Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of capital structure and cost of capital

the following proposed capital structure and costs of capital:



	Capital Structure		Cost of Capital
Long-term debt	45.3	%	4.10	%
Common stock equity	54.7	%	10.15	%
Weighted-average cost of capital			7.41	%

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 2020 and 2019 (dollars in thousands):



	Six Months Ended June 30,
	2020		2019
Beginning balance	$	70,137	$	37,164
Deferred fuel and purchased power costs — current period	26,473		16,702
Amounts charged to customers	4,815		(23,307		)
Ending balance	$	101,425	$	30,559

Schedule of regulatory assets

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



	Amortization Through	June 30, 2020				December 31, 2019
	Amortization Through	Current		Non-Current		Current		Non-Current
Pension	(a)	$	—	$	663,327	$	—	$	660,223
Income taxes — allowance for funds used during construction ("AFUDC") equity	2050	6,815		156,528		6,800		154,974
Retired power plant costs	2033	28,182		128,304		28,182		142,503
Deferred fuel and purchased power (b) (c)	2021	101,425		—		70,137		—
Deferred fuel and purchased power — mark-to-market (Note 7)	2024	42,911		26,151		36,887		33,185
Ocotillo deferral	N/A	—		65,571		—		38,144
SCR deferral	N/A	—		64,971		—		52,644
Deferred property taxes	2027	8,569		53,911		8,569		58,196
Deferred compensation	2036	—		36,481		—		36,464
Four Corners cost deferral	2024	8,077		28,113		8,077		32,152
Lost fixed cost recovery (b)	2021	34,144		—		26,067		—
Income taxes — investment tax credit basis adjustment	2048	1,098		24,532		1,098		24,981
Palo Verde VIEs (Note 6)	2046	—		20,945		—		20,635
Coal reclamation	2026	1,068		17,533		1,546		17,688
Loss on reacquired debt	2038	1,637		11,241		1,637		12,031
TCA balancing account (b)	2022	8,272		2,926		6,324		2,885
Mead-Phoenix transmission line contributions in aid of construction ("CIAC")	2050	332		9,546		332		9,712
Tax expense of Medicare subsidy	2024	1,238		4,444		1,235		4,940
AG-1 deferral	2022	2,787		1,322		2,787		2,716
Tax expense adjuster mechanism (b)	2020	3,640		—		1,612		—
Other	Various	1,399		—		1,917		—
Total regulatory assets (d)		$	251,594	$	1,315,846	$	203,207	$	1,304,073


(a)	This asset represents the future recovery of pension 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.


(b)	See "Cost Recovery Mechanisms" discussion above.


(c)	Subject to a carrying charge.

(d)

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 thousands):



	Amortization Through	June 30, 2020				December 31, 2019
	Amortization Through	Current		Non-Current		Current		Non-Current
Excess deferred income taxes - ACC - Tax Cuts and Jobs Act (a)	2046	$	113,168	$	966,576	$	59,918	$	1,054,053
Excess deferred income taxes - FERC - Tax Cuts and Jobs Act (a)	2058	7,256		233,953		6,302		237,357
Asset retirement obligations	2057	—		408,126		—		418,423
Removal costs	(c)	47,300		126,036		47,356		136,072
Other postretirement benefits	(d)	37,575		118,398		37,575		139,634
Four Corners coal reclamation	2038	5,461		48,795		1,059		51,704
Spent nuclear fuel	2027	6,068		47,901		6,676		51,019
Income taxes — change in rates	2050	2,802		50,163		2,797		68,265
Income taxes — deferred investment tax credit	2048	2,202		49,133		2,202		50,034
Renewable energy standard (b)	2021	38,934		22		39,287		10,300
Sundance maintenance	2031	1,100		13,001		5,698		11,319
Demand side management (b)	2021	3,068		6,138		15,024		24,146
Property tax deferral	N/A	—		8,603		—		7,046
FERC transmission true up	2022	5,452		2,209		1,045		2,004
Active union medical trust	N/A	—		7,629		—		2,041
Tax expense adjustor mechanism (b)	2020	6,450		—		7,018		—
Deferred gains on utility property	2022	2,423		2,973		2,423		4,163
Other	Various	220		331		532		255
Total regulatory liabilities		$	279,479	$	2,089,987	$	234,912	$	2,267,835


(a)	For purposes of presentation on the Statement of Cash Flows, amortization of the regulatory liabilities for excess deferred income taxes are reflected as "Deferred income taxes" under Cash Flows From Operating Activities.


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


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

(d)

See Note 5.