☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number | Exact Name of Each Registrant as specified in its charter; State of Incorporation; Address; and Telephone Number | IRS Employer Identification No. | ||
1-8962 | PINNACLE WEST CAPITAL CORPORATION (an Arizona corporation) 400 North Fifth Street, P.O. Box 53999 Phoenix, Arizona 85072-3999 (602) 250-1000 | 86-0512431 | ||
1-4473 | ARIZONA PUBLIC SERVICE COMPANY (an Arizona corporation) 400 North Fifth Street, P.O. Box 53999 Phoenix, Arizona 85072-3999 (602) 250-1000 | 86-0011170 |
Yes ☒ No ☐ | |
Yes ☒ No ☐ |
PINNACLE WEST CAPITAL CORPORATION | Yes ☒ No ☐ |
ARIZONA PUBLIC SERVICE COMPANY | Yes ☒ No ☐ |
Large accelerated filer ☒ | Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company ☐ |
Emerging growth company ☐ |
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☐ |
Emerging growth company ☐ |
PINNACLE WEST CAPITAL CORPORATION | Yes ☐ No ☒ |
ARIZONA PUBLIC SERVICE COMPANY | Yes ☐ No ☒ |
PINNACLE WEST CAPITAL CORPORATION | Number of shares of common stock, no par value, outstanding as of April 24, 2019: 112,277,359 |
ARIZONA PUBLIC SERVICE COMPANY | Number of shares of common stock, $2.50 par value, outstanding as of April 24, 2019: 71,264,947 |
Page | |||
• | our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels; |
• | variations in demand for electricity, including those due to weather, seasonality, the general economy, customer and sales growth (or decline), and the effects of energy conservation measures and distributed generation; |
• | power plant and transmission system performance and outages; |
• | competition in retail and wholesale power markets; |
• | regulatory and judicial decisions, developments and proceedings; |
• | new legislation, ballot initiatives and regulation, including those relating to environmental requirements, regulatory policy, nuclear plant operations and potential deregulation of retail electric markets; |
• | fuel and water supply availability; |
• | our ability to achieve timely and adequate rate recovery of our costs, including returns on and of debt and equity capital investment; |
• | our ability to meet renewable energy and energy efficiency mandates and recover related costs; |
• | risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty; |
• | current and future economic conditions in Arizona, including in real estate markets; |
• | the direct or indirect effect on our facilities or business from cybersecurity threats or intrusions, data security breaches, terrorist attack, physical attack, severe storms, droughts, or other catastrophic events, such as fires, explosions, pandemic health events or similar occurrences; |
• | the development of new technologies which may affect electric sales or delivery; |
• | the cost of debt and equity capital and the ability to access capital markets when required; |
• | environmental, economic and other concerns surrounding coal-fired generation, including regulation of greenhouse gas emissions; |
• | volatile fuel and purchased power costs; |
• | the investment performance of the assets of our nuclear decommissioning trust, pension, and other postretirement benefit plans and the resulting impact on future funding requirements; |
• | the liquidity of wholesale power markets and the use of derivative contracts in our business; |
• | potential shortfalls in insurance coverage; |
• | new accounting requirements or new interpretations of existing requirements; |
• | generation, transmission and distribution facility and system conditions and operating costs; |
• | the ability to meet the anticipated future need for additional generation and associated transmission facilities in our region; |
• | the willingness or ability of our counterparties, power plant participants and power plant land owners to meet contractual or other obligations or extend the rights for continued power plant operations; and |
• | restrictions on dividends or other provisions in our credit agreements and Arizona Corporation Commission ("ACC") orders. |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
OPERATING REVENUES (NOTE 2) | $ | $ | ||||||
OPERATING EXPENSES | ||||||||
Fuel and purchased power | ||||||||
Operations and maintenance | ||||||||
Depreciation and amortization | ||||||||
Taxes other than income taxes | ||||||||
Other expenses | ||||||||
Total | ||||||||
OPERATING INCOME | ||||||||
OTHER INCOME (DEDUCTIONS) | ||||||||
Allowance for equity funds used during construction | ||||||||
Pension and other postretirement non-service credits - net | ||||||||
Other income (Note 9) | ||||||||
Other expense (Note 9) | ( | ) | ( | ) | ||||
Total | ||||||||
INTEREST EXPENSE | ||||||||
Interest charges | ||||||||
Allowance for borrowed funds used during construction | ( | ) | ( | ) | ||||
Total | ||||||||
INCOME BEFORE INCOME TAXES | ||||||||
INCOME TAXES | ( | ) | ||||||
NET INCOME | ||||||||
Less: Net income attributable to noncontrolling interests (Note 6) | ||||||||
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | $ | ||||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING — BASIC | ||||||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING — DILUTED | ||||||||
EARNINGS PER WEIGHTED-AVERAGE COMMON SHARE OUTSTANDING | ||||||||
Net income attributable to common shareholders — basic | $ | $ | ||||||
Net income attributable to common shareholders — diluted | $ | $ | ||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
NET INCOME | $ | $ | |||||
OTHER COMPREHENSIVE INCOME, NET OF TAX | |||||||
Derivative instruments: | |||||||
Net unrealized loss, net of tax expense of $0 and $96 | ( | ) | |||||
Reclassification of net realized loss, net of tax benefit of $108 and $82 | |||||||
Pension and other postretirement benefits activity, net of tax expense of $288 and $443 | |||||||
Total other comprehensive income | |||||||
COMPREHENSIVE INCOME | |||||||
Less: Comprehensive income attributable to noncontrolling interests | |||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | $ | |||||
Customer and other receivables | |||||||
Accrued unbilled revenues | |||||||
Allowance for doubtful accounts | ( | ) | ( | ) | |||
Materials and supplies (at average cost) | |||||||
Fossil fuel (at average cost) | |||||||
Assets from risk management activities (Note 7) | |||||||
Deferred fuel and purchased power regulatory asset (Note 4) | |||||||
Other regulatory assets (Note 4) | |||||||
Other current assets | |||||||
Total current assets | |||||||
INVESTMENTS AND OTHER ASSETS | |||||||
Nuclear decommissioning trust (Notes 11 and 12) | |||||||
Other special use funds (Notes 11 and 12) | |||||||
Other assets | |||||||
Total investments and other assets | |||||||
PROPERTY, PLANT AND EQUIPMENT | |||||||
Plant in service and held for future use | |||||||
Accumulated depreciation and amortization | ( | ) | ( | ) | |||
Net | |||||||
Construction work in progress | |||||||
Palo Verde sale leaseback, net of accumulated depreciation (Note 6) | |||||||
Intangible assets, net of accumulated amortization | |||||||
Nuclear fuel, net of accumulated amortization | |||||||
Total property, plant and equipment | |||||||
DEFERRED DEBITS | |||||||
Regulatory assets (Note 4) | |||||||
Operating lease right-of-use assets (Note 16) | |||||||
Assets for other postretirement benefits (Note 5) | |||||||
Other | |||||||
Total deferred debits | |||||||
TOTAL ASSETS | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable | $ | $ | |||||
Accrued taxes | |||||||
Accrued interest | |||||||
Common dividends payable | |||||||
Short-term borrowings (Note 3) | |||||||
Current maturities of long-term debt (Note 3) | |||||||
Customer deposits | |||||||
Liabilities from risk management activities (Note 7) | |||||||
Liabilities for asset retirements | |||||||
Operating lease liabilities (Note 16) | |||||||
Regulatory liabilities (Note 4) | |||||||
Other current liabilities | |||||||
Total current liabilities | |||||||
LONG-TERM DEBT LESS CURRENT MATURITIES (Note 3) | |||||||
DEFERRED CREDITS AND OTHER | |||||||
Deferred income taxes | |||||||
Regulatory liabilities (Note 4) | |||||||
Liabilities for asset retirements | |||||||
Liabilities for pension benefits (Note 5) | |||||||
Liabilities from risk management activities (Note 7) | |||||||
Customer advances | |||||||
Coal mine reclamation | |||||||
Deferred investment tax credit | |||||||
Unrecognized tax benefits | |||||||
Operating lease liabilities (Note 16) | |||||||
Other | |||||||
Total deferred credits and other | |||||||
COMMITMENTS AND CONTINGENCIES (SEE NOTE 8) | |||||||
EQUITY | |||||||
Common stock, no par value; authorized 150,000,000 shares, 112,340,322 and 112,159,896 issued at respective dates | |||||||
Treasury stock at cost; 63,271 and 58,135 shares at respective dates | ( | ) | ( | ) | |||
Total common stock | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total shareholders’ equity | |||||||
Noncontrolling interests (Note 6) | |||||||
Total equity | |||||||
TOTAL LIABILITIES AND EQUITY | $ | $ |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization including nuclear fuel | |||||||
Deferred fuel and purchased power | ( | ) | |||||
Deferred fuel and purchased power amortization | |||||||
Allowance for equity funds used during construction | ( | ) | ( | ) | |||
Deferred income taxes | ( | ) | |||||
Deferred investment tax credit | ( | ) | ( | ) | |||
Stock compensation | |||||||
Changes in current assets and liabilities: | |||||||
Customer and other receivables | |||||||
Accrued unbilled revenues | ( | ) | |||||
Materials, supplies and fossil fuel | ( | ) | ( | ) | |||
Other current assets | ( | ) | ( | ) | |||
Accounts payable | ( | ) | |||||
Accrued taxes | |||||||
Other current liabilities | ( | ) | ( | ) | |||
Change in other long-term assets | ( | ) | ( | ) | |||
Change in other long-term liabilities | ( | ) | |||||
Net cash flow provided by operating activities | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Capital expenditures | ( | ) | ( | ) | |||
Contributions in aid of construction | |||||||
Allowance for borrowed funds used during construction | ( | ) | ( | ) | |||
Proceeds from nuclear decommissioning trust sales and other special use funds | |||||||
Investment in nuclear decommissioning trust and other special use funds | ( | ) | ( | ) | |||
Other | ( | ) | |||||
Net cash flow used for investing activities | ( | ) | ( | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Issuance of long-term debt | |||||||
Short-term borrowing and payments — net | |||||||
Short-term debt borrowings under revolving credit facility | |||||||
Short-term debt repayments under revolving credit facility | ( | ) | ( | ) | |||
Dividends paid on common stock | ( | ) | ( | ) | |||
Repayment of long-term debt | ( | ) | |||||
Common stock equity issuance - net of purchases | ( | ) | ( | ) | |||
Net cash flow provided by financing activities | |||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | |||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ |
Common Stock | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance, January 1, 2018 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||
Dividends on common stock | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||||
Issuance of common stock | — | — | — | — | |||||||||||||||||||||||||
Purchase of treasury stock (a) | — | ( | ) | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Reissuance of treasury stock for stock-based compensation and other | — | — | |||||||||||||||||||||||||||
Reclassification of income tax effects related to new tax reform (b) | — | — | ( | ) | — | — | |||||||||||||||||||||||
Balance, March 31, 2018 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Balance, January 1, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||
Dividends on common stock | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||||
Issuance of common stock | — | — | — | — | |||||||||||||||||||||||||
Purchase of treasury stock (a) | — | ( | ) | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Reissuance of treasury stock for stock-based compensation and other | — | — | |||||||||||||||||||||||||||
Balance, March 31, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ |
(a) |
(b) |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
OPERATING REVENUES | $ | $ | ||||||
OPERATING EXPENSES | ||||||||
Fuel and purchased power | ||||||||
Operations and maintenance | ||||||||
Depreciation and amortization | ||||||||
Taxes other than income taxes | ||||||||
Other expenses | ||||||||
Total | ||||||||
OPERATING INCOME | ||||||||
OTHER INCOME (DEDUCTIONS) | ||||||||
Allowance for equity funds used during construction | ||||||||
Pension and other postretirement non-service credits - net | ||||||||
Other income (Note 9) | ||||||||
Other expense (Note 9) | ( | ) | ( | ) | ||||
Total | ||||||||
INTEREST EXPENSE | ||||||||
Interest charges | ||||||||
Allowance for borrowed funds used during construction | ( | ) | ( | ) | ||||
Total | ||||||||
INCOME BEFORE INCOME TAXES | ||||||||
INCOME TAXES | ||||||||
NET INCOME | ||||||||
Less: Net income attributable to noncontrolling interests (Note 6) | ||||||||
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDER | $ | $ |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
NET INCOME | $ | $ | |||||
OTHER COMPREHENSIVE INCOME, NET OF TAX | |||||||
Derivative instruments: | |||||||
Net unrealized loss, net of tax expense of $0 and $96 | ( | ) | |||||
Reclassification of net realized loss, net of tax benefit of $108 and $82 | |||||||
Pension and other postretirement benefits activity, net of tax expense of $247 and $306 | |||||||
Total other comprehensive income | |||||||
COMPREHENSIVE INCOME | |||||||
Less: Comprehensive income attributable to noncontrolling interests | |||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDER | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
PROPERTY, PLANT AND EQUIPMENT | |||||||
Plant in service and held for future use | $ | $ | |||||
Accumulated depreciation and amortization | ( | ) | ( | ) | |||
Net | |||||||
Construction work in progress | |||||||
Palo Verde sale leaseback, net of accumulated depreciation (Note 6) | |||||||
Intangible assets, net of accumulated amortization | |||||||
Nuclear fuel, net of accumulated amortization | |||||||
Total property, plant and equipment | |||||||
INVESTMENTS AND OTHER ASSETS | |||||||
Nuclear decommissioning trust (Notes 11 and 12) | |||||||
Other special use funds (Notes 11 and 12) | |||||||
Other assets | |||||||
Total investments and other assets | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | |||||||
Customer and other receivables | |||||||
Accrued unbilled revenues | |||||||
Allowance for doubtful accounts | ( | ) | ( | ) | |||
Materials and supplies (at average cost) | |||||||
Fossil fuel (at average cost) | |||||||
Assets from risk management activities (Note 7) | |||||||
Deferred fuel and purchased power regulatory asset (Note 4) | |||||||
Other regulatory assets (Note 4) | |||||||
Other current assets | |||||||
Total current assets | |||||||
DEFERRED DEBITS | |||||||
Regulatory assets (Note 4) | |||||||
Operating lease right-of-use assets (Note 16) | |||||||
Assets for other postretirement benefits (Note 5) | |||||||
Other | |||||||
Total deferred debits | |||||||
TOTAL ASSETS | $ | $ |
March 31, 2019 | December 31, 2018 | ||||||
LIABILITIES AND EQUITY | |||||||
CAPITALIZATION | |||||||
Common stock | $ | $ | |||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total shareholder equity | |||||||
Noncontrolling interests (Note 6) | |||||||
Total equity | |||||||
Long-term debt less current maturities (Note 3) | |||||||
Total capitalization | |||||||
CURRENT LIABILITIES | |||||||
Short-term borrowings (Note 3) | |||||||
Current maturities of long-term debt (Note 3) | |||||||
Accounts payable | |||||||
Accrued taxes | |||||||
Accrued interest | |||||||
Common dividends payable | |||||||
Customer deposits | |||||||
Liabilities from risk management activities (Note 7) | |||||||
Liabilities for asset retirements | |||||||
Operating lease liabilities (Note 16) | |||||||
Regulatory liabilities (Note 4) | |||||||
Other current liabilities | |||||||
Total current liabilities | |||||||
DEFERRED CREDITS AND OTHER | |||||||
Deferred income taxes | |||||||
Regulatory liabilities (Note 4) | |||||||
Liabilities for asset retirements | |||||||
Liabilities for pension benefits (Note 5) | |||||||
Liabilities from risk management activities (Note 7) | |||||||
Customer advances | |||||||
Coal mine reclamation | |||||||
Deferred investment tax credit | |||||||
Unrecognized tax benefits | |||||||
Operating lease liabilities (Note 16) | |||||||
Other | |||||||
Total deferred credits and other | |||||||
COMMITMENTS AND CONTINGENCIES (SEE NOTE 8) | |||||||
TOTAL LIABILITIES AND EQUITY | $ | $ |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization including nuclear fuel | |||||||
Deferred fuel and purchased power | ( | ) | |||||
Deferred fuel and purchased power amortization | |||||||
Allowance for equity funds used during construction | ( | ) | ( | ) | |||
Deferred income taxes | ( | ) | |||||
Deferred investment tax credit | ( | ) | ( | ) | |||
Changes in current assets and liabilities: | |||||||
Customer and other receivables | |||||||
Accrued unbilled revenues | ( | ) | |||||
Materials, supplies and fossil fuel | ( | ) | ( | ) | |||
Other current assets | ( | ) | ( | ) | |||
Accounts payable | ( | ) | |||||
Accrued taxes | |||||||
Other current liabilities | ( | ) | ( | ) | |||
Change in other long-term assets | ( | ) | |||||
Change in other long-term liabilities | ( | ) | |||||
Net cash flow provided by operating activities | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Capital expenditures | ( | ) | ( | ) | |||
Contributions in aid of construction | |||||||
Allowance for borrowed funds used during construction | ( | ) | ( | ) | |||
Proceeds from nuclear decommissioning trust sales and other special use funds | |||||||
Investment in nuclear decommissioning trust and other special use funds | ( | ) | ( | ) | |||
Other | ( | ) | ( | ) | |||
Net cash flow used for investing activities | ( | ) | ( | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Issuance of long-term debt | |||||||
Short-term borrowings and payments — net | |||||||
Short-term debt borrowings under revolving credit facility | |||||||
Short-term debt repayments under revolving credit facility | ( | ) | |||||
Repayment of long-term debt | ( | ) | |||||
Dividends paid on common stock | ( | ) | ( | ) | |||
Net cash flow provided by financing activities | |||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | |||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ |
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balance, January 1, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net income | — | — | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | ||||||||||||||||||||||
Other | — | — | — | — | ||||||||||||||||||||||
Reclassification of income tax effects related to new tax reform (a) | — | — | ( | ) | — | — | ||||||||||||||||||||
Balance, March 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Balance, January 1, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net income | — | — | — | |||||||||||||||||||||||
Other comprehensive income | — | — | — | — | ||||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | $ | ( | ) | $ | $ |
(a) | In 2018, the Company adopted new accounting guidance and elected to reclassify income tax effects of the Tax Act on items within accumulated other comprehensive income to retained earnings. |
1. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Cash paid during the period for: | |||||||
Income taxes, net of refunds | $ | $ | |||||
Interest, net of amounts capitalized | |||||||
Significant non-cash investing and financing activities: | |||||||
Accrued capital expenditures | $ | $ | |||||
Right-of-use operating lease assets obtained in exchange for operating lease liabilities |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Cash paid during the period for: | |||||||
Income taxes, net of refunds | $ | $ | |||||
Interest, net of amounts capitalized | |||||||
Significant non-cash investing and financing activities: | |||||||
Accrued capital expenditures | $ | $ | |||||
Right-of-use operating lease assets obtained in exchange for operating lease liabilities |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Retail residential electric service | $ | $ | ||||||
Retail non-residential electric service | ||||||||
Wholesale energy sales | ||||||||
Transmission services for others | ||||||||
Other sources | ||||||||
Total operating revenues | $ | $ |
3. |
As of March 31, 2019 | As of December 31, 2018 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Pinnacle West | $ | $ | $ | $ | |||||||||||
APS | |||||||||||||||
Total | $ | $ | $ | $ |
4. |
• | an agreement by APS not to file another general retail rate case application before June 1, 2019; |
• | an authorized return on common equity of |
• | a capital structure comprised of |
• | a cost deferral order for potential future recovery in APS’s next general retail rate case for the construction and operating costs APS incurs for its Ocotillo modernization project; |
• | a cost deferral and procedure to allow APS to request rate adjustments prior to its next general retail rate case related to its share of the construction costs associated with installing selective catalytic reduction ("SCR") equipment at the Four Corners Power Plant ("Four Corners"); |
• | a deferral for future recovery (or credit to customers) of the Arizona property tax expense above or below a specified test year level caused by changes to the applicable Arizona property tax rate; |
• | an expansion of the Power Supply Adjustor (“PSA”) to include certain environmental chemical costs and third-party battery storage costs; |
• | a new AZ Sun II program (now known as "APS Solar Communities") for utility-owned solar distributed generation with the purpose of expanding access to rooftop solar for low and moderate income Arizonans, recoverable through the Arizona Renewable Energy Standard and Tariff ("RES"), to be no less than $ |
• | an increase to the per kWh cap for the environmental improvement surcharge from $ |
• | rate design changes, including: |
▪ | a change in the on-peak time of use period from noon - 7 p.m. to 3 p.m. - 8 p.m. Monday through Friday, excluding holidays; |
▪ | non-grandfathered distributed generation ("DG") customers would be required to select a rate option that has time of use rates and either a new grid access charge or demand component; |
▪ | a Resource Comparison Proxy (“RCP”) for exported energy of |
• | an agreement by APS not to pursue any new self-build generation (with certain exceptions) having an in-service date prior to January 1, 2022 (extended to December 31, 2027 for combined-cycle generating units), unless expressly authorized by the ACC. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Beginning balance | $ | $ | |||||
Deferred fuel and purchased power costs — current period | ( | ) | |||||
Amounts charged to customers | ( | ) | ( | ) | |||
Ending balance | $ | $ |
• | Customers who have interconnected a DG system or submitted an application for interconnection for DG systems prior to September 1, 2017, based on APS's 2017 Rate Case Decision, will be grandfathered for a period of |
• | Customers with DG solar systems are to be considered a separate class of customers for ratemaking purposes; and |
• | Once an export price is set for APS, no netting or banking of retail credits will be available for new DG customers, and the then-applicable export price will be guaranteed for new customers for a period of |
Amortization Through | March 31, 2019 | December 31, 2018 | |||||||||||||||
Current | Non-Current | Current | Non-Current | ||||||||||||||
Pension | (a) | $ | $ | $ | $ | ||||||||||||
Retired power plant costs | 2033 | ||||||||||||||||
Income taxes — allowance for funds used during construction ("AFUDC") equity | 2049 | ||||||||||||||||
Deferred fuel and purchased power — mark-to-market (Note 7) | 2023 | ||||||||||||||||
Deferred fuel and purchased power (b) (c) | 2020 | ||||||||||||||||
Four Corners cost deferral | 2024 | ||||||||||||||||
Income taxes — investment tax credit basis adjustment | 2047 | ||||||||||||||||
Lost fixed cost recovery (b) | 2020 | ||||||||||||||||
Palo Verde VIEs (Note 6) | 2046 | ||||||||||||||||
Deferred compensation | 2036 | ||||||||||||||||
Deferred property taxes | 2027 | ||||||||||||||||
Loss on reacquired debt | 2038 | ||||||||||||||||
Tax expense of Medicare subsidy | 2024 | ||||||||||||||||
TCA balancing account (b) | 2020 | ||||||||||||||||
AG-1 deferral | 2022 | ||||||||||||||||
Mead-Phoenix transmission line CIAC | 2050 | ||||||||||||||||
Coal reclamation | 2026 | ||||||||||||||||
SCR deferral | N/A | ||||||||||||||||
Tax expense adjuster mechanism (c) | 2019 | ||||||||||||||||
Other | Various | ||||||||||||||||
Total regulatory assets (d) | $ | $ | $ | $ |
(a) | This asset represents the future recovery of pension benefit obligations through retail rates. If these costs are disallowed by the ACC, this regulatory asset would be charged to other comprehensive income ("OCI") and result in lower future revenues. |
(b) | See "Cost Recovery Mechanisms" discussion above. |
(c) | Subject to a carrying charge. |
(d) |
Amortization Through | March 31, 2019 | December 31, 2018 | |||||||||||||||
Current | Non-Current | Current | Non-Current | ||||||||||||||
Excess deferred income taxes - ACC - Tax Cuts and Jobs Act | (a) | $ | $ | $ | $ | ||||||||||||
Excess deferred income taxes - FERC - Tax Cuts and Jobs Act | 2058 | ||||||||||||||||
Asset retirement obligations | 2057 | ||||||||||||||||
Removal costs | (b) | ||||||||||||||||
Other postretirement benefits | (c) | ||||||||||||||||
Income taxes — deferred investment tax credit | 2047 | ||||||||||||||||
Income taxes — change in rates | 2048 | ||||||||||||||||
Spent nuclear fuel | 2027 | ||||||||||||||||
Renewable energy standard (a) | 2020 | ||||||||||||||||
Demand side management (a) | 2020 | ||||||||||||||||
Sundance maintenance | 2030 | ||||||||||||||||
Deferred gains on utility property | 2022 | ||||||||||||||||
Four Corners coal reclamation | 2038 | ||||||||||||||||
Tax expense adjustor mechanism (a) | 2020 | ||||||||||||||||
Other | Various | ||||||||||||||||
Total regulatory liabilities | $ | $ | $ | $ |
(a) | See “Cost Recovery Mechanisms” discussion above. |
(b) | In accordance with regulatory accounting guidance, APS accrues removal costs for its regulated assets, even if there is no legal obligation for removal. |
(c) |
5. |
Pension Benefits | Other Benefits | ||||||||||||||
Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Service cost — benefits earned during the period | $ | $ | $ | $ | |||||||||||
Non-service costs (credits): | |||||||||||||||
Interest cost on benefit obligation | |||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Amortization of: | |||||||||||||||
Prior service cost (credit) | ( | ) | ( | ) | |||||||||||
Net actuarial loss | |||||||||||||||
Net periodic benefit cost (credit) | $ | $ | $ | ( | ) | $ | ( | ) | |||||||
Portion of cost (credit) charged to expense | $ | $ | $ | ( | ) | $ | ( | ) |
6. |
March 31, 2019 | December 31, 2018 | ||||||
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation | $ | $ | |||||
Equity — Noncontrolling interests |
Quantity | |||||||
Commodity | Unit of Measure | March 31, 2019 | December 31, 2018 | ||||
Power | GWh | ||||||
Gas | Billion cubic feet |
Financial Statement Location | Three Months Ended March 31, | |||||||||
Commodity Contracts | 2019 | 2018 | ||||||||
Loss Reclassified from Accumulated OCI into Income (Effective Portion Realized) (a) | Fuel and purchased power (b) | $ | ( | ) | $ | ( | ) |
(a) | During the three months ended March 31, 2019 and 2018, we had |
(b) |
Financial Statement Location | Three Months Ended March 31, | |||||||||
Commodity Contracts | 2019 | 2018 | ||||||||
Net Loss Recognized in Income | Operating revenues | $ | $ | ( | ) | |||||
Net Gain (Loss) Recognized in Income | Fuel and purchased power (a) | ( | ) | |||||||
Total | $ | $ | ( | ) |
(a) |
As of March 31, 2019: (dollars in thousands) | Gross Recognized Derivatives (a) | Amounts Offset (b) | Net Recognized Derivatives | Other (c) | Amount Reported on Balance Sheets | |||||||||||||||
Current assets | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Investments and other assets | ( | ) | ||||||||||||||||||
Total assets | ( | ) | ( | ) | ||||||||||||||||
Current liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Deferred credits and other | ( | ) | ( | ) | ( | ) | ||||||||||||||
Total liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Total | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(a) | All of our gross recognized derivative instruments were subject to master netting arrangements. |
(b) |
(c) | Represents cash collateral and cash margin that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions, or collateral and margin posted in excess of the recognized derivative instrument. Includes cash collateral received from counterparties of $ |
As of December 31, 2018: (dollars in thousands) | Gross Recognized Derivatives (a) | Amounts Offset (b) | Net Recognized Derivatives | Other (c) | Amount Reported on Balance Sheets | |||||||||||||||
Current assets | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Investments and other assets | ( | ) | ||||||||||||||||||
Total assets | ( | ) | ||||||||||||||||||
