Ted Geisler - IR Don Brandt - CEO Jim Hatfield - CFO Jeff Guldner - APS's SVP of Public Policy.

Greg Gordon - Evercore Julien Dumoulin Smith - UBS Ali Agha - SunTrust Michael Lapides - Goldman Sachs Charles Fishman - MorningStar Paul Patterson - Glenrock Associates Gregg Orrill - Barclays.

Greetings and welcome to Pinnacle West Capital Corporation's 2017 First Quarter Earnings Conference Call. At this time all participants are in a listen-only-mode. A Question-and-Answer Session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr.

Ted Geisler, Director of Investor Relations for Pinnacle West. Thank you, Mr. Geisler, you may now begin..

Thank you, Manny. I would like to thank everyone for participating in this conference call and webcast to review our first quarter and 2017 earnings, recent developments and operating performance. Our speakers today will be our Chairman and CEO, Don Brandt; our CFO, Jim Hatfield.

Jeff Guldner, APS's Senior Vice President of Public Policy; is 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.

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 our expectations, we caution you not to place undue reliance on these statements. Our first quarter Form 10-Q was filed this morning.

Please refer to that document for forward-looking statement's 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 May 9. I will now turn the call over to Don..

Thanks Ted and thank you all for joining us today. 2017 has started off in line with our expectations and we remain well positioned for a very solid year. Before Jim discussed the details of our first quarter results I'll provide a few updates on our recent regulatory and operational developments.

I know EPS as a rate review is top of mine from many of you and we continue making good progress with this preceding. On March 1, we announced a settlement which has broad base support.

In total 29 interveners signed a settlement agreement including the Arizona corporation commission staff, the residential and utility consumer officer Ruco, members of the local and national solar industry and low income advocates. The settlement provisions contain a number of benefits to our customers, shareholders and the communities we serve.

Details of the settlements were outlined in the appendix of our slides today and I'll review some of the highlights with you now. Slide 8 shows the settlements proposed base rate changes, which include a non-fuel, non-depreciation base rate increase of $87.2 million per year excluding the transfer of adjusted balances.

Additionally, APS will decrease rates by $53.6 million attributable to reduce fuel and purchase power cost and increase rates by $61 million due to changes in depreciation schedules. The result is a total base rate increase of $94.6 million or an overall 3.3% bill increased.

Other elements that underpin the settlement including maintaining our allowed return on equity at 10%, our capital structure and base fuel rate are also listed on the slide. The settlement contains a number of important financial provisions which reduce regulatory lag and better aligned rates with the cost to service.

In particular the settlement provides for a cost deferral order for the Ocotillo Modernization project and a cost deferral order plus rate adjustment for the selective catalytic reduction equipment to Four Corners. Also the current property tax deferral continues in the power supply adjuster is expanded to include additional production cost.

APS proposed changes to the rate options offered to customers ensuring the price a customer pays more accurately reflects the way that customer uses the electric grid. This one is an important focus of our filing.

The settlement includes meaningful changes to modernize rates including shifting the on peak period from 12 noon to 7 pm, to 3 pm to 8 pm in the afternoon and early evening, which is more aligned with actual peak usage by customers.

Importantly new distributor generation customers will be required to select a rate option that has time of used rates including the great access to our demand component.

APS was the among the first utilities in the nation during it is time of use rates for residential customers back in 1984 today more than half of our customers chose the time of used rate for their service.

This settlement will create another first by establishing time of use rates as a standard for all new customers after May 1, 2018, except for our smallest customers. The settlement also contains a self-build Moratorium through January 1, 2022, with certain exceptions.

For example the Moratorium excludes investments in new combustion turbines that will placed in service after January 1, 2022. Finally, the settlement includes a three year stay out for the next general rate case application under, this provision APS may file its next general rate case on or after June 1, 2019.

Lastly, the APCs formal hearing on the APS rate review began and its currently underway. Looking ahead we anticipate the administrative war judge to issue a recommended order followed by a commissioner vote at an upcoming open meeting. We view the proposed settlement agreement as a further sign of Arizona's constructed regulatory environment.

We appreciate the opportunity to continue working with ACC and various stake holders to find solutions that balanced interest of customers, shareholders and the communities we serve.

