Pinnacle West(PNW) - 2023 Q4 - Annual Report

Clean Energy Commitment - In 2023, approximately 51% of APS's energy supply was derived from clean resources, including nuclear and renewables[30]. - APS has set a goal to provide 100% clean, carbon-free electricity by 2050 and aims for a resource mix of 65% clean energy by 2030[37]. - The company plans to exit from coal-fired generation by 2031 as part of its Clean Energy Commitment[37]. - APS's Clean Energy Commitment includes promoting energy conservation and efficiency programs[31]. - APS has a diverse portfolio of renewable resources, including solar, wind, geothermal, biogas, and biomass[31]. Renewable Energy Portfolio - APS's renewable energy portfolio totals 5,010 MW, with 3,072 MW currently in operation and 1,938 MW under contract or construction[70]. - APS's total renewable portfolio capacity is 3,072 MW, which includes 1,623 MW from distributed energy sources[75]. - The renewable energy requirement under the Renewable Energy Standard is 13% of retail electric sales in 2023, increasing to 15% by 2025[90]. - APS issued a 2023 RFP seeking approximately 1,000 MW of reliable capacity, including at least 700 MW of renewable resources[78]. - APS plans to install over 2,700 MW of utility-scale energy storage by 2026, including projects under PPAs and AZ Sun retrofits[78]. Financial Performance and Regulatory Environment - Pinnacle West's financial condition is significantly influenced by APS's ability to recover costs through regulated rates, which are subject to approval by the ACC and FERC[175]. - The ACC regulates APS's retail electric rates, and any changes in these rates or the timeliness of cost recovery can materially impact financial results[176]. - APS faces potential penalties of approximately $1.2 million per day for non-compliance with mandatory electric reliability standards set by FERC[177]. - Environmental regulations may increase APS's operational costs, particularly regarding air emissions and waste management, which could adversely affect financial performance[181]. - APS's operations are at risk from climate change effects, including prolonged drought and high temperature extremes, which may impact electric generation infrastructure[191]. Employee and Community Engagement - As of December 31, 2023, APS has 6,045 employees, including approximately 2,200 employees at jointly-owned generating facilities[166]. - In 2023, 42$138.2 million, with APS's share being $40.2 million, and a tenth claim of$18.46 million filed on October 31, 2023[46]. - APS incurred approximately $1 million in incremental costs to comply with the CCR rule for the Navajo Plant[119]. - APS estimates costs of approximately$3 million related to the Superfund investigation at the Motorola 52 Street Superfund Site[127]. - The EPA's proposed regulations may impose stricter emission standards on new and existing power plants, which could increase operational costs for APS[114]. Market and Demand Trends - Retail customers in APS's service territory increased by 2.0% for the year ended December 31, 2023, with an average growth of 2.1% per year over the past three years[201]. - Retail electricity sales in kWh, adjusted for weather variations, increased by 1.5% for the year ended December 31, 2023, driven by strong sales to commercial and industrial customers[202]. - APS projects annual retail electricity sales growth in kWh to be between 2.0% to 4.0% for 2024, with average annual growth expected to be in the range of 4.0% to 6.0% through 2026[203]. - APS is experiencing unprecedented incremental requests for service from extra-large commercial energy users (over 25 MW), which exceed available generation and transmission capacity[204]. - A 1% variation in annual residential and small commercial and industrial kWh sales projections can result in approximately $20 million increase or decrease in annual net income[205].