Current liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Deferred credits and other | ( | ) | ( | ) | ( | ) | ||||||||||||||
Total liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Total | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(a) | All of our gross recognized derivative instruments were subject to master netting arrangements. |
(b) |
(c) |
March 31, 2019 | |||
Aggregate fair value of derivative instruments in a net liability position | $ | ||
Cash collateral posted | |||
Additional cash collateral in the event credit-risk-related contingent features were fully triggered (a) |
(a) |
8. |
9. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Other income: | |||||||
Interest income | $ | $ | |||||
Debt return on Four Corners SCR (Note 4) | |||||||
Miscellaneous | |||||||
Total other income | $ | $ | |||||
Other expense: | |||||||
Non-operating costs | $ | ( | ) | $ | ( | ) | |
Investment losses — net | ( | ) | ( | ) | |||
Miscellaneous | ( | ) | ( | ) | |||
Total other expense | $ | ( | ) | $ | ( | ) |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Other income: | |||||||
Interest income | $ | $ | |||||
Debt return on Four Corners SCR (Note 4) | |||||||
Miscellaneous | |||||||
Total other income | $ | $ | |||||
Other expense: | |||||||
Non-operating costs | $ | ( | ) | $ | ( | ) | |
Miscellaneous | ( | ) | ( | ) | |||
Total other expense | $ | ( | ) | $ | ( | ) |
10. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net income attributable to common shareholders | $ | $ | |||||
Weighted average common shares outstanding — basic | |||||||
Net effect of dilutive securities: | |||||||
Contingently issuable performance shares and restricted stock units | |||||||
Weighted average common shares outstanding — diluted | |||||||
Earnings per weighted-average common share outstanding | |||||||
Net income attributable to common shareholders — basic | $ | $ | |||||
Net income attributable to common shareholders — diluted | $ | $ |
11. |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (a) (Level 3) | Other | Balance at March 31, 2019 | |||||||||||||||||
Assets | |||||||||||||||||||||
Risk management activities — derivative instruments: | |||||||||||||||||||||
Commodity contracts | $ | $ | $ | $ | ( | ) | (a) | $ | |||||||||||||
Nuclear decommissioning trust: | |||||||||||||||||||||
Equity securities | (b) | ||||||||||||||||||||
U.S. commingled equity funds | (c) | ||||||||||||||||||||
U.S. Treasury debt | — | ||||||||||||||||||||
Corporate debt | — | ||||||||||||||||||||
Mortgage-backed debt securities | — | ||||||||||||||||||||
Municipal bonds | — | ||||||||||||||||||||
Other fixed income | — | ||||||||||||||||||||
Subtotal nuclear decommissioning trust | |||||||||||||||||||||
Other special use funds: | |||||||||||||||||||||
Equity securities | (b) | ||||||||||||||||||||
U.S. Treasury debt | — | ||||||||||||||||||||
Municipal bonds | — | ||||||||||||||||||||
Subtotal other special use funds | |||||||||||||||||||||
Total Assets | $ | $ | $ | $ | $ | ||||||||||||||||
Liabilities | |||||||||||||||||||||
Risk management activities — derivative instruments: | |||||||||||||||||||||
Commodity contracts | $ | $ | ( | ) | $ | ( | ) | $ | (a) | $ | ( | ) |
(a) | Represents counterparty netting, margin, and collateral. See Note 7. |
(b) | Represents net pending securities sales and purchases. |
(c) | Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy. |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (a) (Level 3) | Other | Balance at December 31, 2018 | |||||||||||||||||
Assets | |||||||||||||||||||||
Cash equivalents | $ | $ | $ | $ | — | $ | |||||||||||||||
Risk management activities — derivative instruments: | |||||||||||||||||||||
Commodity contracts | ( | ) | (a) | ||||||||||||||||||
Nuclear decommissioning trust: | |||||||||||||||||||||
Equity securities | (b) | ||||||||||||||||||||
U.S. commingled equity funds | (c) | ||||||||||||||||||||
U.S. Treasury debt | — | ||||||||||||||||||||
Corporate debt | — | ||||||||||||||||||||
Mortgage-backed debt securities | — | ||||||||||||||||||||
Municipal bonds | — | ||||||||||||||||||||
Other fixed income | — | ||||||||||||||||||||
Subtotal nuclear decommissioning trust | |||||||||||||||||||||
Other special use funds: | |||||||||||||||||||||
Equity securities | (b) | ||||||||||||||||||||
U.S. Treasury debt | — | ||||||||||||||||||||
Municipal bonds | — | ||||||||||||||||||||
Subtotal other special use funds | |||||||||||||||||||||
Total Assets | $ | $ | $ | $ | $ | ||||||||||||||||
Liabilities | |||||||||||||||||||||
Risk management activities — derivative instruments: | |||||||||||||||||||||
Commodity contracts | $ | $ | ( | ) | $ | ( | ) | $ | (a) | $ | ( | ) |
(a) | Represents counterparty netting, margin, and collateral. See Note 7. |
(b) | Represents net pending securities sales and purchases. |
(c) |
March 31, 2019 Fair Value (thousands) | Valuation Technique | Significant Unobservable Input | Weighted-Average | ||||||||||||||
Commodity Contracts | Assets | Liabilities | Range | ||||||||||||||
Electricity: | |||||||||||||||||
Forward Contracts (a) | $ | $ | Discounted cash flows | Electricity forward price (per MWh) | $19.77 - $67.40 | $ | |||||||||||
Natural Gas: | |||||||||||||||||
Forward Contracts (a) | Discounted cash flows | Natural gas forward price (per MMBtu) | $1.90 - $2.97 | $ | |||||||||||||
Total | $ | $ |
(a) | Includes swaps and physical and financial contracts. |
December 31, 2018 Fair Value (thousands) | Valuation Technique | Significant Unobservable Input | Weighted-Average | ||||||||||||||
Commodity Contracts | Assets | Liabilities | Range | ||||||||||||||
Electricity: | |||||||||||||||||
Forward Contracts (a) | $ | $ | Discounted cash flows | Electricity forward price (per MWh) | $17.88 - $37.03 | $ | |||||||||||
Natural Gas: | |||||||||||||||||
Forward Contracts (a) | Discounted cash flows | Natural gas forward price (per MMBtu) | $1.79 - $2.92 | $ | |||||||||||||
Total | $ | $ |
(a) |
Three Months Ended March 31, | |||||||||
Commodity Contracts | 2019 | 2018 | |||||||
Net derivative balance at beginning of period | $ | ( | ) | $ | ( | ) | |||
Total net gains (losses) realized/unrealized: | |||||||||
Deferred as a regulatory asset or liability | ( | ) | ( | ) | |||||
Settlements | |||||||||
Transfers into Level 3 from Level 2 | ( | ) | ( | ) | |||||
Transfers from Level 3 into Level 2 | |||||||||
Net derivative balance at end of period | $ | ( | ) | $ | ( | ) | |||
Net unrealized gains included in earnings related to instruments still held at end of period | $ | $ |
12. |
March 31, 2019 | |||||||||||||||||||
Fair Value | Total Unrealized Gains | Total Unrealized Losses | |||||||||||||||||
Investment Type: | Nuclear Decommissioning Trusts | Other Special Use Funds | Total | ||||||||||||||||
Equity securities | $ | $ | $ | $ | $ | ( | ) | ||||||||||||
Available for sale-fixed income securities | (a) | ( | ) | ||||||||||||||||
Other | (b) | ||||||||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) |
(a) | As of March 31, 2019, the amortized cost basis of these available-for-sale investments is $ |
(b) | Represents net pending securities sales and purchases. |
December 31, 2018 | |||||||||||||||||||
Fair Value | Total Unrealized Gains | Total Unrealized Losses | |||||||||||||||||
Investment Type: | Nuclear Decommissioning Trusts | Other Special Use Funds | Total | ||||||||||||||||
Equity securities | $ | $ | $ | $ | $ | ( | ) | ||||||||||||
Available for sale-fixed income securities | (a) | ( | ) | ||||||||||||||||
Other | (b) | ||||||||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) |
(a) | As of December 31, 2018, the amortized cost basis of these available-for-sale investments is $ |
(b) | Represents net pending securities sales and purchases. |
Three Months Ended March 31, | |||||||||||
Nuclear Decommissioning Trusts | Other Special Use Funds | Total | |||||||||
2019 | |||||||||||
Realized gains | $ | $ | $ | ||||||||
Realized losses | ( | ) | ( | ) | |||||||
Proceeds from the sale of securities (a) | |||||||||||
2018 | |||||||||||
Realized gains | $ | $ | $ | ||||||||
Realized losses | ( | ) | ( | ) | |||||||
Proceeds from the sale of securities (a) |
(a) | Proceeds are reinvested in the nuclear decommissioning trusts or other special use funds. |
Nuclear Decommissioning Trusts (a) | Coal Reclamation Escrow Accounts | Active Union Medical Trust | Total | ||||||||||||
Less than one year | $ | $ | $ | $ | |||||||||||
1 year – 5 years | |||||||||||||||
5 years – 10 years | |||||||||||||||
Greater than 10 years | |||||||||||||||
Total | $ | $ | $ | $ |
(a) |
Pension and Other Postretirement Benefits | Derivative Instruments | Total | |||||||||||||
Balance December 31, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | (a) | (b) | |||||||||||||
Balance March 31, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Balance December 31, 2017 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
OCI (loss) before reclassifications | ( | ) | ( | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive loss | (a) | (b) | |||||||||||||
Reclassification of income tax effect related to tax reform | ( | ) | (c) | ( | ) | (c) | ( | ) | |||||||
Balance March 31, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(a) | These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost. See Note 5. |
(b) | These amounts represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA. See Note 7. |
(c) |
Pension and Other Postretirement Benefits | Derivative Instruments | Total | |||||||||||||
Balance December 31, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | (a) | (b) | |||||||||||||
Balance March 31, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Balance December 31, 2017 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
OCI (loss) before reclassifications | ( | ) | ( | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive loss | (a) | (b) | |||||||||||||
Reclassification of income tax effect related to tax reform | ( | ) | (c) | ( | ) | (c) | ( | ) | |||||||
Balance March 31, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(a) | These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost. See Note 5. |
(b) | These amounts represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA. See Note 7. |
(c) |
15. |
16. |
Three Months Ended March 31, 2019 | ||||||||||||
Purchased Power Lease Contracts | Land, Property & Equipment Leases | Total | ||||||||||
Operating lease cost | $ | $ | $ | |||||||||
Variable lease cost | ||||||||||||
Total lease cost | $ | $ | $ |
March 31, 2019 | ||||||||||||
Year | Purchased Power Lease Contracts | Land, Property & Equipment Leases | Total | |||||||||
2019 (remaining nine months of 2019) | $ | $ | $ | |||||||||
2020 | ||||||||||||
2021 | ||||||||||||
2022 | ||||||||||||
2023 | ||||||||||||
Thereafter | ||||||||||||
Total lease commitments | ||||||||||||
Less imputed interest | ||||||||||||
Total lease liabilities | $ | $ | $ |
December 31, 2018 | ||||||||||||
Year | Purchased Power Lease Contracts | Land, Property & Equipment Leases | Total | |||||||||
2019 | $ | $ | $ | |||||||||
2020 | ||||||||||||
2021 | ||||||||||||
2022 | ||||||||||||
2023 | ||||||||||||
Thereafter | ||||||||||||
Total future lease commitments | $ | $ | $ |
March 31, 2019 | |||
Weighted average remaining lease term | |||
Weighted average discount rate | % | ||
Three Months Ended March 31, 2019 | |||
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows (dollars in thousands): | $ | ||
Net Capacity in Operation (MW) | Net Capacity Planned / Under Development (MW) | |||||
Total APS Owned: Solar | 238 | — | ||||
Purchased Power Agreements: | ||||||
Solar | 310 | — | ||||
Solar + Energy Storage | — | 50 | ||||
Wind | 289 | — | ||||
Geothermal | 10 | — | ||||
Biomass | 14 | — | ||||
Biogas | 6 | — | ||||
Total Purchased Power Agreements | 629 | 50 | ||||
Total Distributed Energy: Solar (a) | 878 | 30 | (b) | |||
Total Renewable Portfolio | 1,745 | 80 |
(b) | Applications received by APS that are not yet installed and online. |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | Net Change | |||||||||
(dollars in millions) | |||||||||||
Regulated Electricity Segment: | |||||||||||
Operating revenues less fuel and purchased power expenses | $ | 509 | $ | 489 | $ | 20 | |||||
Operations and maintenance | (245 | ) | (260 | ) | 15 | ||||||
Depreciation and amortization | (149 | ) | (144 | ) | (5 | ) | |||||
Taxes other than income taxes | (55 | ) | (53 | ) | (2 | ) | |||||
Pension and other postretirement non-service credits - net | 5 | 13 | (8 | ) | |||||||
All other income and expenses, net | 14 | 15 | (1 | ) | |||||||
Interest charges, net of allowance for borrowed funds used during construction | (54 | ) | (52 | ) | (2 | ) | |||||
Income taxes | (2 | ) | 2 | (4 | ) | ||||||
Less income related to noncontrolling interests (Note 6) | (5 | ) | (5 | ) | — | ||||||
Regulated electricity segment income | 18 | 5 | 13 | ||||||||
All other | — | (2 | ) | 2 | |||||||
Net Income Attributable to Common Shareholders | $ | 18 | $ | 3 | $ | 15 |
Increase (Decrease) | |||||||||||
Operating revenues | Fuel and purchased power expenses | Net change | |||||||||
(dollars in millions) | |||||||||||
Effects of weather | $ | 28 | $ | 7 | $ | 21 | |||||
Change in residential rate design and seasonal rates (a) | 13 | — | 13 | ||||||||
Lower transmission revenues (Note 4) | (8 | ) | — | (8 | ) | ||||||
Refunds due to lower Federal corporate income tax rate (Note 4) | (4 | ) | — | (4 | ) | ||||||
Lower renewable energy regulatory surcharges and higher purchased power, partially offset by operations and maintenance costs | (5 | ) | 1 | (6 | ) | ||||||
Changes in net fuel and purchased power costs, including off-system sales margins and related deferrals | 17 | 18 | (1 | ) | |||||||
Higher retail revenue due to higher customer growth and changes in customer usage patterns, partially offset by the impacts of energy efficiency and distributed generation | 4 | 2 | 2 | ||||||||
Miscellaneous items, net | 4 | 1 | 3 | ||||||||
Total | $ | 49 | $ | 29 | $ | 20 |
• | A decrease of $8 million in fossil generation primarily due to lower planned outages; and |
• | A decrease of $7 million related to costs for renewable energy and similar regulatory programs, which is partially offset by operating revenues and purchased power. |
Three Months Ended March 31, | Net | ||||||||||
2019 | 2018 | Change | |||||||||
Net cash flow provided by operating activities | $ | 173 | $ | 167 | $ | 6 | |||||
Net cash flow used for investing activities | (254 | ) | (361 | ) | 107 | ||||||
Net cash flow provided by financing activities | 81 | 196 | (115 | ) | |||||||
Net change in cash and cash equivalents | $ | — | $ | 2 | $ | (2 | ) |
Three Months Ended March 31, | Net | ||||||||||
2019 | 2018 | Change | |||||||||
Net cash flow provided by operating activities | $ | 188 | $ | 177 | $ | 11 | |||||
Net cash flow used for investing activities | (260 | ) | (355 | ) | 95 | ||||||
Net cash flow provided by financing activities | 72 | 178 | (106 | ) | |||||||
Net change in cash and cash equivalents | $ | — | $ | — | $ | — |
Estimated for the Year Ended December 31, | |||||||||||
2019 | 2020 | 2021 | |||||||||
APS | |||||||||||
Generation: | |||||||||||
Clean: | |||||||||||
Nuclear Fuel | $ | 71 | $ | 64 | $ | 64 | |||||
Nuclear Generation | 70 | 68 | 67 | ||||||||
Renewables (a) | 16 | 18 | 3 | ||||||||
New Resources (b) | 90 | 182 | 291 | ||||||||
Environmental | 31 | 41 | 71 | ||||||||
New Gas Generation | 16 | — | — | ||||||||
Other Generation | 119 | 117 | 105 | ||||||||
Distribution | 500 | 455 | 546 | ||||||||
Transmission | 199 | 171 | 197 | ||||||||
Other (c) | 125 | 150 | 128 | ||||||||
Total APS | $ | 1,237 | $ | 1,266 | $ | 1,472 |
(a) | Primarily APS Solar Communities program |
(b) | Projected future generation resources, which may include energy storage, renewable projects, and other clean energy projects |
(c) | Primarily information systems and facilities projects |
Moody’s | Standard & Poor’s | Fitch | |||
Pinnacle West | |||||
Corporate credit rating | A3 | A- | A- | ||
Senior unsecured | A3 | BBB+ | A- | ||
Commercial paper | P-2 | A-2 | F2 | ||
Outlook | Stable | Stable | Stable | ||
APS | |||||
Corporate credit rating | A2 | A- | A- | ||
Senior unsecured | A2 | A- | A | ||
Commercial paper | P-1 | A-2 | F2 | ||
Outlook | Stable | Stable | Stable |
• | ASU 2016-13: Financial Instruments, Measurement of Credit Losses |
• | ASU 2018-15: Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Mark-to-market of net positions at beginning of period | $ | (58 | ) | $ | (91 | ) | |
Decrease (Increase) in regulatory asset/liability | 12 | (21 | ) | ||||
Recognized in OCI: | |||||||
Mark-to-market losses realized during the period | — | — | |||||
Change in valuation techniques | — | — | |||||
Mark-to-market of net positions at end of period | $ | (46 | ) | $ | (112 | ) |
Source of Fair Value | 2019 | 2020 | 2021 | 2022 | 2023 | Total fair value | ||||||||||||||||||
Observable prices provided by other external sources | $ | (23 | ) | $ | (8 | ) | $ | (6 | ) | $ | (3 | ) | $ | — | $ | (40 | ) | |||||||
Prices based on unobservable inputs | (4 | ) | (2 | ) | — | — | — | (6 | ) | |||||||||||||||
Total by maturity | $ | (27 | ) | $ | (10 | ) | $ | (6 | ) | $ | (3 | ) | $ | — | $ | (46 | ) |
March 31, 2019 | December 31, 2018 | ||||||||||||||
Gain (Loss) | Gain (Loss) | ||||||||||||||
Price Up 10% | Price Down 10% | Price Up 10% | Price Down 10% | ||||||||||||
Mark-to-market changes reported in: | |||||||||||||||
Regulatory asset (liability) (a) | |||||||||||||||
Electricity | $ | 5 | $ | (5 | ) | $ | 1 | $ | (1 | ) | |||||
Natural gas | 45 | (45 | ) | 44 | (44 | ) | |||||||||
Total | $ | 50 | $ | (50 | ) | $ | 45 | $ | (45 | ) |
(a) | These contracts are economic hedges of our forecasted purchases of natural gas and electricity. The impact of these hypothetical price movements would substantially offset the impact that these same price movements would have on the physical exposures being hedged. To the extent the amounts are eligible for inclusion in the PSA, the amounts are recorded as either a regulatory asset or liability. |
Exhibit No. | Registrant(s) | Description | ||
10.1 | Pinnacle West APS | |||
10.2 | Pinnacle West | |||
10.3 | Pinnacle West | |||
31.1 | Pinnacle West | |||
31.2 | Pinnacle West | |||
31.3 | APS | |||
31.4 | APS | |||
32.1* | Pinnacle West | |||
32.2* | APS | |||
101.INS | Pinnacle West APS | XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | ||
101.SCH | Pinnacle West APS | XBRL Taxonomy Extension Schema Document | ||
101.CAL | Pinnacle West APS | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | Pinnacle West APS | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | Pinnacle West APS | XBRL Taxonomy Extension Presentation Linkbase Document | ||
101.DEF | Pinnacle West APS | XBRL Taxonomy Definition Linkbase Document |
Exhibit No. | Registrant(s) | Description | Previously Filed as Exhibit(1) | Date Filed | |||||
3.1 | Pinnacle West | 3.1 to Pinnacle West/APS February 28, 2017 Form 8-K Report, File Nos. 1-8962 and 1-4473 | 2/28/2017 | ||||||
3.2 | Pinnacle West | 3.1 to Pinnacle West/APS June 30, 2008 Form 10-Q Report, File Nos. 1-8962 and 1-4473 | 8/7/2008 | ||||||
3.3 | APS | Articles of Incorporation, restated as of May 25, 1988 | 4.2 to APS’s Form S-3 Registration Nos. 33-33910 and 33-55248 by means of September 24, 1993 Form 8-K Report, File No. 1-4473 | 9/29/1993 | |||||
3.4 | APS | 3.1 to Pinnacle West/APS May 22, 2012 Form 8-K Report, File Nos. 1-8962 and 1-4473 | 5/22/2012 | ||||||
3.5 | APS | 3.4 to Pinnacle West/APS December 31, 2008 Form 10-K, File Nos. 1-8962 and 1-4473 | 2/20/2009 |
PINNACLE WEST CAPITAL CORPORATION | |||
(Registrant) | |||
Dated: | May 1, 2019 | By: | /s/ James R. Hatfield |
James R. Hatfield | |||
Executive Vice President and | |||
Chief Financial Officer | |||
(Principal Financial Officer and | |||
Officer Duly Authorized to sign this Report) | |||
ARIZONA PUBLIC SERVICE COMPANY | |||
(Registrant) | |||
Dated: | May 1, 2019 | By: | /s/ James R. Hatfield |
James R. Hatfield | |||
Executive Vice President and | |||
Chief Financial Officer | |||
(Principal Financial Officer and | |||
Officer Duly Authorized to sign this Report) |
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS | 1 |
Section 1.01 | Certain Defined Terms 1 |
Section 1.02 | Other Interpretive Provisions 18 |
Section 1.03 | Accounting Terms 19 |
Section 1.04 | Rounding 20 |
Section 1.05 | Times of Day 20 |
ARTICLE II AMOUNTS AND TERMS OF THE LOANS | 20 |
Section 2.01 | The Loans 20 |
Section 2.02 | Making the Loans 20 |
Section 2.03 | Fees 22 |
Section 2.04 | Repayment of Loans 22 |
Section 2.05 | Interest on Loans 22 |
Section 2.06 | Interest Rate Determination 23 |
Section 2.07 | Optional Conversion of Loans 24 |
Section 2.08 | Prepayments of Loans 25 |
Section 2.09 | Increased Costs 25 |
Section 2.10 | Illegality 27 |
Section 2.11 | Payments and Computations 27 |
Section 2.12 | Taxes 28 |
Section 2.13 | Sharing of Payments, Etc 32 |
Section 2.14 | Evidence of Debt 33 |
Section 2.15 | Use of Proceeds 34 |
Section 2.16 | Affected Lenders 34 |
Section 2.17 | Replacement of Lenders 34 |
ARTICLE III CONDITIONS PRECEDENT | 35 |
Section 3.01 | Conditions Precedent to Effectiveness 35 |
Section 3.02 | Determinations Under Section 3.01 37 |
ARTICLE IV REPRESENTATIONS AND WARRANTIES | 37 |
Section 4.01 | Representations and Warranties of the Borrower 37 |
ARTICLE V COVENANTS OF THE BORROWER | 41 |
Section 5.01 | Affirmative Covenants 41 |
Section 5.02 | Negative Covenants 45 |
Section 5.03 | Financial Covenant 47 |
ARTICLE VI EVENTS OF DEFAULT | 47 |
Section 6.01 | Events of Default 47 |
ARTICLE VII THE AGENT | 49 |
Section 7.01 | Appointment and Authority 49 |
Section 7.02 | Rights as a Lender 50 |
Section 7.03 | Exculpatory Provisions 50 |
Section 7.04 | Reliance by Agent 51 |
Section 7.05 | Delegation of Duties 51 |
Section 7.06 | Resignation of Agent 51 |
Section 7.07 | Non-Reliance on Agent and Other Lenders 52 |
Section 7.08 | No Other Duties, Etc 52 |
Section 7.09 | Certain ERISA Matters. 52 |
ARTICLE VIII MISCELLANEOUS | 54 |
Section 8.01 | Amendments, Etc 54 |
Section 8.02 | Notices, Etc. 55 |
Section 8.03 | No Waiver; Cumulative Remedies; Enforcement 57 |
Section 8.04 | Costs and Expenses; Indemnity; Damage Waiver 58 |
Section 8.05 | Right of Set-off 59 |
Section 8.06 | Effectiveness; Binding Effect 60 |
Section 8.07 | Successors and Assigns 60 |
Section 8.08 | Confidentiality 64 |
Section 8.09 | Governing Law 64 |
Section 8.10 | Counterparts; Integration 64 |
Section 8.11 | Jurisdiction, Etc. 64 |
Section 8.12 | Payments Set Aside 65 |
Section 8.13 | Patriot Act and Beneficial Ownership Regulation 65 |
Section 8.14 | Waiver of Jury Trial 65 |
Section 8.15 | No Advisory or Fiduciary Responsibility 65 |
Section 8.16 | Survival of Representations and Warranties 66 |
Section 8.17 | Severability 66 |
Section 8.18 | Acknowledgement and Consent to Bail-In of EEA Financial Institutions 67 |
ARIZONA PUBLIC SERVICE COMPANY | |
By: /s/ Lee R. Nickloy | |
Name: Lee R. Nickloy | |
Title: Vice President and Treasurer | |
ADMINISTRATIVE AGENT: | SUNTRUST BANK, as Agent and a Lender |
By: /s/ Arize Agumadu | |
Name: Arize Agumadu | |
Title: Vice President | |
LENDERS: | TD BANK, N.A., as a Lender |
By: /s/ Vijay Prasad | |
Name: Vijay Prasad | |
Title: Senior Vice President | |
U.S. BANK NATIONAL ASSOCIATION, as a Lender | |
By: /s/ Michael E. Temnick | |
Name: Michael E. Temnick | |
Title: Vice President | |
THE BANK OF NOVA SCOTIA, as a Lender | |
By: /s/ David Dewar | |
Name: David Dewar | |
Title: Director | |
Lender | Commitment | Ratable Share |
SunTrust Bank | $50,000,000 | 25.00% |
TD Bank, N.A. | $50,000,000 | 25.00% |
U.S. Bank National Association | $50,000,000 | 25.00% |
The Bank of Nova Scotia | $50,000,000 | 25.00% |
TOTAL | $200,000,000 | 100% |
1. | Bixco, Inc. |
2. | Axiom Power Solutions, Inc. |
3. | PWE Newco, Inc. |
$________ | February 26, 2019 |
ARIZONA PUBLIC SERVICE COMPANY |
By:_________________________________ Name: Title: |
Date | Amount of Loan | Amount of Principal Paid or Prepaid | Unpaid Principal Balance | Notation Made By |
(i) | The Business Day of the Initial Borrowing is February 26, 2019. |
(ii) | The Type of Loans comprising the Initial Borrowing is [Base Rate Loans] [Eurodollar Rate Loans]. |
(iii) | The aggregate amount of the Initial Borrowing is $200,000,000. |
[(iv) | The initial Interest Period for each Eurodollar Rate Loan made as part of the Initial Borrowing is [one week][[__] month[s]].] |
1. | This Notice of Initial Borrowing is irrevocable. |
2. | The Borrower shall indemnify each Lender against any loss (excluding loss of anticipated profits), cost or expense incurred by such Lender as a result of any failure by the Borrower (a) to execute and deliver the Term Loan Agreement on or before February 26, 2019, (b) to fulfill the applicable conditions set forth in Article III of the Term Loan Agreement on February 26, 2019 or (c) to otherwise borrow the Eurodollar Rate Loans requested by the Borrower in this Notice of Initial Borrowing on February 26, 2019, in each case in accordance with Section 8.04(e) of the Term Loan Agreement (the terms of which Section are hereby incorporated by reference into this Notice of Initial Borrowing to the same extent and with the same force as if fully set forth herein). |
3. | The terms of paragraphs 1 and 2 above are not conditioned upon the execution and delivery by the Borrower, the Agent or the Lenders of the Term Loan Agreement.] |
1. | Assignor: ________________________________ |
2. | Assignee: ________________________________ |
3. | Borrower: Arizona Public Service Company |
4. | Agent: SunTrust Bank, as the agent under the Term Loan Agreement |
5. | Term Loan Agreement: Term Loan Agreement dated as of February 26, 2019, by and among the Borrower, the Lenders party thereto, the Agent and the other agents party thereto. |
6. | Assigned Interest: |
Aggregate Principal Amount of Loans of all Lenders | Principal Amount of Loans Assigned | Percentage Assigned of Aggregate Principal Amount of Loans Outstanding | CUSIP Number |
$____________ | $____________ | ___________% |
ARIZONA PUBLIC SERVICE COMPANY | |
By ______________________________ | |
Name: | |
Title: |
A. | The Board of Directors of the Company (the “Board of Directors”) has adopted, and the shareholders of the Company have approved, the Pinnacle West Capital Corporation 2012 Long-Term Incentive Plan (the “Plan”), pursuant to which Restricted Stock Units and Dividend Equivalents may be granted to employees of the Company and its subsidiaries. |
B. | The Company desires to grant to Employee Restricted Stock Units and Dividend Equivalents under the terms of the Plan. |
C. | Pursuant to the Plan, the Company and Employee agree as follows: |
1. | Grant of Award. Pursuant to action of the Committee which was taken on the Date of Grant, the Company grants to Employee ___________ ( ) Restricted Stock Units and related Dividend Equivalents. |
2. | Award Subject to Plan. This Restricted Stock Unit Award and the related Dividend Equivalent Award are granted under and are expressly subject to all of the terms and provisions of the Plan, which terms are incorporated herein by reference, and this Award Agreement. In the event of any conflict between the terms and conditions of this Award Agreement and the Plan, the provisions of the Plan shall control. |
3. | Vesting of Restricted Stock Units. |
(a) | Regular Vesting. The Restricted Stock Units granted pursuant to Section 1 will vest and no longer be subject to the restrictions of and forfeiture under this Award Agreement on the following dates (each a “Vesting Date”) and as otherwise set forth in this Section 3: |
i. | ____ Restricted Stock Units will vest on _______________; |
ii. | ____ Restricted Stock Units will vest on _______________; |
iii. | ____ Restricted Stock Units will vest on _______________; and |
iv. | The remaining ____ Restricted Stock Units will vest on _______________. |
(b) | Normal or Early Retirement, Death or Disability. |
i. | Provided that Employee either qualifies for “Early Retirement” or “Normal Retirement”, as defined in the Pinnacle West Capital Corporation |
ii. | The Restricted Stock Units will fully vest and no longer be subject to the restrictions of and forfeiture under this Award Agreement upon Employee’s Termination of Employment which constitutes an Early Retirement or a Normal Retirement. |
(c) | Late Career Recipient. If, at the time of Employee’s death, Disability or retirement, Employee has reached sixty (60) years of age and has been credited with at least five (5) Years of Service, as defined under the Retirement Plan, and does not otherwise meet the criteria for Early Retirement or Normal Retirement under the Retirement Plan, Employee shall be treated for purposes of this Agreement as a “Late Career Recipient.” Upon the date of a Late Career Recipient’s retirement (the “Effective Date”), a portion of Employee’s unvested Restricted Stock Units that would have vested on the next Vesting Date will vest on a straight pro-rata basis based on the number of days elapsed between the last Vesting Date (or, if a Vesting Date has not yet occurred, the Date of Grant) and the Effective Date. Payment will be made on the next Vesting Date following the Effective Date in accordance with Section 4(a). No fractional Stock shall be issued. If the Stock payout results in a fractional share of one-half or greater, such fraction will be increased to provide for the issuance of a full share of Stock. |
