Regulatory Assets and Liabilities

12 Months Ended

Dec. 31, 2019

Regulatory Assets and Liabilities Disclosure [Abstract]



(4) Regulatory Assets and Liabilities

We prepare our Consolidated Financial Statements in accordance with the provisions of ASC 980, as discussed in Note 2 - Significant Accounting Policies. Pursuant to this guidance, certain expenses and credits, normally reflected in income as incurred, are deferred and recognized when included in rates and recovered from or refunded to customers. Regulatory assets and liabilities are recorded based on management's assessment that it is probable that a cost will be recovered or that an obligation has been incurred. Accordingly, we have recorded the following major classifications of regulatory assets and liabilities that will be recognized in expenses and revenues in future periods when the matching revenues are collected or refunded. Of these regulatory assets and liabilities, energy supply costs are the only items earning a rate of return. The remaining regulatory items have corresponding assets and liabilities that will be paid for or refunded in future periods.



	Note Reference	Remaining Amortization Period	December 31,
			2019		2018
			(in thousands)
Income taxes	12	Plant Lives	$	277,434	$	230,434
Pension	14	Undetermined	132,000		130,193
Deferred financing costs		Various	31,089		34,080
Employee related benefits	14	Undetermined	18,622		19,458
Supply costs		1 Year	35,454		10,532
State & local taxes & fees		Various	7,146		15,532
Environmental clean-up	18	Various	11,179		11,221
Other		Various	25,639		24,562
Total Regulatory Assets			$	538,563	$	476,012
Removal cost	6	Various	$	442,129	$	428,528
Tax Cut and Jobs Act		1 Year	—		20,497
Supply costs		1 Year	14,226		15,453
Gas storage sales		20 Years	8,307		8,728
Rates subject to refund		1 Year	14,177		—
State & local taxes & fees		1 Year	1,846		1,747
Environmental clean-up		Various	1,181		1,247
Other		Various	2,697		2,961
Total Regulatory Liabilities			$	484,563	$	479,161

Income Taxes

Tax assets primarily reflect the effects of plant related temporary differences such as flow-through of depreciation, repairs related deductions, removal costs, capitalized interest and contributions in aid of construction that we will recover or refund in future rates. We amortize these amounts as temporary differences reverse. See Note 12 - Income Taxes for further discussion.

Pension and Employee Related Benefits

We recognize the unfunded portion of plan benefit obligations in the Consolidated Balance Sheets, which is remeasured at each year end, with a corresponding adjustment to regulatory assets/liabilities as the costs associated with these plans are recovered in rates. The MPSC allows recovery of pension costs on a cash funding basis. The portion of the regulatory asset related to our Montana pension plan will amortize as cash funding amounts exceed accrual expense under GAAP. The SDPUC allows recovery of pension costs on an accrual basis. The MPSC allows recovery of postretirement benefit costs on an accrual basis.

Deferred Financing Costs

Consistent with our historical regulatory treatment, a regulatory asset has been established to reflect the remaining deferred financing costs on long-term debt that has been replaced through the issuance of new debt. These amounts are amortized over the life of the new debt.

Rates Subject to Refund

In June 2019, in response to a filing associated with our Montana transmission assets, FERC granted an interim rate increase, effective July 1, 2019. Also, in our Montana general electric rate case, the MPSC granted an interim rate increase, effective April 1, 2019. See Note 3 - Regulatory Matters, for further information regarding these dockets.

Supply Costs

The MPSC, SDPUC and NPSC have authorized the use of electric and natural gas supply cost trackers that enable us to track actual supply costs and either recover the under collection or refund the over collection to our customers. Accordingly, we have recorded a regulatory asset and liability to reflect the future recovery of under collections and refunding of over

collections through the ratemaking process. We earn interest on natural gas supply costs under collected, or apply interest to an over collection, of 7.0% in Montana; 7.2% and 7.8% for electric and natural gas, respectively, in South Dakota; and 8.5% for natural gas in Nebraska.

State & Local Taxes & Fees (Montana Property Tax Tracker)

Under Montana law, we are allowed to track the changes in the actual level of state and local taxes and fees and recover the increase in rates, less the amount allocated to FERC jurisdictional customers and net of the related income tax benefit.

Environmental Clean-up

Environmental clean-up costs are the estimated costs of investigating and cleaning up contaminated sites we own. We discuss the specific sites and clean-up requirements further in Note 18 - Commitments and Contingencies. Environmental clean-up costs are typically recoverable in customer rates when they are actually incurred. When cost projections become known and measurable, we coordinate with the appropriate regulatory authority to determine a recovery period.

Removal Cost

The anticipated costs of removing assets upon retirement are collected from customers in advance of removal activity as a component of depreciation expense. Our depreciation method, including cost of removal, is established by the respective regulatory commissions. Therefore, consistent with this regulated treatment, we reflect this accrual of removal costs for our regulated assets by increasing our regulatory liability. See Note 6 - Asset Retirement Obligations, for further information regarding this item.

Tax Cut and Jobs Act

The Tax Cuts and Jobs Act provided a customer benefit as a result of the lower statutory rate. This amount reflects amounts credited to customers in our Montana jurisdiction in the first quarter of 2019.

Gas Storage Sales

A regulatory liability was established in 2000 and 2001 based on gains on cushion gas sales in Montana. This gain is being flowed to customers over a period that matches the depreciable life of surface facilities that were added to maintain deliverability from the field after the withdrawal of the gas. This regulatory liability is a reduction of rate base.