Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of changes in the deferred fuel and purchased power regulatory asset

The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) for 2018 and 2017 (dollars in thousands):



	Nine Months Ended September 30,
	2018			2017
Beginning balance	$	75,637		$	12,465
Deferred fuel and purchased power costs — current period	82,486			43,348
Amounts refunded/(charged) to customers	(92,397		)	18,153
Ending balance	$	65,726		$	73,966

Schedule of regulatory assets

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



	Amortization Through	September 30, 2018				December 31, 2017
	Amortization Through	Current		Non-Current		Current		Non-Current
Pension	(a)	$	—	$	598,031	$	—	$	576,188
Retired power plant costs	2033	28,182		174,257		27,402		188,843
Income taxes — allowance for funds used during construction ("AFUDC") equity	2048	5,882		150,684		3,828		142,852
Deferred fuel and purchased power — mark-to-market (Note 7)	2022	41,062		33,215		52,100		34,845
Deferred fuel and purchased power (b) (d)	2019	65,726		—		75,637		—
Four Corners cost deferral	2024	8,077		42,247		8,077		48,305
Income taxes — investment tax credit basis adjustment	2047	1,066		25,239		1,066		26,218
Lost fixed cost recovery (b)	2019	36,125		—		59,844		—
Palo Verde VIEs (Note 6)	2046	—		19,860		—		19,395
Deferred compensation	2036	—		37,854		—		36,413
Deferred property taxes	2027	8,569		68,499		8,569		74,926
Loss on reacquired debt	2038	1,637		14,078		1,637		15,305
Tax expense of Medicare subsidy	2024	1,235		6,253		1,236		7,415
TCA balancing account (b)	2019	7,087		—		1,220		—
AG-1 deferral	2022	2,654		6,482		2,654		8,472
Mead-Phoenix transmission line CIAC	2050	332		10,127		332		10,376
Coal reclamation	2026	1,546		11,695		1,068		12,396
SCR deferral	N/A	—		16,319		—		353
Other	Various	395		6,453		3,418		—
Total regulatory assets (c)		$	209,575	$	1,221,293	$	248,088	$	1,202,302


(a)	This asset represents the future recovery of pension benefit obligations 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)	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, Transmission Cost Adjustor and Other Transmission Matters."


(d)	Subject to a carrying charge.

Schedule of regulatory liabilities

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



	Amortization Through	September 30, 2018				December 31, 2017
	Amortization Through	Current		Non-Current		Current		Non-Current
Excess deferred income taxes - ACC - Tax Cuts and Jobs Act	(a)	$	—	$	1,273,153	$	—	$	1,266,104
Excess deferred income taxes - FERC - Tax Cuts and Jobs Act	2058	6,284		243,369		—		254,170
Asset retirement obligations	2057	—		344,402		—		332,171
Removal costs	(b)	30,871		196,065		18,238		209,191
Other postretirement benefits	(d)	37,842		123,683		37,642		151,985
Income taxes — deferred investment tax credit	2047	2,137		50,555		2,164		52,497
Income taxes — change in rates	2047	2,799		71,137		2,573		70,537
Spent nuclear fuel	2027	7,769		57,400		6,924		62,132
Renewable energy standard (c)	2019	41,912		92		23,155		—
Demand side management (c)	2019	16,099		4,124		3,066		4,921
Sundance maintenance	2030	—		18,104		—		16,897
Deferred gains on utility property	2022	4,423		7,704		4,423		10,988
Four Corners coal reclamation	2038	1,858		17,972		1,858		18,921
Tax expense adjustor mechanism (c)	2018	7,433		—		—		—
Other	Various	361		2,837		43		2,022
Total regulatory liabilities		$	159,788	$	2,410,597	$	100,086	$	2,452,536

(a)

While the majority of the excess deferred tax balance shown is subject to special amortization rules under federal income tax laws, which require amortization of the balance over the remaining regulatory life of the related property, treatment of a portion of the liability, and the month in which pass-through of the excess deferred tax balance will begin is subject to regulatory approval. This approval will be sought through the Company's TEAM adjustor mechanism. As a result, the Company cannot estimate the amount of this regulatory liability which is expected to reverse within the next 12 months. See Note 15.


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


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

(d)

See Note 5.