From Lag to True-Up: Sizing Arizona's First Annual Reset Cycle

Research evidence excerpt

From Lag to True-Up: Sizing Arizona's First Annual Reset Cycle

na gas pipeline was secured for 8%6% 8%6%

new generation, the state approved its first annual reset for another utility, and the primary challenge 4% 4%

to two supportive regulators weakened. 2%0% 2%0%

-2% -2%

-4% -4%

Our 2028 estimate is $6.41 against consensus at $6.12, and the capital plan is the gap. Guidance -6% -6%

runs only through 2028 and holds annual spending near $2.7bn; we model $3.3bn that year and -10%-8% -8%-10%

Prem/(Disc) vs Regulated Electric Peers Average -3.0%roughly $16bn through 2030; the disclosed plan excludes most of the generation and transmission . Jul-25 Sep-25 Nov-25 Jan-26 Mar-26 May-26 Jul-26

Source: Bloomberg, Jefferies LLC.

required by 4.5 gigawatts of committed new demand, largely data centers. We expect the plan to be We emphasize that PNW's current 5-7% EPS

rolled forward and raised in February alongside 2027 guidance, once the order is in hand. CAGR for '24-'28 is the most stale across

the sector. We see potential for an increaseThe rate case process is loud but on script. Hearings opened to organized opposition, the state

in EPS guide on the back of accelerationattorney general argued for a far lower return, and legislators urged rejection. We expect that

Julienin capexDumoulin-Smiththat isn't captured* | EquitybyAnalystthe currentpressure to trim the outcome at the margin, not block formula rates altogether: both incumbents

+1guidance(281) 774-2066horizon| jds@jefferies.com(through 2028). Watchare on record backing formula rates, and similar constructs have already been approved (e.g. UNS

Paulfor justZimbardohow *far| EquityforwardAnalystnew plans rollsGas). The July 21 primary guarantees at least one supportive incumbent advances, although we believe