Paul J. Mountain - Director of Investor Relations Donald E. Brandt - Chairman, Chief Executive Officer, President, Chairman of Arizona Public Service Company and Chief Executive Officer of Arizona Public Service Company James R. Hatfield - Chief Financial Officer, Executive Vice President, Chief Financial Officer of Arizona Public Service Company and Executive Vice President of Arizona Public Service Company

Shahriar Pourreza - Citigroup Inc, Research Division Greg Gordon - ISI Group Inc., Research Division Julien Dumoulin-Smith - UBS Investment Bank, Research Division Ali Agha - SunTrust Robinson Humphrey, Inc., Research Division Kevin Cole - Crédit Suisse AG, Research Division Brian Chin - BofA Merrill Lynch, Research Division Kit Konolige - BGC Partners, Inc., Research Division Neil Mehta - Goldman Sachs Group Inc., Research Division Craig Martin Lucas - Nexus Asset Management LLC Charles J. Fishman - Morningstar Inc., Research Division Paul Patterson - Glenrock Associates LLC

Greetings, and welcome to the Pinnacle West Capital Corporation 2013 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paul Mountain, Director of Investor Relations for Pinnacle West Capital. Thank you, sir. You may begin.

Thank you, Christine. I'd like to thank everyone for participating in this Conference Call and Webcast to Review Our Third Quarter 2013 Earnings, Recent Developments and Operating Performance. Our speakers today will be our Chairman and CEO, Don Brandt; and our CFO, Jim Hatfield. 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. Note that the slides contain reconciliations of certain non-GAAP financial information. Today's comments and our slides contain forward-looking statements based on current expectations, and the company assumes no obligation to update these statements. Because actual results may differ materially from expectations, we caution you not to place undue reliance on these statements. Our third quarter Form 10-Q was 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, and will also be available by telephone through November 7. I will now turn the call over to Don.

Thank you, Paul. And thank you all for joining us today. My comments today will provide an update on our operations, including the Four Corners transaction, as well as discuss the regulatory proposals that are in front of the Arizona Corporation Commission. Then Jim will discuss the results of the quarter and our earnings guidance. First, let me highlight that last week, our Board of Directors increased the common dividend by 4%, effective with this year's December payment. The increase builds on the 4% increase last fall, and is in line with the value return goals we outlined 1 year ago at our Analyst Day. Turning now to Four Corners. With the Arizona Corporation Commission voting to close the retail electric competition docket on September 11, APS is now moving forward to address the remaining conditions to closing our acquisition of Southern California Edison's interest in Four Corners Units 4 and 5. The transfer of the mine from BHP to the Navajo Nation is progressing, with the Navajo president and the Navajo speaker of the Tribal Council signing legislation last week, necessary to complete the acquisition of the mine. The other co-owners of the plant must also finalize their internal approvals of the coal contract. Assuming all closing conditions are met, we anticipate the Four Corners transaction will close in December. Around the time of closing, APS plans to issue debt to provide permanent funding for the acquisition. Once the transaction is closed, we have 2 actions that need to occur by December 31, 2013: First, a provision in APS's 2012 settlement agreement allows APS to file for the recovery of the Four Corners transaction-related revenue requirement with the Arizona Corporation Commission, and to implement new rates prior to the company's next rate case. The Commission will review the revenue…

