Thanks again everyone for joining us today. These are indeed challenging times for us. Right up front, I want to make it clear that while we may be navigating some short-term challenges, as you'll see, the midterm prospects post-2022 are positive. We remain confident in our ability to create renewed growth and deliver strong shareholder returns. I know the conclusion of the 2019 rate case is the most significant development, and everyone is interested in hearing more about that. Before we cover the rate case, you can see from the four main topics we will discuss today. I'll cover our third quarter results and our expectations for the remainder of 2021. I will then turn it over to Jeff to discuss our rate case outcome, next steps, and strategy coming out of this case.
Finally, I will wrap up with 2022 guidance and our long-term financial outlook. Focusing on the third quarter, our performance remains strong, earning $3 per share compared to $3.07 per share in third quarter of 2020. Mild weather was a significant factor, largely offset by strong sales. We experienced a mild July and August, driven by one of the wettest monsoon seasons in recent history. Residential cooling degree days in the third quarter decreased 27.5% compared to the same time a year ago and were 10.6% lower than historical 10-year averages. As a reminder, Q3 last year was the hottest on record. Robust sales and usage growth, in addition to increased transmission sales this quarter, mitigated most of the weather impacts.
Looking at full year, I'll provide an update to the 2021 key drivers and earnings guidance. Customer growth and weather-normalized sales growth remain important drivers for the remainder of the year. We are updating weather-normalized sales guidance to three percent-four percent, up from one percent -two percent , based on continued robust customer growth and strong residential usage. Lastly, with the conclusion of the 2019 rate case, we're now able to provide full-year guidance. We expect earnings per share to be within the range of $5.25-$5.35 per share. Before I continue with our long-term financial outlook, I'll turn it over to Jeff to provide an update on our rate case.
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. 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 were compelled by the commission to file this case under a question of whether we were over-earning. We're 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. Finally, this case was centered around cost recovery of a 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 a 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 stated before, the Four Corners Power Plant is a critically important reliability asset for the entire Southwest region. It's used and 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 and Order's already low ROE of 9.16% to 8.7%.
With this part of the decision, the commission's 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. The ROE granted ignores the fact that we're 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're disappointed by the Commission's decision, importantly, we now have clarity of the path forward. 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. 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. I'll share, I think, a great example. We've seen a six percent 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 seven percent . 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 are experiencing little or negative customer growth, we're projecting 1.5%-2.5% retail customer growth in 2021 and 3%-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 as one of the top semiconductor hubs in the country. More recently, KORE Power announced their intention to build a 1 million square feet 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%-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 MW 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 we'll be looking to improve the ROE commensurate with rising interest rates and peer 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.
Thank you, Jeff. Now I'll walk through our 2022 guidance and long-term financial outlook. As Jeff discussed, this last case was not the outcome we were looking for, and we recognize this rate case is a regulatory reset. We're providing a 2022 earnings guidance range of $3.80-$4 per share, given the full effects of the rate case. We recognize this is a significant reduction compared to 2021, so we've illustrated key factors contributing to the change in earnings. As you can see on slide 19, we're starting with the midpoint of our 2021 guidance and walking through the drivers to get us to the midpoint of our 2022 guidance. No surprise, the most significant driver is the recent rate case decision with a negative $0.90 impact.
This reflects an additional $13 million downward adjustment beyond the $90 million net income impact estimated for the Recommended Opinion and Order last quarter. In addition, growth in depreciable plant, higher interest expense related to new financing needs, and lower pension OPEB non-service credits make up the remaining negative drivers. We are focused on cost management and expect O&M savings to provide some positive impact to get us to our 2022 guidance range of $3.80-$4 per share. Turning to the future, we are prepared to use all levers we have available to help us mitigate the impact of this case, and we remain optimistic of our ability to provide long-term value. As you can see, investors can expect seven objectives from us, and I'll touch upon each one.
