Q3 2020 Pinnacle West Capital Corp Earnings Call
Greetings and welcome to the Pinnacle West Capital Corporation, 2023rd quarter Conference call.
At this time, all participants are within only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Stephanie Leighton director of Investor Relations. Thank you you may begin.
Thank you Christine I would like to thank everyone for participating in this conference call and webcast to review our third quarter 2020, earning recent developments and operating performance our.
Our speakers today will be our chairman and CEO, Jeff Gardner and our CFO, Ted Geissler seem Hatfield fees administrative officer, Daniel Fritcher, if yes, its president and COO and Barbara Lockwood Senior Vice President Public policy are also here with us first.
First I need to cover a few details with you just like that we will be using are available on our investor Relations website, along with our earnings release and related information note that the slides containing reconciliations of certain non-GAAP financial information. These comments that our slides contain forward looking statements based on current expectations and actual results may differ.
Purely from expectation or third quarter 2020 form 10-Q filed this morning. Please.
Please refer to that document for forward looking statements cautionary language as well as the risk factors and Mdna section, which identify risk and uncertainties that could cause actual results to differ materially from those contained in our disclosures.
A replay of this call will be available shortly on our website for the next 30 days.
Will also be available by telephone through November six 2020.
Now I'll turn the call over to Josh Great. Thanks, Stephanie and thank you all for joining us today.
We continue to navigate through the extraordinary events of 2020, and so as part of my operations update I'll share with you our success in managing the hottest July and August on record in the valley.
I'll also provide an update on our regulatory dockets and our focus as we prepare for 2021.
Well explain our earnings expectations for the year are higher due to the significantly above average temperatures.
And so first I want to recognize our field team are doing an exceptional job in maintaining reliable service for our customers. This summer the extreme heat this year contributed to a challenging energy market across the entire desert southwest.
The lack of available capacity and the resulting declarations of energy emergency use by other utilities across the West served as a reminder of the importance of long term resource portfolio planning vigilance over day to day energy supply and responsible energy policies are.
Our ability to avoid an energy emergency the summer was the result of careful long term planning resource adequacy flexibility and innovative customer programs.
We relied heavily on our base load and fast ramping assets, including four corners, Arca TL and Palo Verde.
Those assets were ready when we needed them.
Our fossil fleets equivalent availability factor, which is the percentage of time that a fossil generation unit is available and ready to perform when called upon was 95.3% from June through September.
And Palo Verde generating stations capacity factor for the same timeframe was 100.2%.
Not only were our generation plants, there when we needed them our customers were as well.
I have an abundance of caution and to better prepare for potential unforeseen events.
On August the 18th and 19th we asked our customers to voluntarily conserve energy during peak hours.
It came as no surprise to me that our customers for an amazing partner.
Their response reduced peak demand on August 18th by approximately 240 megawatts, creating a meaningful reduction on a day when the entire western grid was challenged.
In addition to successfully navigating the capacity shortfalls that were created by the heat. We also used our careful planning and close coordination with the forest service and first responders to mitigate the potential impact from wildfires the season turns.
This fire risk our teams performed vegetation management activities, we held wildfire prevention training and we continue to expand our clearance around polls program.
It wasn't incredibly active wildfire season with over 900000 acres burned to date compared to an average over the last five years of 250000 acres.
Despite the above average while our activity, we actually experienced minimal impact to our assets and I think that was due in part to our effective planning and risk management program.
Despite a worldwide pandemic a record hot summer regional capacity shortage and wildfires. Our team continues to focus on how to make lasting impacts.
That benefit our customers our shareholders and the company.
Palo Verde consistently provides examples of this type of continuous improvement and forward thinking.
As a recent example key lead because of Palo Verde procurement engineer challenge to our traditional procurement process and conducted a cost analysis and engineering evaluation for a micro switch replacement.
Technical evaluation allow Palo Verde to purchase commercial grade switches at approximately seven times lower than the alternative.
Over the next three years alone. This change is expected to save the company two and a half million dollars. Its leadership in innovation earned him a nomination for an upgrade technic technology transfer award.
And I can't emphasize enough that it's our team who drives the success of this company and I'm proud to recognize T for his innovation.
Shifting gears to regulatory staff and Interveners filed testimony in our current rate case on October 2nd.
