Nuclear Decommissioning Trust

12 Months Ended

Dec. 31, 2011

Nuclear Decommissioning Trust

Nuclear Decommissioning Trust

23.          Nuclear Decommissioning Trust

To fund the costs APS expects to incur to decommission Palo Verde, APS established external decommissioning trusts in accordance with NRC regulations.  Third-party investment managers are authorized to buy and sell securities per their stated investment guidelines. The trust funds are invested in fixed income securities and equity securities.  APS classifies investments in decommissioning trust funds as available for sale.  As a result, we record the decommissioning trust funds at their fair value on our Consolidated Balance Sheets.  See Note 14 for a discussion of how fair value is determined and the classification of the nuclear decommissioning trust investments within the fair value hierarchy. Because of the ability of APS to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, we have deferred realized and unrealized gains and losses (including other-than-temporary impairments on investment securities) in other regulatory liabilities.  The following table includes the unrealized gains and losses based on the original cost of the investment and summarizes the fair value of APS’s nuclear decommissioning trust fund assets at December 31, 2011 and December 31, 2010 (dollars in millions):

	Fair Value			Total Unrealized Gains		Total Unrealized Losses
2011
Equity securities	$	175		$	44	$	(1	)
Fixed income securities	340			23		(1		)
Net payables (a)	(1		)	—		—
Total	$	514		$	67	$	(2	)

(a)Net payables relate to pending securities sales and purchases.

	Fair Value			Total Unrealized Gains		Total Unrealized Losses
2010
Equity securities	$	168		$	43	$	(1	)
Fixed income securities	312			12		(2		)
Net payables (a)	(10		)	—		—
Total	$	470		$	55	$	(3	)

(a)           Net payables relate to pending securities sales and purchases.

The costs of securities sold are determined on the basis of specific identification.  The following table sets forth approximate gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds (dollars in millions):

	Year Ended December 31,
	2011			2010			2009
Realized gains	$	8		$	17		$	10
Realized losses	(5		)	(4		)	(7		)
Proceeds from the sale of securities (a)	498			560			441

(a)           Proceeds are reinvested in the trust.

The fair value of fixed income securities, summarized by contractual maturities, at December 31, 2011 is as follows (dollars in millions):

	Fair Value
Less than one year	$	13
1 year - 5 years	83
5 years - 10 years	114
Greater than 10 years	130
Total	$	340