Pinnacle West Capital Corp

NYSE:PNW

Earnings Call Analysis

Pinnacle West's Strong Q2 Driven by Sales Growth and Weather

In Q2 2024, Pinnacle West earned $1.76 per share, up $0.82 from the previous year. This was driven by new customer rates, robust sales growth, and the hottest June on record, contributing a $0.29 weather benefit. Customer growth was 2.1%, supported by a strong Arizona economy with declining inflation and low unemployment rates. The weather-normalized sales growth year-to-date aligned with their long-term guidance of 4-6%. Despite higher interest and depreciation expenses, the company’s financial outlook remains at the higher end of the EPS range due to strategic capital investments and efficient O&M management .

Strong Financial Performance Bolstered by New Rates and Weather

In the second quarter of 2024, Pinnacle West Capital Corporation reported earnings of $1.76 per share, an impressive increase of $0.82 per share from the same quarter last year. This growth was primarily driven by new customer rates, favorable weather conditions, and continued robust sales growth. The company also benefited from the outcome of the 2019 rate case appeal, as well as income tax timing and operational and maintenance (O&M) savings.

Sales Growth Driven by Commercial and Industrial Sector

Pinnacle West saw a strong uptick in sales growth, particularly in the Commercial and Industrial (C&I) segment, which grew by 10% for the quarter. This growth is mainly attributed to the expansion of large manufacturing and data center customers within their service territory. While the company is not changing its 2024 sales growth guidance, it noted that year-to-date weather-normalized sales growth has been aligning more closely with their long-term guidance of 4% to 6%.

Positive Economic Conditions in Arizona

The economic landscape in Arizona remains favorable, with a 2.1% customer growth rate in the second quarter. The Phoenix Metro area reported a year-over-year inflation rate of 2.7%, below the national average of 3%. Furthermore, Arizona’s unemployment rate hit an all-time low of 3.3% in June, also below the national rate of 4.1%. These factors collectively support continued customer growth in Pinnacle West's service territory.

Operational Efficiency and Investment

Pinnacle West's operational and maintenance initiatives have yielded considerable benefits, lowering core O&M expenses in various areas, including nuclear and non-nuclear generation costs. Despite rising interest and depreciation expenses, the company managed its financing costs effectively. Increased depreciation reflects investments in IT projects and grid enhancements, which, though adding short-term expenses, promise long-term advantages.

Guidance and Future Outlook

The company remains optimistic about its financial outlook for the remainder of the year. All other aspects of the 2024 guidance remain unchanged, including the expected earnings per share (EPS). However, should the positive trends in sales growth and weather persist, they expect to be towards the higher end of their EPS guidance range. They are closely monitoring these trends as the year progresses.

Focus on Customer Support and Service

Pinnacle West is dedicated to supporting its customers, particularly those facing financial hardships. They offer various assistance programs, including discounts for limited income customers and crisis bill assistance. The company has also partnered with local organizations to provide emergency support and maintain reliable service during extreme weather conditions.

Commitment to Clean Energy and Infrastructure

In their commitment to providing affordable and reliable energy, the company has secured a diverse energy mix, including solar, wind, and nuclear power. They have executed agreements for multiple projects that will come online between 2026 and 2028, with over 400 megawatts of APS-owned resources already included in the capital plan. These initiatives are part of their long-term strategy to build towards a clean energy future.

Regulatory Developments

Pinnacle West continues to engage with regulatory bodies to address the issue of regulatory lag. They are working closely with the commission and stakeholders to explore solutions like formula rates and future test years. These efforts are crucial for timely recovery of the capital needed to support the company's growth and infrastructure investments.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, everyone, and welcome to the Pinnacle West Capital Corporation 2024 Second Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Amanda Ho. Ma'am, the floor is yours.

[Amanda Ho, executive]

Thank you, Matthew. I would like to thank everyone for participating in this conference call and webcast to review our second quarter 2024 earnings, recent developments and operating performance. Our speakers today will be our Chairman and CEO, Jeff Guldner; and our CFO, Andrew Cooper. Ted Geisler, APS President; Jacob Tetlow, Executive Vice President of Operations; and Jose Esparza Senior Vice President, Public Policy, are also here with us.