Turning to our operations, Palo Verde Nuclear Generating Station had another successful quarter operating above their 100% capacity factor, a planned refilling outage for Palo Verde unit 2 began on April 8.

Additionally, at the Four Corners Power Plant our employees are making solid progress on the installation of selective catalytic reduction equipment and construction activity is ramping up at our Ocotillo Modernization project. This year we are investing more in our distribution systems than ever before.

Our focus on modernizing the distribution grid is not a temporary phase, but instead a shift in how reprioritize investments with a greater emphasis on our transmission and distribution business.

Over the next few years we expect to invest $1.8 billion in our grid infrastructure enabling a more secure and resilient grid which has greater access to the Western Energy market.

On April 10th we filed our 2017 integrated resource plan which includes a 15 year forecast of customer electricity demands and the resources needed to serve our customers reliably in the future. An important point of our forecast is to growing requirement with flexible peeking generation over the planning horizon.

By 2025, we expect an additional 1.3 gigawatts of quick start combustion turbine capacity will be needed in order to meet our growing summer peak, as well as supplement the intermittency created by solar resource.

Moreover we are witnessing lower average daily prices on the wholesale market which show price spikes and increased volatility during peak periods. This new pricing pattern is a result of access energy supply during the middle of the day, throughout much of the year largely created by an oversupply of solar energy in California.

In order to take advantage of the solar supply and payoff the energy savings to our customers we value investments in flexible resources that can quickly shut down to allow the import of market power and then quickly ramp back up when demand and prices spike again later in the day.

We expect these market conditions to exist for the foreseeable future and we are positioning our generation investment to be more aligned with these market conditions. Ultimately, this will result in a lower cost to service to our customer, improve reliability for the region and new investment opportunities for our company.

This also means that our views is on the value of base load and intermediate generation for our customers are evolving and we will focus our future investments for new generation towards flexible peeking technology like combustion turbines and eventually energy storage which is better optimized for emerging market conditions.

Finally, I would like to update you on a change in our executive team. When I became CEO in early 2009, the top of my priority list was to recruit one of the finest legal minds in the electricity industry, Dave Falck to join the company as our general counsel.

Fortunately for us Dave accepted the offer and has provided Pinnacle West and me with consistently thoughtful counsel ever since. These are trusted advisors so it is with mixed feelings that I shared Dave's decision to begin the transition into retirement.

Dave will become Pinnacle West executive vice president of law through his retirement in the spring at 2018 and will continue to advise the Board of Directors and me on governance matters and industries issues.

Dave's transition period allows us to continue our commitments for succession planning and talent development at all levels of our company and I am pleased to announce that Jeff Guldner has been promoted to Executive Vice President and will assume the role of General Counsel for Pinnacle West and APS in addition to his current responsibilities of leading our public policy organization.

Jeff is a skilled lawyer and a thoughtful and respected leader with the deep understanding of our industry. In closing we are delivering on our commitments and continue to be well positioned for a solid year in 2017.

We are focused on completing our rate review filing and maintaining operational excellence while positioning Pinnacle West as a sustainable leader for its strategic capital investments. I'll now turn the call over to Jim..

Thank you, Don, and thank you again everyone for joining us on our call. This morning, we’ve reported our financial results for the first quarter of 2017. As shown on Slide 3 in the materials, for the first quarter of 2017 we earned $0.21 per share compared to $0.4 per share in the first quarter of 2016.

Slide 3, also outlines the variances that has drove the change in our quarterly ongoing earnings per share. I'll highlight a few of the key drivers. An increase in gross margin added $0.6 per share compared with the prior-year first quarter period, supported by higher LFCR revenues and favorable weather.

[Indiscernible] sales in the first quarter of 2017 compared to the first quarter of 2016 decreased earnings by $0.04 per share, where the positive effects of customer growth were more than offset by energy savings driven by customer behavior, energy efficiency programs and distributed renewable generation.

And one less day of sales [indiscernible] 2016. Although sales were down in the first quarter, it should be noted that normalized usage per customer in our first and fourth quarters tend to have more variability than usage in the second and third quarters and results in these periods are less indicative of full year results.

As an example of this month-to-month variability, we've seen positive weather-normalized sales growth in April, although I will remind you that we're only one month of data. Overall operations and maintenance expense contributed $0.11 per share in the first quarter of 2017, primarily due to lower planned outage costs.

