Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes

Tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, at the beginning and end of the year

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, at the beginning and end of the year that are included in accrued taxes and unrecognized tax benefits (dollars in thousands):

	2012			2011			2010
Total unrecognized tax benefits, January 1	$	136,005		$	127,595		$	201,216
Additions for tax positions of the current year	5,167			10,915			7,551
Reductions for tax positions of prior years for:
Changes in judgment	(7,729		)	(1,555		)	(11,017		)
Settlements with taxing authorities	—			(124		)	(62,199		)
Lapses of applicable statute of limitations	(21		)	(826		)	(7,956		)
Total unrecognized tax benefits, December 31	$	133,422		$	136,005		$	127,595

Components of income tax expense

The components of income tax expense are as follows (dollars in thousands):

	Year Ended December 31,
	2012			2011			2010
Current:
Federal	$	(3,493	)	$	(310	)	$	(108,827	)
State	8,395			15,140			25,545
Total current	4,902			14,830			(83,282		)
Deferred:
Federal	200,322			159,566			260,236
State	28,280			16,626			10,911
Discontinued operations	—			—			(10,736		)
Total deferred	228,602			176,192			260,411
Total income tax expense	233,504			191,022			177,129
Less: income tax expense (benefit) on discontinued operations	(3,813		)	7,418			16,260
Income tax expense — continuing operations	$	237,317		$	183,604		$	160,869

Comparison of pretax income from continuing operations at the federal income tax rate to income tax expense - continuing operations

The following chart compares pretax income from continuing operations at the 35% federal income tax rate to income tax expense — continuing operations (dollars in thousands):

	Year Ended December 31,
	2012			2011			2010
Federal income tax expense at 35% statutory rate	$	229,709		$	188,733		$	177,002
Increases (reductions) in tax expense resulting from: State income tax net of federal income tax benefit	23,819			19,594			17,485
Credits and favorable adjustments related to prior years resolved in current year	—			—			(17,300		)
Medicare Subsidy Part-D	483			823			1,311
Allowance for equity funds used during construction (see Note 1)	(6,158		)	(6,881		)	(6,563		)
Palo Verde VIE noncontrolling interest (see Note 20)	(11,065		)	(9,636		)	(7,057		)
Other	529			(9,029		)	(4,009		)
Income tax expense — continuing operations	$	237,317		$	183,604		$	160,869

Net deferred income tax liability recognized on the Consolidated Balance Sheets

The following table shows the net deferred income tax liability recognized on the Consolidated Balance Sheets (dollars in thousands):

	December 31,
	2012			2011
Current asset	$	152,191		$	130,571
Long-term liability	(2,151,371		)	(1,925,388		)
Deferred income taxes — net	$	(1,999,180	)	$	(1,794,817	)

Components of the net deferred income tax liability

The components of the net deferred income tax liability were as follows (dollars in thousands):

	December 31,
	2012			2011
DEFERRED TAX ASSETS
Risk management activities	$	72,243		$	117,765
Regulatory liabilities:
Asset retirement obligation and removal costs	238,669			236,739
Renewable energy standard	—			19,722
Unamortized investment tax credits	53,837			31,460
Other	33,764			33,155
Pension and other postretirement liabilities	408,764			501,202
Renewable energy incentives	66,941			57,901
Credit and loss carryforwards	139,022			171,915
Other	68,844			73,759
Total deferred tax assets	1,082,084			1,243,618
DEFERRED TAX LIABILITIES
Plant-related	(2,584,166		)	(2,446,908		)
Risk management activities	(23,940		)	(30,171		)
Regulatory assets:
Allowance for equity funds used during construction	(37,899		)	(33,347		)
Deferred fuel and purchased power	(28,858		)	(10,884		)
Deferred fuel and purchased power — mark-to-market	(15,796		)	(30,559		)
Pension and other postretirement benefits	(316,757		)	(408,716		)
Other	(68,170		)	(73,087		)
Other	(5,678		)	(4,763		)
Total deferred tax liabilities	(3,081,264		)	(3,038,435		)
Deferred income taxes — net	$	(1,999,180	)	$	(1,794,817	)