Pinnacle West(US:PNW)2021-11-05 20:15Financial Data and Key Metrics Changes - The company reported earnings of $3 per share for Q3 2021, a decrease from $3.07 per share in Q3 2020, attributed to mild weather offsetting strong sales [7][8]. - Weather-normalized sales guidance was updated to 3% to 4%, up from the previous 1% to 2%, due to robust customer growth and strong residential usage [9]. Business Line Data and Key Metrics Changes - Residential cooling degree days decreased by 27.5% compared to the same period last year, and were 10.6% lower than the historical 10-year averages [8]. - The company experienced a 6% weather-normalized increase in demand for residential electricity from 2018 to 2020, while lowering the average residential customer bill by more than 7% during the same period [19]. Market Data and Key Metrics Changes - The company projected retail customer growth of 1.5% to 2.5% in 2021, with weather-normalized sales growth expected to be between 3% to 4% [20]. - The housing market in Maricopa County is projected to see 43,000 housing permits, levels not reached since before the Great Recession, indicating strong economic development [20][21]. Company Strategy and Development Direction - The company aims to transition to clean energy, with plans to end coal use in remaining Cholla units by 2025 and completely exit coal by 2031 [22][23]. - A new rate case will be filed as soon as practicable to improve the return on equity (ROE) and address the challenges posed by the recent rate case outcome [24][39]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term growth despite short-term challenges, emphasizing a solid track record of performance and commitment to customer affordability [18][39]. - The company plans to focus on improving customer experience, communications, and operational efficiency during the reset period [26][35]. Other Important Information - The company announced an increase in its quarterly dividend from $0.83 to $0.85 per share, marking 10 consecutive years of dividend growth [35]. - The long-term financial outlook includes projected earnings growth of 5% to 7% over the next five years, anchored by the 2022 guidance [29][38]. Q&A Session Summary Question: Clarification on 2022 Guidance Midpoint - Management explained that depreciation and pension items were higher than expected, impacting the 2022 guidance midpoint [41][42]. Question: Future Rate Case Strategy - Management emphasized the importance of transparency and constructive dialogue with stakeholders to improve outcomes in future rate cases [46][50]. Question: SCR Litigation and Settlement - The company plans to pursue judicial review regarding the SCR decision and advocates for settlement as a better outcome for future cases [54][57]. Question: Equity Needs and Rate Case Impact - Management indicated that equity issuance would be deferred until after the next rate case, focusing on improving ROE and managing growth financing [73][94]. Question: Operating Expense Management - The company is implementing Lean Sigma initiatives to manage operating expenses and improve efficiency during the reset period [82].