Jeffrey B. Guldner
Chairman of the Board, President and Chief Executive Officer at Pinnacle West Capital
Thanks, Ted, and thank you all for joining us today. As all of you know, after a series of open meetings and public discussions, the Commission issued a final decision in our 2019 rate case. This rate case was complex and the issues were numerous. I'll highlight a few of the main issues that were decided, the revenue requirement SCRs and the ROE. I'll also discuss our next step and strategy coming out of this case, and then lastly as Ted mentioned, he'll provide the 2022 guidance and our long-term financial outlook.
This outcome was not what we wanted and the process that transpired was not constructive. Everything we have said on the record with our regulators about what's so damaging and concerning about this decision holds true. It is a decision that makes everything we're committed to doing more challenging and more costly for a time. What this decision has not done is change our mission as a company, nor our commitment to delivering value to our customers and you our investors. It has not changed the commitment of our employees to operational excellence in all that we do. In fact, we're using the expertise and the track record that we've built in the areas of long-term planning, cost management, innovation and serving as an active voice and advocate for the Arizona business community to emerge from this case with a robust strategy. We're not apologetic about standing up for what's right for our customers and our communities and for our investors, the owners of this company. It's your confidence in us and your investment in us that makes it possible to deliver the product and services that power Arizona's economy and way of life. We don't take that for granted and we'll lay out for you today how we plan to continue to create values at competitive levels, amidst the headwinds and the challenges that this case has created.
As a reminder, this case was unique for many reasons. We are compelled by the Commission to file this case under a question of whether we are over earning. We are also required to fully litigate this case instead of pursuing settlement opportunities. This is our first fully litigated rate case in over 15 years. We still believe that rate case settlements are the standard and this case was definitely an exception. And finally this case was centered around cost recovery of coal asset. In contrast, our future investment recovery will be premised on infrastructure supporting Clean Energy and our customer growth.
Let me walk through some of the major decisions of the case. First, the Commission adopted a total base rate decrease of $119 million inclusive of fuel. The Commission did reverse its initial vote to move the SCR issue to a separate proceeding and instead provided partial recovery of the SCRs with the disallowance of $216 million. We disagree with the Commission's decision that the SCR investment was imprudent and don't believe that the record in this case supports that conclusion. As I've stated before the Four Corners Power Plant is a critically important reliability asset for the entire Southwest region. It's used in useful currently serving customers and the investment in the SCRs was required to keep the plant running under federal law.
In addition, the Commission voted to lower the ROE from the recommended opinion orders already low ROE of 9.16% to 8.7%. With this part of the decision, the Commission has adopted an ROE that's meaningfully below the national average of 9.4% for electric utilities and the company disagrees with the Commission's rationale. We have embraced a culture focused on customer service and don't believe that a penalty was warranted, and the ROE granted ignores the fact that we were one of the fastest growing states in the country and we need to attract capital in order to fund the growth and economic development that we're experiencing in Arizona.
In addition, the Commission moved away from the long-standing practice of providing a risk premium for serving as the operator of the largest clean nuclear generating station in the country. We'll continue to navigate through these challenges by leveraging our strong growth and seeking judicial review of the decision through the courts. Although we are disappointed by the Commission's decision, importantly, we now have clarity of the path forward.
And so, let me share our next steps and strategy as we look to the future. We continue to remain optimistic about our future for many reasons and I'll discuss each of these reasons in more detail. First, we have a solid track record for performance and have grown earnings and our dividends steadily throughout this time, although we're looking at a reset with this rate case outcome and despite the challenges of our regulatory environment, both for Arizona and our company, we believe that we have the ability to create long-term value and steady growth from here. And Ted will later share our financial outlook and the actions that we're taking as a management team to get us there.
In addition to our earnings track record, we've delivered on our promise to provide affordable energy to our customers and I'll share I think a great example. We've seen a 6% weather normalized increase in demand for residential electricity from 2018 to 2020. During that same period we've lowered the average residential customer bill by more than 7%. We remain focused on customer affordability and keeping it central to our plans to provide long-term sustainable growth. That focus, coupled with continued cost management creates headroom for the future.
The second reason that I'm optimistic about our future is our best-in-class service territory. Arizona remains among the fastest growing states in the country, where other states were experiencing little or negative customer growth, we're projecting 1.5% to 2.5% retail customer growth in 2021 and 3% to 4% weather normalized sales growth. We expect 43,000 housing permits this year in Maricopa County alone, levels that have not been reached since before the great recession. We believe the constructive business environment and the ample job growth that it creates a competitive cost of living and a desirable climate will continue to grow the Metro Phoenix housing market and benefit the local economy.
Focusing on our service territory specifically, we continue to see development from a variety of sectors, which is helping to diversify our local economy more than ever. In particular, Phoenix is becoming a leader in attracting high tech and data center customers. As you may remember, Taiwan Semiconductor broke ground on their $12 billion investment earlier this year, cementing Phoenix is one of the top semiconductor hubs in the country. More recently, KORE Power announced their intention to build a 1 million square foot lithium-ion battery manufacturing facility. We'll continue to focus our economic development approach on helping to attract and expand businesses and job creators.
The third reason that we're confident is the clear path for our transition to Clean Energy. We came out with our Clean Energy commitment in early 2020, and I'm proud that we've made significant progress towards that commitment. As you know, earlier this year, we announced that our Four Corners power plant would begin seasonal operations in 2023. This will reduce annual carbon emissions from the plant by an estimated 20% to 25% compared to current conditions. In addition, we remain committed to end the use of coal at our remaining Cholla units by 2025 and to completely exit coal by 2031. Since our Clean Energy commitments announcement we've procured nearly 1,400 megawatts of additional Clean Energy and storage. Obviously, Arizona enjoys some of the best solar conditions in the world and we are well positioned to capitalize on this resource as we continue that Clean Energy transition.
Turning to our regulatory environment. Although, this last case was not constructive, I believe we'll be able to reasonably navigate through the regulatory environment in the future. I'll underscore that this last case was unique in nearly every aspect. We plan on filing a new rate case as soon as practicable and be looking to improve the ROE commensurate with rising interest rates and returns. Historically, outcomes achieved through settlement have delivered new and innovative customer programs and other results that benefit a broad and a diverse range of vested interest in our state's energy future. We would aim to achieve a settled outcome in our next case, because we believe that the nature of that process itself yields more informed constructive and mutually beneficial results. We'll work to find alignment with stakeholders and the regulators, so that we can improve things for all interested parties.
Finally, I'm optimistic about the future because we have a well thought out long-term strategy that my entire management team and I are committed to executing. We've refocused on the customer and have built a customer-centric strategy that will allow us to deliver exceptional customer service results. We are the most improved large utility in J.D. Power's 2020 residential electric service study and we're focused on making continued improvements. Near term, our focus and priorities remain on improving our customer experience, customer communications, providing safe and reliable service and continuing to engage with stakeholders to advance our shared priorities of clean, reliable and affordable energy for Arizona residents and businesses.
I'll now turn it over to Ted to provide guidance and to share our long-term financial outlook.