Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2020

Schedule of capital structure and cost of capital

the following proposed capital structure and costs of capital:


	Capital Structure		Cost of Capital
Long-term debt	45.3	%	4.10	%
Common stock equity	54.7	%	10.15	%
Weighted-average cost of capital			7.41	%

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 for 2020 and 2019 (dollars in thousands):


	Nine Months Ended September 30,
	2020		2019
Beginning balance	$	70,137	$	37,164
Deferred fuel and purchased power costs — current period	82,679		60,911
Amounts refunded/(charged) to customers	9,295		(38,601)
Ending balance	$	162,111	$	59,474

Schedule of regulatory assets

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


	Amortization Through	September 30, 2020				December 31, 2019
		Current		Non-Current		Current		Non-Current
Pension	(a)	$	—	$	656,092	$	—	$	660,223
Income taxes — allowance for funds used during construction ("AFUDC") equity	2050	6,815		159,005		6,800		154,974
Deferred fuel and purchased power (b) (c)	2021	162,111		—		70,137		—
Retired power plant costs	2033	28,182		121,259		28,182		142,503
Ocotillo deferral	N/A	—		80,359		—		38,144
SCR deferral	N/A	—		74,576		—		52,644
Deferred property taxes	2027	8,569		51,769		8,569		58,196
Lost fixed cost recovery (b)	2021	37,868		—		26,067		—
Deferred compensation	2036	—		36,481		—		36,464
Four Corners cost deferral	2024	8,077		26,094		8,077		32,152
Income taxes — investment tax credit basis adjustment	2048	1,097		23,850		1,098		24,981
Palo Verde VIEs (Note 6)	2046	—		21,100		—		20,635
Coal reclamation	2026	1,068		17,266		1,546		17,688
Loss on reacquired debt	2038	1,637		10,846		1,637		12,031
Mead-Phoenix transmission line contributions in aid of construction ("CIAC")	2050	332		9,463		332		9,712
Demand Side Management	2021	—		7,259		—		—
Tax expense adjuster mechanism (b) (c)	2020	6,121		—		1,612		—
Deferred fuel and purchased power — mark-to-market (Note 7)	2024	—		5,664		36,887		33,185
Tax expense of Medicare subsidy	2024	1,238		3,728		1,235		4,940
AG-1 deferral	2022	2,787		626		2,787		2,716
TCA balancing account (b)	2021	4,490		—		6,324		2,885
Other	Various	2,478		—		1,917		—
Total regulatory assets (d)		$	272,870	$	1,305,437	$	203,207	$	1,304,073

(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 other comprehensive income ("OCI") and result in lower future revenues. See Note 5.

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

(c)Subject to a carrying charge.

(d)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."

Schedule of regulatory liabilities

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


	Amortization Through	September 30, 2020				December 31, 2019
		Current		Non-Current		Current		Non-Current
Excess deferred income taxes - ACC - Tax Cuts and Jobs Act (a)	2046	$	113,206	$	952,531	$	59,918	$	1,054,053
Excess deferred income taxes - FERC - Tax Cuts and Jobs Act (a)	2058	7,256		229,753		6,302		237,357
Asset retirement obligations	2057	—		442,035		—		418,423
Removal costs	(c)	51,519		112,168		47,356		136,072
Other postretirement benefits	(d)	37,575		109,035		37,575		139,634
Four Corners coal reclamation	2038	5,461		49,151		1,059		51,704
Spent nuclear fuel	2027	6,520		46,526		6,676		51,019
Income taxes — change in rates	2050	2,802		48,541		2,797		68,265
Income taxes — deferred investment tax credit	2048	2,199		47,765		2,202		50,034
Renewable energy standard (b)	2021	35,813		1,128		39,287		10,300
Demand side management (b)	2021	17,394		—		15,024		24,146
Sundance maintenance	2031	2,200		12,303		5,698		11,319
Property tax deferral	N/A	—		11,784		—		7,046
Deferred fuel and purchased power — mark-to-market (Note 7)	2024	10,894		—		—		—
FERC transmission true up	2022	5,965		4,291		1,045		2,004
Active union medical trust	N/A	—		6,993		—		2,041
Tax expense adjustor mechanism (b) (c)	2020	6,542		—		7,018		—
Deferred gains on utility property	2022	2,423		2,379		2,423		4,163
TCA balancing account (b)	2022	—		2,665		—		—
Other	Various	250		275		532		255
Total regulatory liabilities		$	308,019	$	2,079,323	$	234,912	$	2,267,835

(a)For purposes of presentation on the Statement of Cash Flows, amortization of the regulatory liabilities for excess deferred income taxes are reflected as "Deferred income taxes" under Cash Flows From Operating Activities.

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

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

(d)See Note 5.