(d) | Termination Without Cause. In the event Employee’s employment is terminated by the Company without cause, the Chief Executive Officer of the Company (the “CEO”) may determine in his discretion if, to what extent, and when, any unvested portion of the Restricted Stock Units granted pursuant to this Award should vest; provided, however, that (i) any vesting of unvested Restricted Stock Units pursuant to this Section 3(d) shall be approved by the Chair of the Committee, and (ii) nothing herein shall obligate the CEO to exercise his discretion to cause any unvested Restricted Stock Units to vest. |
(e) | Termination For Cause. Notwithstanding any other provision in this Section 3, in the event Employee’s employment is terminated for Cause, then regardless of Employee’s retirement, Early Retirement, Normal Retirement, death or Disability, Employee shall forfeit the right to receive any cash payment or Stock hereunder that Employee would otherwise be entitled to receive following his or her date of termination. For purposes only of this Section 3(e), “Cause” means (A) embezzlement, theft, fraud, deceit and/or dishonesty by the Employee involving the property, business or affairs of the Company or any of its subsidiaries, or (B) an act of moral turpitude which in the sole judgment of the CEO reflects adversely on the business or reputation of the Company or any of its subsidiaries or negatively affects any of the Company’s or any of its subsidiaries’ employees or customers. |
(f) | Disability. “Disability” has the meaning set forth for such term in the Retirement Plan. |
4. | Payment. |
(a) | Time and Form of Payment. When a Restricted Stock Unit vests in accordance with Section 3 above, Employee (or his or her estate) shall receive in exchange |
(b) | Election of Form of Payment. No later than ___________, Employee must elect to receive payment for Employee’s vested Restricted Stock Units and Dividend Equivalents in (i) fully transferable shares of Stock, (ii) 50% in cash and 50% in fully transferrable shares of Stock or (iii) 100% in cash by completing and returning to the Company the election form attached to this Agreement. In the absence of a timely election by Employee, Employee will receive payment for the vested Restricted Stock Units and Dividend Equivalents in fully transferable shares of Stock. |
(c) | Dividend Equivalents. In satisfaction of the Dividend Equivalents Award made pursuant to Section 1, at the time of the Company’s delivery of payment pursuant to Section 3 or Section 4(a), the Company also will deliver to Employee a payment equal to the amount of dividends, if any, that Employee would have received if Employee had directly owned the Stock to which the Restricted Stock Units relate from the Date of Grant to the applicable Vesting Date, plus interest on such amount at the rate of 5 percent compounded quarterly. Pursuant to the election filed by the Employee pursuant to Section 4(b), payment for the Dividend Equivalents and interest will be made in (i) fully transferrable shares of Stock, (ii) 50% in cash and 50% in fully transferrable shares of Stock or (iii) 100% in cash. The number of shares of Stock distributed to Employee will be determined by dividing the amount of the Dividend Equivalents and interest by the Fair Market Value of one share of Stock as of the applicable Vesting Date. No fractional Stock shall be issued. If the Stock payout results in a fractional share of one-half or greater, such fraction will be increased to provide for the issuance of a full share of Stock. |
(d) | Impact on Retirement Plans. The value of the shares of Stock distributed upon payment for the Restricted Stock Units and Dividend Equivalents will be disregarded for purposes of calculating the amount of Employee’s benefit under any Company retirement plans. |
5. | Termination of Award. Except as otherwise provided in Section 3 above or in Article 15 of the Plan, in the event of the termination of Employee’s employment with the Company or any of its subsidiaries, whether due to voluntary or involuntary termination, retirement, death, Disability or otherwise, Employee’s right to vest in any additional Restricted Stock |
6. | Section 409A Compliance. If the Company concludes, in the exercise of its discretion, that this Award is subject to Section 409A of the Code, the Plan and this Award Agreement shall be administered in compliance with Section 409A and each provision of this Award Agreement and the Plan shall be interpreted to comply with Section 409A. If the Company concludes, in the exercise of its discretion, that this Award is not subject to Section 409A, but, instead, is eligible for the short-term deferral exception to the requirements of Section 409A, the Plan and this Award Agreement shall be administered to comply with the requirements of the short-term deferral exception to the requirements of Section 409A and each provision of this Award Agreement and the Plan shall be interpreted to comply with the requirements of such exception. In either event, Employee does not have any right to make any election regarding the time or form of any payment due under this Award Agreement other than the election described in Section 4(b). |
7. | Tax Withholding. Employee is responsible for any and all federal, state, and local income, payroll or other tax obligations or withholdings (collectively, the “Taxes”) arising out of this Award. Employee shall pay any and all Taxes due in connection with a payout of Stock or cash hereunder by having the Company withhold cash or shares of Stock from such payout. |
8. | Continued Employment. Nothing in the Plan or this Award Agreement shall be interpreted to interfere with or limit in any way the right of the Company or its subsidiaries to terminate Employee’s employment or services at any time. In addition, nothing in the Plan or this Award Agreement shall be interpreted to confer upon Employee the right to continue in the employ or service of the Company or its subsidiaries. |
9. | Confidentiality. During Employee’s employment and after termination thereof for any reason, Employee agrees that Employee will not, directly or indirectly, in one or a series of transactions, disclose to any person, or use or otherwise exploit for Employee’s own benefit or for the benefit of anyone other than the Company or any of its Affiliates any Confidential Information (as hereinafter defined), whether prepared by Employee or not; provided, however, that during the term of Employee’s employment, any Confidential Information may be disclosed (i) to officers, representatives, employees and agents of the Company and its Affiliates who need to know such Confidential Information in order to perform the services or conduct the operations required or expected of them in the business, and (ii) in good faith by Employee in connection with the performance of Employee’s job duties to persons who are authorized to receive such information by the Company or its Affiliates. Employee shall have no obligation to keep confidential any Confidential Information, if and to the extent disclosure of any such information is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Employee shall provide the Company with prompt notice of such requirement, prior to making any disclosure, so that it may seek an appropriate protective order. |
10. | Restrictive Covenants. |
(a) | Non-Competition. Employee agrees that for a period of 12 months following any Termination of Employment voluntarily by Employee (other than due to Disability), Employee shall not, without the prior written consent of the Company’s General Counsel, participate, whether as a consultant, employee, contractor, partner, owner (ownership of less than 5% of the outstanding stock of a publicly traded company will not be considered ownership under this provision), co-owner, or otherwise, with any business, corporation, group, entity or individual that is or intends to be engaged in the business activity of supplying electricity in any area of Arizona for which the Company or its Affiliates is authorized to supply electricity. |
(b) | Employee Non-Solicitation. Employee agrees that for a period of 12 months following Employee’s Termination of Employment for any reason, Employee will not encourage, induce, or otherwise solicit, or actively assist any other person or organization to encourage, induce or otherwise solicit, directly or indirectly, any employee of the Company or any of its Affiliates to terminate his or her employment with the Company or its Affiliates, or otherwise interfere with the advantageous business relationship of the Company and its Affiliates with their employees. |
(c) | [No Pledging or Hedging. Employee agrees that during his or her term of employment and for a period of 90 days thereafter, Employee will not pledge, margin, hypothecate, hedge, or otherwise grant an economic interest in any shares of Company stock received by Employee pursuant to this Award (net of shares sold or surrendered to meet tax withholding or exercise requirements). This restriction shall extend to the purchase or creation of any short sales, zero-cost collars, forward sales contracts, puts, calls, options or other derivative securities in respect of any shares of Company stock.] |
(d) | Remedies. If Employee fails to comply with Sections 9, 10(a), [or] 10(b) [or] [10(c)] in a material respect, the Company may (i) cause any of Employee’s unvested Restricted Stock Units and related Dividend Equivalents to be cancelled and forfeited, (ii) refuse to deliver shares of Stock or cash in exchange for vested Restricted Stock Units or Dividend Equivalents, and/or (iii) pursue any other rights and remedies the Company may have pursuant to this Award Agreement or the Plan at law or in equity including, specifically, injunctive relief. |
11. | Cooperation with Government Agencies. Employee shall have no obligation to keep confidential any Confidential Information, if and to the extent disclosure of any such information is specifically permitted by law, because Employee is providing information to government investigatory or enforcement agencies, such as the Nuclear Regulatory Commission, Department of Labor, Equal Employment Opportunity Commission (or its state equivalent), National Labor Relations Board, the Occupational Safety and Health |
12. | Non‑Transferability. Neither this Award nor any rights under this Award Agreement may be assigned, transferred, or in any manner encumbered except as provided in the Plan. |
13. | Definitions: Copy of Plan and Plan Prospectus. To the extent not specifically defined in this Award Agreement, all capitalized terms used in this Award Agreement will have the same meanings ascribed to them in the Plan. By signing this Award Agreement, Employee acknowledges receipt of a copy of the Plan and the related Plan prospectus. |
14. | Amendment. Except as provided below, any amendments to this Award Agreement must be made by a written agreement executed by the Company and Employee. The Company may amend this Award Agreement unilaterally, without the consent of Employee, if the change (i) is required by law or regulation, (ii) does not adversely affect in any material way the rights of Employee, or (iii) is required to cause the benefits under the Plan to qualify for favorable tax treatment either for the Company or Employee or to comply with the provisions of Section 409A of the Code and applicable regulations or other interpretive authority. Additional rules relating to amendments to the Plan or any Award Agreement to assure compliance with Section 409A of the Code are set forth in Section 17.15 of the Plan |
INFORMATION ABOUT YOU | ||||||||
Last | First | Middle Initial | Employee ID# | |||||
In accordance with the terms of the Pinnacle West Capital Corporation 2012 Long-Term Incentive Plan and pursuant to Section 4(b) of the Award Agreement, I hereby elect to receive payment for the Restricted Stock Units and Dividend Equivalents that vest on the dates set forth below in the following form (place an “X” in the “100% Stock” column, in the “50% Cash/50% Stock” column or in the “100% Cash” column for each of the years and types of Awards set forth below): | ||||||||
Restricted Stock Units and Dividend Equivalents | ||||||||
Vesting Date | 100% Stock | 50% Cash/ 50% Stock | 100% Cash | |||||
__/__/_____ | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | ¨ ¨ ¨ ¨ | |||||
__/__/_____ | ||||||||
__/__/_____ | ||||||||
__/__/_____ | ||||||||
__________________________________________ PARTICIPANT NAME (PLEASE PRINT) __________________________________________ PARTICIPANT SIGNATURE | ______________________ DATE |
A. | The Board of Directors of the Company (the “Board of Directors”) has adopted, and the Company’s shareholders have approved, the Pinnacle West Capital Corporation 2012 Long-Term Incentive Plan (the “Plan”), pursuant to which Performance Share Awards and Dividend Equivalent Awards may be granted to employees of the Company and its subsidiaries. |
B. | The Company desires to grant to Employee Performance Shares and Dividend Equivalents under the terms of the Plan. |
C. | Pursuant to the Plan, the Company and Employee agree as follows: |
1. | Grant of Award. Pursuant to action of the Committee, which was taken on the Date of Grant, the Company grants to Employee ____________ (____) Performance Shares and related Dividend Equivalents. The Performance Shares granted under this Section 1 are referred to in this Award Agreement as the “Base Grant.” |
2. | Award Subject to Plan. This Performance Share Award and the related Dividend Equivalent Award are granted under and are expressly subject to all of the terms and provisions of the Plan, which terms are incorporated herein by reference, and this Award Agreement. In the event of any conflict between the terms and conditions of this Award Agreement and the Plan, the provisions of the Plan shall control. |
3. | Performance Period. The Performance Period for this Award begins January 1, _____, and ends December 31, _____. |
4. | Payment and Vesting. |
(a) | Performance Shares Payable In Stock. As soon as practicable in the fiscal year immediately following the end of the Performance Period, the Company will determine (i) the Company’s Total Shareholder Return (as defined herein) as compared to the Total Shareholder Return of the companies in the S&P 1500 Super Composite Electric Utility Index (the “Growth Index”) over the Performance Period and (ii) the Company’s Average Performance with respect to the Performance Metrics (as defined herein). The Company then will deliver to Employee one (1) share of the Company’s Stock for each then-outstanding Performance Share under this Award Agreement, subject to adjustment pursuant to Section 5 below. The Company anticipates that the Stock payout, if any, related to the Company’s Total Shareholder Return will be made by _________. The Company anticipates that the Stock payout, if any, related to the Performance Metrics will be made by __________ and in no event will such Stock payout be made later than ___________. |
(b) | Normal or Early Retirement, Death or Disability; Late Career Recipient. |
(c) | Termination Without Cause. In the event Employee’s employment is terminated by the Company without cause, the Chief Executive Officer (“CEO”) of the Company may determine in his discretion if, to what extent, and when any unvested portion of the Performance Shares granted under this Agreement should vest; provided, however, that (i) any vesting of unvested Performance Shares granted under this Agreement pursuant to this Section 4(c) shall be approved by the Committee, and (ii) nothing herein shall obligate the CEO to exercise his discretion to cause any unvested Performance Shares to vest. |
(d) | Termination For Cause. Notwithstanding any other provision in this Section 4, in the event Employee is terminated for Cause, then regardless of Employee’s retirement, Early Retirement, Normal Retirement, death or Disability, Employee shall forfeit the right to receive any Stock hereunder that Employee would otherwise be entitled to receive following his or her date of termination. For purposes only of this Section 4(d), “Cause” means (A) embezzlement, theft, fraud, deceit and/or dishonesty by the Employee involving the property, business or affairs of the Company or any of its subsidiaries, or (B) an act of moral turpitude which in the sole judgment of the CEO reflects adversely on the business or reputation of the Company or any of its subsidiaries or negatively affects any of the Company’s or any of its subsidiaries’ employees or customers. |
(e) | Disability. “Disability” has the meaning set forth for such term in the Retirement Plan. |
(f) | Dividend Equivalents. In satisfaction of the Dividend Equivalents Award made pursuant to Section 1, at the time of the Company’s delivery of Stock to Employee pursuant to this Section 4, the Company also will deliver to Employee fully transferrable shares of Stock equal in value to the amount of dividends, if any, that Employee would have received if Employee had directly owned the Stock to which the Performance Shares relate from the Date of Grant to the date of the Stock payout, plus interest on such amount at the rate of 5 percent compounded quarterly, as determined pursuant to the Plan. The number of shares of Stock distributed to Employee will be determined by dividing the amount of the Dividend Equivalents and interest by the Fair Market Value of one share of Stock as of the applicable date of the Stock payout. No fractional Stock shall be issued. If the Stock payout results in |
(g) | Impact on Retirement Plans. The value of the shares of Stock distributed upon payment for the Performance Shares and Dividend Equivalents will be disregarded for purposes of calculating the amount of Employee’s benefit under any Company retirement plans. |
5. | Performance Criteria and Adjustments. Fifty percent (50%) of the Performance Shares awarded under this Award Agreement will be determined pursuant to Section 5(a) and fifty percent (50%) of the Performance Shares awarded under this Award Agreement will be determined pursuant to Section 5(b). In no event will Employee be entitled to receive a number of Performance Shares pursuant to this Award Agreement greater than 2.0 times the Base Grant. |
(a) | Adjustment of Base Grant for Total Shareholder Return. Fifty percent (50%) of the Base Grant will increase or decrease based upon the Company’s “Total Shareholder Return” as compared to the Total Shareholder Return of the companies in the Growth Index during the Performance Period, as follows: |
If the Company’s Total Shareholder Return Over The Performance Period As Compared to the Total Shareholder Return of the Companies in the Growth Index is: | The Number of Performance Shares will be: |
90th Percentile or greater | 1.0 X Base Grant |
75th Percentile | .75 X Base Grant |
50th Percentile | 0.5 X Base Grant |
25th Percentile | 0.25 X Base Grant |
Less than 25th Percentile | None |
(b) | Adjustment of Base Grant for Performance Metrics. Fifty percent (50%) of the Base Grant will increase or decrease based upon the Company’s “Average Performance” with respect to the “Performance Metrics,” as follows: |
If the Company’s Average Performance is: | The Number of Performance Shares will be: |
90th Percentile or greater | 1.0 X Base Grant |
75th Percentile | .75 X Base Grant |
50th Percentile | 0.5 X Base Grant |
25th Percentile | 0.25 X Base Grant |
Less than 25th Percentile | None |
6. | Definitions. |
(a) | Performance Metrics. The “Performance Metrics” for the Performance Period are: (i) the System Average Interruption Frequency Index (Major Events Excluded) (“SAIFI”); (ii) Arizona Public Service Company’s customer to employee improvement ratio; (iii) the OSHA rate (All Incident Injury Rate); (iv) nuclear capacity factor; and (v) coal capacity factor. |
(1) | With respect to the Performance Metric described in clause (i) of this Subsection 6(a), the Edison Electric Institute (“EEI”) will provide data on an annual basis regarding the SAIFI result of the participating companies; the Company will calculate its SAIFI result for the year in question and determine its percentile ranking based on the information provided by EEI. |
(2) | With respect to the Performance Metric described in clause (ii) of this Subsection 6(a), S&P Global Market Intelligence (“Market Intelligence”), an independent third party data system, will provide data on an annual basis regarding the customer and employee counts; the Company will use its customer and employee counts for the year in question and determine its percentile ranking based on the information provided by Market Intelligence. Only those companies whose customers and employees were included in the data provided by Market Intelligence in each of the years of the Performance Period will be considered. |
(3) | With respect to the Performance Metric described in clause (iii) of this Subsection 6(a), EEI will provide data on an annual basis regarding the OSHA rate of the participating companies; the Company will calculate its OSHA rate for the year in question and determine its percentile ranking based on the information provided by EEI. |
(4) | With respect to the Performance Metric described in clause (iv) of this Subsection 6(a), Market Intelligence will provide data on an annual basis regarding the nuclear capacity factors of the participating nuclear plants; the Company will calculate its nuclear capacity factor for the year in question and determine its percentile ranking based on the information provided by Market Intelligence. Only those plants that were included in the data provided by Market Intelligence in each of the years of the Performance Period will be considered. |
(5) | With respect to the Performance Metric described in clause (v) of this Subsection 6(a), Market Intelligence will provide data on an annual basis regarding the coal capacity factors of the participating coal plants; the Company will calculate its coal capacity factor for the year in question and determine its percentile ranking based on the information provided by Market Intelligence. Only those plants that were included in the data provided by Market Intelligence in each of the years of the Performance Period will be considered. |
(6) | The Company’s percentile ranking during the Performance Period for each Performance Metric will be the average of the Company’s percentile ranking for each Performance Metric during each of the three years of the Performance Period (each, |
(7) | If either EEI or Market Intelligence discontinues providing the data specified above, the Committee shall select a data source that, in the Committee’s judgment, will provide data most comparable to the data provided by EEI or Market Intelligence, as the case may be. |
(b) | Total Shareholder Return. “Total Shareholder Return” for the Performance Period is the measure of a company’s stock price appreciation plus any dividends paid during the Performance Period. Only those companies that were included in the Growth Index in each of the years of the Performance Period will be considered. Total Shareholder Return for the Company and the companies in the Growth Index will be determined using the Daily Comparative Return as calculated by Bloomberg (or other independent third party data system). If the Growth Index is discontinued, the Committee shall select the most comparable index then in use for the sector comparison. In addition, if the sector comparison is no longer representative of the Company’s industry or business, the Committee shall replace the Growth Index with the most representative index then in use. Once the Total Shareholder Returns of the Company and all relevant companies in the Growth Index have been determined, the member companies will be ranked from greatest to least. Percentiles will be calculated (interpolated from 0% to 100%) based on a company’s relative ranking. Percentiles will be carried out to one (1) decimal place. If the Company is not in the Growth Index, then its percentile will be interpolated between the companies listed in the relative ranking. These calculations will be verified by the Company’s internal auditors. |
7. | Termination of Award. This Award Agreement will terminate and be of no further force or effect on the date that Employee is no longer employed by the Company or any of its subsidiaries, whether due to voluntary or involuntary termination, death, retirement, Disability, or otherwise, except as specifically set forth in Section 4 above or in Article 15 of the Plan. Employee will, however, be entitled to receive any Stock and Dividend Equivalents payable under Section 4 of this Award Agreement if Employee’s employment terminates after the end of the Performance Period but before Employee’s receipt of such Stock and Dividend Equivalents. |
8. | Section 409A Compliance. If the Company concludes, in the exercise of its discretion, that this Award is subject to Section 409A of the Code, the Plan and this Award Agreement shall be administered in compliance with Section 409A and each provision of this Award Agreement and the Plan shall be interpreted to comply with Section 409A. If the Company concludes, in the exercise of its discretion, that this Award is not subject to Section 409A, but, instead, is eligible for the short-term deferral exception to the requirements of Section 409A, the Plan and this Award Agreement shall be administered to comply with the requirements of the short-term deferral exception to the requirements of Section 409A and each provision of this Award Agreement and the Plan shall be interpreted to comply with the requirements of such exception. In either event, Employee does not have any right to make any election regarding the time or form of any payment due under this Award Agreement. |
9. | Tax Withholding. Employee is responsible for any and all federal, state, and local income, payroll or other tax obligations or withholdings (collectively, the “Taxes”) arising out of this Award. Employee shall pay any and all Taxes due in connection with a payout of Stock hereunder by having the Company withhold shares of Stock from such payout. |
10. | Continued Employment. Nothing in the Plan or this Award Agreement shall be interpreted to interfere with or limit in any way the right of the Company or its subsidiaries to terminate Employee’s employment or services at any time. In addition, nothing in the Plan or this Award Agreement shall be interpreted to confer upon Employee the right to continue in the employ or service of the Company or its subsidiaries. |
11. | Confidentiality. During Employee’s employment and after termination thereof, for any reason, Employee agrees that Employee will not, directly or indirectly, in one or a series of transactions, disclose to any person, or use or otherwise exploit for Employee’s own benefit or for the benefit of anyone other than the Company or any of its Affiliates any Confidential Information (as hereinafter defined), whether prepared by Employee or not; provided, however, that during the term of Employee’s employment, any Confidential Information may be disclosed (i) to officers, representatives, employees and agents of the Company and its Affiliates who need to know such Confidential Information in order to perform the services or conduct the operations required or expected of them in the business, and (ii) in good faith by Employee in connection with the performance of Employee’s job duties to persons who are authorized to receive such information by the Company or its Affiliates. Employee shall have no obligation to keep confidential any Confidential Information, if and to the extent disclosure of any such information is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Employee shall provide the Company with prompt notice of such requirement, prior to making any disclosure, so that it may seek an appropriate protective order. |
12. | Restrictive Covenants. |
(a) | Non-Competition. Employee agrees that for a period of 12 months following any Termination of Employment voluntarily by Employee (other than due to Disability), Employee shall not, without the prior written consent of the Company’s General Counsel, |
(b) | Employee Non-Solicitation. Employee agrees that for a period of 12 months following Employee’s Termination of Employment for any reason, Employee will not encourage, induce, or otherwise solicit, or actively assist any other person or organization to encourage, induce or otherwise solicit, directly or indirectly, any employee of the Company or any of its Affiliates to terminate his or her employment with the Company or its Affiliates, or otherwise interfere with the advantageous business relationship of the Company and its Affiliates with their employees. |
(c) | [No Pledging or Hedging. Employee agrees that during his or her term of employment, Employee will not pledge, margin, hypothecate, hedge, or otherwise grant an economic interest in any shares of Company stock received by Employee pursuant to this Award (net of shares sold or surrendered to meet tax withholding or exercise requirements). This restriction shall extend to the purchase or creation of any short sales, zero-cost collars, forward sales contracts, puts, calls, options or other derivative securities in respect of any shares of Company stock.] |
