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REGULATORY ASSETS AND LIABILITIES (Notes)
12 Months Ended
Dec. 31, 2021
SCHEDULE OF REGULATED ASSETS AND LIABILITIES [Line Items]  
Schedule of Regulatory Assets and Liabilities REGULATORY ASSETS AND LIABILITIES
The tables below present a summary of regulatory assets, net of amortization, and liabilities for the periods indicated:
December 31, 2021
Remaining Recovery PeriodCurrentNoncurrentTotal
(Thousands of dollars)
Winter weather event costs(a)$1,536,054 $428,023 $1,964,077 
Under-recovered purchased-gas costs1 year31,863  31,863 
Pension and other postemployment benefit costs See Note 1311,507 260,559 272,066 
Reacquired debt costs6 years812 4,070 4,882 
MGP remediation costs15 years98 29,841 29,939 
Ad-valorem tax1 year8,561  8,561 
WNA1 year10,044  10,044 
Customer credit deferrals1 year10,685  10,685 
Other1 to 18 years2,052 2,369 4,421 
Total regulatory assets, net of amortization1,611,676 724,862 2,336,538 
Income tax rate changes(a) (552,928)(552,928)
Over-recovered purchased-gas costs1 year(8,090) (8,090)
Total regulatory liabilities(8,090)(552,928)(561,018)
Net regulatory assets and liabilities$1,603,586 $171,934 $1,775,520 
(a) Recovery period varies by jurisdiction. See discussion below for additional information regarding our regulatory assets related to winter weather event costs and regulatory liabilities related to federal income tax rate changes.

December 31, 2020
Remaining Recovery PeriodCurrentNoncurrentTotal
(Thousands of dollars)
Under-recovered purchased-gas costs1 year$16,502 $— $16,502 
Pension and other postemployment benefit costsSee Note 1316,541 341,266 357,807 
Reacquired debt costs7 years812 4,866 5,678 
MGP remediation costs15 years98 18,711 18,809 
Ad-valorem tax1 year5,558 — 5,558 
WNA1 year4,806 — 4,806 
Customer credit deferrals1 year10,267 — 10,267 
Other1 to 18 years2,189 2,113 4,302 
Total regulatory assets, net of amortization56,773 366,956 423,729 
Income tax rate changes(a)— (547,563)(547,563)
Over-recovered purchased-gas costs1 year(15,761)— (15,761)
Total regulatory liabilities(15,761)(547,563)(563,324)
Net regulatory assets and liabilities$41,012 $(180,607)$(139,595)
(a) Recovery period varies by jurisdiction. See discussion below for additional information regarding our regulatory liabilities related to federal income tax rate changes.

Regulatory assets in our consolidated balance sheets, as authorized by various regulatory authorities, are probable of recovery. Base rates and certain riders are designed to provide a recovery of costs during the period such rates are in effect, but do not generally provide for a return on investment for amounts we have deferred as regulatory assets. All of our regulatory assets are subject to review by the respective regulatory authorities during future regulatory proceedings. We are not aware of any evidence that these costs will not be recoverable through either riders or base rates, and we believe that we will be able to recover such costs consistent with our historical recoveries.

Winter weather event costs - In February 2021, the U.S. experienced Winter Storm Uri, a historic winter weather event impacting supply, market pricing and demand for natural gas in a number of states, including our service territories of Kansas, Oklahoma, and Texas. During this time, the governors of Kansas, Oklahoma, and Texas each declared a state of emergency, and certain regulatory agencies issued emergency orders that impacted the utility and natural gas industries, including statewide
utility curtailment programs and orders requiring jurisdictional natural gas and electric utilities to do all things possible and necessary to ensure that natural gas and electricity utility services continued to be provided to their customers. Due to the historic nature of this winter weather event, we experienced unforeseeable and unprecedented market pricing for natural gas in our Kansas, Oklahoma, and Texas jurisdictions, which resulted in aggregated natural gas purchases for the month of February 2021 of approximately $2.1 billion.

On February 16, 2021, the OCC approved an emergency order (i) directing natural gas and electric utilities to prioritize deliveries of natural gas and electricity for services necessary for life, health, and public safety, and of natural gas to electric generation facilities that serve human needs customers, and (ii) directing local utilities to communicate with their customers in order to reduce all non-essential energy consumption, and to reduce load in a safe and reasonable manner. The OCC order recognized that the severe weather conditions resulted in increased commodity prices for both gas and electric utilities, along with issues relating to commodity acquisition, line pressure, and supply shortages. The OCC order expired on February 20, 2021.

