The ratings assume that a final order in the case will provide future revenues sufficient for the utility to earn a return in line with its authorized return on equity, the agency said. Continued under-earnings in 2010 and beyond would lead to further erosion of Arizona Public's credit metrics and negative rating actions.

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