Pinnacle West's Q4 2024 Earnings Call: Contradictions in Regulatory Strategy and Capital Expenditure Plans

These are the key contradictions discussed in Pinnacle West Capital Corporation's latest 2024Q4 earnings call, specifically including: Regulatory Lag Dynamics and Formula Rates, Regulatory Lag Docket Timeline and Formula Rate Implementation, and Capital Expenditure (CapEx) Forecast and Allocation:



Regulatory Outcomes and Formula Rates:
- Pinnacle West achieved a constructive outcome in its last rate case, with the commission committed to reducing regulatory lag.
- The commission approved a policy statement on formula rates to address better regulatory recovery, supporting customer growth in Arizona.
- The implementation of formula rates is expected to improve cost recovery for the company and benefit both customers and stakeholders.

Customer Growth and Sales Trends:
- Pinnacle West reported a customer growth rate of 2.1% for the full year 2024, slightly above the midpoint of their guidance range.
- Weather-normalized sales growth for the year was 5.7%, driven by both residential sales growth of 1.1% and strong growth in the C&I segment of 9.7%.
- Growth was attributed to the diversification of the customer base and economic expansion in Arizona, including new chip manufacturing facilities and data center operations.

Grid Expansion and Investment:
- Pinnacle West procured nearly 7,300 megawatts of new resources to be in service between 2026 and 2028.
- The company is focusing on robust grid expansion, strategic transmission, and new generation resources to meet Arizona's economic and population growth responsibly.
- These investments are crucial to maintaining top-tier reliability for customers and connecting new large customer facilities like chip manufacturers and data centers.

Financial Performance and Guidance:
- The company ended 2024 with earnings of $5.24 per share, an increase of $0.83 per share from 2023.
- Pinnacle West reiterated its 2025 guidance and expressed confidence in its long-term financial health.
- The financial performance was driven by strong sales and usage growth, a constructive rate case outcome, and benefits from surcharges and weather.

Succession and Strategic Leadership:
- Jeffrey Guldner announced his retirement, with Ted Geisler set to succeed him as CEO, effective March 31, 2025.
- Both leaders emphasized a collaborative and seamless transition, continuing to advance the company's strategy.
- The succession plan ensures stability and continuity in the company's vision for reliable, carbon-free electricity and long-term financial health.