Our plan is expected to provide strong long-term earnings growth off of 2022 for the next five years. I want to be transparent and reemphasize that this is projected five percent -seven percent earnings growth builds on our 2022 guidance. We realize the 2021 base year is a lower growth rate at about one percent -two percent . However, we believe 2022 is the appropriate place to anchor our long-term outlook given the valuation reset that has already occurred. We're focused on creating shareholder value from this point going forward. There are a number of factors that could provide upside potential to our growth guidance. For example, we have the ability to invest in more clean energy if we achieve more constructive cost recovery. In addition, robust economic development opportunities may drive increased sales and customer growth.
Those, along with other factors, could provide upside to our guidance. The second objective shareholders can expect from us is an optimized capital management plan. As Jeff discussed, we continue to experience solid growth in our service territory, which is the primary driver behind our capital plan. Steady population growth is expected to drive average annual customer growth in the range of 1.5%-2.5% through 2024. In addition, we expect average annual sales growth to be in the range of 3.5%-4.5% through 2024 on a weather normalized basis. We have updated our capital plan to $4.7 billion from 2022 to 2024.
While this represents a modest increase from prior levels, we believe this is prudent until we're in a better place to secure timely and constructive cost recovery. We are committed to taking a balanced approach to managing our capital plan to support customer growth, reliability, and our clean transition while limiting our equity needs to minimize dilution as we recover from the outcome of this case. Third, as you can see, from 2019 to 2024, we project that our rate-based growth will remain steady at an average annual growth rate of five percent-six percent . I want to highlight that our FERC jurisdictional transmission investments continue to represent a meaningful portion of that growth at almost a quarter of the total rate base. These investments benefit from superior authorized returns and a more favorable cost recovery construct than our ACC jurisdictional investments.
We believe the steady growth will allow us the opportunity to provide solid earnings growth from transmission in the future. Next, I'd like to provide clarity on our financing plans going forward. We've previously stated that we would issue equity prior to the next rate case. We understand this case was not constructive, and we're committed to doing everything we can to protect shareholders from further dilution. Therefore, we're deferring our equity issuance and have no plans to issue equity until the conclusion of the next rate case. In the meantime, we'll leverage our sales growth and the strength of our balance sheet to support our investment needs. While we show equity or equity alternatives in the plan, we have no plans for this to be sourced earlier than 2024, protecting investors from dilution during this period.
Moving to O&M, we have a solid track record of disciplined cost management and previously announced that we have initiated additional cost savings programs. We understand the importance of efficiency and instituting lean initiatives. With that in mind, we're updating our O&M guidance to show. One, a reduction of O&M expense from 2021 to 2022. Two, a goal of keeping total O&M flat during this period. And three, a goal of declining O&M per kilowatt hour. Cost management and lean processes will continue to be a strong focus of our management team to mitigate both inflationary pressures and regulatory lag. We anticipate another important expectation that investors can look forward to is our attractive dividend yield. Yesterday, our board of directors announced an increase in our quarterly shareholder dividend from $0.83 - $0.85 per share.
We have consistently grown our dividend for 10 years straight, and we are committed to dividend growth going forward. Our longer-term objective is to grow the dividend commensurate with earnings growth and target a long-term dividend payout ratio of 65%-75%. We understand that we're not there now, but we are confident in our plan and that we will eventually grow back into this payout range. Turning to the final item, our balance sheet. We continue to maintain a strong balance sheet, providing us flexibility in our sources of capital over the next few years. We have an attractive long-term debt maturity profile and no debt maturing at APS until 2024. Additionally, we maintain robust and durable sources of liquidity with our $1.2 billion of credit facilities recently extended to 2026 and a well-funded and largely de-risked pension.
Taking a closer look at our ratings, we continue to have solid investment-grade credit ratings, even with the recent downgrade by Fitch and the credit reviews announced by Moody's and S&P. Our balance sheet targets include three key components, maintaining credit rating strength, maintaining a parent-APS equity layer greater than 50%, and an FFO to debt range of 16%-18%. In summary, we're taking action during this reset and have a plan for attractive growth going forward. Importantly, we plan to defer all equity until 2024, further reduce O&M, and optimize the balance sheet and capital program during this reset period. In return, we have the highest dividend yield among peers, which stands today above five percent . While certainly a factor in the current valuation, even at a stock price 20% higher than current levels, we offer a dividend yield more competitive than peers.
