Regulatory Matters

9 Months Ended

Sep. 30, 2011

Regulatory Matters

Regulatory Matters

Note 3— Regulatory Matters

Construction Accounting. The Missouri Public Service Commission (MPSC) approved a regulatory plan in 2005, allowing construction accounting. Construction accounting, for the purposes of this regulatory plan, was specific to Iatan 1 and Iatan 2 and allowed us to defer certain charges as regulatory assets. These deferred charges included depreciation, operations and maintenance and carrying costs related to operation of the facilities until the facilities were ultimately included in our rates. The regulatory plan also required us to continue to defer the fuel and purchased power expense impacts of Iatan 2, which were approximately $8.3 million as of September 30, 2011 and are recorded in Non-Current Regulatory Liabilities. Construction accounting began for Iatan 2 in August 2010 when it met its in-service criteria on August 26, 2010. In addition, in our 2009 Missouri rate case, construction accounting was approved for Plum Point, which met its in-service criteria on August 13, 2010. Construction accounting for Plum Point applied only to construction costs incurred subsequent to February 28, 2010. All of these deferrals began at the in-service dates and are to be amortized at the weighted average of the current depreciation rates for these plants once they were included in our rates, which for Iatan 2 and Plum Point was on June 15, 2011, the effective date of rates for our recently completed Missouri rate case. The amortization of the deferred Iatan 1 costs began in September 2010.

As part of a stipulated agreement in our 2009 Kansas rate case, approved by the KCC on June 25, 2010, we also defer depreciation and operating and maintenance expense on both Plum Point and Iatan 2 from their respective in-service dates until the effective date for rates from the next Kansas case, which was filed on June 17, 2011 as an abbreviated case. These deferrals will be recovered over a 3-5 year period as determined in the next case. (See Note 7 for additional details).

Rate base inclusion or amortizable lives for some of our regulatory assets and liabilities have been modified since December 31, 2010. As a result of our recently completed Missouri rate case, a tracking mechanism has been created to track the 2010 Southwest Power Administration (SWPA) payment and associated taxes (see Note 12). The Missouri jurisdictional portion of the payment will be amortized over ten years and reflected as a reduction to fuel expense. The Arkansas jurisdictional portion of the 2010 SWPA payment will be amortized on a straight-line basis over a 50 year period and reflected in the fuel adjustment clause. A tracking mechanism was also created related to the Plum Point, Iatan 2 and Iatan common plant operating expenses. The tracker is to exclude consumables and SO2 allowances which are recovered through the fuel adjustment clause. A regulatory asset or liability will be recorded for the difference between the Missouri jurisdictional portion of actual expenses and the annual recovery allowance with a corresponding charge or credit to regulated operating expense.

The following table sets forth the components of our regulatory assets and liabilities on our consolidated balance sheet (in thousands).

Regulatory Assets and Liabilities

	September 30, 2011		December 31, 2010
Regulatory Assets:
Under recovered electric fuel and purchased power costs — current	$	8,770	$	4,974
Regulatory assets, current(1)	8,770		4,974
Pension and other postretirement benefits(2)	85,700		92,192
Income taxes	49,707		50,188
Unamortized loss on reacquired debt	11,982		13,099
Deferred operating and maintenance expenses	442		—
Unamortized loss on interest rate derivative	1,541		1,776
Asbury five-year maintenance	606		948
Storm costs(3)	5,440		7,733
Deferred construction accounting costs(4)	17,012		10,521
Asset retirement obligation	3,532		3,412
Under recovered electric fuel and purchased gas costs	1,069		—
Under recovered purchased gas costs — gas segment	1,159		439
Unsettled derivative losses — electric segment	4,505		3,166
Customer programs	3,205		2,119
System reliability — vegetation management	4,871		3,338
Other	713		473
Regulatory assets, long-term	191,484		189,404
Total	$	200,254	$	194,378

	September 30, 2011		December 31, 2010
Regulatory Liabilities:
Over recovered purchased gas costs — gas segment - current	$	120	$	1,243
Regulatory liabilities, current(1)	120		1,243
Cost of removal	70,932		62,756
SWPA payment for Ozark Beach lost generation	25,689		—
Income taxes	12,344		12,715
Unamortized gain on interest rate derivative	3,754		3,881
Pension and other postretirement benefits(5)	3,210		4,604
Deferred construction accounting costs — fuel	8,340		3,126
Over recovered electric fuel and purchased power costs	175		155
Other	—		342
Regulatory liabilities, long-term	124,444		87,579
Total	$	124,564	$	88,822

(1)  Reflects under or over recovered costs expected to be recovered within the next 12 months in Missouri rates.

(2)  Primarily reflects regulatory assets resulting from the unfunded portion of our pension and OPEB liabilities and regulatory accounting for EDG acquisition costs. Approximately $0.4 million in pension and other postretirement benefit costs have been recognized since January 1, 2011 to reflect the amortization of the regulatory assets that were recorded at the time of the EDG acquisition of the Aquila, Inc. gas properties.

(3)  Primarily reflects ice storm costs incurred in 2007.

(4)	Balances as of September 30, 2011	Deferred Carrying Charges		Deferred O&M	Depreciation	Total
	Iatan 1	$	2,738	1,368	1,657	$	5,763
	Iatan 2	$	3,908	4,244	2,689	$	10,841
	Plum Point	$	65	207	136	$	408
	Total					$	17,012
	Balances as of December 31, 2010	Deferred Carrying Charges		Deferred O&M	Depreciation	Total
	Iatan 1	$	2,779	1,388	1,682	$	5,849
	Iatan 2	$	1,770	1,643	1,111	$	4,524
	Plum Point	$	33	70	45	$	148
	Total					$	10,521

(5) Includes the effect of costs incurred that are more or less than those allowed in rates for the Missouri (EDE and EDG) and Kansas (EDE) portion of pension and other postretirement benefit costs. Since January 1, 2011, regulatory liabilities and corresponding expenses have been reduced by approximately $0.5 million as a result of ratemaking treatment.