PNW
#Thanks <UNK> and thank you all for joining us today
2017 has started off in line with our expectations and we remain well positioned for a very solid year
Before Jim discussed the details of our first quarter results I'll provide a few updates on our recent regulatory and operational developments
I know EPS as a rate review is top of mine from many of you and we continue making good progress with this preceding
On March 1, we announced a settlement which has broad base support
In total 29 interveners signed a settlement agreement including the Arizona corporation commission staff, the residential and utility consumer officer Ruco, members of the local and national solar industry and low income advocates
The settlement provisions contain a number of benefits to our customers, shareholders and the communities we serve
Details of the settlements were outlined in the appendix of our slides today and I'll review some of the highlights with you now
Slide 8 shows the settlements proposed base rate changes, which include a non-fuel, non-depreciation base rate increase of $87.2 million per year excluding the transfer of adjusted balances
Additionally, APS will decrease rates by $53.6 million attributable to reduce fuel and purchase power cost and increase rates by $61 million due to changes in depreciation schedules
The result is a total base rate increase of $94.6 million or an overall 3.3% bill increased
Other elements that underpin the settlement including maintaining our allowed return on equity at 10%, our capital structure and base fuel rate are also listed on the slide
The settlement contains a number of important financial provisions which reduce regulatory lag and better aligned rates with the cost to service
In particular the settlement provides for a cost deferral order for the Ocotillo Modernization project and a cost deferral order plus rate adjustment for the selective catalytic reduction equipment to Four Corners
Also the current property tax deferral continues in the power supply adjuster is expanded to include additional production cost
APS proposed changes to the rate options offered to customers ensuring the price a customer pays more accurately reflects the way that customer uses the electric grid
This one is an important focus of our filing
The settlement includes meaningful changes to modernize rates including shifting the on peak period from 12 noon to 7 pm, to 3 pm to 8 pm in the afternoon and early evening, which is more aligned with actual peak usage by customers
Importantly new distributor generation customers will be required to select a rate option that has time of used rates including the great access to our demand component
APS was the among the first utilities in the nation during it is time of use rates for residential customers back in 1984 today more than half of our customers chose the time of used rate for their service
This settlement will create another first by establishing time of use rates as a standard for all new customers after May 1, 2018, except for our smallest customers
The settlement also contains a self-build Moratorium through January 1, 2022, with certain exceptions
For example the Moratorium excludes investments in new combustion turbines that will placed in service after January 1, 2022. Finally, the settlement includes a three year stay out for the next general rate case application under, this provision APS may file its next general rate case on or after June 1, 2019. Lastly, the APCs formal hearing on the APS rate review began and its currently underway
Looking ahead we anticipate the administrative war judge to issue a recommended order followed by a commissioner vote at an upcoming open meeting
We view the proposed settlement agreement as a further sign of Arizona's constructed regulatory environment
We appreciate the opportunity to continue working with ACC and various stake holders to find solutions that balanced interest of customers, shareholders and the communities we serve
Turning to our operations, Palo Verde Nuclear Generating Station had another successful quarter operating above their 100% capacity factor, a planned refilling outage for Palo Verde unit 2 began on April 8. Additionally, at the Four Corners Power Plant our employees are making solid progress on the installation of selective catalytic reduction equipment and construction activity is ramping up at our Ocotillo Modernization project
This year we are investing more in our distribution systems than ever before
Our focus on modernizing the distribution grid is not a temporary phase, but instead a shift in how reprioritize investments with a greater emphasis on our transmission and distribution business
Over the next few years we expect to invest $1.8 billion in our grid infrastructure enabling a more secure and resilient grid which has greater access to the Western Energy market
On April 10th we filed our 2017 integrated resource plan which includes a 15 year forecast of customer electricity demands and the resources needed to serve our customers reliably in the future
An important point of our forecast is to growing requirement with flexible peeking generation over the planning horizon
By 2025, we expect an additional 1.3 gigawatts of quick start combustion turbine capacity will be needed in order to meet our growing summer peak, as well as supplement the intermittency created by solar resource