In addition, we announced long-term EPS growth guidance of five percent-seven percent from 2022 for the next five years. With the attractive dividend yield and solid EPS CAGR, we anticipate a competitive 10%-12% total shareholder return going forward. In the short term, we are laser-focused on doing everything we can to protect investors during this reset period, and then transitioning to a renewed era of growth so that we can provide a competitive return going forward. We remain optimistic about the future. Although the final outcome of this rate case was worse than we had expected, we have a path forward that is centered around our long-term track record of constructive rate case outcomes, our robust service territory growth, continued balance sheet strength, and a focused management team that is taking action. This concludes our prepared remarks.
I'll now turn the call back over to the operator for questions.
Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. If you wish to withdraw from the queue, please press star two. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one now. Please hold a moment while we poll for questions. Our first question today is coming from Insoo Kim at Goldman Sachs. Your line is live, you may begin.
Yeah, thank you. Thanks for all the disclosures today on this. My first, maybe for Ted, just trying to reconcile the walk, you know, to the 2022 guidance midpoint of the $3.90. A couple of things that stood out. It seemed like, you know, the depreciable plant, maybe the D&A component of it seemed a little bit higher than what I was expecting. Then, the pension item also something, I don't know if it was just me or if that was already known. Could you walk through a couple of those items in as much detail as possible? Finally, you talked about that sales growth that's very robust, but it didn't seem like that was explicitly laid out in this walk. What's being assumed here?
Yeah. Happy to, and thanks for the question. First, you know, depreciation is certainly a drag, particularly given that the test year for this case has been over two years ago. We've continued robust investment since then, and that certainly has an impact going forward. We haven't detailed out anything beyond the fact that ongoing depreciation until we file our next case certainly has an impact. Given the outcome of this case, that definitely shows next year. With respect to the pension, we've benefited from favorable market returns this year. We still expect there to be a benefit next year, but because our pension is in such strong status, we continue to rebalance and de-risk the pension.
That certainly gives us a view that we'll have likely less market returns next year in terms of favorable non-service credits. That's really just a factor of continuing with our liability-driven investment strategy and de-risking the pension going forward. Finally on sales growth, we can't say enough about the economic development that we see in our service territory. You know, we try to look beyond the COVID impact. For example, if you look at growth in 2021 compared to 2019, you know, really just avoid the comparison to 2020 given the COVID anomalies. We're at over six percent with the normalized sales growth right now, and that is all through customer growth and usage increases, absent any COVID impacts.
That's before some of our large industrial customers that are under construction now come online, TSMC being one of them. We look at the record housing permits levels, the amount of development that's going on right now, and really believe strongly that the growth going forward is solid and based on economic development. That's why we're comfortable with the range from 2022 to 2024 being in the 3.5%-4.5% standpoint. This year we're at the range of three percent -four percent , and last quarter we already exceeded that range. We believe those are good numbers going forward.
Okay. The $3.90, that assumes at least a three percent year-over-year weather-normal load growth?
That's correct.
Okay. Got it. My second question for Jeff, just more broadly, you know, definitely a challenging case. As we think about, you know, moving forward from here and, you know, getting to file that next rate case and having, you know, further dialogue with the intervenors and the commission. You know, what are just some things that in your mind you could do to this time around, have a more constructive dialogue overall on, you know, the various issues? Just curious on your overall thoughts given, you know, what's all transpired.
Yeah. Thanks for the question, Insoo. I mean, I think that's one of the more important things. You know, we ended up having some of the discussion about the long-term negative impacts that happen, credit rating downgrade issues, things like that. That was happening at the open meeting instead of ahead of time. I think one of the important things, just as we are working very hard to be as transparent as we can be with you, is to then be as transparent as we can be with all the different parties that would likely participate in that next case.
