Asset Retirement Obligations

12 Months Ended

Dec. 31, 2025

Asset Retirement Obligation Disclosure [Abstract]

In 2025, the Company revised its cost estimates for existing AROs for the following:

•Cholla coal-fired power plant related to the closure of ponds and facilities, which resulted in an increase to the ARO of approximately $49 million, primarily due to increased cost estimates associated with the CCR Rule.

•Four Corners coal-fired power plant, which resulted in an increase of approximately $16 million.

•Navajo, a decommissioned coal-fired power plant, which resulted in a decrease of approximately $4 million.

•Ironwood, a solar power plant, recorded a new obligation of approximately $15 million.

APS has also recorded the initial investigation and assessment costs related to the newly signed EPA rule for legacy CCR surface impoundments and CCRMUs. At this time, APS is still evaluating the financial impacts of this final regulation on its business, with initial CCRMU site surveys due to be completed by February 2027 and final site investigation reports to be finalized by February 2028 in accordance with the rule published by EPA on February 10, 2026, extending the compliance deadlines. Based on the information available to APS at this time, APS cannot reasonably estimate the fair value of the entire CCRMU ARO. Depending on the outcome of those evaluations and site investigations, the costs associated with APS’s management of CCR could materially increase, which could affect our financial condition, results of operations, or cash flows.

In 2024, the Company revised its cost estimates for existing ARO for the following:

•Cholla coal-fired power plant related to the closure of ponds and facilities, which resulted in an increase to the ARO of approximately $63 million, primarily due to cost estimates associated with the CCR Rule.

•Four Corners coal-fired power plant, which resulted in an increase of approximately $82 million, primarily due to cost estimates associated with the CCR Rule.

•Navajo, a decommissioned coal-fired power plant, which resulted in an increase of approximately $8 million.

•Palo Verde nuclear plant, which resulted in an increase of approximately $1 million.

•Solar, which resulted in a decrease to the ARO of approximately $11 million, primarily due to the reduced cost of solar panel disposal.

See additional details in Notes 8 and 14.

The following table shows the change in our ARO’s (dollars in thousands):


	2025		2024
Asset retirement obligations at the beginning of year	$	1,146,586	$	966,001
Changes attributable to:
Accretion expense	64,552		56,143
Settlements	(16,570)		(18,379)
Estimated cash flow revisions	61,080		142,821
Newly incurred obligation	14,651		—

Asset retirement obligations at the end of year	$	1,270,299	$	1,146,586

In accordance with regulatory accounting, APS accrues removal costs for its regulated utility assets, even if there is no legal obligation for removal. See Note 8 for detail of regulatory liabilities.