Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes.

Income Taxes

Note 12— Income Taxes

The following table shows the changes in our provision for income taxes (in millions) and our consolidated effective federal and state income tax rates for the applicable periods ended June 30, 2011:

	Three Months Ended						Six-Months Ended						Twelve Months Ended
	2011			2010			2011			2010			2011			2010
Consolidated provision for income taxes	$	5.6		$	4.5		$	12.8		$	14.4		$	28.9		$	24.6
Consolidated effective federal and state income tax rates	37.8		%	37.7		%	37.8		%	47.5		%	35.5		%	38.9		%

The effective tax rates for the six months ended June 30, 2011 and the twelve months ended June 30, 2011 are lower than comparable year periods primarily due to an adjustment made in 2010 as a result of the Patient Protection and Affordable Care Act, which became law on March 23, 2010. This legislation included a provision that reduced the deductibility, for income tax purposes, of retiree healthcare costs to the extent an employer receives federal subsidies. Although the elimination of this tax benefit does not take effect until 2013, this change required us to recognize the full accounting impact in our financial statements in the period in which the legislation was enacted. As a result, in the first quarter of 2010, we recorded a one-time non-cash charge of approximately $2.1 million to income taxes to reflect the impact of this change, which increased our effective tax rate in 2010 and our 2010 provision for income taxes.

As part of an agreement reached in our 2009 Missouri electric rate case, effective September 10, 2010, we also agreed to commence an eighteen year amortization of a regulatory asset related to the tax benefits of cost of removal. These tax benefits were flowed through to customers from 1981-2008 and totaled approximately $11.1 million. We had recorded the regulatory asset expecting to recover these benefits from customers in future periods. Based on the agreement, we estimated the portion of the amortization period where rate recovery would no longer be probable for this item and wrote off approximately $1.2 million in the first quarter of 2010.

We received $26.6 million in 2010 from the SWPA which has been deferred for book purposes and treated as a noncurrent liability and is more fully described in our Annual Report on Form 10-K for the year ended December 31, 2010. We increased our current tax liability by $10.0 million in recognition that the $26.6 million payment may be considered taxable income in 2010. During the first quarter of 2011, we submitted a pre-filing agreement with the Internal Revenue Service (IRS) requesting that a determination be made regarding whether or not the payment could be deferred under certain sections of the Internal Revenue code. The IRS is still reviewing our request.

We do not expect any significant changes to our unrecognized tax benefits over the next twelve months. The reserve balance related to unrecognized tax benefits as of December 31, 2010 was $359,000 and has not materially changed at June 30, 2011.