First, I need to cover a few details with you. The slides that we will be using are available on our Investor Relations website, along with our earnings release and related information. Today's comments and our slides contain forward-looking statements based on current expectations, and actual results may differ materially from expectations. Our second quarter 2024 Form 10-Q filed this morning. Please refer to that document for forward-looking statements, cautionary language as well as the risk factors and MD&A sections, which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures. A replay of this call will be available shortly on our website for the next 30 days. It will also be available by telephone through August 8, 2024.

I will now turn the call over to Jeff.

[Jeffrey Guldner, executive]

Great. Thanks, Amanda, and thank you all for joining us today. Second quarter financials were positively impacted by a number of things to the implementation of new customers weather and increased sales growth. Before Andrew discusses the details of our second quarter results, I'll provide a few updates on recent operational and regulatory developments.

Starting with our operations. As we progress through the summer season, really proud to say our team continues to excel in delivering reliable service to our customers. In fact, we just experienced the hottest June on record in Phoenix with an average high temperature of over 109 degrees and an average overnight temperature of 85 degrees. According to the National Weather Service, the average high temperature in Phoenix during the second quarter was 98 degrees Fahrenheit, which is an increase of 2% over the same period last year and 1.4% above the 10-year historical average.

The number of residential degree cooling days -- sorry, the residential cooling degree days, that's a utility measure of the effects of weather in this year's second quarter increased 53% compared to the same period a year ago and was 24% higher than historical 10-year averages. Our robust planning, resource procurement efforts and our dedicated team have allowed us to provide exceptional service to our customers during this unrelenting summer season. And I really do want to recognize our operators and our field teams for doing an exceptional job making sure our customers continue to have reliable service through this persistent heat.

With the extreme weather we experienced each summer, it remains as important as ever that we continue to assist our communities through heat relief support programs. We partnered with local community organizations to aid the state's most vulnerable populations, and this support includes a collaboration with the foundation for Senior Living, where we offer emergency repair, replacement of AC systems during the hot summer months the Salvation Army's network of cooling and hydration stations across Arizona and an emergency shelter and addiction protection program in partnership with St. [ Dosedel ].

We also offer a variety of assistance programs for those who are struggling with their bill. These resources include the Energy Sport program, which provides limited income customers with up to a 60% discount on their monthly bill crisis bill assistance that provides up to $1,000 annually to qualified limited income customers who experienced unexpected financial hardships and Project Share, which is a Salvation Army administer service, providing up to $500 annually in emergency bill assistance.

We plan years in advance to serve customers with reliable and affordable energy. Our resource planners secure a diverse energy mix to meet demand like things like solar and wind and rely on the energy provided by our share of the [ Talavera ] Nuclear Generating Station when temperatures caused demand to increase, APS's strength and resilience comes from using flexible resources like natural gas and energy storage to keep homes and businesses cool over long stretches of extreme heat.

We've taken all of the above approach to provide the most affordable and reliable service when our customers need us suppose. And as part of our vigorous planning, we've recently executed agreements on multiple projects resulting from our 2023 all-source RFP to be online between 2026 and 2028, and that includes over 400 megawatts of APS-owned resources, and those are already reflected in our capital plan. We're still in negotiations on additional projects, and we look forward to announcing those in the future, and we are always seeking the best combination of resources, serve our customers reliably while not sacrificing affordability and continuing to build towards our clean energy future.

Additionally, we remain focused on providing exceptional customer service. I'm proud to share that through the first 2 quarters of the year, the 2024 J.D. Power residential and business survey results have placed us in the first quartile compared to peers. We've made remarkable progress over the past few years moving from fourth quartile to first, and I can absolutely say that progress would not have happened without the dedication and commitment of our hard-working employees across the company.

