Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2014

Regulated Operations [Abstract]

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 2014 and 2013 (dollars in millions):

	Nine Months Ended   September 30,
	2014			2013
Beginning balance	$	21		$	73
Deferred fuel and purchased power costs — current period	27			(13		)
Amounts charged to customers	(32		)	(23		)
Ending balance	$	16		$	37

Schedule of regulatory assets

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

	Remaining Amortization Period	September 30, 2014				December 31, 2013
		Current		Non-Current		Current		Non-Current
Pension and other postretirement benefits	(a)	$	—	$	286	$	—	$	314
Income taxes — allowance for funds used during construction (“AFUDC”) equity	2043	4		117		4		105
Deferred fuel and purchased power — mark-to-market (Note 7)	2016	14		20		5		29
Transmission vegetation management	2016	9		7		9		14
Coal reclamation	2038	8		12		8		18
Palo Verde VIEs (Note 6)	2046	—		39		—		41
Deferred compensation	2036	—		36		—		34
Deferred fuel and purchased power (b) (c)	2015	16		—		21		—
Tax expense of Medicare subsidy	2023	2		14		2		15
Loss on reacquired debt	2034	1		17		1		17
Income taxes — investment tax credit basis adjustment	2043	2		46		1		39
Pension and other postretirement benefits deferral	2015	6		—		8		4
Four Corners cost deferral	2024	—		67		—		37
Lost fixed cost recovery (b)	2015	33		—		25		—
Transmission cost adjustor (b)	2015	4		—		8		2
Retired power plant costs	2033	10		139		3		18
Deferred property taxes	(d)	—		26		—		11
Other	Various	1		11		2		14
Total regulatory assets (e)		$	110	$	837	$	97	$	712

(a) This asset represents the future recovery of pension and other postretirement 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 4 for further discussion.

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

(c) Subject to a carrying charge.

(d) Per the provision of the 2012 Settlement Agreement.

(e) 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 millions):

	Remaining Amortization Period	September 30, 2014				December 31, 2013
		Current		Non-Current		Current		Non-Current
Removal costs	(a)	$	31	$	284	$	28	$	303
Asset retirement obligations	(a)	—		277		—		266
Renewable energy standard (b)	2015	40		8		33		15
Income taxes — change in rates	2043	1		72		—		74
Spent nuclear fuel	2047	5		53		6		36
Deferred gains on utility property	2019	2		9		2		10
Income taxes — deferred investment tax credit	2043	3		92		3		79
Demand side management (b)	2015	39		—		27		—
Other postretirement benefits	(c)	33		221		—		—
Other	Various	—		19		—		18
Total regulatory liabilities		$	154	$	1,035	$	99	$	801

(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.

(c) See Note 4.