Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2012

Regulatory Matters

Changes in the deferred fuel and purchased power regulatory asset (liability)

The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) for 2012 and 2011 (dollars in millions):

	Twelve Months Ended December 31,
	2012			2011
Beginning balance	$	28		$	(58	)
Deferred fuel and purchased power costs — current period	(72		)	(69		)
Amounts credited to customers	117			155
Ending balance	$	73		$	28

Detail of regulatory assets

The detail of regulatory assets is as follows (dollars in millions):

	Remaining Amortization	December 31, 2012				December 31, 2011
	Period	Current		Non-Current		Current		Non-Current
Pension and other postretirement benefits	(a)	$	—	$	780	$	—	$	1,023
Income taxes — AFUDC equity	2042	4		92		3		81
Deferred fuel and purchased power — mark-to-market (Note 18)	2016	19		21		43		34
Transmission vegetation management	2016	9		23		9		32
Coal reclamation	2026	8		24		2		35
Palo Verde VIEs (Note 20)	2046	—		38		—		35
Deferred compensation	2036	—		34		—		33
Deferred fuel and purchased power (b) (c)	2013	73		—		28		—
Tax expense of Medicare subsidy	2024	2		17		2		18
Loss on reacquired debt	2034	2		18		1		19
Income taxes — investment tax credit basis adjustment	2042	1		26		—		15
Pension and other postretirement benefits deferral	2015	8		13		—		12
Other	Various	18		14		9		15
Total regulatory assets (d)		$	144	$	1,100	$	97	$	1,352

(a) This asset represents the future recovery of under-funded pension and other postretirement benefits obligation through retail rates.  If these costs are disallowed by the ACC, this regulatory asset would be charged to OCI and result in lower future revenues.

(b) See “Cost Recovery Mechanisms” discussion above.

(c) Subject to a carrying charge.

(d) There are no regulatory assets for which the ACC has allowed recovery of costs but not allowed a return by exclusion from rate base.  FERC rates are set using a formula rate as described in “Transmission Rates and Transmission Cost Adjustor.”

Detail of regulatory liabilities

The detail of regulatory liabilities is as follows (dollars in millions):

	Remaining Amortization	December 31, 2012				December 31, 2011
	Period	Current		Non-Current		Current		Non-Current
Removal costs	(a)	$	27	$	321	$	22	$	349
Asset retirement obligations	(a)	—		256		—		225
Renewable energy standard (b)	2013	43		—		54		—
Income taxes — change in rates	2042	—		66		—		59
Spent nuclear fuel	2047	10		36		5		44
Deferred gains on utility property	2019	2		12		2		14
Income taxes- deferred investment tax credit	2042	2		52		1		30
Other	Various	4		16		4		16
Total regulatory liabilities		$	88	$	759	$	88	$	737

(a) In accordance with regulatory accounting guidance, APS accrues for removal costs for its regulated assets, even if there is no legal obligation for removal (see Note 12).

(b) See “Cost Recovery Mechanisms” discussion above.