Thank you, Don. The topics I will discuss today are outlined on Slide 4. I'll begin with a review of our third quarter results, including earnings and the primary variances from last year's relative quarter, followed by an update on the status and outlook for the Arizona economy, and we'll conclude with a review of our 2013 and 2014 earnings guidance and financial outlook. Slide 5 summarizes our ongoing and GAAP earnings for the quarter and year-to-date. On an ongoing and GAAP basis, for this year's third quarter, we reported consolidated net income attributable to common shareholders of $226 million or $2.04 per share, compared with net income of $245 million, or $2.21 per share, for the prior year's third quarter. As usual, my remaining comments will focus on ongoing results. Slide 6 outlines the variances that drove the change in quarterly ongoing earnings per share. A decrease in our gross margin reduced earnings by $0.06 per share, compared with the prior year's third quarter. I will cover the drivers of our gross margin variance on the next slide. Higher operations and maintenance expenses reduced earnings by $0.04 per share, including communication costs associated with net metering and deregulation, partially offset by lower generation cost resulting from less plant maintenance being completed in the third quarter of this year than in the same quarter 1 year ago. Both the gross margin and O&M variances exclude expenses related to the Renewable Energy Standard, or RES, energy efficiency and similar regulatory programs, all of which were essentially offset by comparable revenue amounts under adjustment mechanisms. Higher infrastructure-related costs reduced earnings by $0.07 per share, reflecting increases in depreciation and amortization and property taxes, which is driven by both additional property and higher rates. Turning to Slide 7 and the components of the…

Operator Instructions] Our first question comes from the line of Shahriar Pourreza from Citigroup.

The midpoint of your guidance range, $3.60 to $3.75, seems to imply a little bit closer to an earned ROE of 9.5%. I think, historically, you've guided, and even in the prior call you mentioned that you should see probably lag close to about 10 basis points, so maybe an earned ROE close to like 9.8%, 9.9%. I mean, there's no real change in your customer growth assumptions or weather-normalized growth assumptions from a volume basis. So I guess, I'm kind of curious what the delta is? And is it energy efficiency or what are you seeing down there?

Well, Shahriar, I would say, our guidance, sort of booking of the 9.5% to 10%, earned ROE. And I think no real change in our outlook as we look to '14 and beyond, the pieces of the rate base growth, earnings growth and dividend growth are still intact.

Okay. got it. And then let me just ask you one question on Four Corners. The transaction is going to close pretty -- timing-wise, pretty close to when the EPA can announce potential carbon legislation on existing assets. Can you give us an update on where the ACC or APS or the governor is with the EPA on potential impacts? Because obviously, there's going to be a litigation as a result of it, but ultimately could lead to pretty high capital requirements for these assets. Can we get a status on that?

Yes, and just in terms of Four Corners and the EPA, I think the EPA came out earlier this year which was for new sources, and they are coming out with existing sources won't be for an additional amount of time. So our plans right now are to just close the transaction, and so SCR is in '17 and '18, and we think that'll fit within the EPA guidelines.

Our next question comes from the line of Greg Gordon with ISI Group.

Just to be clear on the third quarter and year-to-date numbers, because I think the decline in sales was a little bit disconcerting to some people. The year-to-date numbers, you are seeing about -- you've seen about 1.3% customer growth and more or less flat sales growth. So despite the fact that the third quarter was a bad comp versus last year, you are actually on plan relative to your expectations?

Absolutely, Greg. Like I said in my remarks, we were off in the third quarter. It's consistent with last year, where we're off to the third quarter as well, and it certainly met our expectations from sales growth.

Great. And then you've given guidance for 2% customer growth, 0.5% sales growth in '14. But if I triangulate around what you've said about an expectation of accelerating customer growth and sales growth, and you expect any averages that you said you expect through '15, just mathematically speaking, you think that customer and sales growth should accelerate into '15 versus '14. Is that correct?

Absolutely, Greg.

And you've said before you see an ability to keep your O&M relatively flat over that period? Is that still a fair assumption?

Yes, that's still our assumption.

Okay. The final question on this subject, and then one other. Don, I know Jim just said that the $3.60 to $3.75 guidance for 2014 more or less bookends a earned ROE of 9.5% to 10%. And I know weather variations can do a lot to your earnings throughout the course of the year, and there is other factors that are hard to manage. But is it still your aspiration and assumption that you could default, if your plan is executed earned towards your authorized return on equity?

