Regulatory assets and liabilities

9 Months Ended

Sep. 30, 2022

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory Assets and Liabilities

Regulatory assets and liabilities

The following table summarizes the individual components of unamortized regulatory assets and liabilities:

	Estimated Recovery or Refund Period as of September 30, 2022	*	September 30, 2022		September 30, 2021		December 31, 2021
			(In thousands)
Regulatory assets:
Current:
Natural gas costs recoverable through rate adjustments	Up to 1 year		$	112,079	$	98,211	$	86,371
Conservation programs	Up to 1 year		9,363		8,495		8,225
Decoupling	Up to 1 year		6,549		7,195		9,131
Cost recovery mechanisms	Up to 1 year		3,354		4,693		4,536
Other	Up to 1 year		16,815		14,541		10,428
			148,160		133,135		118,691
Noncurrent:
Pension and postretirement benefits	**		137,582		155,888		142,681
Cost recovery mechanisms	Up to 10 years		67,094		43,955		44,870
Plant costs/asset retirement obligations	Over plant lives		61,941		73,528		63,116
Plant to be retired	-		24,740		48,544		50,070
Manufactured gas plant site remediation	-		25,963		26,000		26,053
Taxes recoverable from customers	Over plant lives		12,394		11,438		12,339
Long-term debt refinancing costs	Up to 38 years		3,335		3,952		3,794
Natural gas costs recoverable through rate adjustments	Up to 2 years		462		6,084		5,186
Other	Up to 17 years		10,931		9,856		9,742
			344,442		379,245		357,851
Total regulatory assets			$	492,602	$	512,380	$	476,542
Regulatory liabilities:
Current:
Taxes refundable to customers	Up to 1 year		$	4,264	$	3,867	$	3,841
Electric fuel and purchased power deferral	Up to 1 year		3,763		3,205		—
Cost recovery mechanisms	Up to 1 year		2,674		2,797		214
Natural gas costs refundable through rate adjustments	Up to 1 year		873		—		6,700
Other	Up to 1 year		7,025		6,622		5,548
			18,599		16,491		16,303
Noncurrent:
Taxes refundable to customers	Over plant lives		205,517		218,566		215,421
Plant removal and decommissioning costs	Over plant lives		174,481		172,683		168,152
Pension and postretirement benefits	**		19,687		16,915		20,434
Accumulated deferred investment tax credit	Up to 20 years		14,665		12,403		12,696
Cost recovery mechanisms	Up to 20 years		12,535		—		7,727
Other	Up to 16 years		6,327		5,574		4,360
			433,212		426,141		428,790
Total regulatory liabilities			$	451,811	$	442,632	$	445,093
Net regulatory position			$	40,791	$	69,748	$	31,449

*Estimated recovery or refund period for amounts currently being recovered or refunded in rates to customers.

**    Recovered as expense is incurred or cash contributions are made.

At September 30, 2022 and 2021, and December 31, 2021, approximately $264.4 million, $318.2 million and $296.6 million, respectively, of regulatory assets were not earning a rate of return; however, these regulatory assets are expected to be recovered from customers in future rates. These assets are largely comprised of the unfunded portion of pension and postretirement benefits, asset retirement obligations, accelerated depreciation on plant retirement and the estimated future cost of manufactured gas plant site remediation.

In the last half of 2021 and in 2022, the Company has experienced higher natural gas costs due to the increase in demand outpacing the supply along with the impact of global events. This increase in natural gas costs experienced in certain jurisdictions has been partially offset by the recovery of prior period natural gas costs being recovered over a period longer than the normal one-year period, as further discussed below.

In February 2021, a prolonged period of unseasonably cold temperatures in the central United States significantly increased the demand for electric and natural gas services and contributed to increased market prices. Overall, Montana-Dakota and Great Plains incurred approximately $44.0 million in increased natural gas costs in order to maintain services for its customers. These extraordinary gas costs were recorded as regulatory assets as they are expected to be recovered from customers. With the exception of $845,000 in Minnesota, Montana-Dakota and Great Plains have received approval for the recovery of purchased gas adjustments related to the cold-weather event in all jurisdictions impacted, including out-of-cycle purchased gas adjustment requests in most jurisdictions. For a discussion of the Company's most recent cases by jurisdiction, see Note 19.

In 2019, the Company experienced increased natural gas costs in Washington from the rupture of the Enbridge pipeline in Canada in late 2018. As a result, the Company requested, and the WUTC approved, recovery through 2022 of the balance of natural gas costs recoverable related to this period of time, which was over three years rather than its normal one-year recovery period.

In February 2019, the Company announced the retirement of three aging coal-fired electric generating units. The Company accelerated the depreciation related to these facilities in property, plant and equipment and recorded the difference between the accelerated depreciation, in accordance with GAAP, and the depreciation approved for rate-making purposes as regulatory assets. Requests were filed with the NDPSC and SDPUC, and subsequently approved, to offset the savings associated with the cessation of operations of these units with the amortization of the deferred regulatory assets. The Company ceased operations of Lewis & Clark Station in March 2021 and Units 1 and 2 at Heskett Station in February 2022. The Company subsequently reclassified the costs being recovered for these facilities from plant retirement to cost recovery mechanisms in the previous table and began amortizing the associated plant retirement and closure costs in the jurisdictions where requests were filed, as previously discussed. The Company expects to recover the regulatory assets related to the plant retirements in future rates.

If, for any reason, the Company's regulated businesses cease to meet the criteria for application of regulatory accounting for all or part of their operations, the regulatory assets and liabilities relating to those portions ceasing to meet such criteria would be written off and included in the statement of income or accumulated other comprehensive loss in the period in which the discontinuance of regulatory accounting occurs.