Turning to regulatory update. The Commission has continued to progress in the regulatory lag docket at the July open meeting, the Commission unanimously voted to hold additional workshops and the next workshop is scheduled for October 3. And Commission staff stated that the workshops will be focused on formula rates and future test years with experts sharing their experience with each of these regulatory structures and we'll continue to work with the commission and stakeholders on this important issue of reducing regulatory lag in Arizona.

We've made solid progress through the first half of this year, improving our customer experience, enhancing our stakeholder relationships and executing on regulatory priorities. And we look forward to continuing to provide exceptional service for our customers through the balance of the year.

And with that, I'll turn the call over to Andrew.

[Andrew Cooper, executive]

Thank you, Jeff, and thanks again to everyone for joining us today. This morning, we released our second quarter 2024 financial results. I will review those results and provide some additional details on key drivers for the quarter. We earned $1.76 per share this quarter, an increase of $0.82 per share compared to second quarter last year. New customer rates, weather and continued robust sales growth were the main drivers for the quarter-over-quarter increase.

The 2019 rate case appeal outcome, income tax timing and O&M savings were other positive drivers for the quarter. Higher interest expense and depreciation and amortization expense were the primary negative drivers compared to last year. As Jeff mentioned, we experienced the hottest June on record, which contributed to a $0.29 benefit from weather versus this time last year. As a reminder, last year, we saw the mildest June since 2009.

Our sales growth continued to be strong during the second quarter, providing a $0.24 benefit with total weather-normalized sales increasing 5.5% compared to second quarter last year. C&I continued its robust growth at 10% for the quarter. This is primarily due to the ramping of large manufacturing and data center customers in our service territory. Although we are not changing 2024 sales growth guidance at this time, our weather-normalized sales growth year-to-date has aligned more closely with our long-term sales growth guidance of 4% to 6% and of which 3% to 5% is expected to be attributable to our extra high load factor customers.

Turning to economic conditions in Arizona. We experienced 2.1% customer growth in the second quarter and the fundamental economic factors supporting customer growth remains strong. National inflation is declining with the Phoenix Metro area in particular, experiencing a year-over-year inflation rate of 2.7% and as of June data, below the national average of 3%. Additionally, Arizona's unemployment rate hit an all-time record low of 3.3% in June, which is below the national unemployment rate of 4.1%. These positive economic indicators underscore the strong support for continued growth in our service territory.

Our O&M initiatives have delivered benefits this quarter. We have been successful in our efforts to lower core O&M expense across multiple areas of our operations, including both nuclear and nonnuclear generation costs. We are making progress in our planned outages to keep our generation resilient and reliable and our goal continues to be declining O&M per [indiscernible] an hour, while ensuring we meet the critical reliability demands of the summer season.

While interest expenses rose in this quarter compared to last year due to higher debt balances and increased interest rates, we are managing our financing costs proactively. Additionally, our depreciation and amortization expense has increased, reflecting our investment in planned IT projects and other grid investments. These strategic projects are expected to yield long-term benefits even as they create additional drag throughout the year. We have continued the successful execution of our capital investment program and related financing strategies this quarter as well as managing our debt maturities.

This quarter, APS issued a $450 million bond in early May. And in early June, we successfully closed on both $525 million in convertible notes and $350 million in floating rate notes at Pinnacle Labs. We are committed to seeking the most advantageous opportunities to strategically finance our capital plan.

Finally, all other aspects of guidance remain unchanged and including 2024 EPS. However, if the sales growth and weather trends we experienced during the second quarter continue, we expect to be towards the higher end of our EPS range. We are closely monitoring sales growth and weather for the remainder of the year. We have had a strong first half of the year and are excited to continue executing our strategy throughout the rest of 2024. We are focused on ensuring our customers have safe and reliable power to navigate the summer heat.

This concludes our prepared remarks. I will now turn the call back over to the operator for questions.

[Operator]

[Operator Instructions] Your first question is coming from Shahr Pourreza from Guggenheim Partners.

[Shahriar Pourreza, analyst]

So just on -- obviously, that's been thematic, the weather-normalized sales growth, 5.5%, it's in line with your longer-term for 6%. Can you just maybe elaborate on how sticky this is for the C&I backdrop? And if it's sticky, obviously, that sets you all well for '24, but how do we think about '25 as we bridge from '24? And what does this all mean to sort of your longer-term capital program and earnings guidance?

