Dive Brief:
- Pinnacle West Capital, the parent company of Arizona Public Service, saw its net income decline more than 20% last year because state regulators in 2021 denied the utility recovery of $215.5 million spent on pollution control upgrades at its Four Corners coal plant, company officials said Monday.
- 2022 was “one of our most challenging years in recent memory as we faced major financial headwinds and a financial reset resulting from the outcome of our last rate case,” Pinnacle West Chairman, President
and CEO Jeff Guldner told financial analysts Monday on the company’s Q4 2022 earnings call. - From an operations perspective, the APS grid remained reliable through patches of extreme weather last year and officials say they are finalizing procurement decisions for up to 1,500 MW to meet the state’s growing demand for electricity.
Dive Insight:
Operationally, APS and Pinnacle West officials said there was much for the utility to celebrate in 2022. Financially, the results gave executives pause.
“The unfavorable rate case decision and reduction in net income from no longer deferring the costs related to the Four Corners [selective catalytic reduction] and Ocotillo modernization project have been the primary driver of lower results all year,” Pinnacle West Chief Financial Officer Andrew Cooper said. The fourth quarter results also included a $17.1 million impairment charge related to a minority stake in a wind farm, he said.
Pinnacle West 2022 consolidated net income fell to $483.6 million, from $618.7 million in 2021.
But APS came out of the 2021 rate case with a “comprehensive plan and strategy,” including overhauling the utility’s relationship with regulators, said Guldner. “And we met or exceeded nearly every target we set for ourselves, including delivering strong service reliability to our customers.”
The APS system in 2022 experienced “one of the most hazardous and damaging summer storm seasons in recent history, where we saw a record number of poles damaged,” Guldner said. And while parts of the Southwest experienced winter capacity shortages, “our careful long-term planning and resource adequacy allowed us to serve our customers reliably,” he said.
APS also participates in the Western wholesale market “which allowed us to make off-system sales and to create savings for APS customers,” Guldner said. “Importantly, those off-system sales directly benefit APS customers by lowering our overall costs, while helping maintain regional grid stability.”
APS has a pending rate case it filed in October and an administrative law judge at the Arizona Corporation Commission issued a procedural order in December, outlining a schedule. The first round of staff and intervenor testimony is due in May, Guldner said, with a hearing set to commence in early August.
“Our number one goal continues to be doing what's right for the people and prosperity of Arizona, which includes working collaboratively with the commission and building a more constructive relationship,” Guldner said.
The utility is also making progress on reaching 100% carbon-free energy by 2050. APS has procured over 2,100 MW of “clean and affordable energy resources,” Guldner said, since announcing the goal three years ago.
APS is also in the last stages of an all-source request for proposals it issued last year for 1,000 MW to 1,500 MW to come online from 2025 to 2027.
“We continue to work through finalizing procurement decisions from that RFP,” Guldner said. “These substantial investments are essential resources designed to help us keep pace with Arizona's tremendous growth. At the same time, electricity capacity markets are tightening across the entire West.”