(d) | Remedies. If Employee fails to comply with Sections 11, 12(a), [or] 12(b), [or 12(c)] in a material respect, the Company may (i) cause any of Employee’s unvested Performance Shares and related Dividend Equivalents to be cancelled and forfeited, (ii) refuse to deliver shares of Stock or cash in exchange for vested Performance Shares or Dividend Equivalents, and/or (iii) pursue any other rights and remedies the Company may have pursuant to this Award Agreement or the Plan at law or in equity including, specifically, injunctive relief. |
13. | Cooperation with Government Agencies. Employee shall have no obligation to keep confidential any Confidential Information, if and to the extent disclosure of any such information is specifically permitted by law, because Employee is providing information to government investigatory or enforcement agencies, such as the Nuclear Regulatory Commission, Department of Labor, Equal Employment Opportunity Commission (or its state equivalent), National Labor Relations Board, the Occupational Safety and Health Administration (or its state equivalent) or the Securities and Exchange Commission. This Award Agreement also does not limit Employee’s ability to communicate with any government agency regarding matters within the agency’s jurisdiction or otherwise participate in any investigation or proceedings that may be conducted by such agency, including providing documents or other information without notice to the Company. Nothing in this Award Agreement shall prevent Employee from the disclosure of Confidential Information or trade secrets that: (i) is made: (a) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (b) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is permitted to be made, and is made, under seal. In the event that Employee files a lawsuit alleging retaliation by Company for reporting a suspected violation of law, Employee may disclose Confidential Information or trade secrets related to the suspected violation of law or alleged retaliation to Employee’s attorney and use the Confidential Information or trade secrets in the court proceeding if Employee or Employee’s attorney: (i) files any document containing Confidential Information or trade secrets, under seal if permitted; and (ii) does not disclose the Confidential Information or trade secrets, except pursuant to or in accordance with a court order. The Company provides this notice in compliance with federal law, including the Defend Trade Secrets Act of 2016. |
14. | Clawback. The portion of this Award, if any, that is earned based on the Company’s Total Shareholder Return will be subject to potential forfeiture or recovery to the extent called for by the Company’s Clawback Policy. The Clawback Policy may include such provisions as the Human Resources Committee of the Board of Directors determines to be necessary or appropriate either to comply with any applicable law or listing standard or in light of Company ethics or other policies and practices. Specific requirements of the Clawback Policy may be adopted and amended at such times as the Human Resources Committee of the Board of Directors determines in its discretion. By accepting this Award, Employee consents and agrees to abide by such Clawback Policy. |
15. | Non-Transferability. Neither this Award nor any rights under this Award Agreement may be assigned, transferred, or in any manner encumbered except as provided in the Plan. |
16. | Definitions: Copy of Plan and Plan Prospectus. To the extent not specifically defined in this Award Agreement, all capitalized terms used in this Award Agreement will have the same meanings ascribed to them in the Plan. By signing this Award Agreement, Employee acknowledges receipt of a copy of the Plan and the related Plan prospectus. |
17. | Amendment. Except as provided below, any amendments to this Award Agreement must be made by a written agreement executed by the Company and Employee. The Company may amend this Award Agreement unilaterally, without the consent of Employee, if the change (i) is required by law or regulation, (ii) does not adversely affect in any material way the rights of Employee, or (iii) is required to cause the benefits under the Plan to qualify for favorable tax treatment either for the Company or Employee or to comply with the provisions of Section 409A of the Code and applicable regulations or other interpretive authority. Additional rules relating to amendments to the Plan or any Award Agreement to assure compliance with Section 409A of the Code are set forth in Section 17.15 of the Plan. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Pinnacle West Capital Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Donald E. Brandt | |
Donald E. Brandt | |
Chairman, President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Pinnacle West Capital Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ James R. Hatfield | |
James R. Hatfield | |
Executive Vice President and Chief Financial Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Arizona Public Service Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Donald E. Brandt | |
Donald E. Brandt | |
Chairman and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Arizona Public Service Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ James R. Hatfield | |
James R. Hatfield | |
Executive Vice President and Chief Financial Officer |
/s/ Donald E. Brandt | |
Donald E. Brandt | |
Chairman, President and | |
Chief Executive Officer |
/s/ James R. Hatfield | |
James R. Hatfield | |
Executive Vice President and | |
Chief Financial Officer |
/s/ Donald E. Brandt | |
Donald E. Brandt | |
Chairman and Chief Executive Officer | |
/s/ James R. Hatfield | |
James R. Hatfield | |
Executive Vice President and | |
Chief Financial Officer |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Net unrealized loss, tax expense | $ 0 | $ 96 |
Reclassification of net realized loss, tax expense (benefit) | 108 | 82 |
Pension and other postretirement (benefits) activity, tax benefit (expense) | 288 | 443 |
APS | ||
Net unrealized loss, tax expense | 0 | 96 |
Reclassification of net realized loss, tax expense (benefit) | 108 | 82 |
Pension and other postretirement (benefits) activity, tax benefit (expense) | $ 247 | $ 306 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest [Abstract] | ||
Common stock, par value (in dollars per share) | ||
Common stock, authorized shares (in shares) | 150,000,000 | 150,000,000 |
Common stock, issued shares (in shares) | 112,340,322 | 112,159,896 |
Treasury stock at cost, shares (in shares) | 63,271 | 58,135 |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) - USD ($) $ in Thousands |
Total |
Common Stock |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Noncontrolling Interests |
APS |
APS
Common Stock
|
APS
Additional Paid-In Capital
|
APS
Retained Earnings
|
APS
Accumulated Other Comprehensive Income (Loss)
|
APS
Noncontrolling Interests
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2017 | 111,816,170 | 64,463 | 71,264,947 | ||||||||||||||||||
Balance at beginning of period at Dec. 31, 2017 | $ 5,135,730 | $ 2,614,805 | $ (5,624) | $ 2,442,511 | $ (45,002) | $ 129,040 | $ 5,385,869 | $ 178,162 | $ 2,571,696 | $ 2,533,954 | $ (26,983) | $ 129,040 | |||||||||
Increase (Decrease) in Shareholders' Equity | |||||||||||||||||||||
Net income | 8,094 | 3,221 | 4,873 | 14,472 | 9,599 | 4,873 | |||||||||||||||
Other comprehensive income | 1,213 | 1,213 | 1,170 | 1,170 | |||||||||||||||||
Other | 1 | 1 | |||||||||||||||||||
Dividends on common stock | (16) | (16) | |||||||||||||||||||
Issuance of common stock (in shares) | 145,793 | ||||||||||||||||||||
Issuance of common stock | 5,456 | $ 5,456 | |||||||||||||||||||
Purchase of treasury stock (in shares) | [1] | (81,177) | |||||||||||||||||||
Purchase of treasury stock | [1] | (6,277) | $ (6,277) | ||||||||||||||||||
Reissuance of treasury stock for stock-based compensation and other (in shares) | 116,543 | ||||||||||||||||||||
Reissuance of treasury stock for stock-based compensation and other | 9,471 | $ 9,470 | 0 | 1 | |||||||||||||||||
Reclassification of income tax effects related to new tax reform | (8,552) | 8,552 | [2] | (8,552) | [2] | (5,038) | 5,038 | [2] | (5,038) | [2] | |||||||||||
Ending balance (in shares) at Mar. 31, 2018 | 111,961,963 | 29,097 | 71,264,947 | ||||||||||||||||||
Balance at end of period at Mar. 31, 2018 | $ 5,153,671 | $ 2,620,261 | $ (2,431) | 2,454,268 | (52,341) | 133,914 | 5,401,512 | $ 178,162 | 2,571,696 | 2,548,591 | (30,851) | 133,914 | |||||||||
Beginning balance (in shares) at Dec. 31, 2018 | 112,159,896 | 112,159,896 | 58,135 | 71,264,947 | |||||||||||||||||
Balance at beginning of period at Dec. 31, 2018 | $ 5,348,705 | $ 2,634,265 | $ (4,825) | 2,641,183 | (47,708) | 125,790 | 5,786,797 | $ 178,162 | 2,721,696 | 2,788,256 | (27,107) | 125,790 | |||||||||
Increase (Decrease) in Shareholders' Equity | |||||||||||||||||||||
Net income | 22,791 | 17,918 | 4,873 | 33,149 | 28,276 | 4,873 | |||||||||||||||
Other comprehensive income | 1,207 | 1,207 | 1,080 | 1,080 | |||||||||||||||||
Dividends on common stock | (15) | (15) | |||||||||||||||||||
Issuance of common stock (in shares) | 180,426 | ||||||||||||||||||||
Issuance of common stock | 9,798 | $ 9,798 | |||||||||||||||||||
Purchase of treasury stock (in shares) | [1] | (75,791) | |||||||||||||||||||
Purchase of treasury stock | [1] | (6,882) | $ (6,882) | ||||||||||||||||||
Reissuance of treasury stock for stock-based compensation and other (in shares) | 70,655 | ||||||||||||||||||||
Reissuance of treasury stock for stock-based compensation and other | $ 6,121 | $ 6,121 | 0 | 0 | |||||||||||||||||
Ending balance (in shares) at Mar. 31, 2019 | 112,340,322 | 112,340,322 | 63,271 | 71,264,947 | |||||||||||||||||
Balance at end of period at Mar. 31, 2019 | $ 5,381,725 | $ 2,644,063 | $ (5,586) | $ 2,659,086 | $ (46,501) | $ 130,663 | $ 5,821,026 | $ 178,162 | $ 2,721,696 | $ 2,816,532 | $ (26,027) | $ 130,663 | |||||||||
|
Consolidation and Nature of Operations |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidation and Nature of Operations | Consolidation and Nature of Operations The unaudited condensed consolidated financial statements include the accounts of Pinnacle West and our subsidiaries: APS, 4C Acquisition, LLC ("4CA"), Bright Canyon Energy Corporation ("BCE") and El Dorado Investment Company ("El Dorado"). See Note 8 for more information on 4CA matters. Intercompany accounts and transactions between the consolidated companies have been eliminated. The unaudited condensed consolidated financial statements for APS include the accounts of APS and the Palo Verde Generating Station ("Palo Verde") sale leaseback variable interest entities ("VIEs") (see Note 6 for further discussion). Our accounting records are maintained in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Amounts reported in our interim Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the respective annual periods, due to the effects of seasonal temperature variations on energy consumption, timing of maintenance on electric generating units, and other factors. Our condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments except as otherwise disclosed in the notes) that we believe are necessary for the fair presentation of our financial position, results of operations, and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to such regulations, although we believe that the disclosures provided are adequate to make the interim information presented not misleading. The accompanying condensed consolidated financial statements and these notes should be read in conjunction with the audited consolidated financial statements and notes included in our 2018 Form 10-K. Supplemental Cash Flow Information The following table summarizes supplemental Pinnacle West cash flow information (dollars in thousands):
The following table summarizes supplemental APS cash flow information (dollars in thousands):
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Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Sources of Revenue We derive our revenues from contracts with customers primarily from sales of electricity to our regulated retail customers. Our retail electric services and tariff rates are regulated by the ACC. Revenues from wholesale energy sales and transmission services for others represent energy and transmission sales to wholesale customers. Our wholesale activities and tariff rates are regulated by the United States Federal Energy Regulatory Commission ("FERC"). The following table provides detail of Pinnacle West's consolidated revenue disaggregated by revenue sources (dollars in thousands):
Revenue Activities Our revenues are primarily derived from activities that are classified as revenues from contracts with customers. This includes sales of electricity to our regulated retail customers and wholesale and transmission activities. Our revenues from contracts with customers for the three months ended March 31, 2019 and 2018 were $721 million and $683 million, respectively. We have certain revenues that do not meet the specific accounting criteria to be classified as revenues from contracts with customers. For the three months ended March 31, 2019 and 2018, our revenues that do not qualify as revenue from contracts with customers were $20 million and $10 million, respectively. This relates primarily to certain regulatory cost recovery mechanisms that are considered alternative revenue programs. We recognize revenue associated with alternative revenue programs when specific events permitting recognition are completed. Certain amounts associated with alternative revenue programs will subsequently be billed to customers; however, we do not reclassify billed amounts into revenue from contracts with customers. See Note 4 for a discussion of our regulatory cost recovery mechanisms. Contract Assets and Liabilities from Contracts with Customers |
Long-Term Debt and Liquidity Matters |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Liquidity Matters | Long-Term Debt and Liquidity Matters Pinnacle West and APS maintain committed revolving credit facilities in order to enhance liquidity and provide credit support for their commercial paper programs, to refinance indebtedness, and for other general corporate purposes. Pinnacle West At March 31, 2019, Pinnacle West had a 364-day $150 million revolving credit facility that matures June 27, 2019. Borrowings under the facility bear interest at LIBOR plus 0.70% per annum. At March 31, 2019, Pinnacle West had $49 million in outstanding borrowings under the facility. At March 31, 2019, Pinnacle West had a $200 million revolving credit facility that matures in July 2023. Pinnacle West has the option to increase the amount of the facility up to a maximum of $300 million upon the satisfaction of certain conditions and with the consent of the lenders. Interest rates are based on Pinnacle West's senior unsecured debt credit ratings. The facility is available to support Pinnacle West's $200 million commercial paper program, for bank borrowings or for issuances of letters of credits. At March 31, 2019, Pinnacle West had no outstanding borrowings under its credit facility, no letters of credit outstanding and $38 million of commercial paper borrowings. APS On February 26, 2019, APS entered into a $200 million term loan agreement that matures August 26, 2020. APS used the proceeds to repay existing indebtedness. Borrowings under the agreement bear interest at LIBOR plus 0.50% per annum. On February 28, 2019, APS issued $300 million of 4.25% unsecured senior notes that mature on March 1, 2049. The net proceeds from the sale, together with funds made available from the term loan described above, were used to repay existing indebtedness. On March 1, 2019, APS repaid at maturity $500 million aggregate principal amount of its 8.75% senior notes. At March 31, 2019, APS had two revolving credit facilities totaling $1 billion, including a $500 million credit facility that matures in June 2022 and a $500 million facility that matures in July 2023. APS may increase the amount of each facility up to a maximum of $700 million, for a total of $1.4 billion, upon the satisfaction of certain conditions and with the consent of the lenders. Interest rates are based on APS’s senior unsecured debt credit ratings. These facilities are available to support APS’s $500 million commercial paper program, for bank borrowings or for issuances of letters of credit. At March 31, 2019, APS had $158 million of commercial paper outstanding and no outstanding borrowings or letters of credit under its revolving credit facilities. See "Financial Assurances" in Note 8 for a discussion of APS’s other outstanding letters of credit. Debt Fair Value Our long-term debt fair value estimates are classified within Level 2 of the fair value hierarchy. The following table presents the estimated fair value of our long-term debt, including current maturities (dollars in thousands):
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Regulatory Matters |
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Regulatory Matters | Regulatory Matters Retail Rate Case Filing with the Arizona Corporation Commission On June 1, 2016, APS filed an application with the ACC for an annual increase in retail base rates. On March 27, 2017, a majority of the stakeholders in the general retail rate case, including the ACC Staff, the Residential Utility Consumer Office, limited income advocates and private rooftop solar organizations signed a settlement agreement (the "2017 Settlement Agreement") and filed it with the ACC. The 2017 Settlement Agreement provides for a net retail base rate increase of $94.6 million, excluding the transfer of adjustor balances, consisting of: (1) a non-fuel, non-depreciation, base rate increase of $87.2 million per year; (2) a base rate decrease of $53.6 million attributable to reduced fuel and purchased power costs; and (3) a base rate increase of $61.0 million due to changes in depreciation schedules. The average annual customer bill impact under the 2017 Settlement Agreement was calculated as an increase of 3.28% (the average annual bill impact for a typical APS residential customer was calculated as an increase of 4.54%). Other key provisions of the agreement include the following:
Through a separate agreement, APS, industry representatives, and solar advocates committed to stand by the 2017 Settlement Agreement and refrain from seeking to undermine it through ballot initiatives, legislation or advocacy at the ACC. On August 15, 2017, the ACC approved (by a vote of 4-1), the 2017 Settlement Agreement without material modifications. On August 18, 2017, the ACC issued a final written Opinion and Order reflecting its decision in APS’s general retail rate case (the "2017 Rate Case Decision"), which is subject to requests for rehearing and potential appeal. The new rates went into effect on August 19, 2017. On October 17, 2017, Warren Woodward (an intervener in APS's general retail rate case) filed a Notice of Appeal in the Arizona Court of Appeals, Division One. The notice raises a single issue related to the application of certain rate schedules to new APS residential customers after May 1, 2018. Mr. Woodward filed a second notice of appeal on November 13, 2017 challenging APS’s $5 per month automated metering infrastructure opt-out program. Mr. Woodward’s two appeals have been consolidated, and APS requested and was granted intervention. Mr. Woodward filed his opening brief on March 28, 2018. The ACC and APS filed responsive briefs on June 21, 2018. The Arizona Court of Appeals issued a Memorandum Decision on December 11, 2018 affirming the ACC decisions challenged by Mr. Woodward. Mr. Woodward filed a petition for review with the Arizona Supreme Court on January 9, 2019. Review by the Arizona Supreme Court is discretionary. APS cannot predict the outcome of this consolidated appeal but does not believe it will have a material impact on our financial position, results of operations or cash flows. On January 3, 2018, an APS customer filed a petition with the ACC that was determined by the ACC Staff to be a complaint filed pursuant to Arizona Revised Statute §40-246 (the “Complaint”) and not a request for rehearing. Arizona Revised Statute §40-246 requires the ACC to hold a hearing regarding any complaint alleging that a public service corporation is in violation of any commission order or that the rates being charged are not just and reasonable if the complaint is signed by at least twenty-five customers of the public service corporation. The Complaint alleged that APS is “in violation of commission order” [sic]. On February 13, 2018, the complainant filed an amended Complaint alleging that the rates and charges in the 2017 Rate Case Decision are not just and reasonable. The complainant requested that the ACC hold a hearing on the amended Complaint to determine if the average bill impact on residential customers of the rates and charges approved in the 2017 Rate Case Decision is greater than 4.54% (the average annual bill impact for a typical APS residential customer estimated by APS) and, if so, what effect the alleged greater bill impact has on APS's revenues and the overall reasonableness and justness of APS's rates and charges, in order to determine if there is sufficient evidence to warrant a full-scale rate hearing. The ACC held a hearing on this matter beginning in September 2018 and the hearing was concluded on October 1, 2018. Post-hearing briefing was concluded on December 14, 2018. On April 9, 2019, the Administrative Law Judge issued a Recommended Opinion and Order recommending that the Complaint be dismissed. On April 22, 2019, the Administrative Law Judge issued a proposed amendment to the Recommended Opinion and Order which proposes that APS credit back to customers the $5 million Demand Side Management Adjustor Charge ("DSMAC") funds used by APS to educate ratepayers on the new rates and that APS ratepayers will be held harmless from expenditures made by APS for targeted outreach and education in any future rate case. APS cannot predict the outcome of this matter. On December 24, 2018, certain ACC Commissioners filed a letter stating that because the ACC had received a substantial number of complaints that the rate increase authorized by the 2017 Rate Case Decision was much more than anticipated, they believe there is a possibility that APS is earning more than was authorized by the 2017 Rate Case Decision. Accordingly, the ACC Commissioners requested the ACC Staff to perform a rate review of APS using calendar year 2018 as a test year and file a report by May 3, 2019. The ACC Commissioners also asked the ACC Staff to evaluate APS’s efforts to educate its customers regarding the new rates approved in the 2017 Rate Case Decision. On January 9, 2019, the ACC Commissioners voted to open a docket for this matter. On April 23, 2019, the ACC Staff indicated that they may need some additional time beyond May 3, 2019 to file the requested report. APS does not believe that the rate review will have a material impact on our current financial position, results of operations or cash flows. However, depending upon the results of the rate review, the ACC may take further actions, including potentially reopening the 2017 Rate Case Decision. APS cannot predict the outcome of this matter. Cost Recovery Mechanisms APS has received regulatory decisions that allow for more timely recovery of certain costs outside of a general retail rate case through the following recovery mechanisms. Renewable Energy Standard. In 2006, the ACC approved the RES. Under the RES, electric utilities that are regulated by the ACC must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including solar, wind, biomass, biogas and geothermal technologies. In order to achieve these requirements, the ACC allows APS to include a RES surcharge as part of customer bills to recover the approved amounts for use on renewable energy projects. Each year APS is required to file a five-year implementation plan with the ACC and seek approval for funding the upcoming year’s RES budget. In 2015, the ACC revised the RES rules to allow the ACC to consider all available information, including the number of rooftop solar arrays in a utility’s service territory, to determine utility compliance with the RES. On June 30, 2017, APS filed its 2018 RES Implementation Plan and proposed a budget of approximately $90 million. APS’s budget request supports existing approved projects and commitments and includes the anticipated transfer of specific revenue requirements into base rates in accordance with the 2017 Settlement Agreement and also requests a permanent waiver of the residential distributed energy requirement for 2018 contained in the RES rules. APS's 2018 RES budget request is lower than the 2017 RES budget due in part to a certain portion of the RES being collected by APS in base rates rather than through the RES adjustor. On November 20, 2017, APS filed an updated 2018 RES budget to include budget adjustments for APS Solar Communities (formerly known as AZ Sun II), which was approved as part of the 2017 Rate Case Decision. APS Solar Communities is a 3-year program authorizing APS to spend $10 million to $15 million in capital costs each year to install utility-owned DG systems for low to moderate income residential homes, buildings of non-profit entities, Title I schools and rural government facilities. The 2017 Rate Case Decision provided that all operations and maintenance expenses, property taxes, marketing and advertising expenses, and the capital carrying costs for this program will be recovered through the RES. On June 12, 2018, the ACC approved the 2018 RES Implementation Plan including a waiver of the distributed energy requirements for the 2018 implementation year. On June 29, 2018, APS filed its 2019 RES Implementation Plan and proposed a budget of approximately $89.9 million. APS’s budget request supports existing approved projects and commitments and requests a permanent waiver of the residential distributed energy requirement for 2019 contained in the RES rules. The ACC has not yet ruled on the 2019 RES Implementation Plan. In September 2016, the ACC initiated a proceeding which will examine the possible modernization and expansion of the RES. On January 30, 2018, ACC Commissioner Tobin proposed a plan in this proceeding which would broaden the RES to include a series of energy policies tied to clean energy sources (the "Energy Modernization Plan"). The Energy Modernization Plan would replace the current RES standard with a new standard called the Clean Resource Energy Standard and Tariff ("CREST"), which incorporates the proposals in the Energy Modernization Plan. A set of draft CREST rules for the ACC’s consideration was issued by Commissioner Tobin’s office on July 5, 2018. See "Energy Modernization Plan" below for more information. Demand Side Management Adjustor Charge. The ACC Electric Energy Efficiency Standards require APS to submit a Demand Side Management Implementation Plan ("DSM Plan") annually for review by and approval of the ACC. Verified energy savings from APS's resource savings projects can be counted toward compliance with the Electric Energy Efficiency Standards; however, APS is not allowed to count savings from systems savings projects toward determination of the achievement of performance incentives, nor may APS include savings from these system savings projects in the calculation of its Lost Fixed Cost Recovery Mechanism (“LFCR”) mechanism. On September 1, 2017, APS filed its 2018 DSM Plan, which proposes modifications to the demand side management portfolio to better meet system and customer needs by focusing on peak demand reductions, storage, load shifting and demand response programs in addition to traditional energy savings measures. The 2018 DSM Plan seeks a requested budget of $52.6 million and requests a waiver of the Electric Energy Efficiency Standard for 2018. On November 14, 2017, APS filed an amended 2018 DSM Plan, which revised the allocations between budget items to address customer participation levels, but kept the overall budget at $52.6 million. The ACC has not yet ruled on the APS 2018 amended DSM Plan. On December 31, 2018, APS filed its 2019 DSM Plan, which requests a budget of $34.1 million and continues APS's focus on DSM strategies such as peak demand reduction, load shifting, storage and electrification strategies. The ACC has not yet ruled on the APS 2019 DSM Plan. Power Supply Adjustor Mechanism and Balance. The PSA provides for the adjustment of retail rates to reflect variations primarily in retail fuel and purchased power costs. The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) for 2019 and 2018 (dollars in thousands):