Staffs initial testimony recommended a 9.4% return on equity and that compares to our current authorized 10% return on equity.
SAP also recommended approval of our actual capital structure at the end of the test year, that's consistent with our request and that would result in a 54.7% equity layer.
The total revenue increase recommended by staff is $89.7 million compared to our request for a 184 million dollar increase.
We'll file our rebuttal testimony on November six and staff and Interveners will file server rebuttal testimony on November Twentyth.
The hearing scheduled to begin on December 14th and I expect that to continue into 2021.
Well testimony is certainly an important part of the process and it does provide visibility into each party's priorities. We're still very early in the case and we expect that many of the issues will certainly be discussed further as the case progresses.
I do want to note that yesterday the commission voted on several amendments to a proposed energy rules package.
The amendments include new carbon reduction standard of 100% by 2050 with interim targets of 50% by 2032 and 75% by 2040.
Reductions are based off of a 2016 to 2018 carbon emissions level benchmark.
The amendment, south or acquire electric utilities to install energy storage systems with a capacity equal to 5% of each utilities 2020 peak demand by 2035.
And 40% of their CT energy storage must be customer owned or customer leaves distributed storage.
Another approved amendment modifies the resource planning process, including requirements for the FCC to approve a utilities load forecast and resource plan.
And for utility to perform an all source request for information to guidance resource planning.
Earlier this month. The commission also voted on another amendment to establish a new energy efficiency standards the.
Standard requires electric utilities to implement demand side management resources equivalent to 35% of their 2020 peak load by 2030.
Eligible demand side management resources include energy efficiency demand response and load shifting.
And just importantly, the commission must vote and I expect they will vote soon to approve a final energy rules package before any of these amendments can take effect.
As we look to wrap up 2020, we'll continue to work with the commission on implementing a clean energy transition for the benefit of their constituents and for our customers.
Recall that we've set an aspiration goal of 100% carbon free by 2050, and 65% clean by 2030.
To do so will require a strong regulatory partnership support for an organized transition away from coal and fossil fuels and regulatory and financial support for the expansion of renewables batteries and energy efficiency within our portfolio.
I think yesterday was a strong indication of alignment with both the commission and other stakeholders to achieve a cleaner energy vision and energy future for Arizona.
Near term, our focus and priorities remain on improving our customer communications rebuilding our regulatory relationships by reestablishing trust moving towards a reasonable resolution of our rate case, and continuing to engage with stakeholders to build alignment on priorities that support our goal of providing clean reliable and affordable service to our customers.
So again, thank you all for your time today, and I'll turn the call over to Ted.
Thank you, Jeff and thanks again, everyone for joining us today as Jeff mentioned I will cover our third quarter results and the impact from weather I'll also provide additional details around our customer and sales growth economic development and financing activities Lastly, I'll cover our expectations for the remainder of 2020, while we typically provide earnings guidance.
As for the upcoming year on that third quarter call. We historically have not provided forward looking guidance during a pending rate case consistent with that approach we will hold off on providing 2021 earnings guidance until after the pending rate case concludes.
Turning now to the third quarter, the significant tailwind from hotter than normal weather supported earnings of $3.07 per share compared to $2.77 per share in the third quarter of 19.
Like set a new record for the hottest month recorded in Phoenix until August August then surpass July setting another new record for the hottest month, you above average temperatures this quarter at a 26 cents to earnings year over year for the nine months ended September Thirtyth 2020, whether at a 91 million a pretax gross margin or 61 cents per share.
Our year over year we.
We also experienced 2.3% customer growth and 1.3% weather normalized sales growth in the third quarter 2020 compared to the same period in 2019.
From May 13th when businesses started reopening after the cobot closure period through September Thirtyth weather normalized sales increased 1% compared to the same period last year, we continue to see a reduction in weather normalized commercial and industrial sales of 5% offset by an increase in weather normalized residential sales of 6% during the.
Period.
The strength and speed of our return for positive growth numbers reflects the continued expansion of our local economy. Following the full cobot closure period earlier this year.
Further evidence of our recovery can be seen in the increased number of single family building permits and commercial construction activity in 2020, we expect a total of 33000 housing permits an increase of about 1200 compared to last year and the highest number since 2006.
The labor market and Arizona has also started to gradually recover from the pandemic impacts as well for 2020 through the end of August employment in Metro Phoenix decreased 1.7% compared to 5.6% across the entire U.S. and.
