Pinnacle West Capital Corporation

Greetings, and welcome to the Pinnacle West Capital Corporation second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance 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 at 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 second 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, ATS'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 second quarter 2020 form 10-Q 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 August 13, 2020. I will now turn the call over to Jeff.

Thank you, Stephanie, and thank you all for joining us today. I'd actually like to begin today's call by expressing my immense appreciation to our team. You know, all of us in leadership stand in awe of their incredible strength and adaptability. We're continually impressed by their compassion for others and their sheer drive to do their very best each day to serve our customers, our stakeholders, and our communities. The culture and engagement that we're striving to create throughout the organization is key to our success in navigating the ongoing COVID-19 challenges. Our plants are operating with impressive reliability during a severe Arizona summer. Our crews have kept the lights on, new customers are being served, and our customers are benefiting from an exceptional commitment to service demonstrated by our people. I'm also pleased to report that through the end of the second quarter, we remain in line with our expectations for the year. I'll provide a brief overview of the current status of COVID-19 in Arizona and then some operational and regulatory updates. While weather variations are typical, we experienced an unusually hot second quarter this year that followed a mild second quarter of last year. So Ted will provide more details regarding the impact of weather given the year-over-year change took us from really one extreme to the other. And Ted will then offer a review of our financial performance and our future forecast. As you know, from March 13th through May 12th, many businesses in Arizona were closed, and the governor asked residents to stay home. Governor Ducey's Stay Home, Stay Healthy, and Stay Connected order expired on May 15th, and in early June, the state began to see an increase in COVID-19 cases. As a result, on June 29th, the governor paused operations of bars, nightclubs, gyms, movie theaters, and water parks through August 10th. and delayed the first day of in-person school to August 17. The governor's latest executive order, which was issued on July 9, limits indoor dining to less than 50% occupancy. On July 30, in his last update, the governor shared that Arizona's numbers are trending down. Positive cases, emergency room visits from COVID-like symptoms, and hospitalizations for COVID cases have all decreased over the last month. Importantly, the state is focused on reducing the number of people infected by an infectious person to less than one. By July 15th, Arizona achieved this goal with an R naught of 0.9, and the numbers are continuing to trend down. I know that's the indicator that he's very focused on. As we've stated previously, we cannot predict what the ultimate impact from COVID-19 will be. However, we remain committed to providing relevant and timely information as the COVID pandemic evolves. From an operations perspective, we continue to execute well under new work protocols. We completed two major planned outages, one at Four Corners Unit 5 and a refueling outage at Palo Verde Unit 2 this quarter. Those and other prepsary activities prepared us for a peak summer season, which brings both extreme temperatures and increased customer demand. While we're experiencing above average wildfire activity this season, our robust fire mitigation efforts, preparation, and planning is serving us well in helping to protect the communities we serve and our infrastructure. In at least one instance, that fire mitigation training went beyond keeping the power on for our customers. I want to share a story about one of our customer servicemen, Ron Walker, was driving from a job in Sedona to his home in Flagstaff where he saw a car on fire on the side of the freeway. Without hesitation, Ron pulled over to help using his fire extinguishers, hydration pack, and a shovel to keep the fire from spreading until firefighters could reach the scene some 30 minutes later. Ron's quick, smart, and safe actions helped keep the situation from becoming severe and demonstrated his personal commitment and APS's dedication to doing the right thing for our neighbors. Turning to another kind of preparation, on June 26, we filed our 15-year integrated resource plan providing a forward look into our resource planning needs. Between 2020 and 2024, we expect approximately 2,500 megawatts of renewable energy, demand response, energy efficiency, and energy storage will be needed to make progress towards our clean energy commitment. We expect the renewable energy additions will include wind and solar generation with the exact mix determined through all-source RFP procurement processes. In fact, We're already executing on our plan. We are currently finalizing contract negotiations from our 2019 RFPs for new clean energy resources and we expect to announce the results soon. We also expect to issue another all-source RFP later this year that will support customer reliability and our clean energy goals. The longer-term look from 2020 through 2035 projects service territory growth driven by population growth, economic growth, data center growth, and changing customer trends related to electric vehicles and distributed generation. The positive economic environment Arizona offers to businesses and the state's focus on encouraging technology and development are key drivers there. In addition to resource needs to meet that anticipated growth, approximately 1400 megawatts of coal are scheduled to be retired and another 1600 megawatts of gas purchase agreements are scheduled to expire over the next decade. These resource requirements and contract roll-offs, coupled with the need for additional capacity to meet our anticipated peak demand growth, result in a capacity needs of approximately 6,000 megawatts by 2035. We're committed to our goal of being carbon-free by 2050, and the paths outlined in our IRP support this objective. We also recently released a report on the McMicken battery event that occurred last year. With the conclusion of that investigation, we are now positioned to evaluate the safest and most effective way to move forward integrating additional storage onto our system, including refreshing the energy storage procurement activities that were already underway at the time of the McMicken event. On the regulatory front, the administrative logics granted the Corporation Commission staff and the Residential Utility Consumer Office's joint request for a 60-day extension to file testimony in our pending rate case. The new date for staff and intervenors to file testimony will be October 2nd, 2020, with rate design testimony due October 9th, and the hearing is now scheduled to begin on December 14th, 2020. While the rate case and regulatory relationship remain top of mind and key priorities for the remainder of 2020, we're also focused on providing reliable service through our peak summer season, emphasizing our cost management initiatives to support both our financial performance and customer affordability, and continuing the transition to a cleaner energy mix. Lastly, I want to mention that while COVID-19 has created significant challenges, there are many lessons learned and achievements made that we may not have thought possible previously to the pandemic. Our culture transformation is focused on a growth mindset, which means learning from challenges and seeking continuous improvement. And I'm pleased that that's exactly what we and the team are doing. Thank you for your time today, and I'll turn it over to Ted.