The PSA rate for the PSA year beginning February 1, 2017 was $(0.001348) per kWh, as compared to $0.001678 per kWh for the prior year. This rate was comprised of a forward component of $(0.001027) per kWh and a historical component of $(0.000321) per kWh. On August 19, 2017 the PSA rate was revised to $0.000555 per kWh as part of the 2017 Rate Case Decision. This new rate was comprised of a forward component of $0.000876 per kWh and a historical component of $(0.000321) per kWh. The PSA rate for the PSA year beginning February 1, 2018 is $0.004555 per kWh, consisting of a forward component of $0.002009 per kWh and a historical component of $0.002546 per kWh. This represented a $0.004 per kWh increase over the August 19, 2017 PSA, the maximum permitted under the Plan of Administration for the PSA. This left $16.4 million of 2017 fuel and purchased power costs above this annual cap. These costs rolled over until the following year and were reflected in the 2019 reset of the PSA. On November 30, 2018, APS filed its PSA rate for the PSA year beginning February 1, 2019. That rate was $0.001658 per kWh and consisted of a forward component of $0.000536 per kWh and a historical component of $0.001122 per kWh. The 2019 PSA rate is a $0.002897 per kWh decrease compared to 2018. These rates went into effect as filed on February 1, 2019. Transmission Rates, Transmission Cost Adjustor ("TCA") and Other Transmission Matters. In July 2008, FERC approved an Open Access Transmission Tariff for APS to move from fixed rates to a formula rate-setting methodology in order to more accurately reflect and recover the costs that APS incurs in providing transmission services. A large portion of the rate represents charges for transmission services to serve APS's retail customers ("Retail Transmission Charges"). In order to recover the Retail Transmission Charges, APS was previously required to file an application with, and obtain approval from, the ACC to reflect changes in Retail Transmission Charges through the TCA. Under the terms of the settlement agreement entered into in 2012 regarding APS's rate case (the "2012 Settlement Agreement"), however, an adjustment to rates to recover the Retail Transmission Charges will be made annually each June 1 and will go into effect automatically unless suspended by the ACC. The formula rate is updated each year effective June 1 on the basis of APS's actual cost of service, as disclosed in APS's FERC Form 1 report for the previous fiscal year. Items to be updated include actual capital expenditures made as compared with previous projections, transmission revenue credits and other items. The resolution of proposed adjustments can result in significant volatility in the revenues to be collected. APS reviews the proposed formula rate filing amounts with the ACC Staff. Any items or adjustments which are not agreed to by APS and the ACC Staff can remain in dispute until settled or litigated at FERC. Settlement or litigated resolution of disputed issues could require an extended period of time and could have a significant effect on the Retail Transmission Charges because any adjustment, though applied prospectively, may be calculated to account for previously over- or under-collected amounts. Effective June 1, 2017, APS's annual wholesale transmission rates for all users of its transmission system increased by approximately $35.1 million for the twelve-month period beginning June 1, 2017 in accordance with the FERC-approved formula. An adjustment to APS’s retail rates to recover FERC approved transmission charges went into effect automatically on June 1, 2017. On March 7, 2018, APS made a filing to make modifications to its annual transmission formula to provide transmission customers the benefit of the reduced federal corporate income tax rate resulting from the Tax Act beginning in its 2018 annual transmission formula rate update filing. These modifications were approved by FERC on May 22, 2018 and reduced APS’s transmission rates compared to the rate that would have gone into effect absent these changes. Effective June 1, 2018, APS's annual wholesale transmission rates for all users of its transmission system decreased by approximately $22.7 million for the twelve-month period beginning June 1, 2018 in accordance with the FERC-approved formula. An adjustment to APS’s retail rates to recover FERC approved transmission charges went into effect automatically on June 1, 2018. Lost Fixed Cost Recovery Mechanism. The LFCR mechanism permits APS to recover on an after-the-fact basis a portion of its fixed costs that would otherwise have been collected by APS in the kWh sales lost due to APS energy efficiency programs and to DG such as rooftop solar arrays. The fixed costs recoverable by the LFCR mechanism were first established in the 2012 Settlement Agreement and amount to approximately 3.1 cents per residential kWh lost and 2.3 cents per non-residential kWh lost. These amounts were revised in the 2017 Settlement Agreement to 2.5 cents for both lost residential and non-residential kWh. The LFCR adjustment has a year-over-year cap of 1% of retail revenues. Any amounts left unrecovered in a particular year because of this cap can be carried over for recovery in a future year. The kWhs lost from energy efficiency are based on a third-party evaluation of APS’s energy efficiency programs. DG sales losses are determined from the metered output from the DG units. APS filed its 2017 LFCR adjustment on January 13, 2017 requesting an LFCR adjustment of $63.7 million. On April 5, 2017, the ACC approved the 2017 annual LFCR adjustment as filed, effective with the first billing cycle of April 2017. On February 15, 2018, APS filed its 2018 annual LFCR Adjustment, requesting that effective May 1, 2018, the LFCR be adjusted to $60.7 million (a $3 million per year decrease from 2017 levels). On February 6, 2019, the ACC approved the 2018 annual LFCR adjustment to become effective March 1, 2019. On February 15, 2019, APS filed its 2019 annual LFCR adjustment, requesting that effective May 1, 2019, the annual LFCR recovery amount be reduced to $36.2 million (a $24.5 million decrease from previous levels). The ACC has not yet ruled on APS’s 2019 LFCR adjustment request. Because the LFCR mechanism has a balancing account that trues up any under or over recoveries, the delay in implementation does not have an adverse effect on APS. Tax Expense Adjustor Mechanism ("TEAM"). As part of the 2017 Settlement Agreement, the parties agreed to a rate adjustment mechanism to address potential federal income tax reform and enable the pass-through of certain income tax effects to customers. The TEAM expressly applies to APS's retail rates with the exception of a small subset of customers taking service under specially-approved tariffs. On December 22, 2017, the Tax Act was enacted. This legislation made significant changes to the federal income tax laws including a reduction in the corporate tax rate from 35% to 21% effective January 1, 2018. On January 8, 2018, APS filed an application with the ACC that addressed the change in the marginal federal tax rate from 35% to 21% resulting from the Tax Act and reduces rates by $119.1 million annually through an equal cents per kWh credit ("TEAM Phase I"). On February 22, 2018, the ACC approved the reduction of rates through an equal cents per kWh credit. The rate reduction was effective for the first billing cycle in March 2018. The impact of the TEAM Phase I, over time, is expected to be earnings neutral. However, on a quarterly basis, there is a difference between the timing and amount of the income tax benefit and the reduction in revenues refunded through the TEAM Phase I related to the lower federal income tax rate. The amount of the benefit of the lower federal income tax rate is based on quarterly pre-tax results, while the reduction in revenues refunded through the TEAM Phase I is based on a per kWh sales credit which follows our seasonal kWh sales pattern and is not impacted by earnings of the Company. On August 13, 2018, APS filed a second request with the ACC that addressed the return of an additional $86.5 million in tax savings to customers related to the amortization of non-depreciation related excess deferred taxes previously collected from customers ("TEAM Phase II"). The ACC approved this request on March 13, 2019, effective the first billing cycle in April 2019. The impact of TEAM Phase II is expected to be earnings neutral as both the timing of the reduction in revenues refunded through TEAM Phase II and the offsetting income tax benefit are recognized based upon our seasonal kWh sales pattern. On April 10, 2019, APS filed a third request with the ACC that addresses the amortization of depreciation related excess deferred taxes over a 28.5 year period (“TEAM Phase III”). Over the first 36 months, TEAM Phase III is expected to return $34.5 million to customers annually, and APS has proposed this refund begin July 1, 2019. The Company is currently in the process of seeking IRS guidance affirming the amortization method and period applicable to these depreciation related excess deferred taxes. The ACC has not yet approved TEAM Phase III. Net Metering In 2015, the ACC voted to conduct a generic evidentiary hearing on the value and cost of DG to gather information that will inform the ACC on net metering issues and cost of service studies in upcoming utility rate cases. A hearing was held in April 2016. On October 7, 2016, the Administrative Law Judge issued a recommendation in the docket concerning the value and cost of DG solar installations. On December 20, 2016, the ACC completed its open meeting to consider the recommended opinion and order by the Administrative Law Judge. After making several amendments, the ACC approved the recommended decision by a 4-1 vote. As a result of the ACC’s action, effective with APS’s 2017 Rate Case Decision, the net metering tariff that governs payments for energy exported to the grid from residential rooftop solar systems was replaced by a more formula-driven approach that utilizes inputs from historical wholesale solar power until an avoided cost methodology is developed by the ACC. As amended, the decision provides that payments by utilities for energy exported to the grid from DG solar facilities will be determined using a RCP methodology, a method that is based on the most recent five-year rolling average price that APS pays for utility-scale solar projects, while a forecasted avoided cost methodology is being developed. The price established by this RCP method will be updated annually (between general retail rate cases) but will not be decreased by more than 10% per year. Once the avoided cost methodology is developed, the ACC will determine in APS's subsequent rate cases which method (or a combination of methods) is appropriate to determine the actual price to be paid by APS for exported distributed energy. In addition, the ACC made the following determinations:
This decision of the ACC addresses policy determinations only. The decision states that its principles will be applied in future general retail rate cases, and the policy determinations themselves may be subject to future change, as are all ACC policies. A first-year export energy price of 12.9 cents per kWh is included in the 2017 Settlement Agreement and became effective on September 1, 2017. In accordance with the 2017 Rate Case Decision, APS filed its request for a second-year export energy price of 11.6 cents per kWh on May 1, 2018. This price reflects the 10% annual reduction discussed above. The new tariff became effective on October 1, 2018. On January 23, 2017, The Alliance for Solar Choice ("TASC") sought rehearing of the ACC's decision regarding the value and cost of DG. TASC asserted that the ACC improperly ignored the Administrative Procedure Act, failed to give adequate notice regarding the scope of the proceedings, and relied on information that was not submitted as evidence, among other alleged defects. TASC filed a Notice of Appeal in the Arizona Court of Appeals and filed a Complaint and Statutory Appeal in the Maricopa County Superior Court on March 10, 2017. As part of the 2017 Settlement Agreement described above, TASC agreed to withdraw these appeals when the ACC decision implementing the 2017 Settlement Agreement is no longer subject to appellate review. Subpoena from Arizona Corporation Commissioner Robert Burns On August 25, 2016, Commissioner Burns, individually and not by action of the ACC as a whole, served subpoenas in APS’s then current retail rate proceeding on APS and Pinnacle West for the production of records and information relating to a range of expenditures from 2011 through 2016. The subpoenas requested information concerning marketing and advertising expenditures, charitable donations, lobbying expenses, contributions to 501(c)(3) and (c)(4) nonprofits and political contributions. The return date for the production of information was set as September 15, 2016. The subpoenas also sought testimony from Company personnel having knowledge of the material, including the Chief Executive Officer. On September 9, 2016, APS filed with the ACC a motion to quash the subpoenas or, alternatively, to stay APS's obligations to comply with the subpoenas and decline to decide APS's motion pending court proceedings. Contemporaneously with the filing of this motion, APS and Pinnacle West filed a complaint for special action and declaratory judgment in the Superior Court of Arizona for Maricopa County, seeking a declaratory judgment that Commissioner Burns’ subpoenas are contrary to law. On September 15, 2016, APS produced all non-confidential and responsive documents and offered to produce any remaining responsive documents that are confidential after an appropriate confidentiality agreement is signed. On February 7, 2017, Commissioner Burns opened a new ACC docket and indicated that its purpose is to study and rectify problems with transparency and disclosure regarding financial contributions from regulated monopolies or other stakeholders who may appear before the ACC that may directly or indirectly benefit an ACC Commissioner, a candidate for ACC Commissioner, or key ACC Staff. As part of this docket, Commissioner Burns set March 24, 2017 as a deadline for the production of all information previously requested through the subpoenas. Neither APS nor Pinnacle West produced the information requested and instead objected to the subpoena. On March 10, 2017, Commissioner Burns filed suit against APS and Pinnacle West in the Superior Court of Arizona for Maricopa County in an effort to enforce his subpoenas. On March 30, 2017, APS filed a motion to dismiss Commissioner Burns' suit against APS and Pinnacle West. In response to the motion to dismiss, the court stayed the suit and ordered Commissioner Burns to file a motion to compel the production of the information sought by the subpoenas with the ACC. On June 20, 2017, the ACC denied the motion to compel. On August 4, 2017, Commissioner Burns amended his complaint to add all of the ACC Commissioners and the ACC itself as defendants. All defendants moved to dismiss the amended complaint. On February 15, 2018, the Superior Court dismissed Commissioner Burns’ amended complaint. On March 6, 2018, Commissioner Burns filed an objection to the proposed final order from the Superior Court and a motion to further amend his complaint. The Superior Court permitted Commissioner Burns to amend his complaint to add a claim regarding his attempted investigation into whether his fellow commissioners should have been disqualified from voting on APS’s 2017 rate case. Commissioner Burns filed his second amended complaint, and all defendants filed responses opposing the second amended complaint and requested that it be dismissed. Oral argument occurred in November 2018 regarding the motion to dismiss. On December 18, 2018, the trial court granted the defendants’ motions to dismiss and entered final judgment on January 18, 2019. On February 13, 2019, Commissioner Burns filed a notice of appeal. APS and Pinnacle West cannot predict the outcome of this matter. Information Requests from Arizona Corporation Commissioners On January 14, 2019, ACC Commissioner Kennedy opened a docket to investigate campaign expenditures and political participation of APS and Pinnacle West. In addition, on February 27, 2019, ACC Commissioners Burns and Dunn opened a new docket and requested documents from APS and Pinnacle West related to ACC elections and charitable contributions related to the ACC. On March 1, 2019, ACC Commissioner Kennedy issued a subpoena to APS seeking several categories of information for both Pinnacle West and APS including political contributions, lobbying expenditures, marketing and advertising expenditures, and contributions made to 501(c)(3) and 501(c)(4) entities, for the years 2013-2018. Pinnacle West and APS voluntarily responded to both sets of requests on March 29, 2019. APS received subsequent requests on these matters and continues to respond to such follow-on requests. Pinnacle West and APS cannot predict the outcome of these matters. Renewable Energy Ballot Initiative On February 20, 2018, a renewable energy advocacy organization filed with the Arizona Secretary of State a ballot initiative for an Arizona constitutional amendment requiring Arizona public service corporations to provide at least 50% of their annual retail sales of electricity from renewable sources by 2030. For purposes of the proposed amendment, eligible renewable sources would not include nuclear generating facilities. The initiative was placed on the November 2018 Arizona elections ballot. On November 6, 2018, the initiative failed to receive adequate voter support and was defeated. Energy Modernization Plan On January 30, 2018, ACC Commissioner Tobin proposed the Energy Modernization Plan, which consists of a series of energy policies tied to clean energy sources such as energy storage, biomass, energy efficiency, electric vehicles, and expanded energy planning through the integrated resource plans ("IRP") process. The Energy Modernization Plan includes replacing the current RES standard with a new standard called the CREST, which incorporates the proposals in the Energy Modernization Plan. On July 5, 2018, ACC Commissioner Tobin’s office issued a set of draft CREST rules for the ACC’s consideration, which proposes an electricity generating portfolio of at least 80% clean energy sources (including nuclear generation) by 2050, a target of 3,000 megawatts of deployed energy storage by 2030, and a plan to implement a new Energy Efficiency Standard when the current standard sunsets in 2020. In August 2018, the ACC directed ACC Staff to open a new rulemaking docket which will address a wide range of energy issues, including the Energy Modernization Plan proposals. The rulemaking will consider possible modifications to existing ACC rules, such as the Renewable Energy Standard, Electric and Gas Energy Efficiency Standards, Net Metering, Resource Planning, and the Biennial Transmission Assessment, as well as the development of new rules regarding forest bioenergy, electric vehicles, interconnection of distributed generation, baseload security, blockchain technology and other technological developments, retail competition, and other energy-related topics. On April 25, 2019, the ACC Staff issued a set of draft rules in regards to the Energy Modernization Plan and workshops were held on April 29, 2019 regarding these draft rules. On April 26, 2019, Commissioner Dunn issued a proposed set of rules with regards to the Energy Modernization Plan. APS cannot predict the outcome of this matter. Integrated Resource Planning ACC rules require utilities to develop fifteen-year IRPs which describe how the utility plans to serve customer load in the plan timeframe. The ACC reviews each utility’s IRP to determine if it meets the necessary requirements and whether it should be acknowledged. In March of 2018, the ACC reviewed the 2017 IRPs of its jurisdictional utilities and voted to not acknowledge any of the plans. APS does not believe that this lack of acknowledgment will have a material impact on our financial position, results of operations or cash flows. Based on an ACC decision, APS is required to file a Preliminary Resource Plan by April 1, 2019 and its final IRP by April 1, 2020. On February 25, 2019, APS filed a request to extend the deadline to file its Preliminary Integrated Resource Plan from April 1, 2019 to August 1, 2019. On April 24, 2019, the ACC approved this request. Four Corners SCE-Related Matters. On December 30, 2013, APS purchased Southern California Edison Company's ("SCE’s") 48% ownership interest in each of Units 4 and 5 of Four Corners. The 2012 Settlement Agreement includes a procedure to allow APS to request rate adjustments prior to its next general retail rate case related to APS’s acquisition of the additional interests in Units 4 and 5 and the related closure of Units 1-3 of Four Corners. APS made its filing under this provision on December 30, 2013. On December 23, 2014, the ACC approved rate adjustments resulting in a revenue increase of $57.1 million on an annual basis. This included the deferral for future recovery of all non-fuel operating costs for the acquired SCE interest in Four Corners, net of the non-fuel operating costs savings resulting from the closure of Units 1-3 from the date of closing of the purchase through its inclusion in rates. The 2012 Settlement Agreement also provided for deferral for future recovery of all unrecovered costs incurred in connection with the closure of Units 1-3. The deferral balance related to the acquisition of SCE’s interest in Units 4 and 5 and the closure of Units 1-3 was $46 million as of March 31, 2019 and is being amortized in rates over a total of 10 years. The ACC's rate adjustment decision was appealed and on September 26, 2017, the Court of Appeals affirmed the ACC's decision on the Four Corners rate adjustment. As part of APS’s acquisition of SCE’s interest in Units 4 and 5, APS and SCE agreed, via a "Transmission Termination Agreement" that, upon closing of the acquisition, the companies would terminate an existing transmission agreement ("Transmission Agreement") between the parties that provides transmission capacity on a system (the "Arizona Transmission System") for SCE to transmit its portion of the output from Four Corners to California. APS previously submitted a request to FERC related to this termination, which resulted in a FERC order denying rate recovery of $40 million that APS agreed to pay SCE associated with the termination. On December 22, 2015, APS and SCE agreed to terminate the Transmission Termination Agreement and allow for the Transmission Agreement to expire according to its terms, which includes settling obligations in accordance with the terms of the Transmission Agreement. APS established a regulatory asset of $12 million in 2015 in connection with the payment required under the terms of the Transmission Agreement. On July 1, 2016, FERC issued an order denying APS’s request to recover the regulatory asset through its FERC-jurisdictional rates. APS and SCE completed the termination of the Transmission Agreement on July 6, 2016. APS made the required payment to SCE and wrote-off the $12 million regulatory asset and charged operating revenues to reflect the effects of this order in the second quarter of 2016. On July 29, 2016, APS filed a request for rehearing with FERC. In its order denying recovery, FERC also referred to its enforcement division a question of whether the agreement between APS and SCE relating to the settlement of obligations under the Transmission Agreement was a jurisdictional contract that should have been filed with FERC. On October 5, 2017, FERC issued an order denying APS's request for rehearing. FERC also upheld its prior determination that the agreement relating to the settlement was a jurisdictional contract and should have been filed with FERC. APS cannot predict whether or if the enforcement division will take any action. APS filed an appeal of FERC's July 1, 2016 and October 5, 2017 orders with the United States Court of Appeals for the Ninth Circuit on December 4, 2017. Oral argument for this proceeding is scheduled for May 15, 2019. APS cannot predict the outcome of the proceeding. SCR Cost Recovery. On December 29, 2017, in accordance with the 2017 Rate Case Decision, APS filed a Notice of Intent to file its SCR Adjustment to permit recovery of costs associated with the installation of SCR equipment at Four Corners Units 4 and 5. APS filed the SCR Adjustment request in April 2018. Consistent with the 2017 Rate Case Decision, the request was narrow in scope and addressed only costs associated with this specific environmental compliance equipment. The SCR Adjustment request provided that there would be a $67.5 million annual revenue impact that would be applied as a percentage of base rates for all applicable customers. Also, as provided for in the 2017 Rate Case Decision, APS requested that the adjustment become effective no later than January 1, 2019. The hearing for this matter occurred in September 2018. At the hearing, APS accepted ACC Staff's recommendation of a lower annual revenue impact of approximately $58.5 million. The Administrative Law Judge issued a Recommended Opinion and Order finding that the costs for the SCR project were prudently incurred and recommending authorization of the $58.5 million annual revenue requirement related to the installation and operation of the SCRs. Exceptions to the Recommended Opinion and Order were filed by the parties and intervenors on December 7, 2018. The ACC has not issued a decision on this matter. APS anticipates a decision later in 2019, however we cannot predict the outcome of the decision. APS may be required to record a charge to its results of operations if the ACC issues an unfavorable decision (see SCR deferral in the Regulatory Assets and Liabilities table below). Cholla On September 11, 2014, APS announced that it would close Unit 2 of the Cholla Power Plant ("Cholla") and cease burning coal at the other APS-owned units (Units 1 and 3) at the plant by the mid-2020s, if the United States Environmental Protection Agency ("EPA") approves a compromise proposal offered by APS to meet required environmental and emissions standards and rules. On April 14, 2015, the ACC approved APS's plan to retire Unit 2, without expressing any view on the future recoverability of APS's remaining investment in the Unit. APS closed Unit 2 on October 1, 2015. In early 2017, EPA approved a final rule incorporating APS's compromise proposal, which took effect on April 26, 2017. Previously, APS estimated Cholla Unit 2’s end of life to be 2033. APS has been recovering a return on and of the net book value of the unit in base rates. Pursuant to the 2017 Settlement Agreement described above, APS will be allowed continued recovery of the net book value of the unit and the unit’s decommissioning and other retirement-related costs ($85 million as of March 31, 2019), in addition to a return on its investment. In accordance with GAAP, in the third quarter of 2014, Unit 2’s remaining net book value was reclassified from property, plant and equipment to a regulatory asset. The 2017 Settlement Agreement also shortened the depreciation lives of Cholla Units 1 and 3 to 2026. On March 20, 2019, APS announced that it has begun evaluating the feasibility and cost of converting a unit at the Cholla to burn biomass. Biomass is a fuel comprised of forest trimmings, and a converted unit at Cholla could assist in forest thinning, responsible forest management, an improved watershed, and a reduced wildfire risk. APS’s ability to operate a biomass power plant would depend on third-parties procuring forest biomass for fuel. APS will report the result of its evaluation by May 20, 2019. If converting a unit is more cost effective than alternatives, APS will seek ACC approval before moving forward with the Cholla conversion project. APS cannot predict the outcome of this matter. Navajo Plant The co-owners of the Navajo Generating Station (the "Navajo Plant") and the Navajo Nation agreed that the Navajo Plant will remain in operation until December 2019 under the existing plant lease. The co-owners and the Navajo Nation executed a lease extension on November 29, 2017 that will allow for decommissioning activities to begin after the plant ceases operations in December 2019. On February 14, 2017, the ACC opened a docket titled "ACC Investigation Concerning the Future of the Navajo Generating Station" with the stated goal of engaging stakeholders and negotiating a sustainable pathway for the Navajo Plant to continue operating in some form after December 2019. APS cannot predict the outcome of this proceeding. APS is currently recovering depreciation and a return on the net book value of its interest in the Navajo Plant over its previously estimated life through 2026. APS will seek continued recovery in rates for the book value of its remaining investment in the plant ($85 million as of March 31, 2019) plus a return on the net book value as well as other costs related to retirement and closure, which are still being assessed and may be material. APS believes it will be allowed recovery of the net book value, in addition to a return on its investment. In accordance with GAAP, in the second quarter of 2017, APS's remaining net book value of its interest in the Navajo Plant was reclassified from property, plant and equipment to a regulatory asset. If the ACC does not allow full recovery of the remaining net book value of this interest, all or a portion of the regulatory asset will be written off and APS's net income, cash flows, and financial position will be negatively impacted. Regulatory Assets and Liabilities The detail of regulatory assets is as follows (dollars in thousands):
The detail of regulatory liabilities is as follows (dollars in thousands):
(c) See Note 5.