And while manufacturing employment Metro Phoenix decreased 1.2% construction employment increased 5.9% younger.
The ongoing growth of new businesses and residential properties and the 18 construction cranes that are currently visible here in downtown Phoenix are evidence of our continued growth.
Serve our growing customer base and support investments in clean energy in September we issued 400 million, a 30 year, 2.65% green bonds at it yes the.
The 2.65% coupon represents the lowest 30 year rate the hps bond portfolio.
Turning to our full year 2020 guidance as a result of the above average weather. We are increasing our 2020 consolidated earnings range from $4 of 75 to 495 per share to $4 95 to $5.15 per share.
The weather benefit has more than offset the additional cost and reduction in sales due to carbonite team. We are also increasing our 2020 weather normalized year over year sales growth expectations to be between zero and 1%.
In light of the weather benefit we have accelerated the timing of near term I went initiatives. For example, we're pulling forward. Some spend in 2020 that was previously anticipated for future years, particularly around project work and customer experience initiatives as well as one time opportunities like our 10 million dollar contribution to the MPS Foundation, which.
It's our community nonprofits.
Our revised 2020 owned them guidance range of 870 million to 890 million reflects these items.
Well, we believe this increase in one m. demonstrates prudent planning and flexibility through this challenging year, we do remain focused on our lean initiatives and continue to see our core OEM trend down we're executing our plan to reduce 2021 m. expense by $20 million.
Including 10 million through improved procurement and contract management activities and another 10 million and several small operating efficiencies across the enterprise.
We also continue to partner with Arizona State University to train our workforce on lean skills and are excited about the long term potential in continuing to streamline our business well, we don't enter year counting on whether it'd be a driver we do enter the year prepared to take advantage of above normal weather when it makes sense to do so this can help us.
Mitigate the impacts of mild weather in future years, while also enabling our investment in certain key initiatives that improve customer experience a focus area for our company.
Our resource planning and capital expenditure forecasts have also been revised.
Delay in our clean energy procurement impacted by the Mcmaken investigation slightly reduced our 2020 capital expenditure forecast by 68 million. However.
However, we do remain committed to our clean energy commitments that have made progress with our resource acquisition activities.
In September we executed a 200 megawatt wind PPA with a 20 year term. This is a re power of an existing wind facility and is expected to be fully upgraded with additional capacity in 2021.
We also plan to issue two new RFP is one all source RFP and then additional Utah.
Utility owned energy storage RFP at our existing solar facilities.
Well it wasn't exceptionally hot summer, we are grateful the weather tailwind allowed us to further increase financial assistance to customers struggling to pay their bills as a result of overnight team and to accelerate investments that will enhance the quality of our service and maintain our record for providing top tier reliability.
As Jeff mentioned, we will continue to focus on our regulatory outcomes in the near term, while executing our long term plan to deliver value for our customers shareholders and communities stakeholders. This concludes our prepared remarks, I'll now turn the call back over to the operator for questions.
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Thank you. Our first question comes from the line of Michael Weinstein with Credit Suisse. Please proceed with your question.
Hi, guys.
Good morning, Michael.
Yeah on the amendments to the proposed energy rules package.
Can you give us a sense of how those amendments.
Now the energy will package in general, but effect to 6% to 7% rate based growth profile that you currently are predicting and at what point do we get an update on all of this you know when you to in order to incorporate all that into it.
Yeah, Let me start Michael on a on just the rulemaking that either tender Barber may want to.
To wait and so one thing I think is the alignment that we see from the energy rules package is really important and if there is fairly nice alignment with our efforts to de carbonized by 2050.
And I think the interim targets, while the dates are a little bit different they're not that the alignment is still there and.
So I think it's consistent with what we were seeing as well as our plan.
It's still got to go through the the rulemaking process. So this just starts the rulemaking, that's a formal rulemaking and that will likely happen next year yeah.
Yeah. Michael This is Ted I'll, just say that given that the.
Amendments and the plan, where it looks like it's headed is largely consistent with a clean energy commitment.
Our rate base growth that we have outlined was already contemplating ER.
Carbon free and energy clean energy goals consistent with these energy rules. So that's how I think about it.
Got you.
Great and also on the rate case as as you're going forward with the staff recommendation out now.