I think that we do have areas of significant alignment when you look at the move towards more clean energy deployment and how we do that and just connecting the dots to say that if you're going to actually meet the growth that we're seeing in the state and at the same time begin this transition and what are the benefits. I think one of the key things, and if you go back to Chairwoman Márquez Peterson's letter, asking on how we could move to a $0.09 rate, while I don't think that's realistic given the fuel mix that we have here in Arizona, it's a great topic of conversation around how we do things like fuel for steel.
If we can reduce our fuel burn and the $1 billion that we spend on fuel and replace that with batteries and storage, you can really manage rate pressure. That's going to have to be an investment that we need to have the ability to invest in. To me, it's really connecting all those dots and working with the stakeholders ahead of time and making sure that as much of that conversation as possible takes place before we file. I think Ted mentioned, you know, it takes about four months to get ready for a filing. We intend to file pretty quickly. The idea is we've got to have that conversation so that people can put in context what a decision like this actually means in meeting Arizona's growth and managing a transition to clean energy.
It's going to be a lot of dialogue. It's not just with the commission, it's with the stakeholders that will be involved. I'm anxious to start on that.
Thanks for the color. I'll see you soon.
Thanks, Insoo.
Thank you. Our next question today is coming from Julien Dumoulin-Smith at Bank of America. Your line is live. You may begin.
Hey, good morning. Good afternoon. Really appreciate the time, questions. Wish you guys the best here. I know it's a difficult situation. Maybe if I can just pick it up from where Insoo left it off. How are you thinking about next steps forward about the SCR here? I noted your commentary. It didn't specifically, if I didn't catch it right, mention, you know, follow-up and litigation. How are you thinking about that side, whether it's securitization, litigation, ultimate operations of Four Corners, as well as just coming back to this question on settlement. I know there's been some open debate as to whether or not the commission or staff specifically can settle. I know the chair made some comments in recent weeks as well.
Is there an ability to settle right now as best you perceive it? I mean, certainly you seem to suggest so in the commentary, but also separately, the wider conversation on next steps, which I imagine is somewhat fluid on the SCR as well.
Yeah. Julian, let me be really direct with that. I did have it in my initial comments, but our first step in a near-term approach with the SCRs is to pursue judicial review. What we have to do is we have to go to the commission first. You have to ask for rehearing. We have 20 days to ask for rehearing. The commission has 20 days to act on that. If they don't act on it within 20 days, then it's deemed denied, and that opens up then your access to the courts. I won't go into the more detailed strategy, but we were very clear in the hearing that the prudence standard that was used just does not match the record in the case.
We were very clear that I think we gave them one option to say if we could do a debt return, that we would be able to to move forward with that. But the partial recovery that they gave, which means there was a disallowance of the $260 million, doesn't leave us a choice but to go to court on that, on that issue. That's the near-term process. What happens down the road with securitization, I mean, those are all things later. With respect to getting in and settling, I think one of the things that this case did show is the challenge of not having a settlement where you do have a more limited scope of issues to look at.
This was pretty wide open in terms of everything that was involved for both the hearing division, the parties, and then ultimately the commissioners. I, you know, I think we would continue to advocate for settlement as being a better outcome because you are able to do a lot of those trade-offs with the parties who are most affected, rather than having it go to a commissioner or judge, where it often can be a binary outcome. Somebody's either going to lose it all or they're going to win it all. In a lot of cases, that compromise is much better. I still think that that's the best path moving forward. That's what we would be working towards.
You know, again, we're going to have this period of time when we finally get out of ex parte to hopefully be able to have some conversation with the policymakers on how to make this more constructive.
Got it. Yep. I hear you on that. More broadly on this five-seven, I mean, how are you thinking about sort of regulatory recovery and rate case support for that and the cadence of that five-seven through the future forecast period? I'll let you define that. I just want to understand what this means for 2023 and 2024 and maybe understand a little bit on especially on the robust sales growth. I mean, can you drive earnings growth independent of a rate case in the medium term, you know, just given the pace of investment that you're articulating in rate case?
