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Palo Verde
9 Months Ended
Sep. 30, 2011
Public Utilities, Property, Plant and Equipment [Abstract] 
Palo Verde
Palo Verde
License Extension. On April 21, 2011, the Company, along with the other Palo Verde Participants, was notified that the NRC had renewed the operating licenses for all three units at Palo Verde. The renewed licenses for Units 1, 2 and 3 will now expire in 2045, 2046 and 2047, respectively. For the second and third quarters of 2011 combined, the extension of the operating licenses had the effect of reducing depreciation and amortization expense by approximately $5.3 million and reducing the accretion expense on the Palo Verde asset retirement obligation by approximately $2.0 million.
Decommissioning. Decommissioning costs are estimated every three years based upon engineering cost studies performed by outside engineers retained by APS. On March 30, 2011, the Palo Verde Participants approved the 2010 Palo Verde decommissioning study (the “2010 Study”). The 2010 Study reflects the increase in the license life from 40 years to 60 years. The 2010 Study estimated that the Company must fund approximately $357.4 million (stated in 2010 dollars) to cover its share of decommissioning costs which was an increase in decommissioning costs from the 2007 Palo Verde decommissioning study (the “2007 Study”). The net effect of these changes will result in lower asset retirement obligations and lower expenses in the future. See Note E for additional discussion. Although the 2010 Study was based on the latest available information, there can be no assurance that decommissioning cost estimates will not increase in the future or that regulatory requirements will not change. In addition, until a new low-level radioactive waste repository opens and operates for a number of years, estimates of the cost to dispose of low-level radioactive waste are subject to significant uncertainty.
Oversight of the Nuclear Energy Industry in the Wake of the Earthquake and Tsunami in Japan. On March 11, 2011, a 9.0 magnitude earthquake occurred off the northeastern coast of Japan. The earthquake produced a tsunami that caused significant damage to the Fukushima Daiichi Nuclear Power Station in Japan. Preliminary data available from the Fukushima Daiichi plant operator and Japanese government have each indicated that the earthquake and tsunami were beyond the plant’s required licensing and design parameters. Validation of that data will continue as more information becomes available.
The Nuclear Energy Institute (“NEI”) and the Institute of Nuclear Power Operations (“INPO”) are working closely to analyze the situation in Japan and develop action plans for U.S. nuclear power plants. APS, which operates Palo Verde Nuclear Generating Station, is actively engaged with NEI and INPO in these efforts. Additionally, the NRC is performing its own independent review of the events at Fukishima Daiichi. On March 23, 2011, the NRC Commissioners voted to launch a review of U.S. nuclear power plant safety. The NRC established an agency task force (the "Task Force") to conduct both near and long-term analyses of the lessons learned from the Fukishima Daiichi nuclear accident in Japan. The report of the Task Force was released on July 12, 2011. The Task Force conducted a systematic and methodical review of NRC processes and regulations to make policy recommendations in light of the accident at Fukishima Daiichi Nuclear Power Plant. The Task Force made certain recommendations and concluded that a sequence of events like the Fukishima accident is unlikely to occur in the United States and some appropriate mitigation measures have been implemented reducing the likelihood of core damage and radiological releases. The Task Force further concluded that continued licensing activities do not pose an imminent risk to public health and safety.