Pinnacle West Capital Corp (PNW)

Regulatory Lag and ROE Improvement Timing
Q: How much are you lagging in 2025 ROE, and when will it improve?
A: Andrew Cooper explained that due to increased CapEx and operating costs not fully recovered, there is regulatory lag impacting ROE in 2025. They plan to file a rate case, possibly by mid-2025, with rates effective in the latter half of 2026, to true up costs and improve ROE. Reducing regulatory lag remains a focus to achieve earnings closer to their authorized return. [Indices 2, 10]

CapEx Increase and Financing Plan
Q: How will you fund the increased CapEx, and does the $725 million equity block net against the $700–$900 million figure?
A: Andrew Cooper confirmed that the $725 million equity from the February block hasn't been drawn yet and does not net against the $700–$900 million incremental equity needed over 2025–2027. They plan to fund the increased CapEx with less than 40% equity, utilizing tools like at-the-market offerings and forward agreements, and exploring alternative financing options like DOE programs and hybrid securities. [Indices 3, 15, 16]

Data Center Load Growth
Q: What is the pipeline of data center demand, and are there transformative large data centers?
A: Theodore Geisler reported over 4,000 megawatts of committed high-load customers, mainly data centers, in development, and over 10,000 megawatts in planning stages. While current projects are relatively distributed, there are a couple of larger single requests in early planning that could significantly impact their system. [Indices 4, 5, 6]

Earnings Growth Expectations and Regulatory Lag
Q: Is the 5%–7% EPS CAGR dependent on reducing regulatory lag?
A: Andrew Cooper stated that while reducing regulatory lag would help smooth earnings growth, the 5%–7% EPS CAGR is not solely dependent on it. They are confident in their rate base growth, focusing on capital allocation to assets with appropriate recovery, and aiming to earn closer to their authorized ROE through effective cost management and upcoming rate cases. [Indices 7, 11]

Inflationary Trends and O&M Costs
Q: How are inflation trends impacting O&M and future rate cases?
A: Andrew Cooper noted that while some inflation persists, costs are stabilizing. They increased O&M in 2024 by pulling forward projects and funding customer assistance programs due to a hot summer. In 2025, they expect O&M to decrease, focusing on cost management. In future rate cases, they aim to true up costs to reflect the current environment, as the last rate case didn't capture recent inflation impacts. [Indices 12, 14]

Rate Design for Large Loads
Q: Are you considering take-or-pay contracts for large customers?
A: Jeffrey Guldner acknowledged that they are engaging with large-load customers to protect existing customers from potential cost shifts. This includes considering rate design changes like take-or-pay contracts to ensure growth pays for growth and prevent any cost shifts to other customer classes. [Index 8]

Elections and Regulatory Outlook
Q: How might the election results affect regulatory proceedings?
A: Jeffrey Guldner noted that preliminary results suggest three Republican commissioners leading, who generally align with current commissioners on issues like the regulatory lag docket. He anticipates continued constructive work on regulatory matters if these results are confirmed. [Indices 0, 9]

All-Source RFP and Ownership Opportunities
Q: How much of the All-Source RFP have you been able to build yourselves, and what's your expected win rate in future rounds?
A: Theodore Geisler stated they've more than doubled their owned projects since the SRB, with about 800 megawatts of projects contracted and under development. Although they haven't reached their long-term target of a 40%–50% ownership mix, they continue to increase owned assets through ongoing and future RFPs. [Index 13]

Alternative Financing and Nuclear PTC
Q: Are you considering alternative financing options, and how does the nuclear PTC factor in?
A: Andrew Cooper mentioned they are open to alternative financing, including DOE programs and hybrid securities, while preferring a straightforward capital structure. Regarding the nuclear PTC, they are awaiting guidance but expect it to benefit customers by deferring capital investment costs, and it is not included in current earnings guidance. [Indices 16, 17]

O&M Pull Forward and Regulatory Lag Docket
Q: How much O&M was pulled forward into this year, and could the regulatory lag docket be enacted before filing a rate case?
A: Andrew Cooper explained they don't break out the exact amount of O&M pulled forward but have derisked projects over a multi-year horizon, including bringing forward projects due to favorable weather. Regarding the regulatory lag docket, Jeffrey Guldner noted it's possible they could file a rate case prior to the issuance of a policy statement and are monitoring the timing closely. [Indices 18, 19]