As you recall, we had large planned outages at the Four Corners Power Plant in both the first and second quarters of 2016 as part of the plant's routine maintenance schedules.

As we've previously indicated, we expect additional planned outages at Four Corners this year as we prepare for the FCR installations, the timing of which will be largely focused in the second half of 2017. Higher D&A decreased earnings by $0.04 per share in the first quarter due to increased expenses resulting from additional planned service.

And lastly, you will notice a $0.05 benefit to first quarter earnings, driven by a lower effective tax rate in the current year period, primarily due to the adoption of the new stock compensation guidance in 2016.

The new guidance requires income tax benefits and deficiencies, resulting from share-based payments to be recognized in the period as they occur. Now turning to Arizona's economy, which continues to be an integral part of our investment story. I'll highlight the trends that we are seeing in our local economy, and in particular, the Phoenix Metro area.

In 2017, the Metro Phoenix region continues to have job growth above the national average. Through February, employment in Metro Phoenix increased 2.6% compared to 1.6% for the entire U.S. This above-average job growth is driven largely by the financial services sector.

This solid job growth continues to have a positive effect on the Metro Phoenix area's commercial and residential real estate markets. As seen on the upward panel of Slide 4, vacancy rates in commercial markets continue to fall in the levels last seen in 2008 or earlier.

Additionally, over 2 million square feet of new office in the retail space was under construction at the end of the quarter. We expect a continuation of business expansion and related job growth in the Phoenix market, which will, in turn, support continued commercial development. Metro Phoenix has also had growth in the residential real estate market.

As you could see on the lower panel of Slide 4, housing construction is expected to continue the upward close recession trend. In 2017, housing permits are expected to increase by about 7,000 compared to 2016, driven by single-family permits. In fact, permits for new single-family homes in March were at the highest levels since August of 2007.

Several factors are driving this increase. Maricopa County was the fastest-growing county in the U.S. in 2016. Also, as I mentioned on previous calls, vacant housing in Phoenix is solidly back to prerecession levels. The activity in the market is providing meaningful support to home prices, which have returned to levels last seen in early 2008.

We believe that solid job growth or mortgage rates and the opening up of credit to the wave of households separates from for-closures during the recession should allow the Metro Phoenix housing market and the economy more generally to continue to expand at this pace over the next couple of years.

Reflecting the steady improvement in economic conditions, APS's has retail customer base grew 1.4% in the first quarter. We expect that this growth rate will continue to gradually accelerate in response to the economic growth trends I just discussed.

Importantly, the long-term fundamental supporting future population, job growth and economic development in Arizona appear to be in place. Finally, I'll comment on our liquidity and financing. On March 21, APS issued an additional $250 million of its outstanding 4.35% senior unsecured notes that mature in November 2045.

The proceeds were used to refinance commercial paper borrowings and replenish cash temporarily used to fund capital expenditures. We expect to issue up to $600 million of additional long-term debt this year, one transaction at Pinnacle, including financing of the $125 million term loan and one at APS.

Overall, our balance sheet liquidity remains very strong. At the end of the first quarter, Pinnacle and APS had approximately $91 million and $117 million of short term debt outstanding respectively. And just a quick thought on guidance. We do not intend to issue earnings guidance for 2017 until after final approval in APS's rate review.

However, to assist you with your estimates, a list of key drivers that may affect 2017 ongoing earnings is included in the appendix in today's slides.

Additionally, if the proposed settlement and depending rate review differed by the Arizona Corporation Commission, we would be comfortable with our ability to continue to fund APS's capital expenditure program with no new equity through our planning horizon. This concludes our prepared remarks.

I'll now turn the call back over to the operator for questions..

[Operator Instructions] Our first question is from Greg Gordon of Evercore..

Looking at your sales statistics for the quarter, did the leap day have an impact on the sort of bottom line demand numbers?.

Yes. I would say of the 3.3 lower sales, about one third of that was related to leap year..

Okay, great. And then, Commissioner Burns at the ACC had recently made a filing with the ALJ in your case, either asking or recommending that several of his peers be refused from voting in that case.

Could you tell us what has occurred subsequent to that, if anything?.

Greg, this is Jeff. Nothing has occurred and the commission, the hearing is continuing right now, and we expect the hearing will probably wrap up today..

Great.

