1) Operational Highlights and Strategy
- Arizona's economy is experiencing strong growth, particularly in semiconductor manufacturing, with TSMC announcing an additional $100 billion investment, totaling $265 billion.
- The company plans to convert two retired coal-fired units at the Cholla power plant to natural gas, expected to provide 380 megawatts by 2029.
- Investments in transmission projects are underway to enhance reliability and expand access to regional markets.
- A focus on customer-centric initiatives includes improving billing experiences and offering flexible payment options.

2) Financial Performance
- Q2 2026 earnings per share were $1.43, down $0.15 YoY.
- Key negative drivers included higher interest expenses, depreciation, and lower transmission revenue, partially offset by beneficial weather and strong sales growth.
- Customer growth was 2.1%, with weather-normalized sales growth at 9.6%. Residential sales grew 5.6%, while commercial and industrial sales increased by 12.7%.
- The company is reiterating its earnings guidance for 2026 at $4.55 to $4.75 per share.

3) Regulatory and Rate Case Updates
- The rate case concluded hearings on July 7, with briefs due by September 11, and a final decision expected by year-end.
- The company aims for a constructive outcome to support ongoing investments and address regulatory lag.
- The administrative law judge's engagement during hearings was noted as a positive aspect for the case's outcome.

4) Challenges and Market Dynamics
- Increased interest expenses and depreciation due to higher debt and plant balances are impacting financial results.
- Transmission revenue was lower due to a true-up adjustment related to 2025.
- The company is monitoring potential impacts from weather variability and sales fluctuations during the summer months.

5) Future Outlook and Guidance
- The Integrated Resource Plan (IRP) is on track for an October filing, incorporating committed customer growth, including TSMC's expansion.
- The company is evaluating long-term gas supply needs and potential challenges related to new pipeline developments.
- There are ongoing discussions regarding the Colorado River's water allocation, but no immediate operational impacts are anticipated.

Bottom line: Pinnacle West Capital Corporation is positioned for growth, driven by strong customer demand and strategic investments in infrastructure. While facing some financial headwinds, the company's proactive approach to regulatory challenges and commitment to customer service should support long-term shareholder value.