That is correct, Greg, that it would be our direction to earn towards our allowed rate of return. Let me add, before we get too far away from your last question about customer growth, and I know you and others would be interested in this. I just had a discussion day before yesterday with some representatives of the homebuilders industry. And to use their words, the builders are not able to meet the current demand for housing in the area, and the key issues are 3: they identified labor shortage, which they have actually built some trade schools to get construction labor back up to speed; the permitting process, and that's going through the various city and county government entities; and a lack of improved lots right now, which they're going at gangbusters. So my word is not theirs. I think theirs is initial hurdle to get over, to get those pieces in place, and we'll see things start to accelerate relative to solar -- excuse me, sales growth, which is in line with essentially what Jim was telling you a few minutes ago.

Great. And then my final question with regard to solar stuff. I guess the next open meeting is in mid-November. Do you think that it's possible you'll get a decision both on the net metering issue and the 50 megawatts of Arizona Sun that you've recommended -- that the staff has recommended be approved? And if they do approve that, is that in your current CapEx forecast or would that be accretive to CapEx and rate base?

We do not have the last 50 megawatts of Arizona Sun in our forecast at the moment. It would likely be in a '15 event.

And that would get recovered through a rate rider as the rest of the Arizona Sun program has?

Yes, exactly.

Our next question comes from the line of Julien Dumoulin-Smith from UBS.

So just wanted to touch on the '14 guidance again just real quickly here. You're talking about some pretty robust growth, obviously. And I'd be curious -- looking at the gross margin component of this, right? It seems more flattish year-on-year. I mean, obviously, the top end is a little higher. Can you talk about maybe the composition of growth and kind of reconcile those 2 comments a little bit?

Sure. I think you have a couple of components here: one, obviously, is 0.5% sales growth; and the others would be, as we've talked about, the mechanisms we have in place that continue to add the gross margin on an annual basis. You have the TSA. You have the RES. You have the LSCR. And of course, we've assumed that 1/2 year at Four Corners. So you would get 1/2 of that -- roughly 1/2 in '14 and 1/2 in '15, assuming it goes in on July 1.

Got you. How much of the growth in gross margin here is attributable to growth in sales, if you will, versus, say, rate increases? And perhaps just to be clear, how much year-on-year, in aggregate, are we talking about a reversal of sort of 1x weather-related benefit this year, just to kind of make it more apples-to-apples?

Well, I think so far, and we don't know what October is yet, because it's last day of the month. We know it was terribly mild. Like I said, we haven't had an October like this since 1998. So I think at the end of September, we still had about $0.06 or $0.07 of weather. Positive weather, so you'd have to weather-normalize from that. Our rule of thumb on 1% sales growth is roughly $10 million of net income, which equates to about $0.09. So you would have $0.04 or so just based on sales growth.

Got you. And I just wanted to clarify this. I mean, been a lot of talk out there about distributed gen and solar and all that. But just to be very clear and perhaps quantify it, I mean, what kind of variability could DG put into your numbers? I mean, it seems relatively small but just put a finer number on that.

Yes. Well, right now, we're seeing the DGPs probably take away about 0.5% of sales growth or so. And the rest is, as we talked about EE and conservation. And we don't see a lot of variability in that number, obviously. We expect DG will grow but so will a number of customers and so you'll see fairly consistent sort of 0.5%.

Got you. And kind of taking the same analogy of growth in '14 and looking further beyond, we've seen some of your peers out there talk about long-term EPS growth, the trajectory coming down a little bit. Obviously, you guys have some EPA-related spend and some demand growth that I suppose longer-term outlook. What are you guys thinking, I mean, if you can put kind of any kind of ballpark sense there? I mean, are we talking about, at a minimum, maintaining your current growth trajectory, or is there actually an acceleration here that you're talking about '15 onwards?

Are you talking about what kind of growth, EPS growth?

Yes, I think. Yes, bottom line EPS growth.

Yes, I think, Julien, you think you have really in '14 somewhat of a lull in growth, but our growth rate hasn't changed. And we talked about our forecast of '15, but beyond that, we have, as we sit here today, planning peakers in the valley that was our '17, '18 event, you have SCRs which are '17, '18 events as well. So we don't really see a slowdown in our growth rate as we sit here today.

