Retirement Plans and Other Benefits

9 Months Ended

Sep. 30, 2012

Retirement Plans and Other Benefits

Retirement Plans and Other Benefits

4.Retirement Plans and Other Benefits

Pinnacle West sponsors a qualified defined benefit and account balance pension plan, a non-qualified supplemental excess benefit retirement plan, and other postretirement benefit plans for the employees of Pinnacle West and our subsidiaries.  Pinnacle West uses a December 31 measurement date for its pension and other postretirement benefit plans.  The market-related value of our plan assets is their fair value at the measurement date.  See Note 14 for the fair value discussion of plan assets held in our retirement and other benefit plans.

Certain pension and other postretirement benefit costs in excess of amounts recovered in electric retail rates were deferred as a regulatory asset for future recovery, pursuant to an ACC regulatory order.  We deferred pension and other postretirement benefit costs of approximately $3 million for the three months ended September 30, 2011, and approximately $14 million and $9 million for the nine months ended September 30, 2012 and 2011, respectively.  Pursuant to an ACC regulatory order, we began amortizing the regulatory asset in July 2012.  We amortized approximately $2 million for the three and nine months ended September 30, 2012. The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction, billed to electric plant participants or charged or amortized to the regulatory asset) (dollars in millions):

	Pension Benefits												Other Benefits
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011			2012			2011			2012			2011
Service cost - benefits earned during the period	$	16		$	14		$	48		$	43		$	7		$	5		$	20		$	17
Interest cost on benefit obligation	30			31			90			94			12			12			35			35
Expected return on plan assets	(35		)	(33		)	(106		)	(100		)	(12		)	(10		)	(34		)	(31		)
Amortization of:
Prior service cost	—			—			1			1			—			—			—			—
Net actuarial loss	11			7			33			19			5			4			15			11
Net periodic benefit cost	$	22		$	19		$	66		$	57		$	12		$	11		$	36		$	32
Portion of cost charged to expense	$	12		$	7		$	25		$	22		$	7		$	4		$	13		$	12

Contributions

We have contributed $65 million to our pension plan year to date in 2012.  The minimum contributions for the pension plan due in 2013 and 2014 under the recently enacted Moving Ahead for Progress in the 21st Century Act (MAP-21) are estimated to be zero and $89 million, respectively.  However, we are currently evaluating future expected contributions considering the pension plan’s current funded status, discount rates, interest rates, investment returns and actual contributions made in prior years, among other factors, to determine the level to which future contributions may exceed these new minimum funding levels.  The contributions to our other postretirement benefit plans for 2012, 2013 and 2014 are expected to be approximately $20 million each year.