Pinnacle West Capital (NYSE: PNW) said Nov. 2 that its Arizona Public Service (APS) utility subsidiary expects to receive “a rate rider carve out” for the proposed Four Corners coal plant deal.
This will allow APS to receive a state rate adjustment for Four Corners as early as mid-2013 after the acquisition is consummated.
Pinnacle officials also said during an earnings conference call that APS is engaged in coal supply contract negotiations for the New Mexico plant. Pinnacle hopes to receive Federal Energy Regulatory Commission (FERC) approval this year.
The utility is in the process of buying Southern California Edison’s (SCE) 739 MW interest in Units 4 and 5 of the sprawling coal plant. APS will then shut down 560 MW of capacity in Units 1-3. SCE, an Edison International (NYSE: EIX) subsidiary, is being forced to sell its interest in the coal power plant due to California’s greenhouse gas emissions policy.
The Pinnacle West unit is buying the SCE unit for an estimated $294m, subject to adjustments. Arizona and California regulatory approvals have already been obtained.
Pinnacle West saw lower retail sales largely because of cooler-than-normal weather versus record-breaking temperatures in the same period last year.
The average high temperature in the 2012 third quarter was slightly below normal at 103.2 degrees, while the average high temperature in the same 2011 period was 106.4 degrees. As a result, the return to more conventional weather patterns contributed to a 15% reduction in cooling degree-days (a proxy for the effects of weather) in the 2012 period versus a year ago.
“During the quarter, our generation fleet performed well, our customers experienced fewer outages, and our employees provided high quality service,” said Pinnacle West CEO Don Brandt. “At the same time, disciplined cost management remained a central theme at our Company and is a key to future earnings improvement.”
Pinnacle West also said that it is facing lower-infrastructure-related costs thanks in part to the new 20-year license extension that the massive Palo Verde nuclear station received from the Nuclear Regulatory Commission (NRC) in 2011. Palo Verde had a 98% capacity factor in the third quarter. Unit 2 is currently in a refueling outage that should conclude within 30 days, Pinnacle officials said.
Pinnacle West will see significant staff retirements, 200 to 300 people per year, for the next couple of years, officials said, adding that not all of them would be replaced.
Pinnacle West is seeing improving economic conditions in both Arizona and the nation. The Arizona market is still not back to “normal” yet, officials said. There is still much vacant housing in the Phoenix area, they said.
The company said its AZ Sun Program is putting another 150 MW into service in the 2012-2015 time period.
Pinnacle West reported consolidated on-going earnings of $244.8m, or $2.21 per diluted share of common stock, for the quarter ended Sept. 30. This result compares with on-going earnings of $245.8m, or $2.24 per share, in the same 2011 period. The company’s consolidated net income attributable to common shareholders for the 2012 third quarter was $244.8m, or $2.21 per diluted share, compared with net income of $255.4m, or $2.32 per share, for the same quarter a year ago.