And just want to confirm it there's no <unk> what would you consider the odds of the settlement process. At this point I mean, you know that but maybe after the elections over or is it even possible at this point to get it done is it or is it just not enough time.
You know Michael we're still this is right now proceeding down a litigated path and so that's the process that we're falling right now as we've said before we'd always be open for for.
For those conversations and it could be a narrower one with some of the individual participants Ah find alignment take some issues off the table. So.
So we continue to be open to it but we are focused on the litigated path right now.
Okay, Great I'll Oh.
That's it for me for now thank you great. Thanks, Michael.
Our next question comes from the line of Julien Dumoulin Smith with Bank of America. Please proceed with your question.
Hey, good morning, Thanks for the time appreciate it.
Right.
Hey, good luck good morning, so perhaps if I can just picking up where your prepared remarks kind of left off can you talk a little bit more about the procurements that you just alluded to for instance, the storage accurate here, the and specifically utility owned efforts and how that lines up against the cadence of the Capex that you all have delayed it.
When should we see the specific projects to line up against the coming years here does that make sense.
Yes, Julien this is Ted appreciate the question then it doesn't make sense given the make making investigation has now concluded we have resumed procurement activity for investing in those ABS owned a battery storage with the intent that its in service in 2022.
We've also got ongoing procurement activity for additional utility owned renewable resources from a prior RFP. So look for results of that soon too and then Additionally, we plan on issuing new RFP for clean energy resources to be in service in future years and that will result, as we said before in a blend of PA and ownership projects are we.
Estimate those through our Capex guidance now, but we continue to refine as we get narrowed to each procurement.
Outcome and we have specific projects that result from those are fees.
Got it excellent alright, it if I could pivot here to the 2021 outlook and I know, it's difficult to talk about without more specifics from you all but obviously.
There seems to be something of a shift you know with them, but I don't want to put words too much in your mouth I'm. How are you thinking about the prospects for earning your are we end or perhaps describe it as the tailwind in terms of accelerating cost from 21 to 20 at this point.
Yeah, I know without that is dead, but I'm curious if you can help to start to quantify some of that benefit.
Yes, it's difficult to quantify without guidance Julian, but what I would say is that we continue to be aggressive about our lean initiatives and cost management and the acceleration of own am opportunities. This year as a result of hot weather really focused largely on the customer space community space.
And was pull forward from future years, it'll help us manage opportunities.
Opportunities to the extent there is mild weather.
But we remain focus despite the unique opportunity this year on cost management, and keeping them flat with kilowatt hour sales.
All right fair enough that's sounds good I'll leave it there. Thank you all very much. Thanks.
Thanks, Julien extra.
Our next question comes the line of Stephen Byrd with Morgan Stanley. Please proceed with your question.
Hi, Good morning, how are you it's David good Steven how are you doing great. Thank you I wanted to just step back and talk about your your generation plans here, it's great to see a pretty aggressive move towards renewable energy and I was just curious if we did see pretty aggressive federal legislation.
So including things like tax credits for solar and storage and maybe he be infrastructure and just other elements of things how much that might change.
Change your longer term planning or you know or may be near to mid term as well, but just if the word fairly generous federal incentives how that might shift your thinking.
Yeah Fair question I think at this point without knowing details of what those incentives look like I would say that it would likely just simply make the assets that we already intend on procuring in order to meet our clean energy commitment and potentially the commission's energy rules more affordable for customers.
But we'll just have to see what the details looked like in any potential legislation and then evaluate from there.
Yep.
Point, and then thinking about the just grid impacts of a more renewables you know theres always been this this hope that perhaps the western states could coordinate more closely in terms of grid operations. I know there has been an initiative underway for for many years do you see any particular changes there that might lead to be.
Great coordination among the western states.
Well.
Hi, Dan Hi, Stephen This is Daniel you know when you look at August and the capacity shortfalls in the corresponding elect a emergencies that were declared in a number of states I think it exacerbates the need for the.
Utilities in the states and the western interconnect to continue their work as it relates to better coordination better facility.
Facilitation of inter dependencies.
With the intended results of ensuring that we have reliability and that generation assets are fully leveraged in utilize across multiple jurisdictions. There is a number as you mentioned of working groups in play assessing those issues and I think over the next.