Is it arguably an increase or...

We haven't talked about increase or decrease. We think it's going to be consistent steady growth which supports our dividend growth outlook.

Got you. And perhaps just lastly here, I mean, obviously, a lot of focus again on DG. Is that an opportunity in the long term here for you guys to get involved somehow beyond AZ Sun?

We have not -- it's something we've looked at, but right now, we have no plans to get into DG. Our plans in the solar space would be more utility scale with PPAs to creditworthy customers.

Our next question comes from the line of Ali Agha with SunTrust Robinson Humphrey.

Jim, wanted to clarify a couple of things. One is just to be clear from your commentary, the third quarter financial results that you just reported, were those in line with expectations or below because of the sales growth or can you just give us a sense of that?

No, I would say it's in line. I don't think we're -- as I said, the sort of sales reduction was not outside our expectation. We did have a little higher property tax, which is something that we probably didn't expect. We see property tax rates going up about 10%. Remember, we have the deferral mechanisms, we are able to deferral a good part of that. Other than that, I'd say it's in line with expectations.

Okay. And then second, as you point out in your '14 guidance, you're not assuming any new equity issuance. So at this stage, when are the earliest, do you believe, equity would be required for you guys?

Well, right now, we're assuming no equity in our forecast period, which goes through '15.

Oh, through '15 as well, okay?

Right.

And does that also influence your thinking on the next rate case filing?

They're somewhat connected but obviously, our goal would be to stay out as long as we can. It's likely to be pushed off but we do have the peakers and the SCRs, which at some point will want to make sure we recover.

Okay. And then you talked about the dividend, the 4% growth rate that you've assumed will continue going forward. Does that assume a pretty steady current payout ratio? Does the payout ratio go up? Does it go down? How should we think about that for the dividend?

It's pretty much steady with the 4% dividend increase.

Okay. So we should assume a 4% EPS growth to go over that dividend growth?

Well, as we said last year, we have 4% dividend growth and sort of 6% rate base growth long term. And so earnings are going to -- that would be your bookends from an earnings perspective.

Right, got it. And last question to be clear, just confirming, I think you mentioned. So in your '14 guidance, you've got Four Corners contributing earnings for 1/2 a year?

Correct.

Our next question comes from the line of Kevin Cole with Credit Suisse. Kevin Cole - Crédit Suisse AG, Research Division: Just kind of following up on Agha's question. So, there's no equity through 2015. Should we think about, I guess, the next test here being 2016 and then you're filing mid-'17 and rates effective '18. Is that kind of how we should think about it?

Kevin, I think you're probably far ahead of our thought. Our objective is to run the business exceptionally well, control our costs, deliver outstanding value and service to our customers. And as Jim said, we have no plans for equity in '14, and it's not our objective, or I doubt many other electric utilities in the country to file rate cases as a first course of action. So, we'll deal with that as our plans evolve. Kevin Cole - Crédit Suisse AG, Research Division: And is it still right to think of you would file -- you would tear up your balance sheet during the test year versus prospectively like how you cut for the CapEx?

Yes, during the test year likely, yes. Kevin Cole - Crédit Suisse AG, Research Division: Okay. And then I guess you guys have long pointed towards your 4% dividend growth to keep the payout ratio flat, which is perfectly in line with your 2014 guidance. Should we think about your growth rate remaining in line with the dividend growth? Or, I guess, can you help me kind of bridge the gap between the 4% growth rate and your 6% rate base growth for 2015 and '16?

Well, Kevin, we haven't come out with a long-term EPS growth rate. But like we said at the analyst meeting last year, you have 6% rate base growth, 4% dividend growth. That's going to be your bookends for earnings growth on a sort of a CAGR, knowing that any year could be plus or minus, depending upon various factors. Kevin Cole - Crédit Suisse AG, Research Division: And the reason that 2014 is maybe not towards the 6% because of a delay in Four Corners. If Four Corners wasn't delayed, then you'd probably be closer to 6%. Is that how we should think about it?

