Arizona Public Service parent company Pinnacle West Capital on Thursday said mild weather during June was primarily responsible for lower second-quarter earnings, along with higher operating and maintenance costs.
Pinnacle West reported consolidated net income of $106.7 million for the second quarter, compared with $164.3 million in the same period last year. Record heat in July and a recent settlement at the Arizona Corporation Commission led the company to raise full-year guidance, however.
"June of 2023 was the mildest since 2009 with an average daily temperature slightly below 90 degrees,” Chief Financial Officer Andrew Cooper said during an earnings call with analysts. That resulted in a $0.25/share year-over-year “drag from weather compared to Q2 last year.”
Increases in non-nuclear generation operating costs and higher transmission, distribution and customer service costs, also impacted results. Higher interest charges and other financial factors also pulled down earnings, though some of the impact was offset by higher transmission revenues.
Looking ahead, officials said there is reason for optimism. “July weather was record-breaking,” Cooper said.
Phoenix, where APS serves most of its customers, experienced a record number of consecutive days of over 110 degrees in July, according to Pinnacle West Chairman and CEO Jeff Guldner.
“The APS team served its customers with top-tier reliability throughout it all. In fact, we broke our previous peak demand record multiple times this July, reaching a new all-time record on July 20 at nearly 8,200 MW,” Guldner said. “That's a 500-MW increase compared to our prior record that was set in 2020.”
Pinnacle West has also updated its full-year earnings guidance to take into account a settlement reached between APS and state regulators, allowing the utility to raise rates to recover its investment in pollution controls at the Four Corners coal plant. The agreement allows the utility to earn a higher rate of return on its investments.
Following the settlement, on July 1 the utility “began collecting a corresponding surcharge with an annualized impact of approximately $52.5 million,” Cooper said.
Taking into account the surcharge, trends towards higher O&M costs and July’s hot weather, “we now expect our new [earnings per share] guidance range to be $4.10 to $4.30 per share for the year,” Cooper said, up from $3.95 to $4.15 per share.