Pinnacle West Capital Corporation

Good day, ladies and gentlemen, and welcome to the Pinnacle West Capital Corporation 2021 Fourth Quarter Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Amanda Ho, Director of IR. Ma'am, the floor is yours.

Thank you, Kate. I would like to thank everyone for participating in this conference call and webcast to review our fourth quarter and full year 2021 earnings, recent developments, and operating performance. Our speakers today will be our Chairman and CEO, Jeff Goldner, and our CFO, Ted Geisler. Barbara Lockwood, Senior Vice President, Public Policy, and Jacob Tetlow, Executive Vice President, Operations, 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. Today's comments and our slides contain forward-looking statements based on current expectations and actual results may differ materially from expectations. Our annual 2021 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 4, 2022. I will now turn the call over to Jeff.

Great. Thank you, Amanda. And thank you all for joining us today. And looking back on 2021, there are certainly a number of challenges and setbacks, but also positive accomplishments and successes. Without question, the biggest setback of 2021 was the rate case outcome. Coming out of the rate case, we laid out a comprehensive plan on the third quarter earnings call, and we've already begun making progress towards that plan, and I'll briefly discuss that. I'll also provide an operations update and share some notable successes from our employees in 2021. And then Ted will discuss our 2021 earnings and our forward-looking financial expectations. I know we're all tired of talking about the last rate case and how disappointing that outcome was. As you know, the rate case decision makes everything that we're committed to doing more challenging and more costly for a time. Importantly, it's also cast our state in a negative light when it comes to our regulatory environment, and our efforts are focused on ways in which the company can support improving that regulatory environment. During our third quarter earnings call, we spoke of management actions that we planned on taking, which included the possibility of filing an appeal of the decision. That's not something that we took lightly, and I'd emphasize I don't, and we don't take pleasure in litigating with the Commission. Our number one goal is doing what's right for the people in prosperity of Arizona, which includes working collaboratively with the commission and building a more constructive relationship. However, in this case, we really had no other choice. And in December, we filed a notice of appeal with the Arizona Court of Appeals in parallel with a special action with the Arizona Supreme Court. Although there were seven other amicus briefs, these are Friends of the Court's briefs, filed in support of our special action filing, on February 8th, the Supreme Court declined to take jurisdiction of the case. This was not particularly surprising since the Supreme Court only hears a small number of special action requests each year. And importantly, the Supreme Court's decision to decline jurisdiction does not impact our pending appeal with the Court of Appeals. We don't know what the final resolution of that case will be. However, we look forward to the opportunity to share with the court our arguments and the reasons why we believe the Commission erred in its rate case decision. Turning to the operations side, although 2021 was extremely challenging, it was not without successes. And I want to start by recognizing our field team's exceptional execution in 2021. We reliably served our over 1.3 million customers through the hottest June on record, followed by the third wettest monsoon season. Our non-nuclear fleet recorded an impressive reliability performance with a summertime equivalent availability factor, or EAF, of 94.4%. I just want to call out another data point on that non-nuclear fleet's performance. Out of 5,226 starts last year, there were only nine misses. And that startup reliability is impressive and it's important in our participation in the energy and balance market and in our actions in the broader market in the West and also benefits our customers. Recognizing that creating customer value is inextricably linked to increasing shareholder value, we remain focused on improving the customer experience. Although there's still much work to be done, we're not where we want to be yet. We're making positive progress. Thanks to the hard work of our employees, our fourth quarter J.D. Power overall residential customer satisfaction score jumped one quartile compared to the year prior among large investor-owned utilities in the U.S., We had year-over-year improvements in several key areas that are important to our customers, including power quality and reliability, billing and payment, and customer call center performance. In fact, our customer ratings put us in the top decile nationally for perfect power and the second quartile nationally for our telephone customer care. APS was also named a 2021 Business Customer Champion by Escalant, which recognized the company as one of the top performing electric utilities in the nation for business customer scores in brand trust, product experience, service satisfaction, and customer effort. In addition, we continue to make progress on the ESG front. On January 22nd, we celebrated two years since announcing our goal to reach 100% clean, carbon-free energy by 2050. Over the past two years, we've procured nearly 1,400 megawatts of clean energy resources. These substantial investments are not only vital to our transition away from coal and into a clean energy future, but they're essential resources designed to help us keep pace with Arizona's tremendous growth at the same time that capacity markets are tightening across the entire West. And finally, I want to highlight three awards that we received in 2021 that recognize our commitment in the ESG space. First, APS was honored by the EPA with the Energy Star Partner of the Year Award for excellence in customer programs. Second, Pinnacle West was recognized by the global environmental nonprofit CDP for leadership in corporate sustainability with A- scores for both climate change and water security. That's significant because Pinnacle West is one of only two North American electric utility companies to achieve leadership scores in these areas. Finally, the 2021 Inclusive Workplace Award, a joint recognition from the Diversity Leadership Alliance and the Arizona Society of Human Resources Management, acknowledging our efforts to create a diverse and inclusive environment for our employees. I'm extremely proud of the progress that our company continues to make and congratulate our employees on these important recognitions. As we look forward, our goals for 2022 include continuously improving our customer communication and engagement, enhancing our regulatory relationships, and continued execution of our clean energy commitment. I want to once again recognize the near-term headwinds that were created by the unfavorable rate case outcome and how challenging it will make 2022, but we believe in our ability to provide long-term value to both customers and shareholders. We look forward to executing our plan and continuing our proven cost management efforts, all against the backdrop of Arizona's incredible economic expansion. So again, thank you all for joining us today, and I'll turn the call over to Ted.