Pinnacle West Capital Corporation

Good day, everyone, and welcome to the Pinnacle West Capital Corporation 2024 Third Quarter Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Amanda Ho. Ma'am, the floor is yours.

Thank you, Matt. I would like to thank everyone for participating in this conference call and webcast to review our third quarter 2024 earnings, recent developments, and operating performance. Our speakers today will be our Chairman and CEO, Jeff Goldner, and our CFO, Andrew Cooper. Ted Geisler, APS President, Jacob Tetlow, COO, and Jose Esparza, Senior Vice President of 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. Today's comments and our slides contain forward-looking statements based on current expectations and actual results may differ materially from expectations. Our third quarter 2024 form 10Q 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 November 13, 2024. I will now turn the call over to Jeff.

Great. Thanks, Amanda. Thank you all for joining us today. We continue to execute well in our operational performance and financial management. So as part of my operations update, I'll share with you our success in managing through another record-breaking summer in the Valley and reliably serving our customers when they needed us most. I also provide an update on the regulatory lag docket, and then Andrew will explain how the hot weather and strong sales growth has led us to update our 2024 earnings guidance, and he'll also discuss our forward-looking financial expectations. So to start, I wanted to recognize our operations and field teams for doing an exceptional job maintaining reliable service for our customers through the hottest summer on record. In addition to our teams keeping our system reliable here in Arizona, I also wanted to share my appreciation for the 30 crew members who recently volunteered to leave their homes to answer the call for assistance in Florida and help rebuild the grid and restore power to communities devastated by Hurricane Milton. Our industry's mutual assistance network made this possible, and it's a great example of living our APS promise by doing what's right for others and delivering for our communities. The summer season here was especially long, continuing into mid-October, when we finally said goodbye to triple-digit temperatures in the valley. We ended the summer with a total of 70 days of 110 degrees or more, and that eclipsed last year's record of 55 days. We had a record streak of 113 consecutive days of 100-plus degrees, and we set an all-time new peak energy demand of 8,210 megawatts on August 4th. The hot days, the high nighttime temperatures, and the Valley's heat island effect meant that air conditioners were often running around the clock to keep homes and businesses cool. During this period, our generation fleet performed extremely well and was available when our customers critically needed the power. Our careful long-term planning for resource adequacy combined with equipment maintenance programs and innovative customer demand side programs proved beneficial through the summer. Our baseload and our fast ramping assets all performed well. In addition, we used our virtual power plant that includes our cool reward smart thermostat program. In that program, we've got over 95,000 enrolled thermostats that work together and help conserve nearly 160 megawatts when called. This summer, during a major storm outage, we partnered with customers enrolled in our program in a unique and historic way. Our customer technology experts worked with a specific targeted portion of that network of thermostats located in participating customers' homes to help voluntarily conserve power. And that effort, along with operational backups that included rerouting electricity or sectionalizing the system, helped to relieve the strain successfully on the grid that was caused by that storm damage. This is the first time in APS history that a smart thermostat program was used in such a targeted manner using this innovative approach. Long-term planning has been key to providing reliable service. In fact, I'm happy to announce we've successfully contracted for our RedHawk power plant expansion, which is expected to be in service by 2028. This project, along with the projects we announced last quarter, will add more than 800 megawatts of APS-owned generation and battery storage ensuring that we have the resources necessary to provide reliable, affordable, and clean energy to our customers. With the 2023 all-source RFP nearly complete, we're turning our attention to the next tranche of resource needs, and we plan to issue our 2024 all-source RFP in the next few weeks. With the extreme weather that we experience each summer, it remains as important as ever to continue assisting our communities through our heat relief support programs, APS increased its energy support and crisis bill assistance, maintained the summer moratorium on disconnects for past due bills, and assisted customers with payment arrangements. And we partnered with more than 100 local nonprofit and community agencies to connect the state's most vulnerable population with helpful resources. Finally, we continue to focus on providing the best experience to our customers. And I'm pleased to say that year to date, Our customer care phone center is ranked first nationally among our peers as rated by our customers in the residential J.D. Power electric customer satisfaction study. Overall, our customer satisfaction as rated by customers through J.D. Power places us in the top 10 utilities amongst our peers. I'm extremely proud of our employees, our progress so far, and I look forward to closing out this year strong. Turning to regulatory, the Commission held a workshop dedicated to formula rates on October 3rd. In that workshop, they heard from the Federal Energy Regulatory Commission, consumer advocates, and Arizona utilities. Staff provided recommendations on consumer safeguards and implementation options. We remain focused on making progress towards reducing regulatory lag while enabling the continued growth of a reliable electric grid. Obviously, elections were held yesterday. Those elections included three Corporation Commission seats in Arizona, with this morning about 91% of precincts reporting if the current results stand, the Corporation Commission seats would be held by Commissioner Lea Marquez-Peterson, Rachel Walden, and Renee Lopez. You can access votes at the Secretary of State's website if you want to follow along, and that's at results.arizona.vote. As we look to wrap up 2024, our focus and priorities remain on executing our mission of providing reliable, affordable, and clean service to our customers. And I thank you for your time today, and I'll turn it over to Andrew.