No, I think some of the factors for next year are things like a smaller -- we're basing it as a smaller TCA this year. That will pick up in '15 just based on transmission spend and the way our formula works. And we are only have Four Corners for 1/2 a year, you're exactly right. Kevin Cole - Crédit Suisse AG, Research Division: Okay. And then I guess when I think about energy efficiency. So for this quarter, I saw we had 1.3% population growth, but weather-normal is negative 1.3%. And so that's roughly 2.5%, I guess, energy efficiency netting. What was unique about the third quarter which drove so much, I guess, energy efficiency versus the future periods?

I don't think there's anything unique about this year's quarter. Sales were off 1.2% last year, which was actually a little better than we thought it'd be last year. So nothing really unique about the third quarter. Keep in mind, you have a lot of weather variability in our largest quarter. That always has an impact on numbers as well. Kevin Cole - Crédit Suisse AG, Research Division: Okay. So the big net energy efficiency loss could be a little bit of weather kind of baked in there just from...

Weather is an art, not a science. I know guys disagree with that assessment, but you look at average temperature and you get peak highs and lower lows and it always has an impact. But that's our calculation that we came up with. Kevin Cole - Crédit Suisse AG, Research Division: Okay. So let me just ask one last question. So I know Jim, you spent a lot of time just on O&M generally. When you're thinking about flat O&M, is flat to -- is it on absolute basis? And are you thinking flat off of year end 2013, so whatever the numbers is this year should kind of hover that level until you file another rate case? Or are you seeing -- or you're already pegging that with volume growth or can you actually see maybe expected year-on-year cut in O&M?

Well, I would pick if we see, sort of, net kWh sales growth, our aspiration is to be at or lower than the rate of sales growth. So, as we look to next year, with the 0.5% kWh sales expectation, I would think you could assume that we're going to be fairly flat in '14 over '13. Kevin Cole - Crédit Suisse AG, Research Division: Okay. So still it's flat to volume growth, not flat on absolute basis?

Correct.

Our next question comes from the line of Brian Chin with Merrill Lynch.

Could you just remind us again, what is the CapEx guidance for '13? And then, I know you didn't give it explicitly in the '14 number, but is there a CapEx number that you're thinking of '14 is well? Just so that we can triangulate properly.

Yes, so the '14 number is roughly a little over $900 million. Our '13 number is about $1.1 billion. Keep in mind, we've assumed the Four Corners in there for '13, which pushes that number up a bit.

Great, great. And then for '14, is there a depreciation and amortization number that we're thinking...

It's about $400 million a year.

Our next question comes from the line of Kit Konolige with BGC.

Most of my questions have been addressed. Just on the inclusion of Four Corners, the settlement in 2012 envisioned that going into rates. What does the Commission need to decide or consider in order to grant approval for that to go into rates?

Well, the docket was held open for Four Corners. We will file the cost of service and ask before the end of the year. And like we said earlier, that pace has been adjudicated once and we will just update our expectation for cost of service with our filing and we expect it to go into effect July 1.

So you expect it to be -- I mean, do you expect this to be a contested issue? Are people going to look at your cost of service and come back and say, "This is way too high", or something to that effect?

Well, any sort of regulatory filing has people on all sides. I will say, this came out in the last case that was adjudicated what we believe our cost of service should be. I think you could expect people to question any sort of changes in that. But the cost of service has been put out there and explained in our last -- in the original filing. So I don't think it will be a surprise to anybody.

Right, okay. And one other area on net metering. If you got what you would like to see, the changes you'd like to see made, how would that affect rates?

Well, our proposal, staff proposal, and I haven't read through the whole process yet, so I can't really comment, although I'm sure it's probably similar, is it's some sort of monthly charge. But keep in mind, all of the -- there's no new money to APS. Any fee collected in the near term would go to offset the LFCR. So there would be no net revenue to APS and a reduction in LFCR going forward until the next rate case will use that rate case design.

