Pinnacle West Capital Corporation (NYSE:PNW) Q3 2020 Earnings Conference Call - Final Transcript

Oct 30, 2020 • 12:00 pm ET

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Pinnacle West Capital Corporation (NYSE:PNW) Q3 2020 Earnings Conference Call - Final Transcript

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Executive
Jeffrey B. Guldner

Station's capacity factor for the same timeframe was 100.2%. Not only were our generation plants there when we needed them, our customers were as well. Out of an abundance of caution and to better prepare for potential unforeseen events, on August 18th and the 19th, we asked our customers to voluntarily conserve energy during peak hours. It came as no surprise to me that our customers were an amazing partner. Their response reduced peak demand on August 18th by approximately 240MW, creating a meaningful reduction on a day when the entire western grid was challenged.

In addition to successfully navigating the capacity shortfalls that were created by the heat, we also used our careful planning in close coordination with the Forest Service and first responders to mitigate the potential impact from wildfires this season. To reduce fire risk, our teams performed vegetation management activities, we held wildfire prevention training and we continued to expand our clearance around poles program, and it was an incredibly active wildfire season with over 900,000 acres burned to-date compared to an average over the last five years of 250,000 acres. Despite the above average wildfire activity, we actually experienced minimal impact to our assets, and I think that was due in part to our effective planning and risk management program.

Despite a worldwide pandemic, a record hot summer, regional capacity shortage and wildfires, our team continues to focus on how to make lasting impacts that benefit our customers, our shareholders and the company. Palo Verde consistently provides examples of this type of continuous improvement and forward thinking, as a recent example, Pe Lee [Phonetic] is a Palo Verde procurement engineer challenged our traditional procurement process and conducted a cost analysis in engineering evaluation for a micro switch replacement. The technical evaluation allowed Palo Verde to purchase commercial grade switches at approximately 7 times lower than the alternative. Over the next three years alone, this change is expected to save the company $2.5 million. His leadership and innovation earned him a nomination for an EPRI Technology Transfer Award, and I can't emphasize enough that it's our team who drives the success for this company, and I'm proud to recognize Pe for his innovation.

Shifting gears to regulatory. Staff and Intervenors filed testimony in our current rate case on October 2. Staff's initial testimony recommended a 9.4% return on equity, and that compares to our current authorized 10% return on equity. Staff also recommended approval of our actual capital structure at the end of the test year, that's consistent with our request and that would result in a 54.7% equity layer. The total revenue increased recommended by staff is $89.7 million compared to our request for a $184 million increase. We'll file our Rebuttal testimony on November 6 and Staff and Intervenors will file Surrebuttal testimony on November 20. The hearing is scheduled to begin on December 14 and I expect it to continue into 2021. While testimony is certainly an important part of the process and