REGULATORY ASSETS AND LIABILITIES (Notes)

12 Months Ended

Dec. 31, 2019

SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]

Schedule of Regulatory Assets and Liabilities

REGULATORY ASSETS AND LIABILITIES

The tables below present a summary of regulatory assets, net of amortization, and liabilities for the periods indicated:

		December 31, 2019
	Remaining Recovery Period	Current			Noncurrent			Total
		(Thousands of dollars)
Under-recovered purchased-gas costs	1 year	$	17,172		$	—		$	17,172
Pension and other postemployment benefit costs	See Note 13	21,213			373,266			394,479
Reacquired debt costs	8 years	812			5,677			6,489
MGP remediation costs	15 years	98			9,709			9,807
Ad-valorem tax	1 year	2,921			—			2,921
Other	1 to 19 years	5,224			2,384			7,608
Total regulatory assets, net of amortization		47,440			391,036			438,476
Federal income tax rate changes	(a)	(10,297		)	(503,518		)	(513,815		)
Over-recovered purchased-gas costs	1 year	(27,623		)	—			(27,623		)
Weather normalization	1 year	(7,281		)	—			(7,281		)
Total regulatory liabilities		(45,201		)	(503,518		)	(548,719		)
Net regulatory assets and liabilities		$	2,239		$	(112,482	)	$	(110,243	)

(a) Recovery period varies by jurisdiction. See discussion below for additional information regarding our regulatory liabilities related to federal income tax rate changes.

		December 31, 2018
	Remaining Recovery Period	Current			Noncurrent			Total
		(Thousands of dollars)
Under-recovered purchased-gas costs	1 year	$	25,083		$	—		$	25,083
Pension and other postemployment benefit costs	See Note 13	23,384			421,726			445,110
Reacquired debt costs	9 years	812			6,487			7,299
MGP remediation costs	15 years	—			7,724			7,724
Ad-valorem tax	1 year	1,070			—			1,070
Other	1 to 20 years	4,071			1,542			5,613
Total regulatory assets, net of amortization		54,420			437,479			491,899
Federal income tax rate changes	(a)	(30,934		)	(520,866		)	(551,800		)
Over-recovered purchased-gas costs	1 year	(13,668		)	—			(13,668		)
Weather normalization	1 year	(3,792		)	—			(3,792		)
Total regulatory liabilities		(48,394		)	(520,866		)	(569,260		)
Net regulatory assets and liabilities		$	6,026		$	(83,387	)	$	(77,361	)

(a) Recovery period varies by jurisdiction. See discussion below for additional information regarding our regulatory liabilities related to federal income tax rate changes.

Regulatory assets in our consolidated balance sheets, as authorized by various regulatory authorities, are probable of recovery. Base rates and certain riders are designed to provide a recovery of costs during the period rates are in effect, but do not generally provide for a return on investment for amounts we have deferred as regulatory assets. All of our regulatory assets are subject to review by the respective regulatory authorities during future regulatory proceedings. We are not aware of any evidence that these costs will not be recoverable through either rate riders or base rates, and we believe that we will be able to recover such costs, consistent with our historical recoveries.

Purchased-gas costs represent the natural gas costs that have been over- or under-recovered from customers through the purchased-gas cost adjustment mechanisms, and includes natural gas utilized in our operations and premiums paid and any cash settlements received from our purchased natural gas call options.

We amortize reacquired debt costs in accordance with the accounting guidelines prescribed by the OCC and KCC.

Weather normalization represents revenue over- or under-recovered through the WNA rider in Kansas. This amount is deferred as a regulatory asset or liability for a 12-month period. Kansas Gas Service then applies an adjustment to the customers’ bills for 12 months to refund the over-collected revenue or bill the under-collected revenue.

Ad-valorem tax represents an increase or decrease in Kansas Gas Service’s taxes above or below the amount approved in a rate case. This amount is deferred as a regulatory asset or liability for a 12-month period. Kansas Gas Service then applies an adjustment to the customers’ bills for 12 months to refund the over-collected revenue or bill the under-collected revenue.

Recovery through rates resulted in amortization of regulatory assets of approximately $2.5 million, $1.7 million and $1.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Federal income tax rate changes represent the effect of the Tax Cuts and Jobs Act of 2017. In each state, we received accounting orders requiring us to establish a regulatory liability for the difference in taxes included in our rates that have been calculated based on a 35 percent federal corporate income tax rate and the new 21 percent federal corporate income tax rate effective in January 2018 and to refund the reduction in ADIT due to the remeasurement resulting from the change in the exacted tax rate.

In 2018, we accrued a separate current regulatory liability associated with the change in the federal corporate income tax rates collected in our rates resulting in a reduction to our revenues of $36.6 million for the year ended December 31, 2018. In January 2019, the OCC issued an order that resulted in the establishment of a $15.8 million liability, including interest, at December 31, 2018, for the estimated impact on customer rates of earnings, including amounts attributable to tax savings, above the 9.5 percent approved ROE in the 2018 review period, to be returned to customers within the 2019 PBRC filing. A settlement was reached and the OCC approved a joint stipulation in August 2019. This stipulation included a PBRC credit of $15.6 million to be credited over a 12-month period to Oklahoma customers beginning in the third quarter 2019. In a separate order issued in February 2019, the KCC required Kansas Gas Service to refund the regulatory liability for the portion of its revenue representing the difference between the 21 percent and 35 percent federal corporate income tax rate for the period between January 1, 2018, and through the date on which the KCC issued a final order in Kansas Gas Service’s June 2018 rate case. In 2019 and 2018, we accrued a $2.4 million and $14.2 million, respectively, reduction to revenues for the periods until new rates were implemented in Kansas. The total refund of $16.6 million was issued through a bill credit to Kansas customers in the second quarter 2019. In 2018, Texas Gas Service issued one-time refunds totaling $6.6 million for the reduction in the federal corporate income tax rate for the period between January 1, 2018, to the dates new rates were implemented in its service areas.

As a result of the enactment of the Tax Cuts and Jobs Act of 2017, we remeasured our ADIT. As a regulated entity, the change in ADIT was recorded as a noncurrent regulatory liability and is subject to refund to our customers. The Tax Cuts and Jobs Act of 2017 retains the tax normalization provisions of the Code that stipulate how these excess deferred income taxes for certain accelerated tax depreciation benefits are to be refunded to customers. Our customers began receiving refunds as determined by our regulators in 2019. In January 2019, the OCC issued an order in response to Oklahoma Natural Gas’ March 2018 PBRC filing requiring Oklahoma Natural Gas to credit customers for the reduction in ADIT based upon an amortization period in compliance with the tax normalization rules for the portions of EDIT stipulated by the Code and ten years for all other components of EDIT. In February 2019, the KCC issued an order adjusting Kansas Gas Service’s base rates, which included an amortization credit associated with the refund of ADIT based on an amortization period in compliance with the tax normalization rules for the portion of EDIT stipulated by the Code and five years for all other components of EDIT. As a result of the orders in Oklahoma and Kansas, the estimated EDIT is being returned to customers beginning in 2019. Three service areas in Texas have authorized EDIT to be credited to customers annually. The timing of the return of EDIT to customers in our remaining three service areas in Texas will be determined as we work with our regulators. In 2019, we credited income tax expense $12.8 million for the amortization of the regulatory liability associated with EDIT that was returned to customers.

See Note 14 for additional information regarding our regulatory liabilities for federal corporate income tax rate changes.