In response to a motion filed by Oklahoma Natural Gas, on March 2, 2021, the OCC issued an order stating that Oklahoma Natural Gas shall defer to a regulatory asset the extraordinary costs associated with this unprecedented winter weather event, including commodity costs, operational costs and carrying costs. The order further states that after all deferred costs have been accumulated and recorded, Oklahoma Natural Gas shall file a compliance report detailing the extent of such costs incurred. The order also provided that recovery of the deferred costs will be addressed in a future proceeding that will include a prudence review.

In April 2021, a bill permitting the state to pursue securitized financing of extraordinary expenses, such as fuel costs, financing costs and other operational costs incurred by regulated utilities during extreme weather events, was signed into law by the Oklahoma governor. This bill gives the OCC the authority to approve amounts to be recovered from the issuance of ratepayer-backed securitized bonds by the ODFA.

On April 29, 2021, Oklahoma Natural Gas submitted an initial application requesting a financing order pursuant to this legislation. On July 30, 2021, Oklahoma Natural Gas filed a supplemental motion with its compliance report pursuant to the March 2, 2021 order from the OCC detailing the extent of extraordinary costs incurred and all required components pursuant to the legislation for the issuance of a financing order, which includes a proposed period of 20 years over which these costs will be collected from customers. On October 4, 2021, the Public Utility Division of the OCC filed responsive testimony recommending that a financing order for securitization be approved. A joint stipulation and settlement was filed on November 18, 2021, ahead of the hearing before the administrative law judge on November 22, 2021. The joint stipulation and settlement agreement includes an agreement that a financing order should be issued to recover through securitization all extreme gas purchase and extraordinary costs over a 25-year period. At the hearing on November 22, 2021, the administrative law judge recommended approval of the joint stipulation and settlement agreement. On January 25, 2022, the OCC approved a financing order, which reflected the terms of the settlement agreement. Following the issuance of the financing order, there is a 30-day period during which parties to our application may appeal the financing order to the Oklahoma Supreme Court. The securitization legislation allows the ODFA 24 months to complete the process to issue the securitized bonds; however, the financing order requests the ODFA to issue bonds and provide the net proceeds to Oklahoma Natural Gas as soon as feasible, but no later than December 31, 2022. At December 31, 2021, Oklahoma Natural Gas has deferred approximately $1.3 billion in extraordinary costs attributable to Winter Storm Uri.

On February 15, 2021, the KCC issued an emergency order (i) directing all jurisdictional natural gas and electric utilities to coordinate efforts and take all reasonably feasible, lawful, and appropriate actions to ensure adequate delivery of natural gas and electricity to interconnected, non-jurisdictional utilities in Kansas, (ii) requiring jurisdictional natural gas and electric utilities to do all things possible and necessary to ensure that natural gas and electricity utility services continued to be provided to their customers in Kansas, and (iii) allowing those electric and natural gas distribution utilities who incur extraordinary costs to ensure their customers and other interconnected customers continued to receive utility service during this unprecedented cold weather event to defer those costs and carrying costs to a regulatory asset account. Each jurisdictional utility was required to file a compliance report detailing the extent of such costs incurred and presenting a plan to minimize the financial impacts of this event on ratepayers over a reasonable time frame. These costs were subject to review for reasonableness and accuracy in future regulatory proceedings. In March 2021, the KCC issued an order adopting the KCC staff’s recommendation to open company-specific dockets to accept each utility’s filing of financial impact compliance reports and permit the KCC staff to conduct a review of the utility’s compliance report and its actions during the winter weather event. In April 2021, a bill permitting the utilities to pursue securitization to finance extraordinary expenses incurred during extreme weather events, was signed into law by the Kansas governor. The bill gives the KCC the authority to oversee and authorize the issuance of ratepayer-backed securitized bonds issued by a public utility.
In May 2021, Kansas Gas Service filed a motion in its company-specific docket opened by the KCC, requesting a limited waiver of the penalty provisions of its tariff to eliminate the multipliers in the penalty calculation when calculating the penalties to assess on marketers and individually-balanced transportation customers for their unauthorized natural gas usage during Winter Storm Uri. In October 2021, a nonunanimous settlement agreement was filed with the KCC to reach a resolution on these penalties. Prior to a hearing on the amended settlement in January 2022, all parties reached a unanimous settlement, which was filed with a motion requesting approval of the unanimous settlement. Under the terms of the amended unanimous settlement, if approved, the carrying charge on assessed penalties was reduced to two percent, consistent with the nonunanimous agreement in the financial docket. Any amounts collected from these penalties would reduce the regulatory asset for the winter weather event by no more than $52.4 million. A hearing on the settlement was held on February 4, 2022. The KCC has until March 7, 2022, to issue an order on the motion.

