SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of regulatory assets and liabilities

Regulatory assets and liabilities are as follows (dollars in thousands):


	December 31,		December 31,
	2019		2018
Regulatory assets
Deferred income tax expense (1)	$	58,937	$	18,098
Deferred prepaid lease expense – Springerville Unit 3 Lease (2)		83,714		86,005
Goodwill – J.M. Shafer (3)		49,145		51,994
Goodwill – Colowyo Coal (4)		37,194		38,227
Deferred debt prepayment transaction costs (5)		140,931		149,559
Deferred Holcomb expansion impairment loss (6)		93,494		93,494
Deferred Nucla impairment loss (7)		33,864		—
Total regulatory assets		497,279		437,377

Regulatory liabilities
Interest rate swap - unrealized gain (8)		—		8,576
Interest rate swap - realized gain (9)		3,744		4,215
Deferred revenues (10)		75,853		82,006
Membership withdrawal (11)		42,572		42,572
Total regulatory liabilities		122,169		137,369
Net regulatory asset	$	375,110	$	300,008

(1)

A regulatory asset or liability associated with deferred income taxes generally represents the future increase or decrease in income taxes payable that will be received or settled through future rate revenues.

(2)

Represents deferral of the loss on acquisition related to the Springerville Generating Station Unit 3 (“Springerville Unit 3”) prepaid lease expense upon acquiring a controlling interest in the Springerville Unit 3 Partnership LP (“Springerville Partnership”) in 2009. The regulatory asset for the deferred prepaid lease expense is being amortized to depreciation, amortization and depletion expense in the amount of $2.3 million annually through the 47-year period ending in 2056 and recovered from our Members in rates.

(3)

Represents goodwill related to our acquisition of Thermo Cogeneration Partnership, LP (“TCP”) in December 2011. Goodwill is being amortized to depreciation, amortization and depletion expense in the amount of $2.8 million annually through the 25-year period ending in 2036 and recovered from our Members in rates.

(4)

Represents goodwill related to our acquisition of Colowyo Coal Company LP (“Colowyo Coal”) in December 2011. Goodwill is being amortized to depreciation, amortization and depletion expense in the amount of $1.0 million annually through the 44-year period ending in 2056 and recovered from our Members in rates.

(5)

Represents transaction costs that we incurred related to the prepayment of our long-term debt in 2014. These costs are being amortized to depreciation, amortization and depletion expense in the amount of $8.6 million annually over the 21.4-year period ending in 2036 and recovered from our Members in rates.

(6)

Represents deferral of the impairment loss related to development costs, including costs for the option to purchase development rights for the expansion of the Holcomb Generating Station. Beginning January 2020, the deferred impairment loss is expected to be amortized to other operating expenses in the amount of $4.7 million annually over the 20-year period ending in 2039 and recovered from our Members in rates.

(7)

In July 2019, the Board took action for the early retirement of the Nucla Generating Station and the deferral of any impairment loss in accordance with accounting for rate regulation. In conjunction with the early retirement, we recognized an impairment loss of $37.1 million during the third quarter of 2019. On September 19, 2019, the Nucla Generating Station was officially retired from service. The deferred impairment loss is being amortized to depreciation, amortization and depletion expense over the 3.3-year period ending in December 2022 and recovered from our Members in rates.

(8)

Represented deferral of an unrealized gain related to the change in fair value of a forward starting interest rate swap that was entered into in 2016 in order to hedge interest rates on anticipated future borrowings. This interest rate swap was terminated in June 2019 with no gain or loss being realized.

(9)

Represents deferral of a realized gain of $4.6 million related to the October 2017 settlement of a forward starting interest rate swap. This realized gain was deferred as a regulatory liability and is being amortized to interest expense over the 12-year term of the First Mortgage Obligations, Series 2017A and refunded to Members through reduced rates when recognized in future periods.

(10)

Represents deferral of the recognition of non-member electric sales revenues. These deferred non-member electric sales revenues will be refunded to Members through reduced rates when recognized in non-member electric sales revenue in future periods.

Represents the deferral of the recognition of other income recorded in connection with the withdrawal of a former member from membership in us. This deferred membership withdrawal income will be refunded to Members through reduced rates when recognized in other income in future periods.

Schedule of investments in other associations

Investments in other associations are as follows (dollars in thousands):


	December 31,		December 31,
	2019		2018
Basin Electric Power Cooperative	$	117,368	$	118,115
National Rural Utilities Cooperative Finance Corporation - patronage capital		11,761		11,704
National Rural Utilities Cooperative Finance Corporation - capital term certificates		15,953		16,018
CoBank, ACB		10,201		9,062
Western Fuels Association, Inc.		2,409		2,392
Other		4,253		4,196
Investments in other associations	$	161,945	$	161,487

Schedule of investments in and advances to coal mines

Investments in and advances to coal mines are as follows (dollars in thousands):


	December 31,		December 31,
	2019		2018
Investment in Trapper Mine	$	15,881	$	15,350
Advances to Dry Fork Mine		3,800		3,578
Investments in and advances to coal mines	$	19,681	$	18,928

Schedule of cash, cash equivalents and restricted cash and investments

The following table provides a reconciliation of cash, cash equivalents and restricted cash and investments reported within our consolidated statements of financial position that sum to the total of the same such amount shown in our consolidated statements of cash flows (dollars in thousands):


	December 31,		December 31,
	2019		2018
Cash and cash equivalents	$	83,070	$	116,858
Restricted cash and investments - current		182		126
Restricted cash and investments - noncurrent		30,516		10,606
Cash, cash equivalents and restricted cash and investments	$	113,768	$	127,590

Schedule of other deferred charges

Other deferred charges are as follows (dollars in thousands):


	December 31,		December 31,
	2019		2018
Preliminary surveys and investigations	$	21,261	$	20,660
Advances to operating agents of jointly owned facilities		3,917		13,161
Interest rate swap		—		8,576
Operating lease right-of-use assets		7,622		—
Other		9,872		4,056
Total other deferred charges	$	42,672	$	46,453

Schedule of change in aggregate carrying amount of asset retirement obligations

Aggregate carrying amounts of asset retirement obligations and environmental reclamation obligations are as follows (dollars in thousands):



	2019		2018
Obligations at beginning of period	$	56,772	$	56,855
Liabilities incurred		23,290		6,065
Liabilities settled		(1,090)		(5,475)
Accretion expense		2,863		2,458
Change in cash flow estimate		(2,921)		(3,131)
Total obligations at end of period	$	78,914	$	56,772
Less current obligations at end of period		(2,460)		(2,183)
Long-term obligations at end of period	$	76,454	$	54,589

Schedule of other deferred credits and other liabilities

The following other deferred credits and other liabilities are reflected on our consolidated statements of financial position (dollars in thousands):


	December 31,		December 31,
	2019		2018
Transmission easements	$	20,549	$	20,966
Operating lease liabilities - noncurrent		1,846		—
Contract liabilities (unearned revenue) - noncurrent		4,217		4,592
Customer deposits		3,015		2,458
Financial liabilities - reclamation		12,091		4,938
Other		14,681		17,312
Total other deferred credits and other liabilities	$	56,399	$	50,266