executive-letter

Updated: March 2022

At APS, a subsidiary of Pinnacle West, we continue to integrate environmental, social and governance (ESG) principles and practices into our core work. Today, we routinely engage with employees, customers, regulators, investors, policymakers and myriad other stakeholders to understand their priorities, to shape our commitments and to report transparently on our progress.

In this web-based Corporate Responsibility Report, we detail our company’s actions in 2021 and highlight progress we made to build a clean and sustainable future for all Arizonans. 

Succeeding Together in ESG

 At the core of our ESG strategy is our commitment to work with stakeholders to build a clean and sustainable future for all Arizonans. This collaborative approach aligns with our APS Promise, which guides us to succeed together as we work to do what is right for the people and prosperity of our state. We seek solutions that provide shared value, meaning solutions that address societal and environmental challenges while also delivering business value.

As we said when we announced our Clean Energy Commitment in 2020, collaboration is key to our ultimate success. In 2019, we filed a rate case with the Arizona Corporation Commission (ACC), the regulatory body that sets our rates and other financial terms. Our application was designed to recover investments we made in our system to support reliable and increasingly clean energy to serve customers and meet the needs of a growing Arizona. On November 2, 2021, the ACC voted to deny recovery of some of those investments. This rate case result emphasizes how critical it is to work toward a constructive regulatory environment, and to partner with customers and stakeholders to create a sustainable energy future for Arizona. The disappointing outcome makes our path forward more challenging, but it does not change where we are headed. We remain committed to deliver 100% clean, carbon-free energy to our customers by 2050.

Advancing the Clean Energy Transition

Achieving 100% clean, carbon-free energy will require continued advances in energy technology. Hydrogen is a promising clean energy resource, and our new Hydrogen Energy Initiatives project allows us to explore opportunities and investments in this sector. We’re also partnering with the Electric Power Research Institute and other utilities on the Low-Carbon Resources Initiative, which focuses on accelerating the development and demonstration of low- and zero-carbon energy technologies.

Our customers are eager participants in the shift to cleaner energy. As of January 2022, residential customers have installed more than 57,000 smart thermostats through our Cool Rewards program. Customers may benefit financially by conserving energy to lower their bills and with incentives for enrolling in the program. With customers’ help, we’re able to shed more than 80 megawatts of energy from the grid during times of high demand. We’re also teaming with customers to create more access to electric vehicle charging stations through our Take Charge AZ program.

Since 2020, we've procured nearly 1,400 megawatts of additional clean energy and storage. Our business is capital intensive, and APS and Pinnacle West maintain $1.2 billion in revolving credit facilities. When these lines of credit recently came up for renewal, we opted to link the interest rate we pay the banks to two of our Priority Sustainability Issues – Safety & Health and Clean Energy – aligning elements of our financing with our ESG focus.

Making an Impact with Customers, Employees and Communities

We continue to focus on delivering a frictionless, customer experience, and in 2021 we continued our improvement. In J.D. Power’s residential electric study, we saw year-over-year advancements in several key areas important to customers, including power quality and reliability, billing and payment, and customer care by phone. Additionally, we were named a 2021 Business Customer Champion by international market research firm Escalent.

The customer experience we deliver starts with the employee experience we create. We were proud to receive the 2021 Inclusive Workplace Award from the Diversity Leadership Alliance and the Arizona Society of Human Resources Management. Our Diversity, Equity and Inclusion (DEI) Employee Council ensures a broad range of employee perspectives are represented as we launch our DEI roadmap, which includes a four-part leadership education series for all officers and human resources team members on topics such as cultural competence, unconscious bias and allyship.

We remain committed to providing financial support and resources to coal communities in our region through the transition from fossil fuels to clean energy. This transition will pose unique economic challenges for the communities around our coal-fired power plants, including the Navajo Nation and the Hopi Tribe. We’ve worked collaboratively with stakeholders and leaders of the Navajo Nation to consider how closing these power plants will impact the surrounding communities. This effort culminated in a comprehensive Coal Communities Transition plan, the framework of which provides substantial financial and economic development support, including a transition strategy for plant employees.

Guided by the APS Promise and our 10-year Strategic Plan, we have revamped our corporate giving efforts to ensure alignment with our long-term objectives and to measurably impact and serve the most critical community needs. For example, in the summer of 2021, as part of our heat-relief initiatives, we partnered with the Foundation for Senior Living, St. Vincent de Paul, The Salvation Army and Solari, Inc., in conjunction with Lyft, to help with air-conditioning repairs and replacements, emergency shelters, eviction protection, hydration stations and transportation services for the state’s most vulnerable populations. In addition we worked with agencies across the state to simplify the process of enrollment in our limited-income program, resulting in approximately 84,600 customers in the program at the end of 2021, an increase of 17% over the prior year.

Measuring Success

We know that measurement and transparency help us prioritize efforts and resources. To that end, we have adopted business plan and performance share metrics that will help ensure progress toward our ESG goals. In February of 2022, the Pinnacle West Human Resources Committee revised the metrics for our performance share grants and added a new clean megawatt installed metric. This revision tracks our near-term progress towards achieving our Clean Energy Commitment.

For the third year in a row, CDP recognized Pinnacle West for leadership in tackling climate change and acting to protect water security. We were one of only two North American electric utility companies to achieve leadership scores in these areas for 2021.

As part of our commitment to ESG transparency, we expanded our reporting efforts this year, aligning to the Task Force on Climate-Related Financial Disclosures framework and the Sustainability Accounting Standards Board standards for electric utilities, and we will soon be releasing EEO-1 diversity data as well.

Pursuing our Promise

The APS Promise is to do what is right for the people and prosperity of our state. This is our commitment to our customers, our employees and our communities.

It is this clarity of purpose, along with our strong leadership and resilient workforce, that makes us optimistic about the future. Our employees are dedicated to operational excellence, advancing our mission of clean, reliable and affordable energy for our customers, and providing value to our shareholders. We are building for growth and are committed to powering prosperity for Arizona.

 

Jeff Guldner

Jeff Guldner
Chairman, President & Chief Executive Officer
Pinnacle West Capital Corporation

Ann Becker

Ann Becker
Vice President, Sustainability
Arizona Public Service Company

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