So, the ALJ like say that they're going to find this as to whether or not they would rule on that? Or has there been any guidance coming from the ALJ on whether or not that [indiscernible] is going to be considered?.

No. She had commented early in the proceeding that any issues with Commissioner Burns were going to be addressed by the commission..

By the commission, okay. And I guess, I apologize for not doing my homework, but on April 17, you guys filed your Integrated Resource Plan.

If we look in there, that will give us some sense of the quantum of capital spending that you expect to deal with the sort of these issues that Don laid out, so clearly on the call on a qualitative fashion? And does it look like it actually would necessitate a sustained spend, capital spend and the $1 billion to $1.3 billion range that you're currently spending through post '19?.

Yes, Greg, this is Jim. The ERP is at beginning of 2021, I think specifically talked about PPAs, it's really for the summer period, May through September. I think that the flexible generation that we've talked about is, really, has been carved out of the self-build Moratorium, and that would be further off into the horizon..

Okay. Last question for me. The commissioner [indiscernible], your former chair, had proposed consideration of an increase in the renewable portfolio standard.

Is it your expectation that the commission will take up that consideration of that proposal at any point this year?.

I think that's on our expectation. Obviously, any increased renewable spends outside of the $15 million a year in '18, '19 from any return to is not currently on our forecast. So that will be incremental capital..

And the next question is from Julien Dumoulin Smith from UBS. Please go ahead. .

So let's pick up where Greg left off. Let's talk about storages real quickly, if we can.

I'd like to understand, in the context, the ERP, the timing of any associated capital ramp-up of the storage program? Looks like you have roughly 400 megawatts in there in the regulatory process and framework that you would otherwise contemplate to put those storage opportunities in theory in rate base..

We're drilling [ph] this chapter, ERP is just been filed. So obviously, we're working through -- we'll be working through that and there will be I'm sure more discussion on that as we move forward. We've got some storage that we're doing right now that is with the Solar Partners program.

I'd say the focus we got right now is storage that's related to power quality, local reliability issues. And we're making sure that we have a good understanding of that. And so that's kind of what [Multiple Speakers] that's what in right now when the discussion started..

I think our view on storage at the moment, Julien, it's more of reliability-driven. And I think we'll be seeing more capital allies for storage, but we're taking a very measured approach and making sure we're on the right side of that cost curve on storage. But clearly, it's going to have a part in our future from a capital perspective.

And I would say, that's not currently in our forecast..

Right.

And just to understand this, is there any if you were to move forward with it, what kind of regulatory recovery framework would you think about? Or would this be more conventional CapEx? The only reason I mentioned is just, in kind of thinking about when this program would roll out and how that would roll into the timing of any subsequent rate case?.

Well, I think if we owned it, would have to be recovered in the regulatory process. So there's not currently a framework for adjuster mechanism. We also have a PSA expanded, where we can put commission approved battery, asset cost through the PSA and net recovered that way..

Got it.

So let's pretend that you could use a PSA to the extent which you built something?.

Potentially..

Got it. Excellent.

And actually, just in tandem with that, rooftop, obviously, there's a good amount of discussion on the RFP on that front, can you elaborate a little bit? Is there -- how meaningful of an opportunity for you all is that to the extent of which you're looking at prospects?.

Well, we agreed to spend a $50 million a year. So we're covering through they know. As currently contemplated, it's not a big capital line, but it is incremental and can recover concurrently, which is from a capital perspective..

And that is indeed embedded in your latest update, right?.

Right..

Lastly, on Navajo, can you expand upon the potential scenarios contemplated? I suppose to the extent in which the plant is indeed left open through some kind of federal program or what have you, is there a [indiscernible] in which you would actually receive funds to continue operating the plant? Or is this unlikely something in which if it continues operation, there would be some different owner? I know there's a lot of different iterations out there, if you can kind of high-level summarize it, I would appreciate it..

Actually, this is Jeff. Right now, the Chris is focused on getting the initial two-year lease extension which would allow the operation of the plant to continue through 2019.

Then the department of interior has workshop going that's looking at a variety of different scenarios that could include potential new owners for the plant, but that's there's been two meetings and there's another meeting coming up at later this month, so that's pretty early right now..

So it's not off the table that you guys would continue to operate that plant clearly?.

We don't operate [Multiple Speakers] --..

Or have an ownership? Sorry..

