Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2021

Schedule of capital structure and cost of capital

the following proposed capital structure and costs of capital:


	Capital Structure		Cost of Capital
Long-term debt	45.3	%	4.10	%
Common stock equity	54.7	%	10.15	%
Weighted-average cost of capital			7.41	%

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 for 2021 and 2020 (dollars in thousands):


	Three Months Ended March 31,
	2021		2020
Beginning balance	$	175,835	$	70,137
Deferred fuel and purchased power costs — current period	52,210		5,785
Amounts refunded to customers	564		1,808
Ending balance	$	228,609	$	77,730

Schedule of regulatory assets

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


	Amortization Through	March 31, 2021				December 31, 2020
		Current		Non-Current		Current		Non-Current
Pension	(a)	$	—	$	467,423	$	—	$	469,953
Deferred fuel and purchased power (b) (c)	2022	228,609		—		175,835		—
Income taxes — allowance for funds used during construction (“AFUDC”) equity	2051	7,169		159,119		7,169		158,776
Retired power plant costs	2033	28,182		107,169		28,181		114,214
Ocotillo deferral	N/A	—		110,820		—		95,723
SCR deferral	N/A	—		88,044		—		81,307
Deferred property taxes	2027	8,569		47,484		8,569		49,626
Lost fixed cost recovery (b)	2022	45,905		—		41,807		—
Deferred compensation	2036	—		35,806		—		36,195
Four Corners cost deferral	2024	8,077		22,056		8,077		24,075
Income taxes — investment tax credit basis adjustment	2049	1,113		24,221		1,113		24,291
Palo Verde VIEs (Note 6)	2046	—		21,409		—		21,255
Coal reclamation	2026	1,068		16,732		1,068		16,999
Loss on reacquired debt	2038	1,703		10,486		1,689		10,877
Mead-Phoenix transmission line contributions in aid of construction (“CIAC”)	2050	332		9,297		332		9,380
Demand side management (b)	2021	—		7,268		—		7,268
Tax expense adjustor mechanism (b)	2021	5,854		—		6,226		—
Tax expense of Medicare subsidy	2024	1,235		3,626		1,235		3,704
Deferred fuel and purchased power — mark-to-market (Note 7)	2024	—		3,728		3,341		9,244


PSA interest	2022	46		—		4,355		—
Other	Various	2,018		1,169		2,716		1,100
Total regulatory assets (d)		$	339,880	$	1,135,857	$	291,713	$	1,133,987

(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 other comprehensive income (“OCI”) and result in lower future revenues. See Note 5.

(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, Transmission Cost Adjustor and Other Transmission Matters.”

Schedule of regulatory liabilities

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


	Amortization Through	March 31, 2021				December 31, 2020
		Current		Non-Current		Current		Non-Current
Excess deferred income taxes - ACC - Tax Cuts and Jobs Act (a)	2046	$	41,353	$	1,004,226	$	41,330	$	1,012,583
Excess deferred income taxes - FERC - Tax Cuts and Jobs Act (a)	2058	7,240		228,690		7,240		229,147
Asset retirement obligations	2057	—		519,015		—		506,049
Other postretirement benefits	(d)	37,705		337,853		37,705		349,588
Removal costs	(c)	55,247		89,937		52,844		103,008
Income taxes — change in rates	2050	2,839		66,374		2,839		66,553
Four Corners coal reclamation	2038	5,461		49,703		5,460		49,435
Income taxes — deferred investment tax credit	2049	2,231		48,507		2,231		48,648
Spent nuclear fuel	2027	6,831		43,059		6,768		44,221
Renewable energy standard (b)	2022	34,460		30		39,442		103
Deferred fuel and purchased power — mark-to-market (Note 7)	2022	20,829		—		—		—
Property tax deferral	N/A	—		15,022		—		13,856
Sundance maintenance	2031	2,867		11,910		2,989		11,508
Demand side management (b)	2022	7,821		5,975		10,819		—
FERC transmission true up	2023	7,630		2,379		6,598		3,008
TCA balancing account (b)	2022	7,315		1,754		2,902		4,672
Tax expense adjustor mechanism (b) (e)	2021	7,452		—		7,089		—
Deferred gains on utility property	2022	2,423		939		2,423		1,544
Active union medical trust	N/A	—		2,337		—		6,057
Other	Various	524		59		409		189
Total regulatory liabilities		$	250,228	$	2,427,769	$	229,088	$	2,450,169

(a)For purposes of presentation on the Statement of Cash Flows, amortization of the regulatory liabilities for excess deferred income taxes are reflected as “Deferred income taxes” under Cash Flows From Operating Activities.

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

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

(d)See Note 5.

(e)Pursuant to Decision 77852, the ACC has authorized APS to return to customers up to $7 million of liability recorded to the TEAM balancing account through December 31, 2021. Should new base rates become effective prior to December 31, 2021, any remaining unreturned balance is anticipated to be included in the new base rates.