Six months to a year you will see some recommendations that will come forth that of some of those working group activities.
And Stephen we see that in our in the energy imbalance market and so there you know there is some coordination of that effort continues to develop.
Understood maybe just a last question for me I, just don't thinking through a fire risk I think your prepared remarks, you touched on a lot of important points.
Bigger picture as you think about just the impacts of climate change and the risk of from climate change.
How might that continue to kind of factor into your thinking on both both Capex and also how do we think about just the the sort of performance standards that you're required to meet I know your states very very different from California. In this regard I just want make should we kind of highlight some of those differences. So for example in in California, We think about certain vegetation management standard.
It's the the sort of standard for liability is.
Not great from a utility perspective, just curious if you wouldn't mind, just adding a little bit more as you think about climate change risk yes.
Yeah. So a lot of it is really focused around resilience and making.
Making sure that we for example, protect transmission lines that are bringing remote generation into the valley and you heard in my direct.
Comments, a lot of that we do with a vegetation management working at defensible space around Poles.
And so weve got targeted programs out there we continue to evaluate that we look closely at what other utilities in the west are doing to make sure that we are adapting any of the best practices that we can but when you look really broadly around climate impacts the importance is around resilience. So whether it's looking at like micro grids, which we've got it you might for the Marine Corps Air station.
Focusing on those kind of investments is well see how that ultimately translates as you look longer term, but that's that's been our focus is making sure. We've got a good resilient redundant systems. So that if we have a line go out because of a wildfire.
We've got alternative paths or alternative ways to serve the load.
That's really helpful. That's all I had thank you.
Thank you.
Our next question comes from the line of Insoo Kim with Goldman Sachs. Please proceed with your question.
Thank you My first question is on.
Just the renewable investments that you have lined out for 2021 2022, given this current rate case will likely conclude sometime in 2021.
And how much the assets and the absence of a writer mechanism will start type of and tracking mechanism for those type of investments.
What is the general offensive.
Planning for having to file the next rate case, you gave a couple of days.
Yeah. So thanks for the question that are largely depend on the outcome of this current case, so difficult to predict at this time, but to your point, we have been clear all along.
That we would intend on being able to seek concurrent recovery for clean energy investments, we think thats, the best outcome for customers and our ability to be able to procure at the rate and volume needed to meet our clean energy goals.
Got it.
And then in terms of the one then I think before the pull forward that you did this quarter.
He has some lower on and they are expecting after cobot happened. So is that incremental amount that seems like a poll for more.
Largely items that youre going to spend in 2021 that now because you're doing 2020, just gives you that flexibility.
To match.
I mentioned 2021.
Sure.
Yeah, I think the way to think about this as these are initiatives that we've had in the pipe is discretionary items that we would like to be able to execute on in future years that hot weather gave us the opportunity to do now and that gives US then further headroom in future years to the extent, we have mild weather than we can manage that accordingly.
Understood. Thank you.
Thanks, and so it makes sense.
Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question.
Hey, good morning, Dave.
Wonderful.
So my first question is going to do with the.
There are variety of proceedings and questions and what have you. So.
So she will design and indeed, the tool comparisons stuff.
When do you think those might be resolved will they be maybe result in the context of the rate case or.
Or before Raptor or do you have any sense as to how.
Those things might be eventually resolved.
And Paul This is Barbara Laughlin certainly there are some items in play in the current rate case that we do expect to be resolved.
Moderate changes potentially to rate design and.
We've been hanging around customer education, as well potentially things right and what the rates are now.
So that is in process and that will happen.
Outside of that we have made a commitment.
That were going to be.
Continuously communicating with the commission and our stakeholders as all of the.
Issues continue to evolve so we'll be talking to the commission.
Very regular basis being open meeting or.
Our individual updates for our stakeholders and that will continue as we seek to make progress on all of the issues with all of our stakeholders, including the commission.
[noise], Okay. So I guess, it's sort of stay tuned in.
And we'll see progress is I'm, just wondering whether or not.
There might be.
We might get some closure I guess with respect to this if there is any sort of timing on that or.
Is it just sort of a stay tuned kind of thing.
So certainly we think we've worked through the majority.
Issues that have been in play with respect to the rate comparison tool.
And while there may be some additional discussion from our perspective, we've taken all the steps that we've made an attempt to resolve that issue.