[Andrew Cooper, executive]

Shahr, it's Andrew. Yes. So as you mentioned, 5.5% sales growth for the quarter, largely driven by those large C&I customers continuing to ramp up. And so you saw that coming from both the manufacturing customers, TSMC [ ecosystem ] as well as from the data centers. And so we're still guiding to a lower range this year as that ramp starts up in a longer-term range of [ 4% to 6% ]. And and that -- we have not provided guidance out past 2026, and don't intend to do so today either.

But if you think about the long term, there is a backlog of these customers that's substantial and extends beyond 2026. You have the second and third phases of TSMC committed. We have over 4,000 megawatts of data center customers that are committed as well. And that doesn't even include the backlog of more than 10,000 data center requests that we've gotten beyond that. And so the stickiness of the large C&I sales growth is a pretty critical trend, and we expect it to continue based on what we're seeing in the service territory.

The only other thing I would just add about the sales growth from this quarter is we saw a nice contribution to that CI sales growth from small business. So 2/3 to 75% of the large C&I that growth in the C&I segment was from the larger customers. But we did see small businesses continue to flourish as well. And I think that speaks to what Jeff and I spend a lot of time talking about, which is the amplification effect of having a strong economy here and a rebuild manufacturing base, and we're starting to see some of the effects of that.

[Shahriar Pourreza, analyst]

Yes. I mean the tailwinds are obviously pretty evident. I guess, Andrew, what's the podium for you to revisit this and update investors? Is it sort of with the year-end update? Or could we see something closer as we get to EEI?

[Andrew Cooper, executive]

We do typically -- when we're not in a rate year provide updates at the third quarter around EEI as we suggest. That's certainly from the perspective of rolling forward our guidance, providing the long-term outlook on the sales growth as well as the capital that goes with it. I know in your first question, you asked about capital as well. So that would be -- the intent would be to look the third quarter there as well as ensuring that we're continuing to see these ramp trends. As we've seen over the last few years with these large high load factor customers, the ramps can be a little bit variable. And so we want to ensure that the 10% growth that we saw in the first half of the year continues before we make any change to sales guidance.

[Shahriar Pourreza, analyst]

Okay. Perfect. And then just lastly, the reg lag docket that's kind of out there, I mean, obviously, another workshop. Maybe just provide just a little bit higher level thoughts on kind of where the timeline stands today? Any incremental details you can provide coming out of the recent meeting and just additional milestones because it seems like it's gaining fairly good traction, but I just wanted to see if there's anything incremental to add there.

[Jeffrey Guldner, executive]

Yes, Shahr. I'll start and then anybody else can chime in. I think -- so you are seeing the -- bringing in the experts having a real dialogue around what are the what are the systemic things that are being done in other places or in other jurisdictions, how does that work, I mean to me, the thing that's encouraging is, I think it really does show that there is a desire to understand what this means and particularly important in the context that we're moving into that the amount of capital that's going to have to go into serving the growth in Arizona and to really leverage.

Like one of the key strengths of Arizona has been the broad regulatory environment, which has attracted so many of these customers like Red Bull and TSMC and others into the state. That's got to pair with our ability to serve them and to meet the growth that's coming. And so it's really, I think, understanding that broader context has been helpful for these workshops. So it's good that we're seeing another 1 coming up in October. I think there'll be some continued exploration or dialogue around what the different areas are we said in the script here that a lot of the focus is right now on both the forward test years, but also the formulaic approach to rates, which is similar to FERC.

And so it's still early in the process. I think they are working to try to move this through and at least get some alignment or direction articulated here throughout the rest of the year. So I think good progress and something that we're definitely engaged in trying to make sure that we can provide the support they're looking for as they sort through some of these policy options.

[Shahriar Pourreza, analyst]

Congrats on the execution. It's pretty notable.

[Operator]

Your next question is coming from Nick Campanella from Barclays.