In July 2021, Kansas Gas Service submitted its financial plan to the KCC as required by the company-specific docket opened by the KCC in March 2021. The plan includes a proposal to issue securitized bonds to recover the extraordinary costs resulting from Winter Storm Uri from its customers over a period of either 5, 7, or 10 years. In November 2021, a nonunanimous settlement agreement was filed with the KCC that would allow Kansas Gas Service to recover extraordinary costs as of October 31, 2021, net of any penalties recovered from marketers and individually-balanced transportation customers, plus carrying costs calculated at two percent. Subsequently, all parties reached agreement on the settlement’s terms which resulted in the nonunanimous agreement becoming a unanimous settlement agreement. The extraordinary costs, other than purchased gas costs, will be trued-up and validated. The settlement agreement supports Kansas Gas Service seeking a financing order from the KCC for the issuance of securitized utility tariff bonds. The KCC issued an order approving the unanimous settlement agreement on February 8, 2022. Kansas Gas Service expects to file an application, in a separate proceeding, requesting a financing order in the first quarter of 2022. The KCC will have 180 days from the date of the filing to consider Kansas Gas Service’s application. If the KCC approves the financing order, we can begin the process to issue the securitized bonds. At December 31, 2021, Kansas Gas Service has deferred approximately $388.3 million in extraordinary costs associated with Winter Storm Uri and has not collected any penalties from marketers or individually-balanced transportation customers.

On February 13, 2021, the RRC issued a Notice to Local Distribution Companies acknowledging that due to the demand for natural gas expected during the upcoming winter weather event, natural gas utility LDCs may be required to pay extraordinarily high prices in the market for natural gas and may be subjected to other extraordinary costs when responding to the event. The RRC also encouraged natural gas utilities to continue to work to ensure that the citizens of the State of Texas were provided with safe and reliable natural gas service. To partially defer and reduce the impact on customers for these costs that ultimately are reflected in customer bills, the RRC authorized LDCs to record a regulatory asset to account for the extraordinary costs associated with this winter weather event, including but not limited to gas cost and other costs related to the procurement and transportation of gas supply. These costs will be subject to review for reasonableness and accuracy in future regulatory proceedings.

In June 2021, a bill permitting the state to pursue securitized financing of extraordinary expenses, such as fuel costs, financing costs and other operational costs incurred by utilities during Winter Storm Uri, was signed into law by the Texas governor. This bill gives the RRC the authority to approve amounts to be recovered from the issuance of ratepayer-backed securitized bonds by the TPFA. Pursuant to this legislation and a June 17, 2021 RRC Notice to Gas Utilities, Texas Gas Service submitted an application to the RRC on July 30, 2021, for an order authorizing the amount of extraordinary costs for recovery and other such specifications necessary for the issuance of securitized bonds.

In October 2021, Texas Gas Service, the other natural gas utilities in Texas participating in the securitization process, the staff of the RRC and all intervenors filed a unanimous settlement agreement with the RRC. The settlement agreement provides that all costs to purchase natural gas during Winter Storm Uri by Texas Gas Service were reasonable, necessary and prudently incurred. Texas Gas Service agreed to reduce its regulatory asset amount to be securitized by the amount of extraordinary costs attributable to the West Texas service area, which will be recovered through a separate surcharge over a three-year period. The unanimous settlement agreement was approved by the RRC in November 2021.

On February 8, 2022, the RRC issued a single financing order for Texas Gas Service and other natural gas utilities in Texas participating in the securitization process, which included a determination that the approved costs will be collected from customers over a period of not more than 30 years. The TPFA formed the Texas Natural Gas Securitization Finance Corporation, a new independent public authority, for purposes of issuing the securitized bonds and has begun the process to issue the securitized bonds. At December 31, 2021, Texas Gas Service has deferred approximately $256.6 million in extraordinary costs associated with Winter Storm Uri, which includes $59.5 million attributable to the West Texas service area. Pursuant to the approved settlement order, Texas Gas Service began collecting the extraordinary costs, including carrying costs, associated with Winter Storm Uri attributable to the West Texas service area from those customers in January 2022.
We intend to use the proceeds of these securitized bonds to satisfy our senior notes coming due in March 2023.

