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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (33720)	10/12/2021 9:15:58 AM
From: E_K_S	1 Recommendation Recommended By Kip S Read Replies (2) \| Respond to of 34328

Pinnacle West shares tumble after regulators slash returns in rate case Pinnacle West Capital Corp (PNW) from SNL Energy Finance Daily Pinnacle West shares tumble after regulators slash returns in rate case Byline: Allison Good Pinnacle West Capital Corp. shares tumbled more than 6% in midday trading Oct. 7 after state regulators voted to slash subsidiary *Arizona Public Service Co.'s return on equity to 8.7% from 10.0%,* a reduction described by some analysts as "draconian." By the end of the trading day, Pinnacle West stock dropped more than 8%, closing at $68.19 on nearly five times average volume. Arizona Public Service sought a 10% return on equity that would translate to a $40.2 million base rate increase. In August, an administrative law judge recommended a 9.16% ROE that would have required the utility to implement a $111.4 million rate reduction. The 4-1 vote by the Arizona Corporation Commission on Oct. 6 after three days of hearings reduced the ROE further. (Docket No. E-01345A-19-0236) Explaining the decision, Commissioner Justin Olson cited "poor customer education, implementation, the challenges with the rate design tool, and the calculation of recommended rate and so on and so forth," according to a report by Phoenix news station ABC15. A similar amendment that would have cut the return for Arizona Public Service even further reportedly failed by a vote of 4-1. Ahead of the vote, Pinnacle West Chairman, President and CEO Jeffrey Guldner reportedly told commissioners any ROE reduction below 9.1% would impair the utility's ability to make investments to accommodate the population and economic growth of its service territory. Sector analysts at Guggenheim Securities LLC and Wells Fargo Securities LLC said the commission's decision jeopardizes ratepayers' interests. "The Commission has voted to adopt amendments which would cause an already overly punitive [recommended opinion and order] to become draconian," Guggenheim analysts wrote in an Oct. 7 report. "Arizona Corporation Commission is now confirmed to be the single most value destructive regulatory environment in the country as far as investor-owned utilities are concerned," Guggenheim's analysts continued. "Rather than positioning itself as a steward of good public policy and a guardian of ratepayers' interests, as is often the case in other states, the [Arizona Corporation Commission] does not appear to take a cooperative approach to the companies it regulates, and worse, seems to misconstrue the fundamentals of utility ratemaking." In a separate vote, the commission also delayed a decision on whether Arizona Public Service can recover the costs of installing selective catalytic reduction equipment at the 1,540-MW Four Corners coal-fired plant , which Wells Fargo analysts noted as "another sign of continued deterioration in the Arizona regulatory environment." "While in our view the circumstances were somewhat unique (customer service issues, last major coal investment, pandemic backdrop), we think the sum of the [Arizona Corporation Commission's] decisions push the bounds of onerous rate case outcomes," they wrote in an Oct. 6 note. Guldner said during the company's Aug. 5 second-quarter earnings call that disallowing the deferral and investment, which the administrative law judge recommended, would compromise reliability. "If we didn't have the capacity out of Four Corners, there's nothing else in the West," Guldner said. "There's nothing else that we could go get. There's no other resource that we could use to keep the lights on. ... That's why I'm struggling in particular with this recommendation. It has been clearly demonstrated over the last two summers as not just used and useful but necessary from a capacity basis in the face of a bunch of challenges around capacity."