[Nicholas Campanella, analyst]

I wanted to just put a finer point. I'm sorry if I missed it, but just is October really the date that you're looking towards for this to be taken up. I just know that there should be some open meetings between now and then, but is it October?

[Jeffrey Guldner, executive]

It's October.

[Nicholas Campanella, analyst]

Okay. And then I guess just with the strong start to '24, what are some of the negatives that we might not be contemplating here that would keep you within the guidance range? I know you kind of said that you're at the higher end? And then just knowing that the long-term CAGR is not linear, obviously, it's going to be predicated on rate outcomes, is there any kind of pull-forward opportunity from O&M or otherwise to kind of help derisk your '25 outlook within the range?

[Andrew Cooper, executive]

Sure. Nick, it's Andrew. So in terms of things that we're monitoring for the rest of the year, as I mentioned earlier, certainly on the sales side, I want to make sure that ramp rate continues with our customers. residential sales continue to have some customer behavioral elements that we watch as well, at the end of a very hot summer, and we saw some of those at the end of the summer last year. But overall, the sales growth trends have been a positive tailwind to date.

The spot that we certainly continue to watch, and it will lead into your second question there is just around O&M. We've been very judicious in the first half of the year to engage some of those O&M savings. If you recall, our guidance for the year for O&M contemplates basically a 2% reduction in core O&M in order to accommodate some of the large planned outages that we have this year, which basically lead to a 2% overall increase in O&M. And so the largest of the outages is still on to come with 4 corners in the second half of this year.

And certainly, so as we watch the O&M picture, we've seen a good story year-to-date. Those savings from exercising our lean muscle and all the operating efficiencies that we look for every year at the company. Those have played out according to plan. But certainly, as we engage in that outage and all the planning and work that we've done to make sure that it keeps us within our O&M range. That's certainly the area that we'll look to.

There aren't a lot of other things that rise to the top of the list in terms of potential headwinds other than the normal economic and sales -- top line related ones. We've derisked our financing plans for the year by doing all the financing we did. So we've kind of got a good handle on what our rate picture is for the year and the D&A is what it is based on the assets going into service.

So just going to your second part on O&M because I think certainly, the outage picture is the one that we watch for the rest of the year. With that weather benefit, we certainly have activated the internal dialogue around the potential to take a look at our multiyear O&M plan and where we can derisk it. And part of the reason for that is actually that the 4 quarters [ outage ] continues in '25. And so our ability to have some flexibility in when we initiate some of these O&M projects, whether they're on the T&D side, on the technology side, there's a number of things that we look at and how we can toggle and have some agility in terms of how we approach them. So the short answer is yes, we'll look at O&M as we continue to look at the weather and see what's the outage schedule, how that pans out as well.

[Nicholas Campanella, analyst]

That's great. I appreciate that color. And one more, if I could, just with the reg lag docket kind of gaining traction, you also kind of have this ACC election in the background as well, and that all kind of culminates around this fall time line. But how do you kind of see that changing the direction of the lag docket, if at all?

[Jeffrey Guldner, executive]

I think the lag docket is moving forward on the schedule that they've got there. I mean right now, the election, it's pretty early. We're just out of the primaries here, most of the attention right now is at the top of the ticket races. And so you're not -- I don't think there's been a lot of dialogue yet on commission election issues. We continue to engage with the candidates on both sides. So it was an uncontested primary on both.

And so we've been in contact with the candidates on both sides in the scenario where we want to continue to dialogue because again it ties back to the growth that we're seeing in the state and the need to support that growth. And that's been consistent. Governor [ Hobbs ] has continued to be very supportive of growth in the state and do things that is following up on what our Republican predecessor is driving.

[Operator]

Your next question is coming from Michael Lonegan from Evercore ISI.

[Michael Lonegan, analyst]

On the financing plan, just wondering if you have any updated thoughts on the timing and type of equity or alternatives. I know you previously said you were leaning towards an ATM program that could match up well with capital deployment.