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Retirement Plans and Other Postretirement Benefits |
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Retirement Plans and Other Postretirement Benefits | Retirement Plans and Other Postretirement Benefits Pinnacle West sponsors a qualified defined benefit and account balance pension plan, a non-qualified supplemental excess benefit retirement plan, and an other postretirement benefit plan for the employees of Pinnacle West and our subsidiaries. Pinnacle West uses a December 31 measurement date for its pension and other postretirement benefit plans. The market-related value of our plan assets is their fair value at the measurement dates. The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction or billed to electric plant participants) (dollars in thousands):
Contributions |
Palo Verde Sale Leaseback Variable Interest Entities |
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Palo Verde Sale Leaseback Variable Interest Entities | Palo Verde Sale Leaseback Variable Interest Entities In 1986, APS entered into agreements with three separate VIE lessor trust entities in order to sell and lease back interests in Palo Verde Unit 2 and related common facilities. APS will retain the assets through 2023 under one lease and 2033 under the other two leases. APS will be required to make payments relating to these leases of approximately $23 million annually through 2023, and $16 million annually for the period 2024 through 2033. At the end of the lease period, APS will have the option to purchase the leased assets at their fair market value, extend the leases for up to two years, or return the assets to the lessors. The leases' terms give APS the ability to utilize the assets for a significant portion of the assets’ economic life, and therefore provide APS with the power to direct activities of the VIEs that most significantly impact the VIEs’ economic performance. Predominantly due to the lease terms, APS has been deemed the primary beneficiary of these VIEs and therefore consolidates the VIEs. As a result of consolidation, we eliminate lease accounting and instead recognize depreciation expense, resulting in an increase in net income for the three months ended March 31, 2019 and 2018 of $5 million, entirely attributable to the noncontrolling interests. Income attributable to Pinnacle West shareholders is not impacted by the consolidation. Our Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018 include the following amounts relating to the VIEs (dollars in thousands):
Assets of the VIEs are restricted and may only be used for payment to the noncontrolling interest holders. These assets are reported on our condensed consolidated financial statements. APS is exposed to losses relating to these VIEs upon the occurrence of certain events that APS does not consider to be reasonably likely to occur. Under certain circumstances (for example, the Nuclear Regulatory Commission ("NRC") issuing specified violation orders with respect to Palo Verde or the occurrence of specified nuclear events), APS would be required to make specified payments to the VIEs’ noncontrolling equity participants and take title to the leased Unit 2 interests, which, if appropriate, may be required to be written down in value. If such an event were to occur during the lease periods, APS may be required to pay the noncontrolling equity participants approximately $299 million beginning in 2019, and up to $456 million over the lease extension terms. |
Derivative Accounting |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Accounting | Derivative Accounting Derivative financial instruments are used to manage exposure to commodity price and transportation costs of electricity, natural gas, emissions allowances, and in interest rates. Risks associated with market volatility are managed by utilizing various physical and financial derivative instruments, including futures, forwards, options and swaps. As part of our overall risk management program, we may use derivative instruments to hedge purchases and sales of electricity and fuels. Derivative instruments that meet certain hedge accounting criteria may be designated as cash flow hedges and are used to limit our exposure to cash flow variability on forecasted transactions. The changes in market value of such instruments have a high correlation to price changes in the hedged transactions. Derivative instruments are also entered into for economic hedging purposes. While economic hedges may mitigate exposure to fluctuations in commodity prices, these instruments have not been designated as accounting hedges. Contracts that have the same terms (quantities, delivery points and delivery periods) and for which power does not flow are netted, which reduces both revenues and fuel and purchased power costs in our Condensed Consolidated Statements of Income, but does not impact our financial condition, net income or cash flows. Our derivative instruments, excluding those qualifying for a scope exception, are recorded on the balance sheets as an asset or liability and are measured at fair value. See Note 11 for a discussion of fair value measurements. Derivative instruments may qualify for the normal purchases and normal sales scope exception if they require physical delivery and the quantities represent those transacted in the normal course of business. Derivative instruments qualifying for the normal purchases and sales scope exception are accounted for under the accrual method of accounting and excluded from our derivative instrument discussion and disclosures below. For its regulated operations, APS defers for future rate treatment 100% of the unrealized gains and losses on derivatives pursuant to the PSA mechanism that would otherwise be recognized in income. Realized gains and losses on derivatives are deferred in accordance with the PSA to the extent the amounts are above or below the Base Fuel Rate (see Note 4). Gains and losses from derivatives in the following tables represent the amounts reflected in income before the effect of PSA deferrals. As of March 31, 2019 and December 31, 2018, we had the following outstanding gross notional volume of derivatives, which represent both purchases and sales (does not reflect net position):
Gains and Losses from Derivative Instruments The following table provides information about gains and losses from derivative instruments in designated cash flow accounting hedging relationships during the three months ended March 31, 2019 and 2018 (dollars in thousands):
During the next twelve months, we estimate that a net loss of $1 million before income taxes will be reclassified from accumulated OCI as an offset to the effect of market price changes for the related hedged transactions. In accordance with the PSA, most of these amounts will be recorded as either a regulatory asset or liability and have no immediate effect on earnings. The following table provides information about gains and losses from derivative instruments not designated as accounting hedging instruments during the three months ended March 31, 2019 and 2018 (dollars in thousands):
Derivative Instruments in the Condensed Consolidated Balance Sheets Our derivative transactions are typically executed under standardized or customized agreements, which include collateral requirements and, in the event of a default, would allow for the netting of positive and negative exposures associated with a single counterparty. Agreements that allow for the offsetting of positive and negative exposures associated with a single counterparty are considered master netting arrangements. Transactions with counterparties that have master netting arrangements are offset and reported net on the Condensed Consolidated Balance Sheets. Transactions that do not allow for offsetting of positive and negative positions are reported gross on the Condensed Consolidated Balance Sheets. We do not offset a counterparty’s current derivative contracts with the counterparty’s non-current derivative contracts, although our master netting arrangements would allow current and non-current positions to be offset in the event of a default. Additionally, in the event of a default, our master netting arrangements would allow for the offsetting of all transactions executed under the master netting arrangement. These types of transactions may include non-derivative instruments, derivatives qualifying for scope exceptions, trade receivables and trade payables arising from settled positions, and other forms of non-cash collateral (such as letters of credit). These types of transactions are excluded from the offsetting tables presented below. The following tables provide information about the fair value of our risk management activities reported on a gross basis, and the impacts of offsetting as of March 31, 2019 and December 31, 2018. These amounts relate to commodity contracts and are located in the assets and liabilities from risk management activities lines of our Condensed Consolidated Balance Sheets.
Credit Risk and Credit Related Contingent Features We are exposed to losses in the event of nonperformance or nonpayment by counterparties and have risk management contracts with many counterparties. As of March 31, 2019, Pinnacle West has no counterparties with positive exposures of greater than 10% of risk management assets. Our risk management process assesses and monitors the financial exposure of all counterparties. Despite the fact that the great majority of our trading counterparties' debt is rated as investment grade by the credit rating agencies, there is still a possibility that one or more of these counterparties could default, resulting in a material impact on consolidated earnings for a given period. Counterparties in the portfolio consist principally of financial institutions, major energy companies, municipalities and local distribution companies. We maintain credit policies that we believe minimize overall credit risk to within acceptable limits. Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition. To manage credit risk, we employ collateral requirements and standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty. Valuation adjustments are established representing our estimated credit losses on our overall exposure to counterparties. Certain of our derivative instrument contracts contain credit-risk-related contingent features including, among other things, investment grade credit rating provisions, credit-related cross-default provisions, and adequate assurance provisions. Adequate assurance provisions allow a counterparty with reasonable grounds for uncertainty to demand additional collateral based on subjective events and/or conditions. For those derivative instruments in a net liability position, with investment grade credit contingencies, the counterparties could demand additional collateral if our debt credit rating were to fall below investment grade (below BBB- for Standard & Poor’s or Fitch or Baa3 for Moody’s). The following table provides information about our derivative instruments that have credit-risk-related contingent features at March 31, 2019 (dollars in thousands):
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Palo Verde Generating Station Spent Nuclear Fuel and Waste Disposal On December 19, 2012, APS, acting on behalf of itself and the participant owners of Palo Verde, filed a second breach of contract lawsuit against the United States Department of Energy ("DOE") in the United States Court of Federal Claims ("Court of Federal Claims"). The lawsuit sought to recover damages incurred due to DOE’s breach of the Contract for Disposal of Spent Nuclear Fuel and/or High Level Radioactive Waste ("Standard Contract") for failing to accept Palo Verde's spent nuclear fuel and high level waste from January 1, 2007 through June 30, 2011, as it was required to do pursuant to the terms of the Standard Contract and the Nuclear Waste Policy Act. On August 18, 2014, APS and DOE entered into a settlement agreement, stipulating to a dismissal of the lawsuit and payment of $57.4 million by DOE to the Palo Verde owners for certain specified costs incurred by Palo Verde during the period January 1, 2007 through June 30, 2011. APS’s share of this amount is $16.7 million. Amounts recovered in the lawsuit and settlement were recorded as adjustments to a regulatory liability and had no impact on the amount of reported net income. In addition, the settlement agreement, as amended, provides APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2019. APS has submitted four claims pursuant to the terms of the August 18, 2014 settlement agreement, for four separate time periods during July 1, 2011 through June 30, 2018. The DOE has approved and paid $74.2 million for these claims (APS’s share is $21.6 million). The amounts recovered were primarily recorded as adjustments to a regulatory liability and had no impact on reported net income. In accordance with the 2017 Rate Case Decision, this regulatory liability is being refunded to customers (see Note 4). APS submitted its most recent claim pursuant to the terms of the August 18, 2014 settlement agreement to the DOE on October 31, 2018 in the amount of $10.2 million (APS's share is $3.0 million). On February 11, 2019 and April 10, 2019 (in response to APS's request for reconsideration), the DOE approved in total a payment of $10.2 million (APS’s share is $3.0 million). Nuclear Insurance Public liability for incidents at nuclear power plants is governed by the Price-Anderson Nuclear Industries Indemnity Act ("Price-Anderson Act"), which limits the liability of nuclear reactor owners to the amount of insurance available from both commercial sources and an industry-wide retrospective payment plan. In accordance with the Price-Anderson Act, the Palo Verde participants are insured against public liability for a nuclear incident of up to approximately $14.1 billion per occurrence. Palo Verde maintains the maximum available nuclear liability insurance in the amount of $450 million, which is provided by American Nuclear Insurers ("ANI"). The remaining balance of approximately $13.6 billion of liability coverage is provided through a mandatory industry-wide retrospective premium program. If losses at any nuclear power plant covered by the program exceed the accumulated funds, APS could be responsible for retrospective premiums. The maximum retrospective premium per reactor under the program for each nuclear liability incident is approximately $137.6 million, subject to a maximum annual premium of approximately $20.5 million per incident. Based on APS’s ownership interest in the three Palo Verde units, APS’s maximum retrospective premium per incident for all three units is approximately $120.1 million, with a maximum annual retrospective premium of approximately $17.9 million. The Palo Verde participants maintain insurance for property damage to, and decontamination of, property at Palo Verde in the aggregate amount of $2.8 billion. APS has also secured accidental outage insurance for a sudden and unforeseen accidental outage of any of the three units. The property damage, decontamination, and accidental outage insurance are provided by Nuclear Electric Insurance Limited ("NEIL"). APS is subject to retrospective premium adjustments under all NEIL policies if NEIL’s losses in any policy year exceed accumulated funds. The maximum amount APS could incur under the current NEIL policies totals approximately $24.8 million for each retrospective premium assessment declared by NEIL’s Board of Directors due to losses. In addition, NEIL policies contain rating triggers that would result in APS providing approximately $71.2 million of collateral assurance within 20 business days of a rating downgrade to non-investment grade. The insurance coverage discussed in this and the previous paragraph is subject to certain policy conditions, sublimits and exclusions. Contractual Obligations As of March 31, 2019, our fuel and purchased power commitments have increased approximately $180 million from the information provided in our 2018 Form 10-K. This change primarily relates to new purchased power commitments. The majority of the changes relate to 2024 and thereafter. Other than the item described above, there have been no material changes, as of March 31, 2019, outside the normal course of business in contractual obligations from the information provided in our 2018 Form 10-K. See Note 3 for discussion regarding changes in our long-term debt obligations. Superfund-Related Matters The Comprehensive Environmental Response Compensation and Liability Act ("Superfund" or "CERCLA") establishes liability for the cleanup of hazardous substances found contaminating the soil, water or air. Those who released, generated, transported to or disposed of hazardous substances at a contaminated site are among the parties who are potentially responsible ("PRPs"). PRPs may be strictly, and often are jointly and severally, liable for clean-up. On September 3, 2003, EPA advised APS that EPA considers APS to be a PRP in the Motorola 52nd Street Superfund Site, Operable Unit 3 ("OU3") in Phoenix, Arizona. APS has facilities that are within this Superfund site. APS and Pinnacle West have agreed with EPA to perform certain investigative activities of the APS facilities within OU3. In addition, on September 23, 2009, APS agreed with EPA and one other PRP to voluntarily assist with the funding and management of the site-wide groundwater remedial investigation and feasibility study ("RI/FS"). Based upon discussions between the OU3 working group parties and EPA, along with the results of recent technical analyses prepared by the OU3 working group to supplement the RI/FS for OU3, APS anticipates finalizing the RI/FS in the fall or winter of 2019. We estimate that our costs related to this investigation and study will be approximately $2 million. We anticipate incurring additional expenditures in the future, but because the overall investigation is not complete and ultimate remediation requirements are not yet finalized, at the present time expenditures related to this matter cannot be reasonably estimated. On August 6, 2013, Roosevelt Irrigation District ("RID") filed a lawsuit in Arizona District Court against APS and 24 other defendants, alleging that RID’s groundwater wells were contaminated by the release of hazardous substances from facilities owned or operated by the defendants. The lawsuit also alleges that, under Superfund laws, the defendants are jointly and severally liable to RID. The allegations against APS arise out of APS’s current and former ownership of facilities in and around OU3. As part of a state governmental investigation into groundwater contamination in this area, on January 25, 2015, the Arizona Department of Environmental Quality ("ADEQ") sent a letter to APS seeking information concerning the degree to which, if any, APS’s current and former ownership of these facilities may have contributed to groundwater contamination in this area. APS responded to ADEQ on May 4, 2015. On December 16, 2016, two RID environmental and engineering contractors filed an ancillary lawsuit for recovery of costs against APS and the other defendants in the RID litigation. That same day, another RID service provider filed an additional ancillary CERCLA lawsuit against certain of the defendants in the main RID litigation, but excluded APS and certain other parties as named defendants. Because the ancillary lawsuits concern past costs allegedly incurred by these RID vendors, which were ruled unrecoverable directly by RID in November of 2016, the additional lawsuits do not increase APS's exposure or risk related to these matters. On April 5, 2018, RID and the defendants in that particular litigation executed a settlement agreement, fully resolving RID's CERCLA claims concerning both past and future cost recovery. APS's share of this settlement was immaterial. In addition, the two environmental and engineering vendors voluntarily dismissed their lawsuit against APS and the other named defendants without prejudice. An order to this effect was entered on April 17, 2018. With this disposition of the case, the vendors may file their lawsuit again in the future. In addition, APS and certain other parties not named in the remaining RID service provider lawsuit may be brought into the litigation via third-party complaints filed by the current direct defendants. We are unable to predict the outcome of these matters; however, we do not expect the outcome to have a material impact on our financial position, results of operations or cash flows. Environmental Matters APS is subject to numerous environmental laws and regulations affecting many aspects of its present and future operations, including air emissions of both conventional pollutants and greenhouse gases, water quality, wastewater discharges, solid waste, hazardous waste, and coal combustion residuals ("CCRs"). These laws and regulations can change from time to time, imposing new obligations on APS resulting in increased capital, operating, and other costs. Associated capital expenditures or operating costs could be material. APS intends to seek recovery of any such environmental compliance costs through our rates, but cannot predict whether it will obtain such recovery. The following proposed and final rules involve material compliance costs to APS. Regional Haze Rules. APS has received the final rulemaking imposing new pollution control requirements on Four Corners and the Navajo Plant. EPA will require these plants to install pollution control equipment that constitutes best available retrofit technology ("BART") to lessen the impacts of emissions on visibility surrounding the plants. In addition, EPA issued a final rule for Regional Haze compliance at Cholla that does not involve the installation of new pollution controls and that will replace an earlier BART determination for this facility. See below for details of the Cholla BART approval. Four Corners. Based on EPA’s final standards, APS's 63% share of the cost of required controls for Four Corners Units 4 and 5 is approximately $400 million, the majority of which has already been incurred. In addition, APS and El Paso Electric Company ("El Paso") entered into an asset purchase agreement providing for the purchase by APS, or an affiliate of APS, of El Paso's 7% interest in Four Corners Units 4 and 5. 4CA purchased the El Paso interest on July 6, 2016. Navajo Transitional Energy Company, LLC ("NTEC") purchased the interest from 4CA on July 3, 2018. See "Four Corners Coal Supply Agreement - 4CA Matter" below for a discussion of the NTEC purchase. The cost of the pollution controls related to the 7% interest is approximately $45 million, which was assumed by NTEC through its purchase of the 7% interest. Navajo Plant. APS estimates that its share of costs for upgrades at the Navajo Plant, based on EPA’s Federal Implementation Plan ("FIP"), could be up to approximately $200 million; however, given the future plans for the Navajo Plant, we do not expect to incur these costs. See "Navajo Plant" in Note 4 for information regarding future plans for the Navajo Plant. Cholla. APS believed that EPA’s original 2012 final rule establishing controls constituting BART for Cholla, which would require installation of SCR controls, was unsupported and that EPA had no basis for disapproving Arizona’s State Implementation Plan ("SIP") and promulgating a FIP that was inconsistent with the state’s considered BART determinations under the regional haze program. In September 2014, APS met with EPA to propose a compromise BART strategy, whereby APS would permanently close Cholla Unit 2 and cease burning coal at Units 1 and 3 by the mid-2020s. (See Note 4 for details related to the resulting regulatory asset.) APS made the proposal with the understanding that additional emission control equipment is unlikely to be required in the future because retiring and/or converting the units as contemplated in the proposal is more cost effective than, and will result in increased visibility improvement over, the BART requirements for oxides of nitrogen ("NOx") imposed through EPA's BART FIP. In early 2017, EPA approved a final rule incorporating APS's compromise proposal, which took effect for Cholla on April 26, 2017. Coal Combustion Waste. On December 19, 2014, EPA issued its final regulations governing the handling and disposal of CCR, such as fly ash and bottom ash. The rule regulates CCR as a non-hazardous waste under Subtitle D of the Resource Conservation and Recovery Act ("RCRA") and establishes national minimum criteria for existing and new CCR landfills and surface impoundments and all lateral expansions consisting of location restrictions, design and operating criteria, groundwater monitoring and corrective action, closure requirements and post closure care, and recordkeeping, notification, and internet posting requirements. The rule generally requires any existing unlined CCR surface impoundment that is contaminating groundwater above a regulated constituent’s groundwater protection standard to stop receiving CCR and either retrofit or close, and further requires the closure of any CCR landfill or surface impoundment that cannot meet the applicable performance criteria for location restrictions or structural integrity. Such closure requirements are deemed "forced closure" or "closure for cause" of unlined surface impoundments, and are the subject of recent regulatory and judicial activities described below. On December 16, 2016, President Obama signed the Water Infrastructure Improvements for the Nation ("WIIN") Act into law, which contains a number of provisions requiring EPA to modify the self-implementing provisions of the Agency's current CCR rules under Subtitle D. Such modifications include new EPA authority to directly enforce the CCR rules through the use of administrative orders and providing states, like Arizona, where the Cholla facility is located, the option of developing CCR disposal unit permitting programs, subject to EPA approval. For facilities in states that do not develop state-specific permitting programs, EPA is required to develop a federal permit program, pending the availability of congressional appropriations. By contrast, for facilities located within the boundaries of Native American tribal reservations, such as the Navajo Nation, where the Navajo Plant and Four Corners facilities are located, EPA is required to develop a federal permit program regardless of appropriated funds. ADEQ has initiated a process to evaluate how to develop a state CCR permitting program that would cover electric generating units ("EGUs"), including Cholla. While APS has been working with ADEQ on the development of this program, we are unable to predict when Arizona will be able to finalize and secure EPA approval for a state-specific CCR permitting program. With respect to the Navajo Nation, APS has sought clarification as to when and how EPA would be initiating permit proceedings for facilities on the reservation, including Four Corners. We are unable to predict at this time when EPA will be issuing CCR management permits for the facilities on the Navajo Nation. At this time, it remains unclear how the CCR provisions of the WIIN Act will affect APS and its management of CCR. Based upon utility industry petitions for EPA to reconsider the RCRA Subtitle D regulations for CCR, which were premised in part on the CCR provisions of the 2016 WIIN Act, on September 13, 2017 EPA agreed to evaluate whether to revise these federal CCR regulations. On July 17, 2018, EPA finalized a revision to its RCRA Subtitle D regulations for CCR, the "Phase I, Part I" revision to its CCR regulations, deferring for future action a number of other proposed changes contemplated in a March 1, 2018 proposal. For the final rule issued on July 17, 2018, EPA established nationwide health-based standards for certain constituents of CCR subject to groundwater corrective action and delayed the closure deadlines for certain unlined CCR surface impoundments by 18 months (for example, those disposal units required to undergo forced closure). These changes to the federal regulations governing CCR disposal are unlikely to have a material impact on APS. As for those aspects of the March 2018 rulemaking proposal for which EPA has yet to take final action, it remains unclear which specific provisions of the federal CCR rules will ultimately be modified, how they will be modified, or when such modification will occur. Pursuant to a June 24, 2016 order by the D.C. Circuit Court of Appeals in the litigation by industry- and environmental-groups challenging EPA’s CCR regulations, EPA is required to complete a rulemaking proceeding in the near future concerning whether or not boron must be included on the list of groundwater constituents that might trigger corrective action under EPA’s CCR rules. Simultaneously with the issuance of EPA's proposed modifications to the federal CCR rules in response to industry petitions, on March 1, 2018, EPA issued a proposed rule seeking comment as to whether or not boron should be included on this list. EPA is not required to take final action approving the inclusion of boron. Should EPA take final action adding boron to the list of groundwater constituents that might trigger corrective action, any resulting corrective action measures may increase APS's costs of compliance with the CCR rule at our coal-fired generating facilities. At this time APS cannot predict the eventual results of this rulemaking proceeding concerning boron. On August 21, 2018, the D.C. Circuit Court issued its decision on the merits in this litigation. The Court upheld the legality of EPA’s CCR regulations, though it vacated and remanded back to EPA a number of specific provisions, which are to be corrected in accordance with the Court’s order. Among the issues affecting APS’s management of CCR, the D.C. Circuit’s decision vacated and remanded those provisions of the EPA CCR regulations that allow for