Regulatory Matters (Tables)

9 Months Ended

Sep. 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):


	Nine Months Ended September 30,
	2025		2024
Balance at beginning of period	$	287,597	$	463,195
Deferred fuel and purchased power costs	276,327		244,109
Amounts charged to customers	(358,871)		(340,030)
Balance at end of period	$	205,053	$	367,274

Schedule of Regulatory Assets

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




	Amortization Through	September 30, 2025		December 31, 2024
Pension	(a)	$	722,942	$	750,976
Deferred fuel and purchased power (b) (c)	2026	205,053		287,597
Income taxes — allowance for funds used during construction equity	2054	204,422		192,936
Palo Verde sale leaseback noncontrolling interests acquisition (Note 8) (d)	2046	151,506		—
Ocotillo deferral	2034	103,642		114,775
Lease incentives	(e)	91,192		70,541
SCR deferral (f)	2038	78,670		83,123
Retired power plant costs	2033	57,799		68,380
FERC Transmission true up	2027	39,095		35,159
Income taxes — investment tax credit basis adjustment	2056	33,327		34,834
Deferred compensation	2036	32,789		33,108
Deferred fuel and purchased power — mark-to-market (Note 9)	2026	26,651		42,275
Deferred property taxes	2027	17,491		23,918
Mead-Phoenix transmission line — contributions in aid of construction ("CIAC")	2050	8,135		8,384
Palo Verde VIEs (Note 8)	2046	8,095		20,611
Loss on reacquired debt	2038	5,910		6,682
Power supply adjustor - interest	2026	4,836		11,525
Active union medical trust	(g)	4,352		9,673
Tax expense adjustor mechanism (b)	2031	4,043		4,534
Navajo Coal reclamation	2026	3,593		7,905
Other	Various	3,392		3,522
Total regulatory assets (h)		$	1,806,935	$	1,810,458
Less: current regulatory assets		$	335,625	$	420,969
Total non-current regulatory assets		$	1,471,310	$	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/loss and result in lower future revenues. The 2022 Rate Case decision allows 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)This asset relates to the acquisition of previously leased interest in Palo Verde Unit 2. See Note 8.

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

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

(g)Collected in retail rates.

(h)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, TCA and Other Transmission Matters.”

Schedule of Regulatory Liabilities

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




	Amortization Through	September 30, 2025		December 31, 2024
Excess deferred income taxes - ACC — Tax Cuts and Jobs Act (a)	2046	$	849,886	$	888,896
Excess deferred income taxes - FERC — Tax Cuts and Jobs Act (a)	2058	200,567		207,400
Asset retirement obligations and removal costs	(b)	314,510		358,403
Other postretirement benefits	(c)	226,043		238,113

Four Corners coal reclamation	2038	97,857		77,532
Income taxes — deferred investment tax credit	2056	63,663		66,327
Income taxes — change in rates	2053	56,421		59,133
Renewable energy standard (d)	2026	43,190		68,523
Demand side management (d)	2025	30,591		23,927
Sundance maintenance	2031	25,408		23,086
Spent nuclear fuel	2027	22,357		26,818
Deferred fuel and purchased power — mark-to-market (Note 9)	2028	15,600		—
TCA Balancing Account (d)	2027	10,413		14,834
Tax expense adjustor mechanism (d)	2032	3,889		4,343
Property tax deferral	2027	3,143		4,785


Other	Various	456		113
Total regulatory liabilities		$	1,963,994	$	2,062,233
Less: current regulatory liabilities		$	194,094	$	206,955
Total non-current regulatory liabilities		$	1,769,900	$	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)In accordance with regulatory accounting, APS accrues removal costs for its regulated assets, even if there is no legal obligation for removal.

(c)See Note 7.

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