[Andrew Cooper, executive]

Michael, it's Andrew. Yes, so no updates at this point. If you recall, we did our -- the big block equity that we really wanted to use to make sure that we have a robust balanced capital structure down at APS. And that's under forward so we'll draw that over time, at 18 months to do so. We derisk our maturities of both APS and Pinnacle West during the second quarter with a number of debt instruments and that used up a little bit of the debt -- parent debt amount that's in our 3-year financing plan. So that really leaves predominantly the incremental external financing that we need to do at the parent, the $400 million number that we have there in the plan.

And ultimately, at the base case, there still really remains common equity. Certainly, we'll look at other instruments, and those alternatives are out there. And as you said it best, Michael, it's an ATM program is an ability to match up the capital needs with the external financing. And so that would be our base case. As we move through the year and think about when we roll forward our financing plan, an ATM tends to be a 3-year program. And so we're kind of done with our 24 equity needs. And so as we look to '25 through '27, we'll provide any updates, but the $400 million is the number that we're targeting at the moment. And ATMs certainly remains the base case.

[Michael Lonegan, analyst]

Great. And then going back to the regulatory lag docket, depending on when it's complete and what comes out of it, do you think you'll start preparing a rate case filing right away and file that when that's complete, that it's done in, say, 4 to 5 months later? Or could we even see a rate case before that docket is finalized and in maybe various forms of what the regulatory lag docket could look like?

[Jeffrey Guldner, executive]

Yes. I think right now, we're just still working through the docket and trying to understand directionally where that's going and that will help inform our path from that point. So let's see what the next workshop looks like, so if they continue to work through the process. And obviously, we'll keep people posted.

[Operator]

Your next question is coming from Travis Miller from Morningstar.

[Travis Miller, analyst]

You talked a lot at the beginning about the customer bill assistance and the higher bills and stuff. Is there any chance with the weather if it either stays hot or get hotter that could impact working capital for you? Or the regulatory mechanisms that would offset some of that cash flow issue potentially?

[Andrew Cooper, executive]

Yes. Certainly, we've been working over the last number of years where there's a moratorium on disconnects and things during the summer. So our pace of customer receipts throughout the year tends to be fairly predictable. And so we plan our financing both the long term and the availability of short-term capital to accommodate the normal pace of customer payments over the course of the year. And certainly, the programs that we participate in and direct funds directly from our bottom line too as well as the ones that we work with on partners all provide an opportunity to kind of reduce some of the pressures on customers from a build perspective over the course of the year, particularly as we come out of our summer season and those bills begin to be more front of mind for customers.

[Travis Miller, analyst]

Okay. Got it. And then another heat question, if we do see these unusual temperatures. What type of planning in terms of system resiliency or even equipment-type planning do you do for the heat? I'm thinking extreme weather taking out some of the equipment as we've seen with extreme cold weather in other places. What type of contingencies do you have on your system like that, if that makes sense?

[Jeffrey Guldner, executive]

Yes, I'll start. I mean that's part of the process, and we've obviously been through -- if you go back and look historically, the hottest temperature we've had in Phoenix was actually -- was it 2018 or so, it was a while ago. And so you always have to manage through with this. And there's a lot of focus around personnel. So how do you make sure that your crews who are working out in the heat, have access to air-conditioned trucks and we manage the workflow there. And then a fair amount of work just on the equipment every year, making sure that we look for resiliency that we monitor the equipment, it does have some heat sensitivity. Ted and Jake, anything?

[Theodore Geisler, executive]

Yes. I think, Jeff, you said it well. The only thing I'd add as well is the temperature we've seen so far as well within our design criteria and what we plan for. It is interesting that while we saw sales higher in Q2, in large part due to weather, we still didn't break our peak demand compared to last year. And so that's really an indication that we saw higher low temperatures at night, and we had more consistent days around 110 degrees or above. But we actually didn't see the top end extreme heat as much as we did the year prior.

So from an equipment standpoint, we take it seriously. We have resiliency plans. We study each summer, and that informs our future design criteria. But we're actually sitting pretty good in terms of having the impact on equipment fall exactly where we would expect it to be, and we'll continue to monitor and adapt along the way.