Well, Julian, the way I think about that is, as Jeff said, we plan on filing the next case as soon as practical given the outcome of this recent one. We assume a conclusion of that before 2024. We're being conservative in our assumption of just with reasonable regulation and a conservative outcome in that case, we can support five percent -seven percent earnings growth. It'll just depend on the details of that next case. I think, given the sales growth, our commitment to cost management, we've got the ability to offer a favorable construct to many stakeholders that could lead to a constructive outcome for everyone.
It'll just depend on those details in determining how long we go then after that before ever needing to file another rate case. The five percent -seven percent is supported by just reasonable regulation and a balanced outcome in the next filing.
Not better than five-seven as you think about the prospects for regulatory recovery by the time you get to 2024 or 2025.
Well, that's a long-term target. In the near term, you could be better. It just depends on the outcome. Over the long term, we believe five-seven is a prudent range.
Got it. All right. Thank you. I'll pass it over. I know there's a lot to ask.
Thanks, Julien.
Thank you. Our next question today is coming from Shar Pourreza at Guggenheim Partners. Your line is live. You may begin.
Hey, guys.
Hey, Shar.
Hey, Shar.
Just a couple questions here. First, I just wanted to follow up on Julien's question. Just curious how you expect the litigation, I guess, to affect the next rate case and any sense on timing of the judicial review. Jeff, more importantly, if you're trying to, you know, align with the different stakeholders, I guess why appeal given that your plan obviously seems to support this outcome? Why not sit out, work with the stakeholders? I guess could the litigation mar the future filing from a settlement and dialogue perspective?
Yeah, Shar. You know, to me, one of the most important things is just how the prudent standard was applied in this case. I tried to make it very clear during the open meetings that this is more than just a $216 million write-off. I mean, that is not good, and I don't think that was supported by the evidence in the case. When you start thinking about the amount of investments that we need to put in, and if every time we do that, there's a look backwards to say, "Well, maybe there's a different technology that would have been better or cheaper," it makes it really hard to think about how you're going to navigate this clean energy transition.
I think we were trying to be as transparent and as clear as we could be with the commission when we were in the open meeting about what we would have to do given this outcome. That's unfortunate. I mean, I would much rather not be in that position. As we move through that, I don't think anybody's going to be surprised by it. The point is to say, let's figure out how we can align on what we can't align on. I mean, you know, that's part of the regulatory structure is sometimes companies appeal. You've got a right to appeal. That's set up in the framework. We're not doing anything more than we have the rights to do, but we still need to work together.
We still need to work collaboratively through that. We'll have to do what we can do to try to navigate that.
Got it. Just on the equity front, it seems like the commission has left the equity layers alone as long as they stay consistent with past levels. I guess it's good to see there's some rationale you highlight that may justify the GRC outcome and how it could be somewhat anomalous. You do have another GRC coming up, you know, which had equity needs in and of itself. Now you layer in, you know, that with this order as it stands today. You seem somewhat under-equitized. I know you're deferring the equity, but it's not going away. I guess, how should we think about your prior equity guide coupled with sort of the recent order, which can be somewhat offset by maybe use of parent leverage and load growth?
I mean, is there a scenario, Ted, where you wouldn't need any equity in 2024? How do we think about the bookends?
Yeah, appreciate that, Shar. You know, the way we think about it first is, any Pinnacle debt that's injected in APS will be treated as equity at APS, of course. Then the second really more fundamental, we just don't believe that it's prudent to issue common at the current valuation. With respect to, you know, whether we could defer beyond 2024 depending on this outcome, that'll just depend on the next outcome. As we stated, we'll also evaluate alternatives when the time comes, such as hybrids or forwards or convertibles to mitigate further dilution at that time.
