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Text: Jim Hatfield, Chief Administrative Officer; Daniel Froetscher, APS' President and COO; Barbara Lockwood, Senior Vice President, Public Policy; and Jacob Tetlow, Senior Vice President, Operations, are also here with us.
First, I need to cover a few details with you.
It will also be available by telephone through May 12, 2021.
2021 has started off in line with our financial expectations.
And so, before Ted discusses the details of our first quarter results, I'll provide a few updates on our recent operational and regulatory developments.
And I'll also touch on our progress toward achieving our 2021 goals.
Spring is an important time of year for our summer preparedness work.
And while we've always had a robust summer preparedness program, resource adequacy has recently become a more visible topic, given the events in neighboring states over the past year.
To serve our customers with top-tier reliability, each year we perform preventative maintenance, emergency operation center drills, acquire critical spare equipment, conduct fire mitigation line patrols and execute a comprehensive plan to support public safety and first responders.
We're also procuring an additional 450 megawatts of seasonal peaking capacity, including hydro power, and we expanded our contract up to 60 megawatts for demand response from our commercial and industrial customers to help ensure that we've got adequate resources through the 2021 summer season.
Our procurement process is another important way that we help ensure long-term resource adequacy.
Last year, we announced the addition of 141 megawatts of battery storage to be located on six of our APS-owned solar sites.
Development has begun and this project is on track to meet the expected 2022 in-service date.
We also announced two RFPs last year, including an all-source RFP and a battery RFP.
The response to these solicitations was robust and we're in the process of reviewing the proposals.
We expect to narrow the potential projects under review to a smaller pool soon.
On the regulatory front, the Commission continues to evaluate the clean energy rules preliminarily approved last year.
In fact, the Commission is scheduled to discuss the clean energy rules at their open meeting today.
The Commission may hold their final vote today or they may choose to continue the discussion.
For our rate case, the hearing concluded in March and initial briefs were filed on April 6 and reply briefs were filed on April 30.
The ACC is scheduled to discuss at their open meeting today whether to reopen the evidentiary record in our pending case to include additional evidence, including evidence regarding adjusted cost recovery mechanisms.
We believe the rate case record is sufficient and that adjustors provide substantial benefit to customers by supporting both critical programs and reflecting changes in utility cost that can be properly passed on to customers.
Pending this decision, the next steps in this rate case are that the administrative law judge will issue a recommended opinion and order and the Commission will schedule the case for an open meeting to vote.
We currently expect a decision on the rate case will be issued during the third quarter of 2021.
Turning to our 2021 goals.
On the fourth quarter 2020 earnings call, we highlighted improving our customer communication and engagement, enhancing our regulatory relationship and continuing to execute our clean energy commitment as three key priorities.
We've made progress toward these objectives during the first quarter, but we recognized there is more work to do.
Customer enrollment in our Cool Rewards program surpassed 36,000 connected smart thermostats.
We're also working on a customer bill redesign project to simplify customer bills.
And a lot of the work that we're doing in the customer communication and education space is the result of collaboration with an input from our customer advisory and our stakeholder advisory boards.
I can say, we truly appreciate the individuals and organizations that participate in these forums and they provide us with tremendous feedback.
In the regulatory space, we appreciate the Commission's balanced decision to implement our annual power supply adjusted rate change, 50% in April and 50% in November, instead of our typical February 1 implementation date.
This decision recognizes and balances the ongoing COVID impacts on customers providing rate gradualism and helping to ensure that the company remains financially secure.
I already covered some of the progress we've made on procuring additional clean energy.
I'm also proud to share that the US Environmental Protection Agency selected APS as a 2021 Energy Star Partner of the Year in recognition of our demand-side management programs.
These programs contributed to our overall 2020 energy efficiency savings of nearly 586,000 megawatt hours and they will contribute to reducing lifetime carbon emissions by an estimated 2.1 billion pounds.
In addition, we continue to explore partnerships with our customers to expand our microgrid offerings.
I'll close my comments by sharing that Daniel Froetscher, President and Chief Operating Officer, will retire this August after serving nearly 41 years with the company.
Daniel has been instrumental in the success of this company over the past four decades.
In particular, he served as a respected and admired leader both within the companies and in the communities that we serve and as a mentor to many.
I can't express in words my gratitude and appreciation for Daniel's contribution.
I join my colleagues in congratulating Daniel on his retirement.
As Stephanie mentioned, Jacob Tetlow, Senior Vice President of Operations, is here today and he'll be joining our earnings calls going forward.
Jacob has a wealth of experience in both transmission and distribution operations and fossil generation here at APS.
And Jacob's extensive experience as well as the company's robust succession planning position us well to continue operating with top-tier reliability.
With Jeff having covered our operational and regulatory updates, I'll cover our first quarter 2021 financial results.
I'll also provide additional details around our customer and sales growth.
2021 started strong, earning $0.32 per share compared to $0.27 per share in the first quarter of 2020.
Higher pension and other post-retirement non-service credits, higher transmission revenue and weather, all contributed to the increase in earnings, partially offset by a higher operations and maintenance expense due to higher planned outage expense compared to the prior year period.
We also experienced 2.1% customer growth and positive weather-normalized sales growth, both within our expected guidance for the first quarter compared to the same period in 2020.
Economic development continues to support our customer and sales growth as headlines regarding new companies moving to our state are becoming even more frequent.
Chris Camacho, the Greater Phoenix Economic Council President and CEO, said the organization is working with 291 companies that are considering relocating or expanding in the Phoenix area.
To support the expansion of businesses, Phoenix is projected to add 18.4 million square feet of new industrial space in 2021, placing the valley second nationwide after Dallas according to a study by CommercialSearch.
This represents a 76% increase over last year for industrial construction.
The influx from business for relocation also adds to the residential population growth we have experienced.
Turning to our financial health.
We are following the status of President Biden's infrastructure and tax plan, including the potential for new tax incentives and we'll integrate any necessary changes to our resource procurement plans and capital if the proposal passes.
With regard to the potential for a corporate tax rate increase, we are well positioned to address future changes through our existing TEAM adjustor mechanism.
As an update on our customer delinquent account balances, the cumulative total dollar amount of all residential accounts in arrears has decreased 30% since December 31, 2020.
We see this trend continuing as customers are paying down past due balances.
We expect the Commission's preliminary vote at the April open meeting to implement a permanent summer disconnect moratorium will result in this continuing trend of increasing delinquent balances through the summer and decreasing balances after the expiration of the annual moratorium.
For 2021, we expect the increased bad debt expense associated with the summer disconnect moratorium and COVID-19 disconnect moratorium will result in a negative impact to our 2021 operating results of approximately $20 million to $30 million pre-tax compared to prior years that did not have a disconnect moratorium.
This is consistent with the results we experienced in 2020.
Including the impacts from COVID and the summer disconnect moratorium, we continue to maintain a strong balance sheet, solid investment grade credit ratings, a well-funded pension and sufficient liquidity.
In addition, our focus and progress on cost saving initiatives continues to result in improvements.
As a recent example, our supply chain team installed a new inventory optimization software.
The software uses scenario-based service level-driven methodologies to establish optimal inventory policies.
Since implementation in August of last year, this software has reduced our inventory by nearly $9 million, which mitigates potential inventory write-off risk in the future.
Our Lean efforts continue for managing costs, combined with the key initiatives Jeff highlighted for 2021.
They all support our commitment to provide long-term value to both shareholders and customers.

user
compname reports q1 earnings per share of $0.32.
qtrly earnings per share $0.32.

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