And anything remaining that will just be update in that respect so well.
We can't guarantee where things are.
Evolve from there, but we do believe that we have taken every action that we need to contend to resolve that issue and we've had numerous discussions about it and it should be nearing the end of that conversation.
Okay Awesome [laughter] I've been numerous so good it's good to hear so and then just on could you give us an update on on with this weather and everything else or where things stand on terms or rich customers.
But in everything what.
Well, how how how there how they're managing in terms of paying their bills.
Yeah, Paul I appreciate the question at this point, we monitor that closely but still expect.
That the allowance we set forth for 20 to 30 million is consistent with where everything things are coming in but we'll continue to monitor closely obviously as things evolve. We did feel it was appropriate to extend the disconnect moratorium through the end of the year. We think that's the right thing to do for our customers, but even given that extension we.
Leave that the allowance we have identified as appropriate.
And then.
With respect to the storage investigation and just in general I mean, I know you guys are looking into this you know this is obviously sort of something that you guys have been focusing on stuff any takeaways or any thoughts sort of about how you approach storage I mean, it's sort of just a one off thing and it doesn't really mean much.
Sure.
Maybe you know selection of vendors or I don't know do you have any sense or any takeaways that we might think about with the stores.
And you know just going forward.
Any thoughts or insights that you gained from from this process.
Yeah, Paul its Daniel and there's no doubt that off of our Mcmaken experience. We've learned a number of things quite a few things that we will put into play on a going forward basis.
Energy storage in order for us to meet our clean energy commitments and frankly.
As it relates to the energy rules that were discussed in and.
Tentatively agreed to yesterday at the commission.
Battery storage energy storage is a critical component of our ability to to meet those obligations.
Weve.
Expanded our internal knowledge off the mcmeekin event incredibly as it relates to design engineering safety protocols and mitigation steps.
Having our employ a number of consultants who are using on a going forward basis to help us assess vendor and product design technologies and again underlying systems, both mitigation and preventative and I have a high level of confidence that we are much better positioned today than we've ever been as it relates to understand.
Getting the technology is associated risks and are in a much better place as it relates to design engineering and safety protocols, we've learned quite a bit and I think we're we're in a pretty good place. Okay. I'm. Just was wondering if there is any sort of easy take away for us analysts who were not <unk>, who are doing anywhere near the kind of work you guys are in terms of any.
Sort of general sort of technological thing that that's it that's it that's it came up where there were maybe not a maybe its just too too detailed but I'm. Just wondering is there something.
That that you could share with us or.
Yeah, a couple of general themes or Paul can as we move forward we will consider.
Containerized, but not occupy a little as a design alternatives as a as compared to the occupied will containerized system that maybe mcmaken was.
I believe it will be changes I trust will be changes in both fire suppression and the arresting if you will of what's called thermal runaway when battery cells fail and we are moving forward under the absolute belief that sells will fail in the future and that we've got a design engineer and established safety protocols to deal with.
That may very well see some wet or dry standpipe installations as it relates to a water cooling mechanism as.
Mitigation infrastructure to deal with a thermal runaway.
Those are some of the things that weve extracted from the mic make an experience.
Okay, Great and then finally I was wondering if you wanted to to opine on what the election might bring us.
And of course I understand if you if you if you if you don't but are there any polling trends or anything yet.
You think we should be looking out for there or should we just wait a few tied to the job I.
I'd just wait.
I don't think you can see a lot right now.
Okay.
Thanks, so much thinking there thanks, a lot thanks Paul.
Our next question comes from the line of Sophie Karp with Keybanc. Please proceed with your question.
Hi, Good morning, Thank you for taking my question.
Sure I was just wondering yeah I'm just wondering about the rate case and as you know.
Barry Youre.
Bravo on what are some of the key items that you identified where you disagree with the staff of where you think there's room for.
And to move more towards the middle ground versus Commendation.
Sophie So we're in the middle of working on rebuttal testimony right now so probably not able to really go into a significant amount of detail about that but obviously, what we do as we look pretty carefully at the testimony that conversion. We see if there are issues in there inevitably are there some issues, where we're like you know what that's a good point.
And let's make an adjustment to that and then there are some issues, where we're going to try to clarify or explain what we meant in the initial filing.
And so we're not too far away from getting that rebuttal testimony filed I think you'll be able to see the highlights of where that is on November six.