Moreover we are witnessing lower average daily prices on the wholesale market which show price spikes and increased volatility during peak periods
This new pricing pattern is a result of access energy supply during the middle of the day, throughout much of the year largely created by an oversupply of solar energy in California
In order to take advantage of the solar supply and payoff the energy savings to our customers we value investments in flexible resources that can quickly shut down to allow the import of market power and then quickly ramp back up when demand and prices spike again later in the day
We expect these market conditions to exist for the foreseeable future and we are positioning our generation investment to be more aligned with these market conditions
Ultimately, this will result in a lower cost to service to our customer, improve reliability for the region and new investment opportunities for our company
This also means that our views is on the value of base load and intermediate generation for our customers are evolving and we will focus our future investments for new generation towards flexible peeking technology like combustion turbines and eventually energy storage which is better optimized for emerging market conditions
Finally, I would like to update you on a change in our executive team
When I became CEO in early 2009, the top of my priority list was to recruit one of the finest legal minds in the electricity industry, Dave Falck to join the company as our general counsel
Fortunately for us Dave accepted the offer and has provided Pinnacle West and me with consistently thoughtful counsel ever since
These are trusted advisors so it is with mixed feelings that I shared Dave's decision to begin the transition into retirement
Dave will become Pinnacle West executive vice president of law through his retirement in the spring at 2018 and will continue to advise the Board of Directors and me on governance matters and industries issues
Dave's transition period allows us to continue our commitments for succession planning and talent development at all levels of our company and I am pleased to announce that Jeff <UNK> has been promoted to Executive Vice President and will assume the role of General Counsel for Pinnacle West and APS in addition to his current responsibilities of leading our public policy organization
Jeff is a skilled lawyer and a thoughtful and respected leader with the deep understanding of our industry
In closing we are delivering on our commitments and continue to be well positioned for a solid year in 2017. We are focused on completing our rate review filing and maintaining operational excellence while positioning Pinnacle West as a sustainable leader for its strategic capital investments
I'll now turn the call over to Jim
I think that's on our expectation
Obviously, any increased renewable spends outside of the $15 million a year in '18, '19 from any return to is not currently on our forecast
So that will be incremental capital
We're drilling [ph] this chapter, ERP is just been filed
So obviously, we're working through ---+ we'll be working through that and there will be I'm sure more discussion on that as we move forward
We've got some storage that we're doing right now that is with the Solar Partners program
I'd say the focus we got right now is storage that's related to power quality, local reliability issues
And we're making sure that we have a good understanding of that
And so that's kind of what [Multiple Speakers] that's what in right now when the discussion started
Well, we agreed to spend a $50 million a year
So we're covering through they know
As currently contemplated, it's not a big capital line, but it is incremental and can recover concurrently, which is from a capital perspective
We don't operate [Multiple Speakers] ---+
I don't know that I would say it's off the table
We're only 14% owner in that plant
So we don't want to speak for [indiscernible] owner-operator
<UNK>, there's a self-build moratorium that's in the case, that you'd have to step through the process if you're going to propose a bill
So typically, that's going to be more in the view of a back step, but one of the changes to that moratorium would be an acquisition, would be different
So that's changed a little bit from the last moratorium
The moratorium that's proposed in the settlement doesn't preclude the acquisitions, but it would affect the self-build
More like the first quarter of '16.
It's going to be the major outage for our Units 4 and 5, practically for the SCR installations
Our fossil planted outage O&M is pretty lumpy
'16 and '17 are elevated because of the impact for the SCRs
So I think you would see, as you get out to '18, '19, more normalized fast O&M
Last one we could have filed June 15, we elected not to file until '16.
<UNK>, Don <UNK> here
Just a couple of facts right here, Metropolitan Phoenix housing permits are at the highest levels they've been since 2007. Maricopa County's the fastest-growing county in the United States in 2016, eclipsing, I believe a county that where Austin, Texas is located
And we've seen not just in the financial services, but beyond State Farm a lot of back-office operations are here, call centers
But also, in biosciences, there's a really booming industry, that brings a lot of jobs and relatively highly paid jobs
We'll get that to you
We have that number
