Regulatory Assets and Liabilities (Notes)

12 Months Ended

Dec. 31, 2020

Regulatory Assets and Liabilities Disclosure [Abstract]

REGULATORY ASSETS AND LIABILITIES

Our regulatory assets and liabilities result from our application of the provisions of ASC Topic 980 and are reflected on our Balance Sheet. Current regulatory assets are included in Prepayments and other. Current regulatory liabilities are included in Exchange gas due to others. These balances are presented on our Balance Sheet on a gross basis and are recoverable or refundable over various periods. Below are the details of our regulatory assets and liabilities as of December 31, 2020 and 2019:


	2020		2019
	(Thousands)
Current regulatory assets:
Levelized depreciation	$	1,360	$	978

Fuel Recovery	52		—
Total current regulatory assets	1,412		978
Non-current regulatory assets:
Grossed-up deferred taxes on equity funds used during construction	5,114		5,498
Levelized depreciation	14,908		16,437
Total non-current regulatory assets	20,022		21,935
Total regulatory assets	$	21,434	$	22,913

Current regulatory liabilities:
Fuel recovery	$	3,232	$	4,121
Non-current regulatory liabilities:
Postretirement benefits	39,391		37,722
Deferred federal taxes-liability	206,527		206,527
Deferred state taxes - liability	12,120		12,120
Customer tax refund	75,694		49,598
Asset retirement obligations, net	21,993		17,065
Total non-current regulatory liabilities	355,725		323,032
Total regulatory liabilities	$	358,957	$	327,153

The significant regulatory assets and liabilities include:

Levelized Depreciation Levelized depreciation allows contract revenue streams to remain constant over the primary contract terms by recognizing lower than book depreciation in the early years and higher than book depreciation in later years. The depreciation component of the levelized incremental rates will equal the accumulated book depreciation by the end of the primary contract terms. The difference between levelized depreciation and straight-line book depreciation is recorded as a FERC approved regulatory asset or liability and is eliminated over the levelization period.

Fuel Recovery These amounts reflect the value of the cumulative volumetric difference between the gas retained from our customers and the gas consumed in operations. These amounts are not included in the rate base, but are expected to be recovered or refunded by changing the fuel reimbursement factor in subsequent fuel filings.

Grossed-Up Deferred Taxes on Equity Funds Used During Construction The regulatory asset balance was established to offset the deferred tax for the equity component of the allowance for funds used during the construction of long-lived assets. All amounts were generated during the period that we were a taxable entity. Taxes on capitalized funds used during construction and the offsetting deferred income taxes are included in the rate base and are recovered over the depreciable lives of the long-lived asset to which they relate.

Postretirement Benefits We seek to recover the actuarially determined cost of postretirement benefits through rates that are set through periodic general rate filings. Any differences between the annual actuarially determined cost and amounts currently being recovered in rates are recorded as regulatory assets or liabilities and collected or refunded through future rate

adjustments. These amounts are not included in the rate base, and we are not currently recovering postretirement benefit costs in our rates (See Note 7. Benefit Plans).

Deferred Federal Taxes-Liability This regulatory liability balance was established as a result of a decrease to rate base deferred taxes due to a decrease to the effective federal income tax rate. The timing of the refund of the regulatory liability to rate payers will be subject to future discussions and negotiations with our customers in our next rate case.

Deferred State Taxes-Liability This regulatory liability balance, following the WPZ Merger, reflects a decrease to rate base deferred taxes due to a decrease to the estimated effective state income tax rates. The timing of the refund of the regulatory liability to rate payers will be subject to future discussions and negotiations with our customers in our next rate case.

Customer Tax Refund In our 2017 Settlement, which became effective January 1, 2018, we agreed with our customers that if federal income tax rates decreased due to subsequent legislation, such as Tax Reform enacted in 2017, we would record a regulatory liability. As a result of Tax Reform, the regulatory liability will be $23.6 million annually plus accrued interest ($5.0 million at December 31, 2020) for the period beginning January 1, 2018 and continuing through the time that our current rates remain effective.

Asset Retirement Obligations, net This regulatory liability balance reflects the amount that we have recovered in our rates related to our future retirement costs offset by depreciation of the ARO asset and changes in the ARO liability due to the passage of time. AROs are expected to be fully recovered through the net negative salvage component of depreciation included in our rates (See Note 10. Asset Retirement Obligations).