When we make that I'm, so sorry, I can't be a lot more helpful. Right now on it but that's not too far down the road.
Thank you Yeah, I was kind of hoping to get some of these people are bad but [laughter].
I wanted to just make sure I understand the stance on that one right. So clearly you guys had a very good quarter with the weather help and you pulled forward some of that with them. So what is the reason that you didnt pull forward more is that strictly driven by the customer reconsideration trying to balance the or NAV per megawatt.
Oh, we're or was it just not enough projects in the pipeline that the Lee who will go forward if you will.
Yes, Okay. I appreciate the question I I think there's many factors that go into that evaluation, but we want to make sure that we are.
Balance or projects that are immediately add value that we can execute a and that our prioritized amongst a myriad of criteria as we rank in order every project that that we planned for and decide to fund. So it really just went through our normal prioritization and and ranking exercise and we pulled forward initiatives that we have.
<unk> are prudent and could have an immediate impact, particularly in the customer experience and customer focus space.
Got it thank you.
Thank you so thanks Harvey.
Our next question comes from the line of Charles Fishman with Morningstar. Please proceed with your question.
Hi, I'm just wanted to follow up on the battery storage or make sure.
Hi, I'm up to date on this that facility that had the incident.
Has still not been energized am I correct about that I mean, you've never.
Great completed all the repair and felt that it was ER and the condition you could start using it again correct.
Charles This is Daniel that is correct. It has not been a re commissioned and it will not be re commissioned we're working with the vendor on make whole remedies as it relates to our contractual arrangements.
Okay, and then specific to you know again following up on battery storage I would think or.
Tell me if my assumption is correct or not.
Extremely hot weather creates some challenges for hps with respect to battery storage there may be a typical utility doesn't.
He says that the is that true.
Again, Charles this is Daniel I know, that's not quite true the containerized systems, our air conditioned and cooled to certain optimal operating temperatures and so Arizona is high summer time. He does not introduced any additional risk as it relates to the underlying technology.
Okay. So it sounds like you're going to have battery storage. It's just a question of.
Maybe different technology and.
Some advancements that occur correct.
Yes will employ the learnings off of MC MC in other learnings.
From the general industry and technology development that have occurred since MC MC in and be prepared to move forward with.
What we believe to be a superior engineering design instead of safety systems to ensure battery success moving forward.
Okay. That's very helpful. Thanks, Daniel that's all I have thanks.
Thanks Charles.
Our next question comes from the line of sharper easy with Guggenheim. Please proceed with your question.
Hey, guys. Good morning, its actually James for sure.
Hey, David.
Just one quick question about the energy rules I could just follow on the earlier ones.
There was some discussion from one commissioner I think about including Us spending Paul.
I'm just wondering if you could give us a little bit of background on that and then do you see something like that actually getting into the final package at this point.
Hi, James This is Barbara Laughlin, Yes Commissioner Olson and Commissioner Olson is.
I am not a supporter of any sort of clean energy requirement and so he was attempting to.
Insert.
A requirement that consistent.
Consistent with his philosophy that it should only be low cost resource that's the only guiding force for energy and resource investment across the board. So it was not supported.
And one other commissioner and it was not.
To to vote. So I would be very surprised if there is any support on a going forward basis for that sort of cap I haven't.
Having said that we do have an election next week and depending on the outcome of that there could be a different perspective, but as it sits today, we believe dashed frac support for these clean energy and that sort of requirement is not going to be successful attached are incorporated equals.
Okay, and then just the the schedule for Finalization of the package I guess, they set a date yet.
Have James Good question and they have not set a date yet.
You were listening yesterday they voted on.
At work there they actually.
I don't.
Recessed before they.
Voted final package and that was because they needed to put together the final package and all the conforming.
Sure It was exactly what they wanted to vote on it.
And as a chairman indicated when they had that package.
And then.
So we don't have any indication as to when that's going to be but we do think it will be relatively soon that they would like to get it done.
He said that keep in mind. This is a key goal downturn.
So there will be another though.
For these rules become final and effect and that will happen.
Yeah.
Okay. Thank you very much that's it from me thanks, guys. It would we get better access.
Thank you we have no further questions at this time I would now like to turn the floor back over to management for closing comments.
Thank you for joining us today this concludes our call.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.