Asset Retirement Obligation

12 Months Ended

Dec. 31, 2011

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation

Asset Retirement Obligations

We recognize a liability for the legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event. We have identified asset retirement obligations (ARO), which are liabilities related to our electric and natural gas transmission and distribution assets that have been installed on easements over property not owned by us. The easements are generally perpetual and only require remediation action upon abandonment or cessation of use of the property for the specified purpose. The ARO liability is not estimable for such easements as we intend to utilize these properties indefinitely. In the event we decide to abandon or cease the use of a particular easement, an ARO liability would be recorded at that time.

Our regulated utility operations have, previously recognized removal costs of transmission and distribution assets as a component of depreciation in accordance with regulatory treatment. Generally, the accrual of future non-ARO removal obligations is not required. However, long-standing ratemaking practices approved by applicable state and federal regulatory commissions have allowed provisions for such costs in historical depreciation rates. These removal costs have accumulated over a number of years based on varying rates as authorized by the appropriate regulatory entities. Accordingly, the recorded amounts of estimated future removal costs are considered regulatory liabilities. These amounts do not represent legal retirement obligations. As of December 31, 2011 and December 31, 2010, we have recognized accrued removal costs of $235.3 million and $222.1 million, respectively. In addition, for our generation properties, we have accrued non-ARO decommissioning costs since the generating units were first put into service in the amount of $15.9 million and $15.4 million as of December 31, 2011 and December 31, 2010, respectively, which are included in regulatory liabilities.

The liabilities associated with conditional AROs are adjusted on an ongoing basis due to the passage of new laws and regulations and revisions to either the timing or amount of estimates of undiscounted cash flows and estimates of cost escalation factors. Our conditional AROs are primarily related to Department of Transportation requirements to cut, purge and cap retired natural gas pipeline segments. We measure the liability at fair value when incurred and capitalize a corresponding amount as part of the book value of the related assets, which increases our property, plant and equipment and other noncurrent liabilities. The increase in the capitalized cost is included in determining depreciation expense over the estimated useful life of these assets. Since the fair value of the ARO is determined using a present value approach, accretion of the liability due to the passage of time is recognized each period and recorded as a regulatory asset until the settlement of the liability.

The following table presents the change in our gross conditional ARO (in thousands):

	December 31,
	2011			2010
Liability at January 1,	$	7,181		$	6,688
Accretion expense	493			518
Liabilities incurred	486			76
Liabilities settled	(1,970		)	(35		)
Revisions to cash flows	102			(66		)
Liability at December 31,	$	6,292		$	7,181