Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2018

Schedule of changes in the deferred fuel and purchased power regulatory asset

The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) for 2018 and 2017 (dollars in thousands):



	Three Months Ended March 31,
	2018			2017
Beginning balance	$	75,637		$	12,465
Deferred fuel and purchased power costs — current period	18,950			988
Amounts refunded/(charged) to customers	(20,002		)	4,172
Ending balance	$	74,585		$	17,625

Schedule of regulatory assets

The detail of regulatory assets is as follows (dollars in thousands):



	Amortization Through	March 31, 2018				December 31, 2017
	Amortization Through	Current		Non-Current		Current		Non-Current
Pension	(a)	$	—	$	569,784	$	—	$	576,188
Retired power plant costs	2033	26,668		180,298		27,402		188,843
Income taxes — allowance for funds used during construction ("AFUDC") equity	2048	3,818		143,619		3,828		142,852
Deferred fuel and purchased power — mark-to-market (Note 7)	2021	62,069		45,788		52,100		34,845
Deferred fuel and purchased power (b) (d)	2019	74,585		—		75,637		—
Four Corners cost deferral	2024	8,077		46,285		8,077		48,305
Income taxes — investment tax credit basis adjustment	2046	1,066		26,198		1,066		26,218
Lost fixed cost recovery (b)	2019	54,384		—		59,844		—
Palo Verde VIEs (Note 6)	2046	—		19,550		—		19,395
Deferred compensation	2036	—		37,650		—		36,413
Deferred property taxes	2027	8,569		73,244		8,569		74,926
Loss on reacquired debt	2038	1,637		14,896		1,637		15,305
Tax expense of Medicare subsidy	2024	1,235		7,387		1,236		7,415
Transmission cost adjustor (b)	2019	6,867		—		1,220		—
AG-1 deferral	2022	2,654		7,809		2,654		8,472
Mead-Phoenix transmission line CIAC	2050	332		10,293		332		10,376
Coal reclamation	2026	1,068		12,468		1,068		12,396
Other	Various	46		4,991		3,418		353
Total regulatory assets (c)		$	253,075	$	1,200,260	$	248,088	$	1,202,302


(a)	This asset represents the future recovery of pension benefit obligations through retail rates. If these costs are disallowed by the ACC, this regulatory asset would be charged to OCI and result in lower future revenues.


(b)	See "Cost Recovery Mechanisms" discussion above.


(c)	There are no regulatory assets for which the ACC has allowed recovery of costs, but not allowed a return by exclusion from rate base. FERC rates are set using a formula rate as described in "Transmission Rates, Transmission Cost Adjustor and Other Transmission Matters."


(d)	Subject to a carrying charge.

Schedule of regulatory liabilities

The detail of regulatory liabilities is as follows (dollars in thousands):



	Amortization Through	March 31, 2018				December 31, 2017
	Amortization Through	Current		Non-Current		Current		Non-Current
Excess deferred income taxes - Tax Cuts and Jobs Act	(a)	$	—	$	1,519,224	$	—	$	1,520,274
Asset retirement obligations	2057	—		315,922		—		332,171
Removal costs	(b)	26,949		197,274		18,238		209,191
Other postretirement benefits	(d)	37,642		142,560		37,642		151,985
Income taxes — deferred investment tax credit	2046	2,144		52,478		2,164		52,497
Income taxes — change in rates	2046	2,799		73,703		2,573		70,537
Spent nuclear fuel	2027	6,609		61,736		6,924		62,132
Renewable energy standard (c)	2019	32,694		—		23,155		—
Demand side management (c)	2019	4,049		4,123		3,066		4,921
Sundance maintenance	2030	—		17,299		—		16,897
Deferred gains on utility property	2022	4,423		9,873		4,423		10,988
Four Corners coal reclamation	2038	1,858		18,525		1,858		18,921
Tax expense adjustor mechanism (c)	2018	15,676		—		—		—
Other	Various	1,692		2,700		43		2,022
Total regulatory liabilities		$	136,535	$	2,415,417	$	100,086	$	2,452,536

(a)

While the majority of the excess deferred tax balance shown is subject to special amortization rules under federal income tax laws, which require amortization of the balance over the remaining regulatory life of the related property, treatment of a portion of the liability, and the month in which pass-through of the excess deferred tax balance will begin is subject to regulatory approval. This approval will be sought through the Company's TEAM adjustor mechanism and FERC filings in 2018. As a result, the Company cannot estimate the amount of this regulatory liability which is expected to reverse within the next 12 months. See Note 15.


(b)	In accordance with regulatory accounting guidance, APS accrues for removal costs for its regulated assets, even if there is no legal obligation for removal.


(c)	See “Cost Recovery Mechanisms” discussion above.


(d)	See Note 5.