the operation of unlined CCR surface impoundments, even where those unlined impoundments have not otherwise violated a regulatory location restriction or groundwater protection standard (i.e., otherwise triggering forced closure). At this time, it remains unclear how this D.C. Circuit Court decision will affect APS’s operations or any financial impacts, as EPA has yet to take regulatory action on remand to revise its 2015 CCR regulations consistent with the Court’s order. Based on this decision, on December 17, 2018, certain environmental groups filed an emergency motion with the D.C. Circuit to either stay or summarily vacate EPA's July 17, 2018 final rule extending the closure-initiation deadline for certain unlined CCR surface impoundments until October 2020. In response, EPA filed a motion to remand but not vacate that deadline extension regulation. On March 13, 2019, the Court issued its ruling on the pending motions concerning the October 2020 deadline for closure initiation and granted remand without vacatur. This ruling allows the current October 2020 deadline to remain in effect while EPA completes a rulemaking to revise or reaffirm this deadline in accordance with the August 2018 D.C. Circuit decision concerning the closure of unlined CCR surface impoundments. We cannot predict the outcome of EPA’s remand rulemaking concerning the October 2020 deadline for closure initiation. APS currently disposes of CCR in ash ponds and dry storage areas at Cholla and Four Corners. APS estimates that its share of incremental costs to comply with the CCR rule for Four Corners is approximately $22 million and its share of incremental costs to comply with the CCR rule for Cholla is approximately $15 million. The Navajo Plant currently disposes of CCR in a dry landfill storage area. APS estimates that its share of incremental costs to comply with the CCR rule for the Navajo Plant is approximately $1 million. Additionally, the CCR rule requires ongoing, phased groundwater monitoring. By October 17, 2017, electric utility companies that own or operate CCR disposal units, such as APS, must have collected sufficient groundwater sampling data to initiate a detection monitoring program. To the extent that certain threshold constituents are identified through this initial detection monitoring at levels above the CCR rule’s standards, the rule required the initiation of an assessment monitoring program by April 15, 2018. APS recently completed the statistical analyses for its CCR disposal units that triggered assessment monitoring. APS determined that several of its CCR disposal units at Cholla and Four Corners will need to undergo corrective action. In addition, all such units must cease operating and initiate closure by October of 2020. APS currently estimates that the additional incremental costs to complete this corrective action and closure work, along with the costs to develop replacement CCR disposal capacity, could be approximately $5 million for both Cholla and Four Corners. APS initiated an assessment of corrective measures on January 14, 2019, and anticipates completing this assessment during the summer of 2019. During this assessment, APS will gather additional groundwater data, solicit input from the public, host public hearings, and select remedies. As such, this $5 million cost estimate may change based upon APS’s performance of the CCR rule’s corrective action assessment process. Given uncertainties that may exist until we have fully completed the corrective action assessment process, we cannot predict any ultimate impacts to the Company; however, at this time we do not believe any potential change to the cost estimate would have a material impact on our financial position, results of operations or cash flows. Clean Power Plan. On June 2, 2014, EPA issued two proposed rules to regulate greenhouse gas ("GHG") emissions from modified and reconstructed EGUs pursuant to Section 111(b) of the Clean Air Act and existing fossil fuel-fired power plants pursuant to Clean Air Act Section 111(d). On August 3, 2015, EPA finalized carbon pollution standards for EGUs, the "Clean Power Plan". On October 10, 2017, EPA issued a proposal to repeal the Clean Power Plan and proposed replacement regulations on August 21, 2018. In addition, judicial challenges to the Clean Power Plan are pending before the D.C. Circuit, though that litigation is currently in abeyance while EPA develops regulatory action to potentially repeal and replace that regulation. EPA's pending proposal to regulate carbon emissions from EGUs replaces the Clean Power Plan with standards that are based entirely upon measures that can be implemented to improve the heat rate of steam-electric power plants, specifically coal-fired EGUs. In contrast with the Clean Power Plan, EPA's proposed "Affordable Clean Energy Rule" would not involve utility-level generation dispatch shifting away from coal-fired generation and toward renewable energy resources and natural gas-fired combined cycle power plants. In addition, to address the New Source Review ("NSR") implications of power plant upgrades potentially necessary to achieve compliance with the proposed Affordable Clean Energy Rule standards, EPA also proposed to revise EPA's NSR regulations to more readily authorize the implementation of EGU efficiency upgrades. We cannot predict the outcome of EPA's regulatory actions related to the August 2015 carbon pollution standards for EGU's, including any actions related to EPA's repeal proposal for the Clean Power Plan or additional rulemaking actions to approve the EPA's recently proposed Affordable Clean Energy Rule. In addition, we cannot predict whether the D.C. Circuit Court will continue to hold the litigation challenging the original Clean Power Plan in abeyance in light of EPA's repeal proposal, which is still pending. Other environmental rules that could involve material compliance costs include those related to effluent limitations, the ozone national ambient air quality standard and other rules or matters involving the Clean Air Act, Clean Water Act, Endangered Species Act, RCRA, Superfund, the Navajo Nation, and water supplies for our power plants. The financial impact of complying with current and future environmental rules could jeopardize the economic viability of our coal plants or the willingness or ability of power plant participants to fund any required equipment upgrades or continue their participation in these plants. The economics of continuing to own certain resources, particularly our coal plants, may deteriorate, warranting early retirement of those plants, which may result in asset impairments. APS would seek recovery in rates for the book value of any remaining investments in the plants as well as other costs related to early retirement, but cannot predict whether it would obtain such recovery. Federal Agency Environmental Lawsuit Related to Four Corners On April 20, 2016, several environmental groups filed a lawsuit against the Office of Surface Mining Reclamation and Enforcement ("OSM") and other federal agencies in the District of Arizona in connection with their issuance of the approvals that extended the life of Four Corners and the adjacent mine. The lawsuit alleges that these federal agencies violated both the Endangered Species Act ("ESA") and the National Environmental Policy Act ("NEPA") in providing the federal approvals necessary to extend operations at the Four Corners Power Plant and the adjacent Navajo Mine past July 6, 2016. APS filed a motion to intervene in the proceedings, which was granted on August 3, 2016. On September 15, 2016, NTEC, the company that owns the adjacent mine, filed a motion to intervene for the purpose of dismissing the lawsuit based on NTEC's tribal sovereign immunity. On September 11, 2017, the Arizona District Court issued an order granting NTEC's motion, dismissing the litigation with prejudice, and terminating the proceedings. On November 9, 2017, the environmental group plaintiffs appealed the district court order dismissing their lawsuit. Oral argument for this appeal occurred on March 7, 2019. We cannot predict whether this appeal will be successful and, if it is successful, the outcome of further district court proceedings. Four Corners National Pollutant Discharge Elimination System ("NPDES") Permit On July 16, 2018, several environmental groups filed a petition for review before the EPA Environmental Appeals Board ("EAB") concerning the NPDES wastewater discharge permit for Four Corners, which was reissued on June 12, 2018. The environmental groups allege that the permit was reissued in contravention of several requirements under the Clean Water Act and did not contain required provisions concerning EPA’s 2015 revised effluent limitation guidelines for steam-electric EGUs, 2014 existing-source regulations governing cooling-water intake structures, and effluent limits for surface seepage and subsurface discharges from coal-ash disposal facilities. To address certain of these issues through a reconsidered permit, EPA took action on December 19, 2018 to withdraw the NPDES permit reissued in June 2018. Withdrawal of the permit moots the EAB appeal, and EPA filed a motion to dismiss on that basis. The EAB thereafter dismissed the environmental group appeal on February 12, 2019. EPA indicated that, depending on the extent of public comments it receives concerning the permit proposal, it anticipates taking final action on a new NPDES permit by August 2019. At this time we cannot predict the outcome of EPA's reconsideration of the NPDES permit and whether reconsideration will have a material impact on our financial position, results of operations or cash flows. Four Corners - 4CA Matter On July 6, 2016, 4CA purchased El Paso’s 7% interest in Four Corners. NTEC had the option to purchase the 7% interest within a certain timeframe pursuant to an option granted to NTEC. On December 29, 2015, NTEC provided notice of its intent to exercise the option. The purchase did not occur during the originally contemplated timeframe. Concurrent with the settlement of the 2016 Coal Supply Agreement matter described above, NTEC and 4CA agreed to allow for the purchase by NTEC of the 7% interest, consistent with the option. On June 29, 2018, 4CA and NTEC entered into an asset purchase agreement providing for the sale to NTEC of 4CA's 7% interest in Four Corners. Completion of the sale was subject to the receipt of approval by FERC, which was received on July 2, 2018, and the sale transaction closed on July 3, 2018. NTEC purchased the 7% interest at 4CA’s book value, approximately $70 million, and is paying 4CA the purchase price over a period of four years pursuant to a secured interest-bearing promissory note. In connection with the sale, Pinnacle West guaranteed certain obligations that NTEC will have to the other owners of Four Corners, such as NTEC's 7% share of capital expenditures and operating and maintenance expenses. Pinnacle West's guarantee is secured by a portion of APS's payments to be owed to NTEC under the 2016 Coal Supply Agreement. The 2016 Coal Supply Agreement contained alternate pricing terms for the 7% interest in the event NTEC did not purchase the interest. Until the time that NTEC purchased the 7% interest, the alternate pricing provisions were applicable to 4CA as the holder of the 7% interest. These terms included a formula under which NTEC must make certain payments to 4CA for reimbursement of operations and maintenance costs and a specified rate of return, offset by revenue generated by 4CA’s power sales. Such payments are due to 4CA at the end of each calendar year. A $10 million payment was due to 4CA at December 31, 2017, which NTEC satisfied by directing to 4CA a prepayment from APS of a portion of a future mine reclamation obligation. The balance of the amount under this formula due December 31, 2018 for calendar year 2017 was approximately $20 million, which was paid to 4CA on December 14, 2018. The balance of the amount under this formula for calendar year 2018 (up to the date that NTEC purchased the 7% interest) is approximately $10 million, which is due to 4CA at December 31, 2019. Financial Assurances In the normal course of business, we obtain standby letters of credit and surety bonds from financial institutions and other third parties. These instruments guarantee our own future performance and provide third parties with financial and performance assurance in the event we do not perform. These instruments support commodity contract collateral obligations and other transactions. As of March 31, 2019, standby letters of credit totaled $0.2 million and will expire in 2019. As of March 31, 2019, surety bonds expiring through 2020 totaled $17 million. The underlying liabilities insured by these instruments are reflected on our balance sheets, where applicable. Therefore, no additional liability is reflected for the letters of credit and surety bonds themselves. We enter into agreements that include indemnification provisions relating to liabilities arising from or related to certain of our agreements. Most significantly, APS has agreed to indemnify the equity participants and other parties in the Palo Verde sale leaseback transactions with respect to certain tax matters. Generally, a maximum obligation is not explicitly stated in the indemnification provisions and, therefore, the overall maximum amount of the obligation under such indemnification provisions cannot be reasonably estimated. Based on historical experience and evaluation of the specific indemnities, we do not believe that any material loss related to such indemnification provisions is likely. |
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Other Income and Other Expense | Other Income and Other Expense The following table provides detail of Pinnacle West's Consolidated other income and other expense for the three months ended March 31, 2019 and 2018 (dollars in thousands):
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Earnings Per Share |
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Earnings Per Share | Earnings Per Share The following table presents the calculation of Pinnacle West’s basic and diluted earnings per share for the three months ended March 31, 2019 and 2018 (in thousands, except per share amounts):
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Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements We classify our assets and liabilities that are carried at fair value within the fair value hierarchy. This hierarchy ranks the quality and reliability of the inputs used to determine fair values, which are then classified and disclosed in one of three categories. The three levels of the fair value hierarchy are: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Other significant observable inputs, including quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active, and model-derived valuations whose inputs are observable (such as yield curves). Level 3 — Valuation models with significant unobservable inputs that are supported by little or no market activity. Instruments in this category include long-dated derivative transactions where valuations are unobservable due to the length of the transaction, options, and transactions in locations where observable market data does not exist. The valuation models we employ utilize spot prices, forward prices, historical market data and other factors to forecast future prices. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, a valuation may be classified in Level 3 even though the valuation may include significant inputs that are readily observable. We maximize the use of observable inputs and minimize the use of unobservable inputs. We rely primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities. If market data is not readily available, inputs may reflect our own assumptions about the inputs market participants would use. Our assessment of the inputs and the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities as well as their placement within the fair value hierarchy levels. We assess whether a market is active by obtaining observable broker quotes, reviewing actual market activity, and assessing the volume of transactions. We consider broker quotes observable inputs when the quote is binding on the broker, we can validate the quote with market activity, or we can determine that the inputs the broker used to arrive at the quoted price are observable. Certain instruments have been valued using the concept of Net Asset Value ("NAV"), as a practical expedient. These instruments are typically structured as investment companies offering shares or units to multiple investors for the purpose of providing a return. These instruments are similar to mutual funds; however, their NAV is generally not published and publicly available, nor are these instruments traded on an exchange. Instruments valued using NAV, as a practical expedient are included in our fair value disclosures however, in accordance with GAAP are not classified within the fair value hierarchy levels. Recurring Fair Value Measurements We apply recurring fair value measurements to cash equivalents, derivative instruments, and investments held in the nuclear decommissioning trust and other special use funds. On an annual basis we apply fair value measurements to plan assets held in our retirement and other benefit plans. See Note 7 for fair value discussion of plan assets held in our retirement and other benefit plans. Cash Equivalents Cash equivalents represent certain investments in money market funds that are valued using quoted prices in active markets. Risk Management Activities — Derivative Instruments Exchange traded commodity contracts are valued using unadjusted quoted prices. For non-exchange traded commodity contracts, we calculate fair value based on the average of the bid and offer price, discounted to reflect net present value. We maintain certain valuation adjustments for a number of risks associated with the valuation of future commitments. These include valuation adjustments for liquidity and credit risks. The liquidity valuation adjustment represents the cost that would be incurred if all unmatched positions were closed out or hedged. The credit valuation adjustment represents estimated credit losses on our net exposure to counterparties, taking into account netting agreements, expected default experience for the credit rating of the counterparties and the overall diversification of the portfolio. We maintain credit policies that management believes minimize overall credit risk. Certain non-exchange traded commodity contracts are valued based on unobservable inputs due to the long-term nature of contracts, characteristics of the product, or the unique location of the transactions. Our long-dated energy transactions consist of observable valuations for the near-term portion and unobservable valuations for the long-term portions of the transaction. We rely primarily on broker quotes to value these instruments. When our valuations utilize broker quotes, we perform various control procedures to ensure the quote has been developed consistent with fair value accounting guidance. These controls include assessing the quote for reasonableness by comparison against other broker quotes, reviewing historical price relationships, and assessing market activity. When broker quotes are not available, the primary valuation technique used to calculate the fair value is the extrapolation of forward pricing curves using observable market data for more liquid delivery points in the same region and actual transactions at more illiquid delivery points. When the unobservable portion is significant to the overall valuation of the transaction, the entire transaction is classified as Level 3. Our classification of instruments as Level 3 is primarily reflective of the long-term nature of our energy transactions. Our energy risk management committee, consisting of officers and key management personnel, oversees our energy risk management activities to ensure compliance with our stated energy risk management policies. We have a risk control function that is responsible for valuing our derivative commodity instruments in accordance with established policies and procedures. The risk control function reports to the chief financial officer’s organization. Investments Held in Nuclear Decommissioning Trust and Other Special Use Funds The nuclear decommissioning trust and other special use funds invest in fixed income and equity securities. Other special use funds include the coal reclamation escrow account and the active union medical trust. See Note 12 for additional discussion about our investment accounts. We value investments in fixed income and equity securities using information provided by our trustees and escrow agent. Our trustees and escrow agent use pricing services that utilize the valuation methodologies described below to determine fair market value. We have internal control procedures designed to ensure this information is consistent with fair value accounting guidance. These procedures include assessing valuations using an independent pricing source, verifying that pricing can be supported by actual recent market transactions, assessing hierarchy classifications, comparing investment returns with benchmarks, and obtaining and reviewing independent audit reports on the trustees’ and escrow agent's internal operating controls and valuation processes. Fixed Income Securities Fixed income securities issued by the U.S. Treasury are valued using quoted active market prices and are typically classified as Level 1. Fixed income securities issued by corporations, municipalities, and other agencies, including mortgage-backed instruments, are valued using quoted inactive market prices, quoted active market prices for similar securities, or by utilizing calculations which incorporate observable inputs such as yield curves and spreads relative to such yield curves. These fixed income instruments are classified as Level 2. Whenever possible, multiple market quotes are obtained which enables a cross-check validation. A primary price source is identified based on asset type, class, or issue of securities. Fixed income securities may also include short-term investments in certificates of deposit, variable rate notes, time deposit accounts, U.S. Treasury and Agency obligations, U.S. Treasury repurchase agreements, commercial paper, and other short term instruments. These instruments are valued using active market prices or utilizing observable inputs described above. Equity Securities The nuclear decommissioning trust's equity security investments are held indirectly through commingled funds. The commingled funds are valued using the funds' NAV as a practical expedient. The funds' NAV is primarily derived from the quoted active market prices of the underlying equity securities held by the funds. We may transact in these commingled funds on a semi-monthly basis at the NAV. The commingled funds are maintained by a bank and hold investments in accordance with the stated objective of tracking the performance of the S&P 500 Index. Because the commingled funds' shares are offered to a limited group of investors, they are not considered to be traded in an active market. As these instruments are valued using NAV, as a practical expedient, they have not been classified within the fair value hierarchy. The nuclear decommissioning trust and other special use funds may also hold equity securities that include exchange traded mutual funds and money market accounts for short-term liquidity purposes. These short-term, highly-liquid, investments are valued using active market prices. Fair Value Tables The following table presents the fair value at March 31, 2019 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
The following table presents the fair value at December 31, 2018 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
Fair Value Measurements Classified as Level 3 The significant unobservable inputs used in the fair value measurement of our energy derivative contracts include broker quotes that cannot be validated as an observable input primarily due to the long-term nature of the quote. Significant changes in these inputs in isolation would result in significantly higher or lower fair value measurements. Changes in our derivative contract fair values, including changes relating to unobservable inputs, typically will not impact net income due to regulatory accounting treatment (see Note 4). Because our forward commodity contracts classified as Level 3 are currently in a net purchase position, we would expect price increases of the underlying commodity to result in increases in the net fair value of the related contracts. Conversely, if the price of the underlying commodity decreases, the net fair value of the related contracts would likely decrease. Other unobservable valuation inputs include credit and liquidity reserves which do not have a material impact on our valuations; however, significant changes in these inputs could also result in higher or lower fair value measurements. The following tables provide information regarding our significant unobservable inputs used to value our risk management derivative Level 3 instruments at March 31, 2019 and December 31, 2018:
The following table shows the changes in fair value for our risk management activities' assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs for the three months ended March 31, 2019 and 2018 (dollars in thousands):
Transfers between levels in the fair value hierarchy shown in the table above reflect the fair market value at the beginning of the period and are triggered by a change in the lowest significant input as of the end of the period. We had no significant Level 1 transfers to or from any other hierarchy level. Transfers in or out of Level 3 are typically related to our long-dated energy transactions that extend beyond available quoted periods. Financial Instruments Not Carried at Fair Value |
Investments in Nuclear Decommissioning Trusts and Other Special Use Funds |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Nuclear Decommissioning Trusts and Other Special Use Funds | Investments in Nuclear Decommissioning Trusts and Other Special Use Funds We have investments in debt and equity securities held in Nuclear Decommissioning Trusts, Coal Reclamation Escrow Accounts, and an Active Union Employee Medical Account. Investments in debt securities are classified as available-for-sale securities. We record both debt and equity security investments at their fair value on our Condensed Consolidated Balance Sheets. See Note 11 for a discussion of how fair value is determined and the classification of the investments within the fair value hierarchy. The investments in each trust or account are restricted for use and are intended to fund specified costs and activities as further described for each fund below. Nuclear Decommissioning Trusts - To fund the future costs APS expects to incur to decommission Palo Verde, APS established external decommissioning trusts in accordance with NRC regulations. Third-party investment managers are authorized to buy and sell securities per stated investment guidelines. The trust funds are invested in fixed income securities and equity securities. Earnings and proceeds from sales and maturities of securities are reinvested in the trusts. Because of the ability of APS to recover decommissioning costs in rates, and in accordance with the regulatory treatment, APS has deferred realized and unrealized gains and losses (including other-than-temporary impairments) in other regulatory liabilities. Coal Reclamation Escrow Accounts - APS has investments restricted for the future coal mine reclamation funding related to Four Corners. This escrow account is primarily invested in fixed income securities. Earnings and proceeds from sales of securities are reinvested in the escrow account. Because of the ability of APS to recover coal reclamation costs in rates, and in accordance with the regulatory treatment, APS has deferred realized and unrealized gains and losses (including other-than-temporary impairments) in other regulatory liabilities. Activities relating to APS coal reclamation escrow account investments are included within the other special use funds in the table below. Active Union Employee Medical Account - APS has investments restricted for paying active union employee medical costs. These investments were transferred from APS other postretirement benefit trust assets into the active union employee medical trust in January 2018 (see Note 7 in the 2018 Form 10-K). These investments may be used to pay active union employee medical costs incurred in the current period and in future periods. The account is invested primarily in fixed income securities. In accordance with the ratemaking treatment, APS has deferred the unrealized gains and losses (including other-than-temporary impairments) in other regulatory assets. Activities relating to active union employee medical account investments are included within the other special use funds in the table below. APS The following tables present the unrealized gains and losses based on the original cost of the investment and summarizes the fair value of APS's nuclear decommissioning trust and other special use fund assets at March 31, 2019 and December 31, 2018 (dollars in thousands):
The following table sets forth APS's realized gains and losses relating to the sale and maturity of available-for-sale debt securities and equity securities, and the proceeds from the sale and maturity of these investment securities for the three months ended March 31, 2019 and 2018 (dollars in thousands):
The fair value of APS's fixed income securities, summarized by contractual maturities, at March 31, 2019, is as follows (dollars in thousands):
(a) Includes certain fixed income investments that are not due at a single maturity date. These investments have been allocated within the table based on the final payment date of the instrument.
