Asset Retirement Obligations

9 Months Ended

Sep. 30, 2024

Asset Retirement Obligation Disclosure [Abstract]

During the nine months ended September 30, 2024, the Company revised its cost estimates for existing Asset Retirement Obligations (“ARO”) for the following:

•Cholla coal-fired power plant related to the closure of ponds and facilities, which resulted in an increase to the ARO of approximately $63 million, primarily due to cost estimates associated with the CCR Rule.

•Four Corners coal-fired power plant, which resulted in an increase of approximately $82 million, primarily due to cost estimates associated with the CCR Rule.

•Navajo, a decommissioned coal-fired power plant, which resulted in an increase of approximately $8 million.

•Palo Verde nuclear plant, which resulted in an increase of approximately $1 million.

APS has also recorded the initial investigation and assessment costs related to the newly signed EPA rule for Legacy Impoundments and CCRMUs. At this time, APS is still estimating the financial impacts of this final regulation on its business, with initial CCRMU site surveys due to be completed by February 2026 and final site investigation reports to be finalized by February 2027. Based on the information available to the Company at this time, APS cannot reasonably estimate the fair value of the entire CCRMU asset retirement obligation. Depending on the outcome of those evaluations and site investigations, the costs associated with APS’s management of CCR could materially increase, which could affect our financial condition, results of operations, or cash flows.

See additional details in Notes 4 and 8.

The following table shows the change in our asset retirement obligations for the nine months ended

September 30, 2024 (dollars in thousands):


	2024
Asset retirement obligations at January 1, 2024	$	966,001
Changes attributable to:
Accretion expense	40,349
Settlements	(9,055)
Estimated cash flow revisions	154,113
Asset retirement obligations at September 30, 2024	$	1,151,408

In accordance with regulatory accounting, APS accrues removal costs for its regulated utility assets, even if there is no legal obligation for removal. See Note 4 for detail of regulatory liabilities.