For a description of the Company’s regulatory assets and liabilities other than those described below, see Note 4 to the Company’s 2013 Annual Financial Statements and Notes. UGI Utilities does not recover a rate of return on its regulatory assets. The following regulatory assets and liabilities associated with Gas Utility and Electric Utility are included in our accompanying Condensed Consolidated Balance Sheets:



	December 31, 2013		September 30, 2013		December 31, 2012
Regulatory assets:
Income taxes recoverable	$	106,435	$	106,069	$	103,665
Underfunded pension and postretirement plans	92,755		94,515		184,764
Environmental costs	14,910		17,054		17,119
Deferred fuel and power costs	427		8,283		7,797
Removal costs, net	13,748		13,333		11,541
Other	5,722		5,657		5,742
Total regulatory assets	$	233,997	$	244,911	$	330,628
Regulatory liabilities:
Postretirement benefits	$	16,846	$	16,497	$	13,486
Environmental overcollections	2,329		2,552		3,077
Deferred fuel and power refunds	7,524		8,283		1,916
State tax benefits — distribution system repairs	8,725		8,453		7,750
Other	1,332		1,502		570
Total regulatory liabilities	$	36,756	$	37,287	$	26,799

Deferred fuel and power — costs and refunds. Gas Utility’s tariffs and Electric Utility’s tariffs contain clauses which permit recovery of all prudently incurred purchased gas and power costs through the application of purchased gas cost (“PGC”) rates in the case of Gas Utility and default service (“DS”) rates in the case of Electric Utility. The clauses provide for periodic adjustments to PGC and DS rates for differences between the total amount of purchased gas and electric generation supply costs collected from customers and recoverable costs incurred. Net undercollected costs are classified as a regulatory asset and net overcollections are classified as a regulatory liability.

Gas Utility uses derivative financial instruments to reduce volatility in the cost of natural gas it purchases for firm- residential, commercial and industrial (“retail core-market”) customers. Realized and unrealized gains or losses on natural gas derivative financial instruments are included in deferred fuel costs or refunds. Net unrealized gains (losses) on such contracts at December 31, 2013, September 30, 2013, and December 31, 2012, were $1,968, $(1,743) and $(440), respectively.

Electric Utility enters into forward electricity purchase contracts to meet a substantial portion of its electricity supply needs. Because these contracts do not qualify for the normal purchases and normal sales exception under GAAP, the fair values of these contracts are recognized on the Condensed Consolidated Balance Sheet with an associated adjustment to regulatory assets or liabilities in accordance with GAAP related to rate-regulated entities. At December 31, 2013, September 30, 2013, and December 31, 2012, the fair values of Electric Utility’s electricity supply contracts were net losses of $3,182, $4,759 and $8,182, respectively, which amounts are reflected in current derivative financial instrument liabilities and other noncurrent liabilities on the Condensed Consolidated Balance Sheets with equal and offsetting amounts reflected in deferred fuel and power costs in the table above.

In order to reduce volatility associated with a substantial portion of its electric transmission congestion costs, Electric Utility obtains financial transmission rights (“FTRs”). FTRs are derivative financial instruments that entitle the holder to receive compensation for electricity transmission congestion charges when there is insufficient electricity transmission capacity on the electric transmission grid. Because Electric Utility is entitled to fully recover its DS costs, realized and unrealized gains or losses on FTRs are included in deferred fuel and power costs or deferred fuel and power refunds. Unrealized gains or losses on FTRs at December 31, 2013, September 30, 2013, and December 31, 2012, were not material.