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New Accounting Standards |
3 Months Ended |
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Mar. 31, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Standards | New Accounting Standards Standards Adopted in 2019 ASU 2016-02, Leases In February 2016, a new lease accounting standard was issued. This new standard supersedes the existing lease accounting model, and modifies both lessee and lessor accounting. The new standard requires a lessee to reflect most operating lease arrangements on the balance sheet by recording a right-of-use asset and a lease liability that is initially measured at the present value of lease payments. Among other changes, the new standard also modifies the definition of a lease, and requires expanded lease disclosures. Since the issuance of the new lease standard, additional lease related guidance has been issued relating to land easements and how entities may elect to account for these arrangements at transition, among other items. The new lease standard and related amendments were effective for us on January 1, 2019, with early application permitted. The standard must be adopted using a modified retrospective approach with a cumulative-effect adjustment to the opening balance of retained earnings determined at either the date of adoption, or the earliest period presented in the financial statements. The standard includes various optional practical expedients provided to facilitate transition. We adopted this standard, and related amendments, on January 1, 2019. See Note 16. Standards Pending Adoption ASU 2016-13, Financial Instruments: Measurement of Credit Losses In June 2016, a new accounting standard was issued that amends the measurement of credit losses on certain financial instruments. The new standard will require entities to use a current expected credit loss model to measure impairment of certain investments in debt securities, trade accounts receivables, and other financial instruments. The new standard is effective for us on January 1, 2020 and must be adopted using a modified retrospective approach for certain aspects of the standard, and a prospective approach for other aspects of the standard. We are currently evaluating this new accounting standard and the impacts it may have on our financial statements. ASU 2018-15, Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract |
Changes in Accumulated Other Comprehensive Loss |
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Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Accumulated Other Comprehensive Loss | Changes in Accumulated Other Comprehensive Loss The following table shows the changes in Pinnacle West's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component for the three months ended March 31, 2019 and 2018 (dollars in thousands):
(c) In 2018, the company adopted new accounting guidance and elected to reclassify income tax effects of the Tax Act on items within accumulated other comprehensive income to retained earnings.The following table shows the changes in APS's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component for the three months ended March 31, 2019 and 2018 (dollars in thousands):
(c) In 2018, the company adopted new accounting guidance and elected to reclassify income tax effects of the Tax Act on items within accumulated other comprehensive income to retained earnings.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Tax Cuts and Jobs Act reduced the corporate tax rate to 21% effective January 1, 2018. As a result of this rate reduction, the Company recognized a $1.14 billion reduction in its net deferred income tax liabilities as of December 31, 2017. In accordance with accounting for regulated companies, the effect of this rate reduction was substantially offset by a net regulatory liability. Federal income tax laws require the amortization of a majority of the balance over the remaining regulatory life of the related property. As a result of the modifications made to the annual transmission formula rate during the second quarter of 2018, the Company began amortization of FERC jurisdictional net excess deferred tax liabilities in 2018. On March 13, 2019, the ACC approved the Company's proposal to amortize non-depreciation related net excess deferred tax liabilities subject to its jurisdiction over a twelve month period. As a result, the Company began amortization in March 2019. On April 10, 2019, the Company filed a request with the ACC which addresses the amortization of depreciation related excess deferred taxes. See Note 4 for more details. In August 2018, Treasury proposed regulations that clarify bonus depreciation transition rules under the Tax Act for regulated public utility property placed in service after September 27, 2017 and before January 1, 2018. However, the proposed regulations are ambiguous with respect to regulated public utility property placed in service on or after January 1, 2018. On December 20, 2018, the Joint Committee on Taxation ("JCT") released the general explanation of the Tax Act. The document - commonly referred to as the "Blue Book" - provides a comprehensive technical description of the Tax Act and includes the legislative intent of Congress with respect to the changes made by provisions of the Tax Act. The "Blue Book" provides clarification that the intent of the Tax Act was to exclude from the definition of bonus depreciation qualified property any property placed in service by a regulated public utility after December 31, 2017. In a footnote, the JCT indicated that a technical correction bill may be necessary to reflect this intent. Management recognizes tax positions which it believes are “more likely than not” to be sustained upon examination. In applying this “more likely than not” assessment, the Company is required to consider the technical merits of a position, including legislative intent. As a result, while no legislation has been passed which clarifies the ambiguities related to bonus depreciation for property placed in service on or after January 1, 2018, the Company currently believes the continued availability of bonus depreciation is not “more likely than not” to be sustained upon examination. As a result, the Company has not recognized any current or deferred tax benefits related to bonus depreciation for property placed in service on or after January 1, 2018. Net income associated with the Palo Verde sale leaseback VIEs is not subject to tax (see Note 6). As a result, there is no income tax expense associated with the VIEs recorded on the Pinnacle West Consolidated and APS Consolidated Statements of Income. |
Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We lease certain land, buildings, vehicles, equipment and other property through operating rental agreements with varying terms, provisions, and expiration dates. APS also has certain purchased power agreements that qualify as lease arrangements. Our leases have remaining terms that expire in 2019 through 2050. Substantially all of our leasing activities relate to APS. On January 1, 2019 we adopted new lease accounting guidance (see Note 13). We elected the transition method that allows us to apply the new lease guidance on the date of adoption, January 1, 2019, and will not retrospectively adjust prior periods. We also elected certain transition practical expedients that allow us to not reassess (a) whether any expired or existing contracts are or contain leases, (b) the lease classification for any expired or existing leases and (c) initial direct costs for any existing leases. These practical expedients apply to leases that commenced prior to January 1, 2019. Furthermore, we elected the practical expedient transition provisions relating to the treatment of existing land easements. On January 1, 2019 the adoption of this new accounting standard resulted in the recognition on our Condensed Consolidated Balance Sheets of approximately $194 million of right-of-use lease assets and $119 million of lease liabilities relating to our operating lease arrangements. The right-of-use lease assets include $85 million of prepaid lease costs that have been reclassified from other deferred debits, and $10 million of deferred lease costs that have been reclassified from other current liabilities. In addition to these balance sheet impacts, the adoption of the guidance resulted in expanded lease disclosures, which are included below. The following table provides information related to our lease costs for the three months ended March 31, 2019 (dollars in thousands):
Lease costs are primarily included as a component of operating expenses on our Condensed Consolidated Statements of Income. Lease costs relating to purchased power lease contracts are recorded in fuel and purchased power on the Condensed Consolidated Statements of Income, and are subject to recovery under the PSA or RES (see Note 4). Variable lease costs are recognized in the period the costs are incurred, and primarily relate to renewable purchased power lease contracts. Payments under most renewable purchased power lease contracts are dependent upon environmental factors, and due to the inherent uncertainty associated with the reliability of the fuel source, the payments are considered variable and are excluded from the measurement of lease liabilities and right-of-use lease assets. Certain of our lease agreements have lease terms with non-consecutive periods of use. For these agreements we recognize lease costs during the periods of use. Leases with initial terms of 12 months or less are considered short-term leases and are not recorded on the balance sheet. Short-term lease cost is immaterial. The following table provides information related to the maturity of our operating lease liabilities at March 31, 2019 (dollars in thousands):
The following table provides information related to estimated future minimum operating lease payments at December 31, 2018 (dollars in thousands):
The following tables provide other additional information related to operating lease liabilities:
At March 31, 2019, we have additional lease arrangements that have been executed, but have not yet commenced. These arrangements primarily relate to purchased power lease contracts. These leases have commencement dates beginning in June 2020 with terms ending through October 2027. In 1986, APS entered into agreements with three separate lessor trust entities in order to sell and lease back interests in Palo Verde Unit 2 and related common facilities. These lessor trust entities have been deemed VIEs for which APS is the primary beneficiary. As the primary beneficiary, APS consolidated these lessor trust entities. The impacts of these sale leaseback transactions are excluded from our lease disclosures as lease accounting is eliminated upon consolidation. See Note 6 for a discussion of VIEs.
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New Accounting Standards (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Standards | Standards Adopted in 2019 ASU 2016-02, Leases In February 2016, a new lease accounting standard was issued. This new standard supersedes the existing lease accounting model, and modifies both lessee and lessor accounting. The new standard requires a lessee to reflect most operating lease arrangements on the balance sheet by recording a right-of-use asset and a lease liability that is initially measured at the present value of lease payments. Among other changes, the new standard also modifies the definition of a lease, and requires expanded lease disclosures. Since the issuance of the new lease standard, additional lease related guidance has been issued relating to land easements and how entities may elect to account for these arrangements at transition, among other items. The new lease standard and related amendments were effective for us on January 1, 2019, with early application permitted. The standard must be adopted using a modified retrospective approach with a cumulative-effect adjustment to the opening balance of retained earnings determined at either the date of adoption, or the earliest period presented in the financial statements. The standard includes various optional practical expedients provided to facilitate transition. We adopted this standard, and related amendments, on January 1, 2019. See Note 16. Standards Pending Adoption ASU 2016-13, Financial Instruments: Measurement of Credit Losses In June 2016, a new accounting standard was issued that amends the measurement of credit losses on certain financial instruments. The new standard will require entities to use a current expected credit loss model to measure impairment of certain investments in debt securities, trade accounts receivables, and other financial instruments. The new standard is effective for us on January 1, 2020 and must be adopted using a modified retrospective approach for certain aspects of the standard, and a prospective approach for other aspects of the standard. We are currently evaluating this new accounting standard and the impacts it may have on our financial statements. ASU 2018-15, Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In August 2018, a new accounting standard was issued that clarifies how customers in a cloud computing service arrangement should account for implementation costs associated with the arrangement. To determine which implementation costs should be capitalized, the new guidance aligns the accounting with existing guidance pertaining to internal-use software. As a result of this new standard, certain cloud computing service arrangement implementation costs will now be subject to capitalization and amortized on a straight-line basis over the cloud computing service arrangement term. The new standard is effective for us on January 1, 2020, with early application permitted, and may be applied using either a retrospective or prospective transition approach. We are currently evaluating this new accounting standard and the impacts it may have on our financial statements. |
Consolidation and Nature of Operations (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of supplemental cash flow information | The following table summarizes supplemental Pinnacle West cash flow information (dollars in thousands):
The following table summarizes supplemental APS cash flow information (dollars in thousands):
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Revenue (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table provides detail of Pinnacle West's consolidated revenue disaggregated by revenue sources (dollars in thousands):
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Long-Term Debt and Liquidity Matters (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair value of long-term debt, including current maturities | The following table presents the estimated fair value of our long-term debt, including current maturities (dollars in thousands):
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Regulatory Matters (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulated Operations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in the deferred fuel and purchased power regulatory asset | The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) for 2019 and 2018 (dollars in thousands):
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Schedule of regulatory assets | The detail of regulatory assets is as follows (dollars in thousands):
(d) There are no regulatory assets for which the ACC has allowed recovery of costs, but not allowed a return by exclusion from rate base. FERC rates are set using a formula rate as described in "Transmission Rates, Transmission Cost Adjustor and Other Transmission Matters."
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Schedule of regulatory liabilities | The detail of regulatory liabilities is as follows (dollars in thousands):
(c) See Note 5.
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Retirement Plans and Other Postretirement Benefits (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction, billed to electric plant participants or charged or amortized to the regulatory asset) | The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction or billed to electric plant participants) (dollars in thousands):
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Palo Verde Sale Leaseback Variable Interest Entities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets | Our Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018 include the following amounts relating to the VIEs (dollars in thousands):
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Derivative Accounting (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding gross notional amount of derivatives, which represents both purchases and sales (does not reflect net position) | As of March 31, 2019 and December 31, 2018, we had the following outstanding gross notional volume of derivatives, which represent both purchases and sales (does not reflect net position):
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Gains and losses from derivative instruments in designated cash flow accounting hedges relationships | The following table provides information about gains and losses from derivative instruments in designated cash flow accounting hedging relationships during the three months ended March 31, 2019 and 2018 (dollars in thousands):
(b) Amounts are before the effect of PSA deferrals.
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Gains and losses from derivative instruments not designated as accounting hedges instruments | The following table provides information about gains and losses from derivative instruments not designated as accounting hedging instruments during the three months ended March 31, 2019 and 2018 (dollars in thousands):
(a) Amounts are before the effect of PSA deferrals.
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Schedule of offsetting assets | The following tables provide information about the fair value of our risk management activities reported on a gross basis, and the impacts of offsetting as of March 31, 2019 and December 31, 2018. These amounts relate to commodity contracts and are located in the assets and liabilities from risk management activities lines of our Condensed Consolidated Balance Sheets.
(c) Represents cash collateral and cash margin that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions, or collateral and margin posted in excess of the recognized derivative instrument. Includes cash collateral received from counterparties of $1,310 and cash margin provided to counterparties of $156.
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Schedule of offsetting liabilities | The following tables provide information about the fair value of our risk management activities reported on a gross basis, and the impacts of offsetting as of March 31, 2019 and December 31, 2018. These amounts relate to commodity contracts and are located in the assets and liabilities from risk management activities lines of our Condensed Consolidated Balance Sheets.
(c) Represents cash collateral and cash margin that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions, or collateral and margin posted in excess of the recognized derivative instrument. Includes cash collateral received from counterparties of $1,310 and cash margin provided to counterparties of $156.
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Information about derivative instruments that have credit-risk-related contingent features | The following table provides information about our derivative instruments that have credit-risk-related contingent features at March 31, 2019 (dollars in thousands):
(a) This amount is after counterparty netting and includes those contracts which qualify for scope exceptions, which are excluded from the derivative details above.
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Other Income and Other Expense (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Detail of other income and other expense | The following table provides detail of Pinnacle West's Consolidated other income and other expense for the three months ended March 31, 2019 and 2018 (dollars in thousands):
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per weighted average common share outstanding | The following table presents the calculation of Pinnacle West’s basic and diluted earnings per share for the three months ended March 31, 2019 and 2018 (in thousands, except per share amounts):
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of assets and liabilities that are measured at fair value on a recurring basis | The following table presents the fair value at March 31, 2019 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
The following table presents the fair value at December 31, 2018 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
(c) Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.
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Information regarding the entity's internally developed significant unobservable inputs used to value its level 3 instruments | The following tables provide information regarding our significant unobservable inputs used to value our risk management derivative Level 3 instruments at March 31, 2019 and December 31, 2018:
(a) Includes swaps and physical and financial contracts.
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Changes in fair value for assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs | The following table shows the changes in fair value for our risk management activities' assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs for the three months ended March 31, 2019 and 2018 (dollars in thousands):
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Investments in Nuclear Decommissioning Trusts and Other Special Use Funds (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of APS's nuclear decommissioning trust fund assets | The following tables present the unrealized gains and losses based on the original cost of the investment and summarizes the fair value of APS's nuclear decommissioning trust and other special use fund assets at March 31, 2019 and December 31, 2018 (dollars in thousands):
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Realized gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds | The following table sets forth APS's realized gains and losses relating to the sale and maturity of available-for-sale debt securities and equity securities, and the proceeds from the sale and maturity of these investment securities for the three months ended March 31, 2019 and 2018 (dollars in thousands):
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Fair value of fixed income securities, summarized by contractual maturities | The fair value of APS's fixed income securities, summarized by contractual maturities, at March 31, 2019, is as follows (dollars in thousands):
(a) Includes certain fixed income investments that are not due at a single maturity date. These investments have been allocated within the table based on the final payment date of the instrument.
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Changes in Accumulated Other Comprehensive Loss (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in accumulated other comprehensive loss including reclassification adjustments, net of tax, by component | The following table shows the changes in Pinnacle West's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component for the three months ended March 31, 2019 and 2018 (dollars in thousands):
(c) In 2018, the company adopted new accounting guidance and elected to reclassify income tax effects of the Tax Act on items within accumulated other comprehensive income to retained earnings.The following table shows the changes in APS's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component for the three months ended March 31, 2019 and 2018 (dollars in thousands):
(c) In 2018, the company adopted new accounting guidance and elected to reclassify income tax effects of the Tax Act on items within accumulated other comprehensive income to retained earnings.
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Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease cost | The following tables provide other additional information related to operating lease liabilities:
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Schedule of future minimum payments | The following table provides information related to the maturity of our operating lease liabilities at March 31, 2019 (dollars in thousands):
The following table provides information related to estimated future minimum operating lease payments at December 31, 2018 (dollars in thousands):
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Consolidation and Nature of Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
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Cash paid during the period for: | ||
Income taxes, net of refunds | $ 1 | $ 0 |
Interest, net of amounts capitalized | 63,764 | 56,026 |
Significant non-cash investing and financing activities: | ||
Accrued capital expenditures | 95,879 | 86,991 |
Right-of-use operating lease assets obtained in exchange for operating lease liabilities | 2,293 | 0 |
APS | ||
Cash paid during the period for: | ||
Income taxes, net of refunds | 0 | 0 |
Interest, net of amounts capitalized | 61,387 | 54,873 |
Significant non-cash investing and financing activities: | ||
Accrued capital expenditures | 95,879 | 86,944 |
Right-of-use operating lease assets obtained in exchange for operating lease liabilities | $ 2,293 | $ 0 |
Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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Disaggregation of Revenue [Line Items] | ||
Operating revenues | $ 740,530 | $ 692,714 |
Regulatory cost recovery revenue | 20,000 | 10,000 |
Electric Service | Retail residential electric service | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 351,566 | 316,675 |
Electric Service | Retail non-residential electric service | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 332,668 | 343,189 |
Electric Service | Wholesale energy sales | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 36,452 | 12,089 |
Transmission Services For Others | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 15,249 | 14,845 |
Other sources | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 4,595 | 5,916 |
Electric and Transmission Service | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | $ 721,000 | $ 683,000 |
Long-Term Debt and Liquidity Matters - Estimated Fair Value of Long-Term Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Estimated fair value of long-term debt, including current maturities | ||
Carrying Amount | $ 5,136,108 | $ 5,138,232 |
Fair Value | 5,388,892 | 5,233,563 |
Pinnacle West | ||
Estimated fair value of long-term debt, including current maturities | ||
Carrying Amount | 448,953 | 448,796 |
Fair Value | 446,835 | 443,955 |
APS | ||
Estimated fair value of long-term debt, including current maturities | ||
Carrying Amount | 4,687,155 | 4,689,436 |
Fair Value | $ 4,942,057 | $ 4,789,608 |
Regulatory Matters - Four Corners and Cholla (Details) - APS - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | |||||
---|---|---|---|---|---|---|---|
Dec. 23, 2014 |
Dec. 30, 2013 |
Sep. 30, 2018 |
Apr. 30, 2018 |
Mar. 31, 2019 |
Jun. 30, 2016 |
Dec. 31, 2015 |
|
SCE | Four Corners Units 4 and 5 | |||||||
Business Acquisition [Line Items] | |||||||
Ownership interest acquired | 48.00% | ||||||
Settlement agreement, ACC approved rate adjustment, annualized customer impact | $ 57.1 | $ 58.5 | $ 67.5 | ||||
Net receipt due to negotiation of alternate arrangement | $ 40.0 | ||||||
Four Corners cost deferral | SCE | Four Corners Units 4 and 5 | |||||||
Business Acquisition [Line Items] | |||||||
Regulatory assets, non-current | $ 46.0 | ||||||
Regulatory noncurrent asset amortization period | 10 years | ||||||
Retired power plant costs | |||||||
Business Acquisition [Line Items] | |||||||
Net book value | $ 85.0 | ||||||
Navajo Plant | |||||||
Business Acquisition [Line Items] | |||||||
Net book value | $ 85.0 | ||||||
Four Corners | SCE | |||||||
Business Acquisition [Line Items] | |||||||
Regulatory assets, non-current | $ 12.0 | ||||||
Regulatory asset, write off amount | $ 12.0 |
Retirement Plans and Other Postretirement Benefits - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Pension Benefits | |
Contributions | |
Voluntary employer contributions to pension plan | $ 90,000,000 |
Minimum employer contributions for the next three years | 0 |
Maximum employer contributions for the next two years (up to) | 350,000,000 |
Other Benefits | |
Contributions | |
Estimated future employer contributions in next three years | $ 0 |
Palo Verde Sale Leaseback Variable Interest Entities - Schedule of VIEs (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets | ||
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation | $ 104,808 | $ 105,775 |
Equity — Noncontrolling interests | 130,663 | 125,790 |
APS | ||
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets | ||
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation | 104,808 | 105,775 |
Equity — Noncontrolling interests | 130,663 | 125,790 |
APS | Consolidation of VIEs | ||
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets | ||
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation | 104,808 | 105,775 |
Equity — Noncontrolling interests | $ 130,663 | $ 125,790 |
Derivative Accounting - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Commodity Contracts | |
Derivative Accounting | |
Additional collateral to counterparties for energy related non-derivative instrument contracts | $ 102 |
Commodity Contracts | Designated as Hedging Instruments | |
Derivative Accounting | |
Estimated loss before income taxes to be reclassified from accumulated other comprehensive income | $ 1 |
APS | |
Derivative Accounting | |
Percentage of unrealized gains and losses on certain derivatives deferred for future rate treatment | 100.00% |
Derivative Accounting - Schedule of Gross Notional Amounts Outstanding (Details) - Commodity Contracts MWh in Thousands, MMcf in Thousands |
Mar. 31, 2019
MWh
MMcf
|
Dec. 31, 2018
MWh
MMcf
|
---|---|---|
Outstanding gross notional amount of derivatives | ||
Power | MWh | 1,146 | 250 |
Gas | MMcf | 233 | 218 |
Derivative Accounting - Credit Risk and Credit Related Contingent Features (Details) - Commodity Contracts $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Credit Risk and Credit-Related Contingent Features | |
Aggregate fair value of derivative instruments in a net liability position | $ 50,212 |
Cash collateral posted | 0 |
Additional cash collateral in the event credit-risk-related contingent features were fully triggered | $ 47,874 |
Commitments and Contingencies - Superfund-Related Matters, Southwest Power Outage and Clean Air Act (Details) - APS - Contaminated groundwater wells $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Apr. 05, 2018
plaintiff
|
Dec. 16, 2016
plaintiff
|
Aug. 06, 2013
Defendant
|
Mar. 31, 2019
USD ($)
|
|
Loss Contingencies [Line Items] | ||||
Costs related to investigation and study under Superfund site | $ | $ 2 | |||
Number of defendants against whom Roosevelt Irrigation District (RID) filed lawsuit | Defendant | 24 | |||
Number of plaintiffs | 2 | |||
Settled Litigation | ||||
Loss Contingencies [Line Items] | ||||
Number of plaintiffs | 2 |
Other Income and Other Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Other income: | ||
Interest income | $ 2,302 | $ 1,891 |
Debt return on Four Corners SCR (Note 4) | 4,844 | 2,092 |
Miscellaneous | 23 | 2 |
Total other income | 7,169 | 3,985 |
Other expense: | ||
Non-operating costs | (2,704) | (1,646) |
Investment losses — net | (238) | (176) |
Miscellaneous | (1,416) | (1,407) |
Total other expense | (4,358) | (3,229) |
APS | ||
Other income: | ||
Interest income | 1,550 | 1,678 |
Debt return on Four Corners SCR (Note 4) | 4,844 | 2,092 |
Miscellaneous | 22 | 2 |
Total other income | 6,416 | 3,772 |
Other expense: | ||
Non-operating costs | (2,467) | (1,539) |
Miscellaneous | (1,411) | (1,406) |
Total other expense | $ (3,878) | $ (2,945) |
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Sep. 30, 2018 |
Mar. 31, 2018 |
|
Earnings Per Share [Abstract] | |||
Net income attributable to common shareholders | $ 17,918 | $ 17,918 | $ 3,221 |
Weighted average common shares outstanding - basic (in shares) | 112,337 | 112,017 | |
Net effect of dilutive securities: | |||
Contingently issuable performance shares and restricted stock units (in shares) | 398 | 476 | |
Weighted average common shares outstanding — diluted (in shares) | 112,735 | 112,493 | |
Earnings per weighted-average common share outstanding | |||
Net income attributable to common shareholders - basic (in dollars per share) | $ 0.16 | $ 0.03 | |
Net income attributable to common shareholders - diluted (in dollars per share) | $ 0.16 | $ 0.03 |
Fair Value Measurements - Level 3 Rollforward Derivatives (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Net derivative balance at beginning of period | $ (8,214) | $ (18,256) |
Deferred as a regulatory asset or liability | (1,579) | (2,322) |
Settlements | 518 | 782 |
Transfers into Level 3 from Level 2 | (2) | (2,445) |
Transfers from Level 3 into Level 2 | 3,665 | 2,487 |
Net derivative balance at end of period | (5,612) | (19,754) |
Net unrealized gains included in earnings related to instruments still held at end of period | $ 0 | $ 0 |
Fair Value Measurements - Financial Instruments Not Carried at Fair Value (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Stated interest rate for notes receivable | 3.90% | |
Note receivable, net book value | $ 57 | $ 61 |
Income Taxes (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Reduction in net deferred income tax liabilities | $ 1,140 |
Leases - Additional information (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Operating Leased Assets [Line Items] | |||
Operating lease right-of-use assets (Note 16) | $ 193,897 | $ 194,000 | $ 0 |
Operating lease, liability | 119,139 | 119,000 | |
Other | (39,257) | (129,312) | |
Other current liabilities | $ (114,361) | $ (184,229) | |
Accounting Standards Update 2016-02 | |||
Operating Leased Assets [Line Items] | |||
Other | 85,000 | ||
Other current liabilities | $ 10,000 |
Leases - Lease costs (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Operating Leased Assets [Line Items] | |
Operating lease cost | $ 4,348 |
Variable lease cost | 17,290 |
Total lease cost | 21,638 |
Purchased Power Lease Contracts [Member] | |
Operating Leased Assets [Line Items] | |
Operating lease cost | 0 |
Variable lease cost | 17,290 |
Total lease cost | 17,290 |
Land, Property and Equipment Leases [Member] | |
Operating Leased Assets [Line Items] | |
Operating lease cost | 4,348 |
Variable lease cost | 0 |
Total lease cost | $ 4,348 |
Leases - Maturity of our operating lease liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Lessee, Lease, Description [Line Items] | |||
2019 (remainder of fiscal year) | $ 65,038 | ||
2019 | $ 68,246 | ||
2020 | 12,424 | 12,428 | |
2021 | 9,585 | 9,478 | |
2022 | 6,621 | 6,513 | |
2023 | 5,496 | 5,359 | |
Thereafter | 41,618 | 42,236 | |
Total lease commitments | 140,782 | 144,260 | |
Less imputed interest | 21,643 | ||
Total lease liabilities | 119,139 | $ 119,000 | |
Purchased Power Lease Contracts [Member] | |||
Lessee, Lease, Description [Line Items] | |||
2019 (remainder of fiscal year) | 54,499 | ||
2019 | 54,499 | ||
2020 | 0 | 0 | |
2021 | 0 | 0 | |
2022 | 0 | 0 | |
2023 | 0 | 0 | |
Thereafter | 0 | 0 | |
Total lease commitments | 54,499 | 54,499 | |
Less imputed interest | 814 | ||
Total lease liabilities | 53,685 | ||
Land, Property and Equipment Leases [Member] | |||
Lessee, Lease, Description [Line Items] | |||
2019 (remainder of fiscal year) | 10,539 | ||
2019 | 13,747 | ||
2020 | 12,424 | 12,428 | |
2021 | 9,585 | 9,478 | |
2022 | 6,621 | 6,513 | |
2023 | 5,496 | 5,359 | |
Thereafter | 41,618 | 42,236 | |
Total lease commitments | 86,283 | $ 89,761 | |
Less imputed interest | 20,829 | ||
Total lease liabilities | $ 65,454 |
Leases - Other additional information related to operating lease liabilities (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Weighted average remaining lease term | 8 years |
Weighted average discount rate | 3.86% |
Cash paid for amounts included in the measurement of lease liabilities (dollars in thousands): Operating cash flows | $ 3,087 |
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