Right, understood. Okay.

Kit, let me -- this is Don. As I know you know, net metering is a cost shifting issue. It's fundamentally a customer issue. It's no secret to the current net metering structure creates a cost shift that unfairly burdens nonsolar customers. Other important stakeholders like the ACC's staff and RUCO has acknowledged this fact. And without a doubt, the time to fix this problem is now before it gets worse. And that's the key, is fix it now while it's easily fixable. The best way to encourage the continued growth of rooftop solar is not through hidden subsidies as currently exist with the net metering structure. And those subsidies are funded by nonsolar customers. But rather, through transparent upfront incentives funded by all customers. And fixing the current net metering policy will help continue Arizona's national leadership in solar energy.

Understood. So I was kind of trying to get at the idea of how much would rates change for nonsolar customers? Is this a big impact or is this spread out over so many customers that it's relatively small and they're relatively indifferent to how this proceeding turns out?

Near term, there will be no change to nonsolar customers. As proposed by us and staff, it would be a monthly charge other than whatever they decide to do with upfront incentives, which should be collected through the rest.

Our next question comes from the line of Neil Mehta with Goldman Sachs.

Could you provide some clarity on the major transmission projects that you're currently working on right now? And what are the incremental opportunities that sit in front of you that could present some upside to your transmission budget?

Well, our biggest project -- I mean, we have several projects, as we talked about. Our biggest project is our Hassayampa in North Gila, Substation 2, which is about a $230 million spend that does not go into service until May of '15. So that's our big one. Everything else is pretty fairly routine. We're always adding substations and adding capacity to make sure the system's robust. So between now and '15, I don't really see any incremental opportunities. Longer term, as growth picks up, we've got to do more and more transmissions just to support the system load.

Our next question comes from the line of Craig Lucas with Nexus Asset Management.

I have another -- I have a question about net metering. I know that this -- didn't head over the last couple of questions. But my question is that your guidance for next year, as well as your comments around the 9.5% ROE, are they assuming that the net metering issue is fixed within that guidance or does it -- does your guidance assume status quo regarding TG?

Well, as I said earlier, Craig, let's assume that Commission rules on the staff proposal, for example. That offset is a reduction in the LFCR. So again, there will be known net gross margin to APS until such time we have our next rate case.

Well, that may be true but it's obviously also true that about 0.5% of sales growth then would obviously benefit the company even though the money would go essentially to obviously properly incentive the real economics of solar and that cross subsidy. But obviously, there would be 0.5% of better sales coming through...

The 0.5% is not going away. It's here and it's on the system.

Right, but I apologize. That existing solar customers would not change, but the continued growth in that class would obviously change, right?

The growth -- it would be so incremental and small as to not be noticeable in our '14 guidance.

I see. So basically, what you had would stay and then the stick would kind of the property attuned, let's say, going forward?

Yes, I mean, again, it right now is 0.5%. We have about 20,000 residential installations. That's a small piece of the system. And any up or down of sort of installation is not going to really impact our key number.

I see. One more little question, though. Also, so if you're able to fix this through the cross-subsidy issue, that really -- there's really no reason to go in for a rate case until the '16 timeframe. Is that kind of the way we should think about it, or beyond?

This is U.S. nothing to do with our thinking of the next rate case.

Our next question comes from the line of Charles Fishman with Morningstar.

Just in comparing Slides 16 to 17 on '14 guidance, the gross margin stays about the same. Expenses stay roughly the same. Interest expense actually goes up. Tax rate sure is about the same. Is it because of the footnote that you've got a little bit of a bump up in your guidance versus '13? Is it because of renewable energy and energy efficiency programs? Where does the little bit of increase come from?

Well, they come from our mechanisms: 1.5 a year Four Corners; interest in DNA is going to go up. But that's sort of a-- and then that's sort of a difference in our guidance would be those 2 factors: a little higher gross margin; a little higher interest in G&A in 2014.