[Jeffrey Guldner, executive]

Yes. Just a correction, the highest temp in Phoenix recorded was in 1990, 122 degrees. And so this is just something in a desert environment you plan for hot summers.

[Travis Miller, analyst]

Whenever you want to send that heat to Chicago, I'd appreciate it. I'll even trade you some 0 degrees over there, if you like. I appreciate the thoughts.

[Operator]

Your next question is coming from Julien Dumoulin-Smith from Jefferies.

[Unknown Analyst]

So maybe just coming back to the rate case timing and just the expectations of how this would filter in on the reg lag front. Obviously, making good progress here on that front. It sounds like it wouldn't be too long a short period of time, subsequent to its resolution, say, in October, so early '25 -- is your expectation here that ultimately, the impacts would be, call it, mid 26-ish if you wanted to put a tilt to it in terms of addressing that lag and having a partial year? And then maybe you could be a little bit more specific on how you think the extent of that is going right now on resolving some of that lag? Just if I can press you a little bit further.

[Jeffrey Guldner, executive]

Yes. Just Julien, on the process. I mean, so there's a workshop schedule next in October. That's kind of the data point that is out there. So more dialogue. And I think I would expect the commission might give a little more guidance or at least have some dialogue on how they see that process moving forward. Once you see visibility into that, I think it's pretty standard. Everybody has about the same schedule. It takes about 6 months to put together filing, and then it typically takes about a year to work through it. You've got factors like settlement, possibilities and other things that come into the analysis.

And so we're in August right now, workshop coming in October. We'll see how the dialogue continues to go and then look at how that how that would affect the schedule and the timing. One of the things that you're starting to see, and this goes back to a program that we had in place, and you probably remember it the Arizona Sun program from a number of years ago, I think we got that approved in 2012 is time frame, and that allowed us to move forward with a tracking mechanism to get more concurrent recovery of capital that we are investing in that case with solar plants. And now that's part of the SRB process.

And so there already is some movement that is helping us to address some of those regulatory lag items. The SRB is the one that was activated in the last case and as supply did not just us, but another utility here in the in the state. And so those are the kind of things that you just have to continue to work through as the commission addresses the issues so that we can get back to where there's more contemporary recovery of the capital that we're investing to serve the growth we have.

[Unknown Analyst]

Awesome. And then related to that, if I can push you the SRB you just alluded to. I mean, in there, there's no -- it's an evergreen program, right? As in to the extent we get subsequent revisions on your generation needs to the extent to which that you're still in negotiation on some of the assets here as long as it goes through your typical procurement processes, all of that would still be eligible to participate in the SRB, right?

[Jeffrey Guldner, executive]

Yes.

[Operator]

[Operator Instructions] Your next question is coming from Paul Patterson from Glenrock Associates.

[Paul Patterson, analyst]

Just -- and I apologize for being slightly unclear. But it sounds to me from just listening to the call that perhaps you guys are expecting this regulatory lag proceeding to move somewhat rapidly from a regulatory time. And I just want to make sure I understand this. So there's a workshop, as you mentioned, scheduled in October, but you think that things might move rapidly after that. I just wanted to get some sort of sense on that. And would it be safe to assume that you guys are not going to be filing a rate case until you get a determination in that proceeding?

[Jeffrey Guldner, executive]

On the latter, we don't know where the proceeding is ultimately going to go. I wouldn't say that. I think, again, we're in August, there's a workshop scheduled for October. I would expect that, that workshop that the commission would have some dialogue on kind of where they feel they are in the process and what they think the timing is going forward. I think to your point, I think they are being pretty deliberate in how they're moving the workshop process forward. But kind of hard to sit here and give you expected dates and everything. I think we'll see how the dialogue goes in October, see how comfortable they get with the information that they're that they're hearing and get a check in at that point on what we expect to see from a process standpoint moving forward.

[Paul Patterson, analyst]

Have a great one. Stay cool.

[Operator]

Thank you. That completes our Q&A session. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.