Asset Retirement Obligations

9 Months Ended

Sep. 30, 2016

Asset Retirement Obligation Disclosure [Abstract]

In the second quarter of 2016, APS recognized an asset retirement obligation (“ARO”) for the Ocotillo steam units as a condition of the air permit (issued in 2016) to allow the construction and operation of five new turbine units. This resulted in an increase to the ARO in the amount of $10 million.

In the third quarter of 2016, 4CA acquired El Paso Electric’s share of Four Corners Units 4 & 5 and the associated ARO. This resulted in an increase to the ARO in the amount of $9 million.

The following schedule shows the change in our asset retirement obligations for the nine months ended September 30, 2016 (dollars in thousands):



Asset retirement obligations at January 1, 2016	$	443,576
Changes attributable to:
Accretion expense	19,868
Settlements	(11,891		)
Newly incurred or acquired liabilities	18,927
Asset retirement obligations at September 30, 2016	$	470,480

Decommissioning activities for Four Corners Units 1-3 began in January 2014. Decommissioning activities for Cholla Ash Ponds began in January 2015. Thus, $12 million of the total asset retirement obligation of $470 million at September 30, 2016, is classified as a current liability on the balance sheet.

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