Heading into the next rate case, our primary focus will be improving the ROE that we believe is unjust and not appropriate given, as Jeff mentioned, the growth that we need to finance as well as the responsibilities we have, as operating the nation's largest clean energy asset. I believe that our balance sheet profile heading in this next case will allow us to then focus on improving that ROE.
Got it. Thank you guys for this and I appreciate the color. See you next week.
Thanks, sure.
Thank you. Our next question today is coming from Sophie Karp at KeyBanc. Your line is live. You may begin.
Hi. Good morning. Thank you for taking my question.
Hi, Sophie. Hey, Sophie.
Okay. I guess a couple of questions here. First on your operating expense, this OpEx guide for 2022. I'm just kind of curious what levers you have to keep that fairly flat and maybe modestly down versus what we've seen in 2021. How are you thinking about that?
Yeah, I appreciate that, Sophie. You know, we're real proud of our customer affordability program and our growing culture of being focused on Lean Six Sigma. This has really been a company-wide concerted effort to embrace lean, eliminate waste, harvest savings, and be able to use this as one of our levers through this reset period. In this last rate case, in fact, we were able to take some of the customer affordability savings and have that as part of our filing and pass that on to customers. Of course, it doesn't just stop with that last rate case filings. We're continuing to focus on cost management and operating a lean organization, and that's part of one of the levers that is going to help us during this period. It's not any one item.
It's a variety of initiatives across the entire enterprise, whether it be, being able to consolidate supply and services and, leverage our supply chain strategies, more efficiently, or be able to automate some of our systems and processes and then be able to focus our, human hours on more value add work. There is just a tremendous amount of opportunity and ideas that this organization has come forward with and is executing. We're really inspired by, how much the team has stepped up, and is taking this as a challenge and an opportunity to, deliver efficiencies in this period.
Got it. Thank you. On solar, right? The Grid Access Charge has been eliminated, and I think this is, we all remember kind of the reasons why it was put in in the first place. I guess now that it's gone and the solar applications are going up, how do you think about that when you kind of forecast your load growth? Would that be an issue for you guys at some point?
Well, Sophie, first of all, just want to make sure we're clear that the Grid Access Charge going away is revenue neutral. That really is just a cost shift between customer classes. Our estimates for weather normalized sales growth is net of energy efficiency or rooftop. If you were to look at the gross numbers, they're even higher than what we're projecting. Again, as we sit here today, over four percent weather normalized sales growth currently, that's higher than our current range. If you compare it to 2019, we're over six percent. We are confident net weather normalized range going forward, even with the impacts of energy efficiency and rooftop solar.
All right. Thank you. That's all for me.
Thank you.
Thank you. Our next question today is coming from Steve Fleishman at Wolfe Research. Your line is live. You may begin.
Yeah. Hi. Thanks. Just, somebody asked this question before, but I'm not sure I heard the answer. The 5%-7% growth rate that you laid out, is that something you see consistent over this period, or is there some maybe lag up front, and then when you get the rate relief, it goes higher? Could you just talk a little bit about kind of the year by year of that?
Yes, Steve. Happy to. It's difficult to break down year by year, but I think the main point that you're getting at is it certainly is dependent upon reasonable regulation in the next rate case. We will continue to have growth based on our organic growth in the service territory. But we believe with reasonable regulation and what we're estimating as a conservative outcome of the next rate case, then that'll really propel growth in that long-term earnings range target. So certainly, we'll be looking for the filing that'll be coming forward sooner rather than later and the outcome of that next case to project over the long term. That's why that range is over the next five years.
Okay. I'm just going to ask maybe a little more clearly on the question, just so, because I think for the next rate case, you're really not going to have in place till late 2024, did you say, or
Well, it depends on the schedule, but if you file in 2022, I think it's reasonable to expect an outcome in 2023.
Oh, okay. There's only really one year, 2023, without the outcome of the rate case. By 2024, you expect you'll have it in place.
Yeah. Actually, I think if we file in 2022, it's possibly an outcome in 2023 consistent with schedules we've had in the past. Therefore, you have some resolution in 2023, and then your first full year is 2024.
