Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2013

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 2013 and 2012 (dollars in millions):

	Nine Months Ended September 30,
	2013			2012
Beginning balance	$	73		$	28
Deferred fuel and purchased power costs — current period	(13		)	(52		)
Amounts (collected from) credited to customers	(23		)	92
Ending balance	$	37		$	68

Schedule of regulatory assets

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

	Remaining Amortization		September 30, 2013				December 31, 2012
	Period		Current		Non-Current		Current		Non-Current
Pension and other postretirement benefits		(a)	$	—	$	754	$	—	$	780
Income taxes — allowance for equity funds used during construction	2043		4		105		4		92
Deferred fuel and purchased power — mark-to-market (Note 7)	2016		15		24		19		21
Transmission vegetation management	2016		9		16		9		23
Coal reclamation	2038		8		20		8		24
Palo Verde VIEs (Note 6)	2046		—		40		—		38
Deferred compensation	2036		—		36		—		34
Deferred fuel and purchased power (b) (c)	2013		37		—		73		—
Retired power plant costs	2020		3		19		—		—
Tax expense of Medicare subsidy	2024		2		15		2		17
Loss on reacquired debt	2034		1		17		2		18
Income taxes — investment tax credit basis adjustment	2042		1		30		1		26
Pension and other postretirement benefits deferral	2015		8		6		8		13
Lost fixed cost recovery (b)	2014		19		—		7		—
Transmission cost adjustor (b)	2014		12		2		10		—
Other	Various		1		22		1		14
Total regulatory assets (d)			$	120	$	1,106	$	144	$	1,100

(a) This asset represents the future recovery of under-funded 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.

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

(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 and Transmission Cost Adjustor.”

Schedule of regulatory liabilities

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

	Remaining Amortization		September 30, 2013				December 31, 2012
	Period		Current		Non-Current		Current		Non-Current
Removal costs		(a)	$	26	$	311	$	27	$	321
Asset retirement obligations		(a)	—		272		—		256
Renewable energy standard (b)	2014		27		22		43		—
Income taxes — change in rates	2042		—		68		—		66
Spent nuclear fuel	2047		5		37		10		36
Deferred gains on utility property	2019		2		11		2		12
Income taxes — deferred investment tax credit	2042		2		60		2		52
Demand side management (b)	2014		26		—		4		—
Other	Various		—		17		—		16
Total regulatory liabilities			$	88	$	798	$	88	$	759

(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.