Retirement Plans and Other Benefits

9 Months Ended

Sep. 30, 2011

Retirement Plans and Other Benefits

Retirement Plans and Other Benefits

4. Retirement Plans and Other Benefits

Pinnacle West sponsors a qualified defined benefit and account balance pension plan, a non-qualified supplemental excess benefit retirement plan, and other postretirement benefit plans for the employees of Pinnacle West and our subsidiaries.  Pinnacle West uses a December 31 measurement date for its pension and other postretirement benefit plans.  The market-related value of our plan assets is their fair value at the measurement date.

Certain pension and other postretirement benefit costs in excess of amounts recovered in electric retail rates are deferred as a regulatory asset for future recovery, pursuant to an ACC regulatory order.  The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction, billed to electric plant participants or charged to the regulatory asset) (dollars in millions):

	Pension Benefits												Other Benefits
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010			2011			2010			2011			2010
Service cost - benefits earned during the period	$	14		$	14		$	43		$	42		$	5		$	4		$	17		$	14
Interest cost on benefit obligation	31			31			94			92			12			11			35			32
Expected return on plan assets	(33		)	(31		)	(100		)	(93		)	(10		)	(9		)	(31		)	(29		)
Amortization of:
Prior service cost	—			—			1			1			—			—			—			—
Net actuarial loss	7			5			19			15			4			2			11			7
Net periodic benefit cost	$	19		$	19		$	57		$	57		$	11		$	8		$	32		$	24
Portion of cost charged to expense	$	7		$	10		$	22		$	29		$	4		$	4		$	12		$	12

Contributions

The required minimum contribution to our pension plan is zero in 2011 and approximately $68 million in 2012.  The contributions to our other postretirement benefit plans for 2011 and 2012 are expected to be approximately $20 million each year.