Accounting For Asset Retirement Obligations

6 Months Ended

Jun. 30, 2011

Accounting For Asset Retirement Obligations

Accounting For Asset Retirement Obligations

E. Accounting for Asset Retirement Obligations

The Company complies with FASB guidance for asset retirement obligations ("ARO"). FASB guidance requires the Company to revise its previously recorded ARO for any changes in estimated cash flows including changes in estimated probabilities related to timing of settlements. In the second quarter, the Company implemented the recently approved 2010 Palo Verde decommissioning study, and as a result, revised its ARO related to Palo Verde to (i) increase estimated cash flows from the 2007 Study to the 2010 Study, and (ii) change estimated probabilities due to Palo Verde license extension (see Note D). The assumptions used to calculate the original ARO liability and the revised ARO liability are as follows:

	Escalation Rate			Credit-Risk Adjusted Discount Rate
Original ARO liability		3.6	%		9.5	%
Incremental ARO liability		3.6	%		6.2	%

A roll forward of the Company's ARO liability is presented below and revisions to estimates include both the increase to estimated cash flows and the change in estimated probabilities due to Palo Verde license extension.

	2011			2010
	(in thousands)
ARO liability at beginning of year	$	92,911		$	85,358
Revisions to estimates		(27,076	)		0
Accretion expense		3,532			3,917
Liabilities settled		(72	)		(303	)
ARO liability at June 30	$	69,295		$	88,972