Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Analyst Conference 2008
17 slides from Pinnacle West Capital's conference presentation, Nov 7, 2008
Slide 1: Regulatory Overview
Regulatory Overview Steve Wheeler Analyst Conference November 7, 2008
Slide 2: Today's Agenda
Today's Agenda Regulatory goals Significant developments in recent years Retail rate cases pending Interim base rate request General rate case Transmission rate settlement ACC election results Focusing on regulatory improvements
Slide 3: APS' Primary Regulatory Goals
APS' Primary Regulatory Goals Timely cost recovery and return on investment Financial strength and stability APS integrated resource plan approval Improved regulatory processes Establishment of prudent, comprehensive state energy policy Support for beneficial customer programs
Slide 4: Significant Developments Since 2005
Significant Developments Since 2005 Unification of PWEC assets Retail cost recovery mechanisms Fuel and purchased power adjustor (PSA) Transmission cost adjustor (TCA) Renewables surcharge (RES) Demand-side management adjustor (DSM) Environmental improvement surcharge (EIS) Retail line extension fee
Slide 5: APS Interim Base Rate Request Details
APS Interim Base Rate Request Details Application filed with ACC June 6, 2008 Base rate surcharge to be effective until general rate case decision $0.004 per kWh (approximately 4%) $115 million annual pretax retail revenues Subject to refund pending outcome of general rate case Hearings September 15
Slide 6: Interim Rate Request Themes
Interim Rate Request Themes Address APS' financial condition pending general rate case proceedings Preserve investment-grade credit ratings Provide cash flow Strengthen credit metrics and earnings Protect customers against higher future costs Reduce rate volatility for customers Recognize cost manag
Slide 7: Summary of Staff and Intervenor Positions on Interim Relief Request
Summary of Staff and Intervenor Positions on Interim Relief Request ACC Staff Does not support interim increase If Commission grants request $65 million annual revenue increase recommended No equity infusion pre-condition Residential Utility Consumer Office (RUCO) Does not support interim increase A
Slide 8: APS Retail Rate Case Elements
APS Retail Rate Case Elements Adjusted 2007 test year Recognize $1.7 billion of capital expenditures since last rate case Address earnings attrition Implement new growth impact fee Encourage energy efficiency programs New conservation rates
Slide 9: Composition of $278 Million APS Rate Increase
Composition of $278 Million APS Rate Increase Post-test year large projects 0.09 25 Post-test year CWIP 0.12 34 Attrition adjustment 0.29 79 Other items - net 0.02 6 Fuel-related increase 0.05 14 Cost of capital update 0.17 48 Traditional rate base 0.26 72 Traditional rate base Cost of capital Net f
Slide 10: Composition of $278 Million APS Rate Increase
Composition of $278 Million APS Rate Increase Post-test year large projects 0.09 25 Post-test year CWIP 0.12 34 Attrition adjustment 0.29 79 Other items - net 0.02 6 Fuel-related increase 0.05 14 Cost of capital update 0.17 48 Traditional rate base 0.26 72 Attrition adjustment Other post test-year p
Slide 11: Proposals to Mitigate Earnings Attrition
Proposals to Mitigate Earnings Attrition Post test-year plant additions Consistent with ACC historic test-year methodology $174 million large projects in service by mid-2008 $245 million other plant in service by time rates go into effect $79 million attrition adjustment to capture revenue shortfall
Slide 12: Growth Impact Fee Proposal
Growth Impact Fee Proposal Helps "growth pay for itself" Reduces increase for existing customers Supplements line extension payments approved in early 2008 Captures additional growth-related costs Carrying costs of tax asset related to line extension payments Incremental operating costs Net base rat
Slide 13: APS Retail Rate Case Schedule
Staff & Intervenor Testimony Part 1 * Staff & Intervenor Testimony Part 2 ** APS Rebuttal Testimony Staff & Intervenor Surrebuttal Testimony APS Rejoinder Testimony Hearing Begins Apr. 2, 2009 Dec. 19, 2008 Jan. 9, 2009 Feb. 6, 2009 Mar. 6, 2009 Mar. 20, 2009 APS Retail Rate Case Schedule * All issu
Slide 14: Timely Transmission Rate Updates
Timely Transmission Rate Updates Annual formula-based rate adjustments (based on prior-year FERC Form 1 data) Retail transmission cost adjustor Key implementation dates APS FERC request filing July 10, 2007 Initial increases (wholesale and retail adjustor) March 1, 2008 Second increase Wholesale Jun
Slide 15: Transmission Revenue Increases
Transmission Revenue Increases 1st Increase 1st Increase 1st Increase 2nd Increase 2nd Increase Annual Revenue Annual Revenue Request Settlement Effective Date Annual Revenue Effective Date Retail Portion (TCA) $30M $27M 3/1/2008 $13M 7/3/2008 Wholesale Portion $ 7M $ 1M 3/1/2008 $ 2M 6/1/2008 Total
Slide 16: Arizona Corporation Commissioners
Arizona Corporation Commissioners Mike Gleason Republican Jeff Hatch-Miller Republican William Mundell Republican Kristin Mayes Republican Gary Pierce Republican Terms Expire January 2009 Terms Expire January 2011
Slide 17: Focusing on Regulatory Improvements
Focusing on Regulatory Improvements Substantial APS capital expenditures driven by growth and reliability APS commodity prices increases Historic test year Significant regulatory lag Inadequate earnings Weak credit metrics No comprehensive state energy policy Partner with ACC and stakeholders to: As