Okay, great. Maybe just on the, in terms of understanding the kind of equity. You plan to, I assume, keep the APS equity at the 54 and change that's authorized in this last case?
Well, that was the equity from the last test year. We'll measure the equity at the end of this next test year, and that'll just be whatever it is. That'll be exactly what we file. Again, our view is, while you'll have equity injection based on Pinnacle debt, we are more focused on trying to prevent further dilution during this period and then really focus the filing on improving the ROE.
Right. Is there any risk of them imputing that, or is there not, any history of that?
We don't believe there's risk, and we believe that the commission will understand that we have to leverage the company in order to keep funding the growth in the state. That's the position they put us in as a result of the outcome of this recent case. I view that as little risk.
Okay. That's it for now. Thanks.
Thanks, Steve.
Thank you. Our next question today is coming from Anthony Crowdell at Mizuho. Your line is live. You may begin.
Hey, good afternoon. Thanks so much for the detail on the slide. If I could just follow up on Steve's question. You're saying the commission doesn't really care or has historically not cared about double leverage. Is that accurate?
Well, it's really not been anything that's been a focus, and I can't speculate on what that may look like in the next rate case filing. I think the key is that with our record growth, we have to finance that somehow. Given the outcome and the impact that's had on our valuation, the prudent way to finance it is to use the strength of our balance sheet, and I believe the commission will understand that.
Okay, it's more of maybe the double leverage hasn't been presented to the commission historically versus that they've either approved or disapproved of it. Is that fair?
Anthony, I don't expect it to be an issue.
Okay. If I think of, high-end rate-based guidance is six percent. The high-end EPS guidance is seven percent. Are you assuming either improved ROEs or minimizing some regulatory lag to get to that? If you hit the high end of rate-based guidance, how do I hit the high end of the EPS guidance?
Yeah, I think the key there is over time is really gonna be improving regulatory lag, which has been a focus of our team all along. I believe that we've been clear as well that improving regulatory lag also allows us to stay out of rate cases. That'll definitely be a key focus in this next filing. Certainly improving ROE to be commensurate with peers is also a driver as well.
Great. Just lastly, you know, you made a really good distinction about, you know, maybe the disallowance on the SCRs as it relates to, like, legacy coal plant and a lot of the CapEx going forward is more modernizing the grid clean energy. But just given any type of risk of new technology or something coming up, supplementing it and have the commission playing Monday morning quarterback with that CapEx, does that give you any hesitancy on going with any big projects or limiting the value of any type of projects so that your risk of disallowance is much smaller than maybe what we saw in the SCR order or decision?
Yeah. I think two parts to that one. One is that's again one of the important reasons for why we had to seek review of the case is because getting clarity around not, you know, we make the decisions based on the information that we have at the time we make the decisions to move forward in a prudent way. There is a lot of new technology that's coming in. I do think probably everybody in the industry is trying to figure out how do you de-risk new technology projects so, you know, you don't run out. Look at, for example, our battery storage work. We put a pause after we had the McMicken event so that we could deeply understand safety around lithium-ion utility scale batteries.
We're now moving forward in a pretty aggressive way with those systems, but they're established technology. They're known. There's more of them being installed. We're not first movers on it. I think that you'll see a lot of work on trying to make sure that we're managing that risk because I think it's a good point. One of the important things for us was to get clarity on, you know, that you don't use hindsight to go back and look at what was an appropriate decision when circumstances have changed.
Great. Thanks so much for taking my question and looking forward to seeing you guys at EEI.
Us too, Anthony. Thank you.
Thank you. That was our last question for today. I'll now turn the call over to management for any closing remarks.
Great. Thank you. I just want to thank all of you for your investment and your confidence in us. You know, this rate case outcome was not what we had hoped for, but we are focused now on a path forward and are focused on our customers and look forward to seeing some of you at EEI. Thank you again. That concludes our call.
Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.