Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2025

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	47.65	%	4.26	%
Common stock equity	52.35	%	10.70	%
Weighted-average cost of capital			7.63	%

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 (dollars in thousands):


	Six Months Ended June 30,
	2025		2024
Balance at beginning of period	$	287,597	$	463,195
Deferred fuel and purchased power costs	95,850		64,220
Amounts charged to customers	(201,035)		(204,748)
Balance at end of period	$	182,412	$	322,667

Schedule of Regulatory Assets

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




	Amortization Through	June 30, 2025		December 31, 2024
Pension	(a)	$	733,970	$	750,976
Income taxes — allowance for funds used during construction equity	2054	196,476		192,936
Deferred fuel and purchased power (b) (c)	2026	182,412		287,597
Ocotillo deferral	2034	107,353		114,775
Lease incentives	(g)	92,379		70,541
SCR deferral (e)	2038	80,154		83,123
Retired power plant costs	2033	62,607		68,380
FERC Transmission true up	2027	52,720		35,159
Income taxes — investment tax credit basis adjustment	2056	34,338		34,834
Deferred compensation	2036	33,977		33,108
Palo Verde VIEs (Note 8)	2046	20,531		20,611
Deferred property taxes	2027	19,634		23,918
Deferred fuel and purchased power — mark-to-market (Note 9)	2026	9,598		42,275
Mead-Phoenix transmission line — contributions in aid of construction ("CIAC")	2050	8,218		8,384
Loss on reacquired debt	2038	6,168		6,682
Active union medical trust	(f)	5,032		9,673
Navajo Coal reclamation	2026	4,670		7,905
Tax expense adjustor mechanism (b)	2031	4,206		4,534
Power supply adjustor - interest	2026	3,329		11,525
Other	Various	3,458		3,522
Total regulatory assets (d)		$	1,661,230	$	1,810,458
Less: current regulatory assets		$	303,848	$	420,969
Total non-current regulatory assets		$	1,357,382	$	1,389,489

(a)This asset represents the future recovery of pension benefit obligations and expense through retail rates. If these costs are disallowed by the ACC, this regulatory asset would be charged to other comprehensive income and result in lower future revenues. As a result of the 2019 Rate Case decision, the amount authorized for inclusion in rate base was determined using an averaging methodology, which resulted in a reduced return in retail rates. Subsequently, the 2022 Rate Case decision allowed for the full return on the pension asset in rate base. See Note 7 for further discussion.

(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.”

(e)See “Court Resolution Surcharge” discussion above.

(f)Collected in retail rates.

(g)Amortization periods vary based on specific terms of lease contract.

Schedule of Regulatory Liabilities

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




	Amortization Through	June 30, 2025		December 31, 2024
Excess deferred income taxes - ACC — Tax Cuts and Jobs Act (a)	2046	$	876,142	$	888,896
Excess deferred income taxes - FERC — Tax Cuts and Jobs Act (a)	2058	205,166		207,400
Asset retirement obligations and removal costs	(d)	357,327		358,403
Other postretirement benefits	(c)	228,956		238,113

Four Corners coal reclamation	2038	97,617		77,532
Renewable energy standard (b)	2026	76,796		68,523
Income taxes — deferred investment tax credit	2056	65,449		66,327
Income taxes — change in rates	2053	58,246		59,133
Demand side management (b)	2025	30,983		23,927
Deferred fuel and purchased power — mark-to-market (Note 9)	2028	27,058		—
Sundance maintenance	2031	24,634		23,086
Spent nuclear fuel	2027	23,733		26,818
TCA Balancing Account (b)	2027	14,771		14,834
Tax expense adjustor mechanism (b)	2032	4,041		4,343
Property tax deferral	2027	3,690		4,785


Other	Various	128		113
Total regulatory liabilities		$	2,094,737	$	2,062,233
Less: current regulatory liabilities		$	182,458	$	206,955
Total non-current regulatory liabilities		$	1,912,279	$	1,855,278

(a)For purposes of presentation on the Statements 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)See Note 7.

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