Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2014

Regulatory Matters

Schedule of changes in the deferred fuel and purchased power regulatory asset (liability)

The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) for 2014 and 2013 (dollars in millions):

	Three Months Ended March 31,
	2014			2013
Beginning balance	$	21		$	73
Deferred fuel and purchased power costs — current period	(32		)	(31		)
Amounts charged to customers	(8		)	(1		)
Ending balance	$	(19	)	$	41

Schedule of regulatory assets

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

	Remaining Amortization	March 31, 2014				December 31, 2013
	Period	Current		Non-Current		Current		Non-Current
Pension and other postretirement benefits	(a)	$	—	$	313	$	—	$	314
Income taxes — allowance for funds used during construction (“AFUDC”) equity	2043	4		104		4		105
Deferred fuel and purchased power — mark-to-market (Note 7)	2016	—		26		5		29
Transmission vegetation management	2016	9		12		9		14
Coal reclamation	2038	8		16		8		18
Palo Verde VIEs (Note 6)	2046	—		42		—		41
Deferred compensation	2036	—		36		—		34
Deferred fuel and purchased power (b) (c)	2015	—		—		21		—
Tax expense of Medicare subsidy	2023	2		15		2		15
Loss on reacquired debt	2034	1		18		1		17
Income taxes — investment tax credit basis adjustment	2043	1		39		1		39
Pension and other postretirement benefits deferral	2015	8		2		8		4
Four Corners cost deferral	2024	—		47		—		37
Lost fixed cost recovery (b)	2015	32		—		25		—
Transmission cost adjustor (b)	2016	6		2		8		2
Retired power plant costs	2020	3		17		3		18
Other	Various	2		31		2		25
Total regulatory assets (d)		$	76	$	720	$	97	$	712

(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.  See Note 4 for further discussion.

(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 and Transmission Cost Adjustor.”

Schedule of regulatory liabilities

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

	Remaining Amortization	March 31, 2014				December 31, 2013
	Period	Current		Non-Current		Current		Non-Current
Removal costs	(a)	$	28	$	298	$	28	$	303
Asset retirement obligations	(a)	—		253		—		266
Renewable energy standard (b)	2015	35		16		33		15
Income taxes — change in rates	2043	1		73		—		74
Spent nuclear fuel	2047	5		37		6		36
Deferred gains on utility property	2019	2		9		2		10
Income taxes — deferred investment tax credit	2043	3		79		3		79
Demand side management (b)	2015	34		—		27		—
Deferred fuel and purchased power (b) (c)	2015	19		—		—		—
Deferred fuel and purchased power — mark to market	2015	9		—		—		—
Other	Various	—		19		—		18
Total regulatory liabilities		$	136	$	784	$	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) Subject to carrying charge.