How Does Pinnacle West Company Work?

Pinnacle West, through APS, is fundamentally an electricity provider. Its operations encompass generating power from various sources and distributing it to customers across Arizona. This ensures a consistent energy supply for homes and businesses.

As of 2024, the company's energy generation is approximately 54% clean energy. This mix includes nuclear power from its stake in the Palo Verde Nuclear Generating Station, solar energy, and other renewables, balanced with natural gas and coal. This diversification supports reliable energy delivery.

Pinnacle West consistently invests in its infrastructure, allocating over $2 billion annually for system upgrades and maintenance. Projects like the Ironwood Solar Plant and expanded battery storage at the Agave Solar Plant demonstrate a commitment to enhancing the grid and integrating more renewable resources.

The company manages a complex supply chain for energy fuels and renewable energy projects via power purchase agreements. Collaboration on regional infrastructure, such as the Transwestern Pipeline expansion, is also key to meeting growing energy demands in Arizona.

A significant milestone for Pinnacle West was the implementation of new customer rates in March 2024. This, coupled with record-high temperatures in June 2024, substantially boosted second-quarter earnings. Net income reached $203.8 million, or $1.76 per diluted share, a notable increase from $106.7 million in the same period of 2023.

For the full year 2024, Pinnacle West reported robust results with $608.8 million in net income. This performance was driven by a healthy 5.7% growth in retail sales and a consistent 2.1% annual retail customer growth, underscoring the strength of its market position.

The company is actively managing regulatory lag, which can impact short-term earnings due to rising operational costs. Pinnacle West is pursuing formula rate plans and improved cost recovery mechanisms to mitigate these effects, with over 40% of future capital investments expected to benefit from these initiatives.

As Arizona's largest electric utility, Pinnacle West benefits from the state's strong economic growth and population increase, which consistently drives electricity demand. Its commitment to reliability, demonstrated by a 99.9% system average interruption duration index (SAIDI) in 2024, further solidifies its competitive edge.

Pinnacle West Capital Corporation, through its subsidiary Arizona Public Service (APS), holds a dominant position as Arizona's largest electric utility. It serves approximately 1.4 million customers across 11 counties, leveraging the state's robust economic expansion and population growth. This strong market presence is further bolstered by significant customer loyalty and a consistent rise in electricity demand.

The company faces several risks, including economic uncertainties such as inflation and supply chain disruptions, which can impact operational costs and capital markets. A significant challenge is regulatory lag, where current rates may not adequately cover escalating operational and investment expenses, potentially affecting revenue recovery.

Pinnacle West maintains a positive outlook, reaffirming its 2025 EPS guidance between $4.40 and $4.60 per diluted share. The company is committed to a long-term EPS growth target of 5-7% from its 2024 midpoint, supported by a substantial capital investment plan of $7.6 billion for 2025-2027. This investment is geared towards enhancing infrastructure and expanding generation capacity.

The company plans to integrate nearly 10 GW of solar, wind, energy storage, and gas resources by 2028, with over 90% of this capacity being carbon-free. Leadership emphasizes grid expansion, improved investment recovery, enhanced customer experience, and achieving a 100% carbon-free energy mix by 2050.