I don't know that I would say it's off the table. We're only 14% owner in that plant. So we don't want to speak for [indiscernible] owner-operator..

The next question is from Ali Agha of SunTrust. Please go ahead..

First question, Jim, what the effective tax rate should we be assuming for the year and going forward with these tax rate changes you were mentioning?.

I think it will be consistent with prior years. That tax benefit in the first quarter, we typically took over the course of the year in our effective tax rate with the change in accounting guidance, with both right now at the time this years are issued.

It required us to do in the first quarter, which just stands out because the first quarter is such a small quarter..

Okay.

So about 34% or so?.

Yes..

Okay. And then, coming back to the electric sales. This is the third consecutive quarter we've seen a decline here on a weather-normalized basis.

Any particular explanation for that? Or what's may be happening here?.

Well, again, in the fourth and first quarter, with small sales, any sort of weather variation or anomalies pop up from year to year. We look for the second and third quarter, and so far, the second quarter is starting off with weather adjusted positive sales.

So I would sort of hold on cost on sales until we get through the second quarter, where we have more meaningful amount of sales..

Okay..

I'm worried about as we tick it [ph] today for the year..

I see. And then as part of the settlement, one thing obviously that also will get updated is the higher equity ratio later for you guys.

So assuming the sentiment obviously is approved, does that change your thinking of the underlying earnings power of the company, now that you're operating with a higher equity ratio? Does that change the growth outlook from your perspective?.

No. Not at all. I think the equity ratio are more normalized as we find our CapEx program with long term debt..

Okay.

So all else being equal, you don't think the higher ratio should lead to higher earnings growth as well?.

No. It was good in the context with the settlement obviously, but not driving meaningful growth..

Thank you. The next question is from Michael Lapides of Goldman Sachs. Please go ahead..

A couple of regulatory questions. So in the IRP, it talks about your filing a 2017 RFP for summer season peaking needs, 2021 and beyond.

How does -- how do the requirements in the rate case settlement fit into whether APS could either be building CTs in the 2022, 2024 time frame? Or whether you could potentially be buying other people's CTs and putting them in rate base if that's the outcome of an independent review process in RFP?.

Michael, there's a self-build moratorium that's in the case, that you'd have to step through the process if you're going to propose a bill. So typically, that's going to be more in the view of a back step, but one of the changes to that moratorium would be an acquisition, would be different. So that's changed a little bit from the last moratorium..

Meaning, you're allowed to do, in the rate case settlement and acquisition, going through the normal process with the PSC and RFP, but it doesn't preclude acquisitions?.

Yes. The moratorium that's proposed in the settlement doesn't preclude the acquisitions, but it would affect the self-build..

Got it. Okay. Can I just think through, and this may be a Jim question, trying to think through O&M and some of the lumpiness in O&M. So first quarter '16 had the big outages. First quarter '17, you still had some outages, but not nearly the size that you had in first quarter '16.

But fourth quarter or late third, early fourth quarter '17 will once again have pretty sizable outages.

Is that the kind of the right way to think about it? And will those outages look more like what you had this quarter or what you had in the first quarter of '16?.

More like the first quarter of '16..

So pretty big?.

Yes. It's going to be the major outage for our Units 4 and 5, practically for the SCR installations..

Okay.

Are the 2016 and '17 outages -- should we think of this as normal run-off course type of stuff that happens kind of every year? Or is this more stuff that's kind of more one-off-ish? And when we think out to 2018 and beyond, we shouldn't be thinking that O&M stays at this pretty elevated level?.

No. Our fossil planted outage O&M is pretty lumpy. '16 and '17 are elevated because of the impact for the SCRs. So I think you would see, as you get out to '18, '19, more normalized fast O&M..

Okay.

And is there a year where we can go back in time and look at O&M and say, that was more of a normal year?.

I'd say, probably '15 would be more normal..

The next question is from Charles Fishman of MorningStar. Please go ahead. .

The 3-year stay-out, remind me, that was similar to your last settlement, except it went longer, right, just by your choice?.

Correct..

Last one we could have filed June 15, we elected not to file until '16..

But originally, was it 3 years?.

Yes..

And then, the stay-out, didn't it have provisions into this one that allowed you to go back in under certain unusual circumstances? Does this have something like that?.

