Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2012

Regulatory Matters

Changes in the deferred fuel and purchased power regulatory asset (liability)

	Nine Months Ended September 30,
	2012			2011
Beginning balance	$	28		$	(58	)
Deferred fuel and purchased power costs — current period	(52		)	(31		)
Amounts credited to customers	92			121
Ending balance	$	68		$	32

Detail of regulatory assets

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

	September 30, 2012				December 31, 2011
	Current		Non-Current		Current		Non-Current
Pension and other postretirement benefits	$	—	$	939	$	—	$	1,023
Income taxes — allowance for funds used during construction (“AFUDC”) equity	3		91		3		81
Deferred fuel and purchased power — mark-to-market (Note 8)	11		16		43		34
Transmission vegetation management	9		25		9		32
Coal reclamation	8		26		2		35
Palo Verde VIEs (Note 7)	—		37		—		35
Deferred compensation	—		35		—		33
Deferred fuel and purchased power (a)	68		—		28		—
Tax expense of Medicare subsidy	2		17		2		18
Loss on reacquired debt	1		18		1		19
Income taxes — investment tax credit basis adjustment	1		17		—		15
Pension and other postretirement benefits deferral	8		15		—		12
Demand side management (a)	—		—		7		1
Other	11		15		2		14
Total regulatory assets (b)	$	122	$	1,251	$	97	$	1,352

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

(b)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 and Transmission Cost Adjustor.”

Detail of regulatory liabilities

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

	September 30, 2012				December 31, 2011
	Current		Non-Current		Current		Non-Current
Removal costs (a)	$	28	$	328	$	22	$	349
Asset retirement obligations	—		258		—		225
Renewable energy standard (b)	47		—		54		—
Income taxes — change in rates	—		59		—		59
Spent nuclear fuel	9		38		5		44
Deferred gains on utility property	2		13		2		14
Income taxes- deferred investment tax credit	1		35		1		30
Demand side management (b)	8		—		—		—
Other	1		16		4		16
Total regulatory liabilities	$	96	$	747	$	88	$	737

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

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