In accordance with these regulatory orders associated with the winter weather event, we have deferred approximately $2.0 billion in extraordinary costs for natural gas purchases, related financing and carrying costs and other operational costs, which includes $1.3 billion of costs attributable to Oklahoma Natural Gas customers, $388.3 million of costs attributable to Kansas Gas Service customers and $256.6 million of costs attributable to Texas Gas Service customers, including $59.5 million attributable to the West Texas service area that will be recovered over a three year period beginning January 1, 2022. The amounts deferred at December 31, 2021, include invoiced costs for natural gas purchases that have not been paid as we work with our suppliers to resolve discrepancies in invoiced amounts. The amounts deferred may be adjusted as the differences are resolved. In addition, as a result of Winter Storm Uri, we were assessed penalties as a result of over- or under-deliveries of natural gas during periods that operational flow orders were imposed on us. Regarding Kansas Gas Service’s motion requesting a limited waiver of penalty provisions of its tariff, if the nonunanimous settlement agreement filed with the KCC is approved, we anticipate assessing penalties on the marketers and individually-balanced transport customers we serve or their agents. Amounts recorded reflect management’s best estimate of the amounts we may pay or receive and may be adjusted in future periods as the disposition of such penalties is determined. As these amounts are related to the extraordinary gas purchase costs associated with Winter Storm Uri, which are deferred, future adjustments to the amounts we have deferred are not expected to have a material impact on earnings.

Other regulatory assets and liabilities - Purchased-gas costs represent the natural gas costs that have been over- or under- recovered from customers through the purchased-gas cost adjustment mechanisms, and includes natural gas utilized in our operations and premiums paid and any cash settlements received from our purchased natural gas call options.

The OCC, KCC and regulatory authorities in Texas have approved the recovery of pension costs and other postemployment benefits costs through rates for Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service, respectively. The costs recovered through rates are based on the net periodic benefit cost for defined benefit pension and other postemployment costs. Differences, if any, between the net periodic benefit cost, net of deferrals, and the amount recovered through rates are reflected in earnings. We historically have recovered defined benefit pension and other postemployment benefit costs through rates. We believe it is probable that regulators will continue to include the net periodic pension and other postemployment benefit costs in our cost of service.

We amortize reacquired debt costs in accordance with the accounting guidelines prescribed by the OCC and KCC.

Weather normalization represents revenue over- or under- recovered through the WNA rider in Kansas. This amount is deferred as a regulatory asset or liability for a 12-month period. Kansas Gas Service then applies an adjustment to the customers’ bills for 12 months to refund the over-collected revenue or bill the under-collected revenue.

Ad-valorem tax represents an increase or decrease in Kansas Gas Service’s taxes above or below the amount approved in base rates. This amount is deferred as a regulatory asset or liability for a 12-month period. Kansas Gas Service then applies an adjustment to the customers’ bills for 12 months to refund the over-collected revenue or bill the under-collected revenue.

The customer credit deferrals and the noncurrent regulatory liability for income tax rate changes represents deferral of the effects of enacted federal and state income tax rate changes on our ADIT and the effects of these changes on our rates. At December 31, 2021, the noncurrent regulatory liability for income tax rate changes includes the reclassification of $29.3 million of deferred taxes related to the reduction of the state income tax rate in Oklahoma. Additionally, it includes the reclassification of $84.2 million of deferred taxes related to the elimination of state income tax for utilities in Kansas at December 31, 2021 and 2020. See Note 14 for additional information regarding the impact of income tax rate changes during the year ended December 31, 2021.

See Note 16 for additional information regarding our regulatory assets for MGP remediation costs.

We have received accounting orders in each of our jurisdictions authorizing us to accumulate and defer for regulatory purposes certain incremental costs incurred, including bad debt expenses, and certain lost revenues, net of offsetting expense reductions associated with COVID-19. Pursuant to these orders, the recovery of any net incremental costs and lost revenues will be determined in future rate cases or alternative rate recovery filings in each jurisdiction. For financial reporting purposes, any amounts deferred as a regulatory asset for future recovery under these accounting orders must be probable of recovery. At December 31, 2021, no regulatory assets have been recorded. We continue to evaluate the impacts of COVID-19 on our business and will record regulatory assets for financial reporting purposes at such time as recovery is deemed probable.
Recovery through rates resulted in amortization of regulatory assets of approximately $5.5 million, $3.2 million and $2.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.