Arizona's fast-growing population and new business activity combined with improving rate regulation in the state should give investors more confidence in Pinnacle West's earnings growth potential.
Pinnacle West should benefit from investing in the infrastructure that will be needed to support energy demand growth in Arizona.
Bears
Utility regulators in Arizona are publicly elected, creating more regulatory uncertainty and shareholder risk than at utilities in states with appointed regulators.
Pinnacle West is a holding company whose principal subsidiary is Arizona Public Service, a vertically integrated electric utility serving approximately 1.5 million customers across a 35,000-square-mile territory in central Arizona, including the Phoenix area. APS owns or leases 6.5 gigawatts of power generation capacity, including a 29% ownership stake in one of the largest nuclear plants in the US, Palo Verde. Half of the electricity that APS supplies to customers comes from clean energy sources, including nuclear.