There's always in kind of every settlement I've seen in Arizona, that Charles, there has been force majeure type of provisions. I don't recall a case in which they've actually been used..

Okay, that sounds what I was thinking..

The next question is from Paul Patterson of Glenrock Associates. Please go ahead..

Most of my questions have been answered. But I want to sort of touch base on something I heard on the economics of the area.

It astonished me that, if I got it right or let me know if I got it wrong, but the financial services was the big driver on the commercial side, is that correct?.

Correct..

And part of my ignorance, but why -- I don't think it's financial services being in Arizona that much, what -- is there anything in particular? Or?.

We defined that broadly, but State Farm relocated the Western operations to Tempe. And built five buildings on Tempe County lake and they're beginning now to populate all of these buildings with the people, and so that's a big driver of that growth..

Okay. And then, you also just mentioned that like, basically, things look like they were pretty much around 2008. Now obviously things have changed in the economy and what have you. But do you guys -- what do you feel -- obviously, 2008, in some ways, is not so positive in terms of what followed afterwards.

Do you have any sense in terms of the real estate market or anything about how things are on the ground there? In other words, I mean, are you seeing the same kind of real estate activity that you actually saw in 2008? Or could you just elaborate a little bit more on that?.

Paul, Don Brandt here. Just a couple of facts right here, Metropolitan Phoenix housing permits are at the highest levels they've been since 2007. Maricopa County's the fastest-growing county in the United States in 2016, eclipsing, I believe a county that where Austin, Texas is located.

And we've seen not just in the financial services, but beyond State Farm a lot of back-office operations are here, call centers. But also, in biosciences, there's a really booming industry, that brings a lot of jobs and relatively highly paid jobs..

The next question is from Gregg Orrill of Barclays. Please go ahead..

Is it possible to give a sensitivity, an EPS sensitivity to 1% weather-normalized sales growth?.

It's about $0.08 after tax..

Okay.

And with regard to the LFCR, under the new settlement, is it more -- does it result in more recovery than under the prior rate plan?.

No, it will be recovered differently. It's going to be demand-based versus volumetric. But the robustness on the LFCR did not change..

The next question is from Michael Lapides of Goldman Sachs. Please go ahead..

My apologies, a follow-up The LFCR running $0.03 to $0.04 a quarter, that stays post rate case implementation roughly? I know it's hard to forecast, but just trying to think about if the rate case changes that at all?.

No..

Okay. Second, when we think about the rate case settlement, I've kind of go through it and it's not the easiest document to get your arms around. The increase in the D&A rate, the $61 million, that doesn't drop to the bottom line because your D&A is going to go up.

And the moving around of the $53.6 million in the fuel and purchased power, will that also not drop to the EBITDA or EBIT line because your fuel and purchased power costs should change, right?.

Correct..

Okay, the base rate increase of 87.2, are there any costs that are not on your income statement today that will be on your income statement when the rates go into effect? Or is this simply trying to catch up some of the regulatory lag with the investments you've made and the increased costs you've seen?.

Well, I wouldn’t contemplate recovery any costs that will be new as that defer the SCR's for recovery in '19 and Ocotillo until the next rate case. Another now it's just be really reflecting the capital investment into the system that was -- from the last settlement forward..

Got it.

And so what ending period last year was that using, what's the ending rate base of that?.

'15 rate base was -- we don’t have that number. .

We'll get that to you. We have that number..

Okay, I just didn't know that it was a known and measurable number from like, say, 3 months ago or 6 months ago, or is that truly an ending 2015 or early 2015 rate base number?.

It was 2015 with 12 months of post [indiscernible] plan. So we really were approximately '16 our agency rate base at year-end was $6.8 billion for purposely of Arizona and if we're to add probably another $300 million of rate base over the course of '16..

Okay. And the only reason why I kind of asked about this is, an 87, this is a pretty decent revenue increase and on your share count, if you just kind of tax effect that, that would seem like a pretty decent outcome.

I'm just trying to make sure I'm not missing anything, where there are costs that are increasing significantly relative to what you're incurring today and that's all kind of embedded in that base rate case?.

Yes. I don’t you're missing anything..

There are no further questions at this time. I would like to turn the conference back over to management for closing remarks..

Thank you all for joining us today. This concludes our call..

Thank you. Ladies and gentlemen, this does conclude today's teleconference..