Profits cool a bit for APS
Cooler weather and less need for air conditioners this year have cut into profits at Pinnacle West Capital Corp., the parent company of APS.
Nice weather and less need for air conditioners this year have cut into profits at the parent company of Arizona Public Service Co., Pinnacle West Capital Corp., which also said it will delay big battery projects following an April fire.
Pinnacle West said Thursday that profits for the April-June quarter fell 14% to $144.1 million, or $1.28 per share. That compares with $166.7 million, or $1.48 per share, in the same quarter a year ago.
The $22.3 million drop in the secondquarter profits reported Thursday more than offsets the $14.7 million jump Pinnacle West saw in the first quarter. That jump also was attributed to cool weather, but it was earlier in the year and meant customers used more electric heat than usual.
APS also will delay more than $1 billion in investments in large batteries to store energy on the power grid following an April battery fire, which injured eight firefighters and a police officer in the West Valley.
The cause of that fire still is unknown, President/CEO Don Brandt told investors on a conference call Thursday.
The fire came just months after APS announced that it would make major investments in batteries paired with solar plants around the state, saying batteries have become the cheapest way to meet power demand.
“We will temporarily be delaying our investments in new battery storage resources to incorporate our learnings from this instance,” Brandt said.
Among the delayed projects are a 100-megawatt solar plant with a 100megawatt battery. One megawatt is enough to supply about 250 homes with power.
APS had planned to install an additional 850 megawatts of batteries around the state by 2025.
APS still will spend the money planned for batteries, just on different projects, Brandt said.
APS said on July 29 it would issue requests for proposals from developers to build as much as 150 megawatts of solar, where batteries could later be added, and 250 megawatts of wind power.
“I want to reinforce that we remain committed to investing in new clean energy resources,” Brandt said.
After the April fire, APS said it had a team of about 30 people investigating the fire at the McMicken Energy Storage facility near Grand Avenue and Deer Valley Road.
A report released this week by fire officials said a cause had not been determined.
The fire was in a 2-megawatt battery. It is one of two that APS installed two years ago to help accommodate large amounts of rooftop solar power on the grid. The other battery is in the Festival Ranch neighborhood, about 10 miles west of the Loop 303 off Bell Road.
Brandt said the delay is a “responsible pause” to give the company time to understand what happened with the fire, which was the second time a large APS battery burned. The other was in Flagstaff in 2012.
Analysts on the conference call Thursday asked about a $3 per month average rate increase APS expected would be in place by earlier this year.
The increase is tied to upgrades APS made at the coal-fired Four Corners Power Plant near Farmington, New Mexico.
The increase was delayed by a rate challenge that was closed since the last APS earnings update. State regulators’ decision to close the complaint, which sought to reduce electric rates, eliminated one threat to earnings.
The complaint came from a citizen activist named Stacey Champion, who got thousands of signatures on her petition for regulators to reverse the 2017 rate hike.
Amid Champion’s complaint, commissioners voted to force APS to file a new rate case by Oct. 31 this year. APS officials are unsure if the Four Corners rate increase will be voted on before then or rolled into the new rate case.
Champion’s efforts ultimately failed to rescind the rate hike, but the more than yearlong proceedings uncovered a variety of facts regarding APS rates that commissioners said they found troubling.
Among them was that more than half the company’s 1.1 million customers are not on their most economical rate plan.
Some might chose a less cost-effective plan to avoid complex rate plans with multiple parts, while others might just be unaware of the options.
Commissioners and the administrative-law judge who oversaw the complaint said APS could have done a better job explaining the rate hike to customers.
And while the rate hike was described as averaging $6 a month, or about 4.5%, on residential customers, the way that figure was calculated was hotly debated.
APS says it increased “base rates” by 15.9% in September 2017. The company also planned an 11.36% decrease in seven “adjustors,” or line items on bills for things like energy efficiency, emissions controls on power plants, renewable energy and transmission lines.
But while base rates went up immediately in September 2017, the adjustors did not. Those schedules are tied to separate proceedings at the commission.
So, the average net bill increase customers saw on their first bills after the rate hike was more than 4.5%.
But even that number is misleading because APS officials explained during the proceedings that more than 300,000 customers were expected to have bill increases of 10.8% or more. Many others had increases smaller than 4.5%, which is how that average figure was reported.
Those are not even the most extreme examples. APS estimates show at least one customer was expected to have an 81% drop in average costs as a result of the changes, while six unlucky customers were predicted to see their bills increase 95%.
Often such details are revealed in a rate case, but in the APS case in 2017, several parties entered confidential settlement talks with the utility.
On the day the commissioners voted to approve the hike, they asked no questions regarding the rate impacts or how the change would affect different customers.