Note 3 — Regulatory Assets and Liabilities

Cleco Power follows the authoritative guidance on regulated operations, which allows utilities to capitalize or defer certain costs based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered through the ratemaking process. The following table summarizes Cleco Power’s regulatory assets and liabilities at March 31, 2014 and December 31, 2013:



(THOUSANDS)	AT MAR. 31, 2014		AT DEC. 31, 2013
Regulatory assets – deferred taxes, net	$	230,489	$	229,173
Mining costs	$	13,382	$	14,019
Interest costs	5,853		5,943
Asset removal costs	954		936
Postretirement plan costs	91,638		93,333
Tree trimming costs	5,560		4,840
Training costs	7,136		7,175
Surcredits, net	17,033		16,738
Amended Lignite mining agreement contingency	3,781		3,781
Power purchase agreement capacity costs	6,143		9,749
AMI deferred revenue requirement	5,400		4,682
Production Operations & Maintenance expenses	8,459		8,459
AFUDC equity gross-up	73,257		73,306
Rate case costs	—		45
Acadia Unit 1 acquisition costs	2,734		2,760
Financing costs	9,679		9,772
Biomass costs	106		114
Total regulatory assets – other	$	251,115	$	255,652
Fuel and purchased power	1,582		(3,869		)
Total regulatory assets, net	$	483,186	$	480,956

Power Purchase Agreement Capacity Costs

In March 2012, Cleco Power received approval from the LPSC for a three-year power purchase agreement with Evangeline providing 730 MW of capacity and energy beginning May 1, 2012 and ending April 30, 2015. The LPSC order allowed Cleco Power to defer and recover a portion of capacity costs associated with the power purchase agreement. On March 15, 2014, Coughlin was transferred to Cleco Power and the power purchase agreement was terminated. The recovery of the remaining capacity costs will be determined as part of Cleco Power’s FRP extension.

Fuel and Purchased Power Costs

The cost of fuel used for electric generation and the cost of power purchased for utility customers are recovered through the LPSC-established FAC, which enables Cleco Power to pass on to its customers substantially all such charges. For the three months ended March 31, 2014, approximately 88% of Cleco Power’s total fuel cost was regulated by the LPSC, while the remainder was regulated by FERC.

The $5.5 million change in the under/over recovered costs was primarily due to a $4.7 million decrease in net mark-to-market gains as a result of lower valuations of open FTR positions and the settlement of certain positions, and an $0.8 million increase in fuel and purchased power costs.