Note 4 — Regulatory Assets and Liabilities

Cleco capitalizes or defers certain costs for recovery from customers and recognizes a liability for amounts expected to be returned to customers based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered or refunded through the ratemaking process.

Under the current regulatory environment, Cleco believes these regulatory assets will be fully recoverable; however, if in the future, as a result of regulatory changes or competition, Cleco’s ability to recover these regulatory assets would no longer be probable, then to the extent that such regulatory assets were determined not to be recoverable, Cleco would be required to write-down such assets. In addition, potential deregulation of the industry or possible future changes in the method of rate regulation of Cleco could require discontinuance of the application of the authoritative guidance on regulated operations.

The following table summarizes Cleco Power’s regulatory assets and liabilities:



(THOUSANDS)	AT JUNE 30, 2017		AT DEC. 31, 2016
Regulatory assets – deferred taxes, net	$	240,319	$	237,449
Mining costs	5,098		6,372
Interest costs	4,680		4,860
AROs	2,420		2,096
Postretirement costs	140,300		145,268
Tree trimming costs	6,280		5,549
Training costs	6,630		6,708
Surcredits, net	4,161		5,876
AMI deferred revenue requirement	4,499		4,772
Late/reconnect fees	3,154		—
Production operations and maintenance expenses	11,055		13,999
AFUDC equity gross-up	69,958		70,423
Acadia Unit 1 acquisition costs	2,389		2,442
Financing costs	8,478		8,663
Biomass costs	3		18
MISO integration costs	936		1,404
Coughlin transaction costs	984		999
Corporate franchise tax	1,290		1,308
MATS costs	5,128		4,270
Other	1,098		710
Total regulatory assets	278,541		285,737
Fuel and purchased power	26,922		20,787
Total regulatory assets, net	$	545,782	$	543,973

The following table summarizes Cleco’s net regulatory assets and liabilities:



(THOUSANDS)	AT JUNE 30, 2017		AT DEC. 31, 2016
Total Cleco Power regulatory assets, net	$	545,782	$	543,973
Cleco Holdings’ Merger adjustments ⁽¹⁾
Fair value of long-term debt	151,368		155,776
Postretirement costs	22,368		23,362
Financing costs	8,794		8,966
Debt issuance costs	6,872		7,606
Total Cleco regulatory assets, net	$	735,184	$	739,683

⁽¹⁾Cleco Holdings’ regulatory assets include acquisition accounting adjustments as a result

of the Merger.

Late/Reconnect Fees

In August 2016, the LPSC issued executive orders following flooding events in south Louisiana which prohibited public utilities from disconnecting or charging late fees to customers for non-payment in affected parishes. In January 2017, the LPSC issued an order terminating those executive orders effective March 1, 2017. The January 2017 order also provided that public utilities were entitled to formally petition the LPSC to recover lost revenues as a result of the executive orders issued in August 2016. Beginning July 2017, Cleco Power’s lost revenues related to reconnect and late fees of $3.2 million are being recovered and amortized over a three-year period.

Cleco Holdings’ Merger Adjustments

As a result of the Merger, Cleco implemented acquisition accounting, which eliminated AOCI at the Cleco consolidated level on the date of the Merger. Cleco will continue to recover expenses related to certain postretirement costs; therefore, Cleco recognized a regulatory asset based on its determination that these costs can continue to be collected from customers. These costs will be amortized to Other operations expense over the average remaining service period of participating employees. Cleco will also continue to recover financing costs associated with the settlement of two treasury rate locks and a forward starting swap contract that were previously recognized in AOCI. Additionally, as a result of the Merger, a regulatory asset was recorded for debt issuance costs that were eliminated at Cleco and a regulatory asset was recorded for the difference between the carrying value and the fair value of long-term debt. These regulatory assets will be amortized over the terms of the related debt issuances. On March 1, 2017, Cleco completed the repayment of the first of two tranches of its Cleco Katrina/Rita storm recovery bonds issued in March 2008. As a result, the fair value adjustments for the redeemed long-term debt and the related unamortized debt issuance cost of $0.7 million on Cleco’s Condensed Consolidated Balance Sheet were derecognized. The offset was to the respective regulatory assets.