Pinnacle West Capital Corporation · NYSE:PNW
Pinnacle West Capital — Investor Day (November 2012)
17 slides from Pinnacle West Capital's investor day presentation, Nov 9, 2012
Slide 1: Delivering Superior Shareholder Value: Regulatory Overview
DELIVERING SUPERIOR SHAREHOLDER VALUE REGULATORY OVERVIEW Jeff Guldner
Slide 2: Regulatory Overview Agenda
2 REGULATORY OVERVIEW AGENDA • Regulatory Landscape • Regulatory Strategic Framework • Goals and Initiatives • FERC Developments • Conclusions
Slide 3: Our Regulatory Mix
3 OUR REGULATORY MIX The bulk of APS’s revenues comes from a regulated retail rate base and a meaningful transmission business. $6.9 Billion Total Approved Rate Base Most Recent Rate Decisions ACC FERC Rate Effective Dates 7/1/2012 6/1/2012 Test Year Ended 12/31/2010* 12/31/2011 Rate Base $5.7 B $1.
Slide 4: Constructive Regulatory Environment
4 CONSTRUCTIVE REGULATORY ENVIRONMENT Enables creative solutions towards a common goal: healthy utility that will help Arizona’s sustainable energy future. • Commission and Stakeholder Engagement • Productive and Constructive Regulatory Relationships • Culture of Compliance
Slide 5: Improving Our Regulatory Environment: Historical Perspective
IMPROVING OUR REGULATORY ENVIRONMENT: 5 HISTORICAL PERSPECTIVE We have reduced our rate case cycle length significantly while achieving increasingly constructive outcomes. Prolonged Proceedings Financial Results 2003-05 2005-07 2008-09 2011-12 Case Case Case Case 18 Months 20 Months 22 Months 12 Mon
Slide 6: Current Regulatory Framework
6 CURRENT REGULATORY FRAMEWORK Traditional themes are trending towards sustained constructive outcomes. Themes Progress Regulatory Lag Recovery of post-test year plant in rates and certain capital through adjustors. Historical Test Year Enhanced Commission engagement, constructive regulatory relatio
Slide 7: Beyond a Historical Test Year
7 BEYOND A HISTORICAL TEST YEAR Retail rate mechanisms mitigate strict historical test-year framework. Current Arizona Retail Rate Structure Traditional Adjustors that Post-Test Year Cost Enhanced Fixed Historical Test Recover Revenue Plant in Rate Base Deferrals Cost Recovery Year Requirements • Ra
Slide 8: FERC Overview
8 FERC OVERVIEW We have achieved constructive transmission rate treatment and actively engage in key policy matters. • Ratemaking • Formula rates updated annually • Retail transmission cost adjuster • Policy Development • Transmission returns on equity • FERC Order 1000 compliance • Non-RTO performa
Slide 9: Regulatory Initiatives
9 REGULATORY INITIATIVES We have a near-term business plan that supports the Company’s overall objectives • Begin recovery of Four Corners acquisition by end of 2013 • Target next retail rate decision by mid-2016 • Continue active engagement of stakeholders in integrated resource planning process to
Slide 10: Customer Satisfaction: A Key Priority
10 CUSTOMER SATISFACTION: A KEY PRIORITY Strong customer service supports constructive regulatory outcomes. Outstanding Residential Customer Satisfaction Rating Rating 700 APS 675 650 Industry Average 625 600 575 550 525 500 2012 J.D. Power Residential Customer Survey
Slide 11: 2012 Regulatory Settlement Positioned APS Well Through 2016
2012 REGULATORY SETTLEMENT 11 POSITIONED APS WELL THROUGH 2016 An intentional structure of on-going financial support buttresses a four-year stay-out. Rate Rider for Four Corners Acquisition Costs Forward-Looking Improvements to 4 Year Lost Fixed Cost Recovery Environmental Mechanism Surcharge Stay-
Slide 12: Conclusions
12 CONCLUSIONS We remain focused on achieving supportive regulatory structures and productive cost recovery process and timing. • Positive regulatory developments • Constructive on-going relationships • Address future of continuing change
Slide 13: Regulatory Overview Appendix
Regulatory Overview Appendix
Slide 14: 2012 Retail Rate Case Settlement Key Benefits
2012 RETAIL RATE CASE SETTLEMENT 14 KEY BENEFITS The settlement contains a number of benefits for shareholders and customers. Shareholder Benefits • Regulatory certainty • Base rate stay-out until at least mid-2016 • Rate gradualism through adjustment mechanisms • Financial support APS needs to achi
Slide 15: Settlement Key Financial Provisions – Base Rates & Timing
2012 RETAIL RATE CASE SETTLEMENT 15 KEY FINANCIAL PROVISIONS – BASE RATES & TIMING The provisions of the settlement became effective July 1, 2012, as originally requested by APS. Annual Revenue Change Annualized Base Rate Revenue Changes ($ millions) Non-fuel base rate increase $ 116.3 Fuel-related
Slide 16: Settlement Key Provisions – Other Than Base Rates
2012 RETAIL RATE CASE SETTLEMENT 16 KEY PROVISIONS – OTHER THAN BASE RATES Other key provisions continue constructive regulatory treatment and limit regulatory lag. • Post test-year plant additions – 15 months’ additions included in rate base • Constructive new or modified adjustment mechanisms • Lo
Slide 17: Settlement Key Financial Assumptions
2012 RETAIL RATE CASE SETTLEMENT 17 KEY FINANCIAL ASSUMPTIONS Updated rate base, cost of capital and fuel prices underpin the settlement amounts. Rate base $5.7 billion Allowed return on equity 10% Capital structure Long-term debt 46.1% Common equity 53.9% Base fuel rate (¢/kWh) 3.21¢ Projected fuel