Pinnacle West Capital Corporation

Greetings, and welcome to the Pinnacle West Capital Corporation 2020 Fourth Quarter Earnings Conference Call. At this time, all participants are in 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. 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 fourth quarter and full year 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, we need to cover a few details with you. The slides 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 our current expectations, and actual results may differ materially from expectations. Our 2020 Form 10-K was filed this morning. Please refer to that document for forward-looking statements, cautionary language, as well as the 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 March 3rd, 2021. I will now turn the call over to Jeff.

Great. Thank you, Stephanie. And thank you all for joining us today. I want to spend a few minutes looking back on 2020 because there were certainly challenges, but there are also many impressive accomplishments. So as part of my operations update, I'll share with you some of the most notable successes from 2020. I'll also provide a regulatory update and highlight our goals for 2021. And then Ted will discuss our 2020 earnings and our approach to communicating forward-looking financial expectations. I'd like to start by recognizing our field team's exceptional execution in 2020. Our non-nuclear fleet recorded its best reliability performance since 2007 with a summertime equivalent availability factor of 95.3%. We also celebrated our best year ever for service reliability when you exclude voluntary and proactive fire mitigation impacts. With that performance, the average APS customer experienced less than one power outage and faced fewer total minutes of interrupted service than industry averages. And Palo Verde surpassed the 1 billion gross megawatt hours mark for production over the life of the plant, and it achieved a summer reliability capacity factor of 100%. In addition, the U.S. Department of Energy's Office of Nuclear Energy announced Palo Verde was the nation's top producer of carbon-free energy for the 25th year in a row, highlighting its important contribution to our clean energy commitment. Our team's performance was even more meaningful given the record-setting summer. In 2020, we set a new record for peak demand on our system, beating the former 2017 record by 4% and then surpassing that record six more times. Our partnership and support both to and from our customers was another defining aspect to me of 2020. On the most challenging summer days, our customers responded to our time of use rate structure and a request to voluntarily conserve by reducing peak demand up to 240 megawatts. Our customers were there for us last year, and we were there for our customers. In 2020, we provided more than $15 million in pandemic aid to our customers and our communities. And our commitment to our customers, communities, and to each other is captured in our new APS Promise, which we adopted last year. The APS Promise incorporates the principles and behaviors that will empower us to achieve our strategic goals. It represents the opportunity to build on our cultural strengths and develop new behaviors that will enable our future success. And I want to share with you an example of this behavior. It involves Glenn Chamberlain, who's a storekeeper at our Yucca Power Plant in Yuma. And he assisted a customer who rode his bike to the plant in an effort to pay his bill. Glenn not only located the nearest bill payment location, but he also provided the customer water and helped him get to the grocery store to pay his bill. Glenn went above and beyond his duties to ensure that this customer had a positive experience with APS, and it's a great example of the APS promise in action by doing the right thing and being empowered to go the extra mile, literally in this case, for our customers. Turning now to regulatory, we started 2021 with two new commissioners and a new chair. Commissioner Tovar, a Democrat, and Commissioner O'Connor, a Republican, joined the bench. In addition, Commissioner Marquez Peterson was elected chairwoman. After her election, Chairwoman Marquez Peterson outlined several priorities, including moving forward with the Commission's energy rules, improving Arizona's regulatory climate, and establishing permanent disconnect rules. With regard to the Commission's energy rules, the Arizona Legislature has introduced two identical measures, one in the Senate and one in the House of Representatives, that seek to limit the Commission's ability to set energy policy. Each version was heard by the respective Natural Resources, Energy, and Water Committee, and they passed along party lines. Although we can't predict that these bills will ultimately pass and be signed by the governor, we do know that this will not change our investment plans in clean energy or our commitment to become 100% carbon-free by 2050. For our rate case, the hearing began on January 14th, and it's expected to conclude by mid-March. After the hearing, the parties will file briefs, and the administrative law judge will issue what's called a recommended opinion and order. Finally, the commission will schedule the case for an open meeting to vote, and our current expectation is that the case will likely conclude around mid-year. On February 22nd, APS entered into a settlement agreement with the Arizona Attorney General's Office related to the implementation of new service plans from our 2016 rate case. including the execution of our customer education and outreach plan. The settlement resulted in APS paying $24.75 million, $24 million of which will be returned to as many as 228,000 eligible APS customers. Though moving all customers to new plans in the 2017-2018 timeframe was a major undertaking and an industry first, there are areas we could have done better to guide customers through the process. Recognizing that, we've embraced lessons learned and applied a lot of improvement, and it's my hope that the settlement agreement will enable us to concentrate on building a best-in-class customer experience, which in turn will provide improved shareholder value for the long term. I've said this before, and I think it's important. We will create shareholder value by creating customer value. Looking forward, our goals for 2021 include continuously improving our customer communication and engagement. enhancing our regulatory relationship, and continued execution of our clean energy commitment. On January 22nd, we celebrated one year since announcing our goal to reach 100 percent clean, carbon-free energy by 2050. Over the past year, we secured more than 400 megawatts of clean energy resources, and we've also issued RFPs late last year to acquire battery storage and renewables. Those RFPs are expected to add more than a gigawatt of clean energy resources to the system. In addition to reducing carbon through our generation resources, we also committed to transition 30% of our light duty vehicles and equipment to electric and ultimately to operate 100% clean carbon free transportation fleet by 2050. Our performance in 2020 demonstrates that we have what it takes to forge a path forward and to keep our company strong. In 2021, we look forward to supporting our growing customer base while maintaining our financial health. So I want to thank you for your time today and I'll turn the call over to Ted. Thank you, Jeff.