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Income Taxes (APSC) (Tables)

12 Months Ended

Dec. 31, 2011

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

		2011			2010			2009
Total unrecognized tax benefits, January 1		$	127,595		$	201,216		$	63,318
Additions for tax positions of the current year		10,915			7,551			44,094
Additions for tax positions of prior years		—			—			98,942
Reductions for tax positions of prior years for:
Changes in judgment		(1,555		)	(11,017		)	—
Settlements with taxing authorities		(124		)	(62,199		)	(4,089		)
Lapses of applicable statute of limitations		(826		)	(7,956		)	(1,049		)
Total unrecognized tax benefits, December 31		$	136,005		$	127,595		$	201,216

Components of income tax expense

		Year Ended December 31,
		2011			2010			2009
Current:
Federal		$	(310	)	$	(108,827	)	$	(38,502	)
State		15,140			25,545			(38,080		)
Total current		14,830			(83,282		)	(76,582		)
Deferred:
Federal		159,566			260,236			62,874
State		16,626			10,911			42,618
Discontinued operations		—			(10,736		)	—
Total deferred		176,192			260,411			105,492
Total income tax expense		191,022			177,129			28,910
Less: income tax expense (benefit) on discontinued operations		7,418			16,260			(109,641		)
Income tax expense — continuing operations		$	183,604		$	160,869		$	138,551

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

		Year Ended December 31,
		2011			2010			2009

Federal income tax expense at 35% statutory rate		$	188,733		$	177,002		$	138,110
Increases (reductions) in tax expense resulting from:
State income tax net of federal income tax benefit		19,594			17,485			15,068
Credits and favorable adjustments related to prior years resolved in current year		—			(17,300		)	—
Medicare Subsidy Part-D		823			1,311			(2,095		)
Allowance for equity funds used during construction (see Note 1)		(6,881		)	(6,563		)	(4,265		)
Palo Verde VIE noncontrolling interest (see Note 20)		(9,636		)	(7,057		)	(6,723		)
Other		(9,029		)	(4,009		)	(1,544		)
Income tax expense — continuing operations		$	183,604		$	160,869		$	138,551

Net deferred income tax liability recognized on the Consolidated Balance Sheets

		December 31,
		2011			2010
Current asset		$	130,571		$	124,897
Long-term liability		(1,925,388		)	(1,863,861		)
Deferred income taxes — net		$	(1,794,817	)	$	(1,738,964	)

Components of the net deferred income tax liability

		December 31,
		2011			2010
DEFERRED TAX ASSETS
Risk management activities		$	117,765		$	124,731
Regulatory liabilities:
Asset retirement obligation and removal costs		236,739			222,448
Deferred fuel and purchased power		—			23,089
Renewable energy standard		19,722			18,749
Unamortized investment tax credits		31,460			642
Other		33,155			27,718
Pension and other postretirement liabilities		501,202			321,182
Real estate investments and assets held for sale		—			19,855
Renewable energy incentives		57,901			37,327
Credit and loss carryforwards		171,915			42,971
Other		73,759			68,684
Total deferred tax assets		1,243,618			907,396
DEFERRED TAX LIABILITIES
Plant-related		(2,446,908		)	(2,210,976		)
Risk management activities		(30,171		)	(30,125		)
Regulatory assets:
Allowance for equity funds used during construction		(33,347		)	(28,276		)
Deferred fuel and purchased power		(10,884		)	—
Deferred fuel and purchased power — mark-to-market		(30,559		)	(30,276		)
Pension and other postretirement benefits		(408,716		)	(264,313		)
Other		(73,087		)	(77,078		)
Other		(4,763		)	(5,316		)
Total deferred tax liabilities		(3,038,435		)	(2,646,360		)
Deferred income taxes — net		$	(1,794,817	)	$	(1,738,964	)

ARIZONA PUBLIC SERVICE COMPANY

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

		2011			2010			2009
Total unrecognized tax benefits, January 1		$	126,698		$	199,887		$	62,409
Additions for tax positions of the current year		10,915			7,551			44,094
Additions for tax positions of prior years		—			—			98,269
Reductions for tax positions of prior years for:
Changes in judgment		(1,555		)	(10,964		)	—
Settlements with taxing authorities		(124		)	(61,820		)	(4,089		)
Lapses of applicable statute of limitations		(110		)	(7,956		)	(796		)
Total unrecognized tax benefits, December 31		$	135,824		$	126,698		$	199,887

Components of income tax expense

		Year Ended December 31,
		2011			2010			2009
Current:
Federal		$	4,633		$	(71,036	)	$	(8,667	)
State		19,104			17,406			(31,673		)
Total current		23,737			(53,630		)	(40,340		)
Deferred:
Federal		154,632			207,334			163,572
State		14,173			16,761			29,342
Total deferred		168,805			224,095			192,914
Total income tax expense		$	192,542		$	170,465		$	152,574

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

		Year Ended December 31,
		2011			2010			2009

Federal income tax expense at 35% statutory rate		$	194,710		$	184,202		$	148,053
Increases (reductions) in tax expense resulting from:
State income tax net of federal income tax benefit		21,139			19,186			16,691
Credits and favorable adjustments related to prior years resolved in current year		—			(17,300		)	—
Medicare Subsidy Part-D		823			889			(2,025		)
Allowance for equity funds used during construction (see Note 1)		(6,880		)	(6,563		)	(4,265		)
Palo Verde VIE noncontrolling interest (see Note 20)		(9,633		)	(7,057		)	(6,723		)
Other		(7,617		)	(2,892		)	843
Income tax expense		$	192,542		$	170,465		$	152,574

Net deferred income tax liability recognized on the Consolidated Balance Sheets

		December 31,
		2011			2010
Current asset		$	111,503		$	105,042
Long-term liability		(1,952,608		)	(1,895,654		)
Deferred income taxes — net		$	(1,841,105	)	$	(1,790,612	)

Components of the net deferred income tax liability

		December 31,
		2011			2010
DEFERRED TAX ASSETS
Regulatory liabilities:
Asset retirement obligation and removal costs		$	236,739		$	222,448
Deferred fuel and purchased power		—			23,089
Renewable energy standard		19,722			18,749
Unamortized investment tax credits		31,460			642
Other		33,155			27,718
Risk management activities		117,765			124,731
Pension and other postretirement liabilities		494,744			303,055
Renewable energy incentives		57,901			37,327
Credit and loss carryforwards		106,668			—
Other		99,176			97,989
Total deferred tax assets		1,197,330			855,748
DEFERRED TAX LIABILITIES
Plant-related		(2,446,908		)	(2,210,976		)
Risk management activities		(30,171		)	(30,125		)
Regulatory assets:
Allowance for equity funds used during construction		(33,347		)	(28,276		)
Deferred fuel and purchased power		(10,884		)	—
Deferred fuel and purchased power — mark-to-market		(30,559		)	(30,276		)
Pension and other postretirement benefits		(408,716		)	(264,313		)
Other		(73,087		)	(77,078		)
Other		(4,763		)	(5,316		)
Total deferred tax liabilities		(3,038,435		)	(2,646,360		)
Deferred income taxes — net		$	(1,841,105	)	$	(1,790,612	)

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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