But does the renewable energy programs and efficiency programs, they add a little bit, don't they, to make up for the gross margin loss or...?

Well, we have the LFCR, which part and then we have the Renewable Energy Standard, which is our implementation plan. So any of the Arizona Sun projects, we know we're going to get 32 megawatts in '14 and that will help gross margin as well.

Okay. I probably need plug in your '14 numbers and talk to Paul and get clear on that.

Our next question comes from the line of Paul Patterson with Glenrock Associates.

I just wanted to sort a follow-up with the -- sort of, on Craig's question in maybe a different way. What I'm wondering here is what is the impact of taking away the subsidy on this 0.5%, let's just talk about going forward perhaps or in other words, what the sensitivity to -- in other words, if you do away with the subsidy for solar, which seems to be precipitously defended by the solar advocates, what would be the impact on new installation? Could you give us a little bit of a flavor as to what would happen in terms of new solar, what you would estimate would happen as a result of new solar applications?

Well Paul, Don Brandt here. It's important to take our proposals in their entirety. And most importantly upfront, we said is the existing -- whether it's 18,000, 20,000 customers that are already on rooftop to grandfather them, so they're not impacted. If you like, there's a takeaway. To fix and we had 2 different proposals basically to fix the nontransparent subsidy that is inherent in the current net metering structure. But then, equally importantly is to provide an upfront transparent subsidy. We didn't recommend any specific number but our idea is a number that would continue to allow the rooftop solar market to continue to flourish in Arizona as it has been. But to do it in a transparent manner that in future years, every year, the Commission could reconsider that amount of subsidy to reflect: one, changing an overall public policy goals; but also, the expectation is that solar panel prices and installation costs will continue to decline dramatically as they have in the past few years.

Okay, that sounds great. And I think it makes a lot of sense public policy wise. I guess what I'm sort of wondering is from what I've seen from the solar industry, they seemed almost apoplectic at the idea of changing this. Which would suggest to me that perhaps it would -- it has a potential for threatening their business. And I'm not sure if that's because of just simply the profit margin that's associated with it or if it's because of the level of installations, or what have you, being less. But I guess I'm just trying to get a sense as to, I mean, when you put forward this, I mean, do you think this would lower the level of solar deployment...?

It is lower. But we thought it was a fair and equitable solution. It's a customers issue balancing the interests of customers without solar and those that are going to elect to install solar. There's no expectation that it would decline. And just to sort of set the record straight, I mean, APS is one of the strongest proponents of solar energy in Arizona and we have the record to prove it. Arizona has the largest percentage of per capita solar per customer in the nation. And this is a cost shifting and fairness issue, the current net metering structure. When it became apparent, we took action at the Corporation Commission that we believe is in the best interest of Arizona and all electricity customers. And we look forward to a constructive discussion that we started earlier this year. And as you point out, and I think you used the perfect word to describe it, but instead, we immediately became the target of intense political attack from Solar City and Sunrun and a few other organizations, that established organizations that twisted the facts, misdirected the conversation from the actual issue and proposed ideas that would further harm our customers. It wasn't a fight we sought, and we would have preferred to avoid it. But we had to set the record straight. We have an obligation to our customers, our employees and shareholders. And I think it's going to be very evident in what's been filed already with the Commission and their hearings middle of next month.

Okay, great. Just to further -- not to put too fine a point on it, but basically you don't see it having a material impact one way or the other in terms of your projected sales growth to the level of sales growth going forward in terms of the foreseeable future the next at least 2 or 3 years. Is that the best way to think about -- am I correct in understanding that?

I think that's very correct. Kind of add my point of that, I'd direct you if you want to take a look at the editorial in the Wall Street Journal, the Monday before last, about how government is making solar billionaires. And that's how you get apoplectic behavior, when they feel their profit margins are threatened.

We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Thanks, Christine. That concludes our call. Thanks, everybody.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.