Pinnacle West Capital Corporation

Greetings, and welcome to the Pinnacle West Capital Corporation 2020 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. During the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stephanie Layton, Director of Investor Relations. Thank you. You may begin.

Thank you, Christine. I would like to thank everyone for participating in this conference call and webcast to review our first quarter 2020 earnings, recent developments, and operating performance. Our speakers today will be our Chairman and CEO, Jeff Goldner, and our CFO, Ted Geisler. Jim Hatfield, Chief Administrative Officer, Daniel Fletcher, APS's President and COO, and Barbara Lockwood, Senior Vice President, Public Policy, are also here with us. First, I need to cover a few details with you. The slides that we will be using are available on our investor relations website, along with our earnings release and related information. Note that the slides contain reconciliations of certain non-GAAP financial information. Today's comments and our slides contain forward-looking statements based on current expectations and actual results may differ materially from expectations. Our first quarter 2020 form 10Q was filed this morning. Please refer to that document for forward-looking statements, cautionary language, as well as risk factors and MD&A sections, which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures. A replay of this call will be available shortly on our website for the next 30 days. It will also be available by telephone through May 15th. I will now turn the call over to Jeff.

Thank you, Stephanie, and thank you all for joining us today. Before I get started, let me say I hope everyone is doing well. This is certainly an unexpected way to start our year, but the last several weeks have only reaffirmed to me that our company and our people are resilient, agile, and prepared to handle whatever comes our way. We recognize the realities of COVID-19 and the challenges that people are facing, and we remain committed first and foremost to safely delivering reliable power to Arizona, building shareholder value by ensuring customer value. In March, we made the decision to deploy as much of our workforce as possible to work from home and to change our work practices for those essential workers needed to keep the lights on for our customers and to prepare for the Arizona summer. The transition from normal course of business to social distancing and revised safety procedures was seamless from our reliability standpoint and for our customers. While our processes have changed, our priorities have not. From the financial perspective, our strengths lie in a strong balance sheet, good credit rating, and sufficient liquidity. We can and will weather this storm. We recognize that in order to serve both our customers and our shareholders, it is important to maintain our financial health. Financial stability is a key driver in our decision-making, and it's essential to support our long-term goals. Operationally, the rigor of our preparation and the strength of our team position us well to navigate the challenges presented by COVID-19. Our pandemic plan was established, tested, refined, and rehearsed before any of the COVID-19 impacts began to hit us. As I mentioned earlier, we've transitioned as many employees as possible to working from home. I'll note that includes over 140 call center associates who we moved very quickly to seamlessly continue to provide customer service from their homes, and that includes the oversight folks as well, an incredible job by the IT group there, as well as our field employees who continue to prepare for our peak summer season. All necessary summer preparedness work, including vegetation management and planned outages at our power plants have continued. In an effort to minimize the duration of those outages and the number of people required to be physically present, We prioritized essential work and deferred some discretionary maintenance until later in the year. I'm pleased to share that we completed the Palo Verde Unit 2 refueling outage earlier this week, ensuring that this key resource will be available to serve customers this summer. The refueling outage had a reduced scope to allow the completion of the essential work with 40% less contractors than normal. In addition, we've deferred non-essential transmission and distribution work that would require more than a two-hour planned outage to our residential customers during this time. We are grateful for the support we've received from so many who've helped our employees stay safe, including Armored Outdoor Gear, one of our commercial customers in Flagstaff. I'd like to thank the owner, Tom Monroe, who made the decision to quickly pivot manufacturing operations to produce masks. We were able to quickly secure 3,000 masks for APS, including an expedited quantity of 300 for Palo Verde employees at a time when masks were harder to come by. It was really a win-win situation. We were able to keep our employees safe and at the same time support our local economy. Based on what we've seen so far in energy usage and customer load growth, and Ted will talk more about this, but we know that circumstances will continue to evolve Our resource plans for additional generation remain in place. We expect to announce the results of outstanding wind and solar requests for proposal in the near future. Just as in our pre-COVID-19 world, as we learn more about our customer needs and how we are all recovering from the impacts of our current situation, we'll evaluate our assumptions for future generation resource needs and make any necessary adjustments. To date, we have not experienced any material supply chain disruptions, Our team is actively monitoring for potential disruptions and has conducted a contract review to confirm the adequacy of our summer resource needs. In addition, they've solicited supplier input to identify market risks associated with 800-plus high-volume suppliers, including all of our critical suppliers. As with many other aspects of our operations, mitigation plans are in place to minimize any potential supply chain disruptions. On the regulatory front, the Arizona Corporation Commission has been busy addressing COVID-19 concerns and adjusting their work to accommodate social distancing guidelines. Not surprisingly, as a result, a number of their work streams have been delayed. As you may recall, the original rate case schedule that staff was going to file testimony on May 20th, At the request of the Commission staff, that date's been extended to August 3rd, and the hearing's now scheduled to begin on September 30th. On May 5th and 6th, the Commission held open meetings discussing our rate comparison tool, how to refund overcollected demand-side management funds, and treatment for costs associated with COVID-19. As a result of the discussion, the Commission voted to return $36 million of overcollected demand-side management funds to customers through a one-time bill credit in June. No votes were taken regarding the other matters. However, I'll note that Chairman Burns did indicate that he plans to bring the topic of an accounting order for COVID-related costs before the Commission again at a later date. Our clean energy commitment received some positive validation in March, after the Commission held a workshop to discuss clean energy rules. Following that workshop, Chairman Burns, Commissioner Kennedy, and Commissioner Marquez-Peterson all publicly expressed support for a 100% clean by 2050 standard, and obviously that's aligned with our clean energy commitment, and I think that's a good sign for the future of clean energy in Arizona. A good future for clean energy in Arizona means robust economic development in our state and an opportunity for financial growth for Pinnacle West. We've never experienced anything like COVID-19, but we've been through many challenging times in our 136 years of service to Arizona. We don't know today what the ultimate disruptions or impacts of this pandemic will be, but I have no doubt we'll navigate both through the near term and continue to deliver on our long-term goals. And with that, I'll turn it over to Ted.