Pinnacle West Capital Corp. reported that cooler weather in the second quarter led to a financial loss, and also said it is pulling back on investment in energy storage technology after a utility-scale battery exploded at a substation in April.
“Weather provided above-average revenue in the first quarter and significantly below-average revenue in the second quarter,” Pinnacle West Chairman, President and CEO Don Brandt said on an Aug. 8 conference call. The Phoenix, Arizona-based holding company is the parent of regulated electric utility Arizona Public Service.
Colder weather in the first quarter spurred customers to use more power for heating, while milder temperatures in May and June meant less energy was needed for cooling. The cooler May and June drove the Pinnacle West share value down 20 cents compared with Q2 2018, from $1.48/share to $1.28/share.
The total losses for the 2019 financial year to date attributed to weather are $24 million, which is a loss of 31 cents/share versus a year ago. This compares with a $13-million weather-related loss for all of FY 2019.
Pinnacle West noted that there were 357 actual cooling degree days for a three-month period ending June 30, compared with 513 for the same period in 2018. This is a decrease of 18 percent, or 156 cooling degree days. The 10-year average is 489 cooling degree days.
Federal tax reform was a second factor that drove down earnings by 19 cents/share.
The company reported it was able to offset the losses with lower operations and maintenance expenses compared with the year prior.
The Arizona economy, which is attracting both commercial and residential customers to the region, continues spurring customer growth, which increased 1.8 percent year over year.
Executives also said the company is pulling back from its investments in battery storage based on safety concerns, after the April 19 explosion at a utility-scale battery facility in suburban Phoenix. The incident, which is still being investigated, occurred at the McMicken Substation in Surprise, Arizona (see CEM No. 1536 ).
Executives said the company will temporarily be delaying investments in new battery storage resources to incorporate lessons learned from the incident.
Two requests for proposals originally announced in April—one for up to 60 MW of battery storage on existing solar facilities and another for 100 MW of new solar with 100 MW of battery storage—have been placed on hold.
APS executives had previously told the Arizona Corporation Commission the incident would not deter company efforts to bring more energy storage onto its system, including plans to install 950 MW of additional battery capacity beginning in 2020 (see CEM No. 1527 ).
Pinnacle West remains committed to investing in new clean-energy projects, executives said on the call, characterizing the delay as a “thoughtful and responsible pause” before moving forward. When pressed for details, they hesitated “to speculate on specific timelines” and said the forensic investigation may take at least two more months. The company intends to proceed with battery storage projects “prudently, safely, with full confidence in the technology,” the executives said.
While the projects from the earlier solicitation are on hold, two new RFPs—one for up to 150 MW of APS-owned solar to be in service by 2021 and another for up to 250 MW of wind, which would ideally be operational as soon as possible, but no later than 2022—will be issued by Sept. 15 (see CEM No. 1550 [6.1]). APS should have about 2,500 MW of renewable energy on line by 2021.
Other items discussed included APS’ integrated resource plan, its interest in promoting electric vehicles through expanding charging infrastructure in the state, the place of natural gas generation in the IRP, and the Four Corners coal plant step-up request.
APS serves roughly 1.2 million customers in Arizona. Pinnacle West’s assets include about 6,000 MW of generation, including the nuclear Palo Verde Generating Station, which it operates and co-owns with several other Western utilities.