ASSET RETIREMENT OBLIGATIONS

AROs consist of the following (in millions):



	As of December 31,
	2015		2014
Trojan decommissioning activities	$	43	$	41
Utility plant	97		64
Non-utility property	11		11
Asset retirement obligations	$	151	$	116

Trojan decommissioning activities represents the present value of future decommissioning costs for the plant, which ceased operation in 1993. The remaining decommissioning activities primarily consist of the long-term operation and decommissioning of the ISFSI, an interim dry storage facility that is licensed by the Nuclear Regulatory Commission. The ISFSI is to house the spent nuclear fuel at the former plant site until an off-site storage facility is available. Decommissioning of the ISFSI and final site restoration activities will begin once shipment of all the spent fuel to a USDOE facility is complete, which is not expected prior to 2034.

In 2004, the co-owners of Trojan (PGE, Eugene Water & Electric Board, and PacifiCorp, collectively referred to as Plaintiffs) filed a complaint against the USDOE for failure to accept spent nuclear fuel by January 31, 1998. PGE, which holds a 67.5% ownership interest in Trojan, had contracted with the USDOE for the permanent disposal of spent nuclear fuel in order to allow the final decommissioning of Trojan. The Plaintiffs paid for permanent disposal services during the period of plant operation and have met all other conditions precedent. The Plaintiffs sought approximately $112 million in damages incurred through 2009.

A trial before the U.S. Court of Federal Claims concluded in 2012, with the U.S. Court of Federal Claims issuing a judgment awarding certain damages to the Plaintiffs. In 2013, the Plaintiffs received $70 million for the settlement of this matter. The settlement agreement also provides for a process to submit claims for allowable costs for the period 2010 through 2016, and pursuant to this process the Plaintiffs received $9 million in 2014 for costs related to the 2010 through 2013 time period. The Company will seek recovery of costs under the current settlement agreement, as well as any subsequent extensions of the agreement to cover future periods.

PGE has received proceeds of $50 million related to its share in this legal matter, with $44 million received in 2013 and $6 million received in 2014. Such funds were deposited into the Nuclear decommissioning trust and recorded as a regulatory liability to offset amounts previously collected in relation to Trojan decommissioning activities. In December 2014, the OPUC issued an order on the Company’s 2015 GRC, authorizing the return of the $50 million of proceeds received related to this legal matter to customers over a three-year period beginning January 1, 2015. In early 2015, a distribution was made from the Nuclear decommissioning trust in the amount of $50 million to be refunded to customers over the three year period that began January 1, 2015.

The ARO related to Trojan decommissioning activities was not impacted by the outcome of this legal matter because the proceeds received in connection with the settlement of this legal matter were for past Trojan decommissioning costs and this ARO reflects future Trojan decommissioning costs.

Utility plant represents AROs that have been recognized for the Company’s thermal and wind generation sites, distribution and transmission assets, the disposal of which is governed by environmental regulation. During 2015, the Company recorded an overall increase in AROs of $33 million, with the change comprised of an increase to revisions in estimated cash flows and incurred liabilities of $30 million, accretion of $4 million, and a reduction of $1 million due to settled liabilities.

In 2015 and 2014, PGE increased its ARO related to Boardman by $9 million and $7 million, respectively, due primarily to changes in timing of estimated settlements and due to the acquisition of additional interests in Boardman, with corresponding increases in the cost basis of the plant, included in Electric utility plant, net on the consolidated balance sheet. For additional information regarding the Company’s acquisition of additional interests in Boardman, see Note 17, Jointly-owned Plant.

The United States Environmental Protection Agency (EPA) published a final rule, effective October 19, 2015, that regulates Coal Combustion Residuals (CCRs) under the Resource Conservation and Recovery Act, Subtitle D. The rule imposes extensive new requirements, including location restrictions, design and operating standards, groundwater monitoring and corrective action requirements, and closure and post-closure care requirements on CCR impoundments and landfills that are located on active power plant sites and not closed. The requirements for covered CCR impoundments and landfills under the final rule include commencement or completion of closure activities generally between three and ten years from certain triggering events.

The Boardman coal-fired generating plant (Boardman) produces dry CCRs as a by-product. Disposal of the dry CCRs has historically occurred at an on-site landfill that is permitted and regulated by the state of Oregon under requirements similar to the final EPA rule. PGE has determined that it will continue use of the on-site landfill in compliance with the new rule, and the Company believes the final EPA rule will not have a material effect on operations at Boardman.

Colstrip utilizes wet scrubbers and a number of settlement ponds that will require upgrading or closure to meet the new regulatory requirements. The operator of Colstrip has provided an initial cost estimate related to the impacts of the final EPA rule. As a result, during 2015, the Company recorded an increase to the existing Colstrip AROs in the amount of $17 million, with a corresponding increase in the cost basis of the plant, included in Electric utility plant, net on the consolidated balance sheet. PGE plans to seek recovery in customer prices of the incremental costs associated with the final EPA rule.

In 2015, PGE also recorded AROs totaling $4 million related to the Company’s Beaver natural gas-fired generating plant (Beaver) and Carty.

Non-utility property primarily represents AROs which have been recognized for portions of unregulated properties leased to third parties.

The following is a summary of the changes in the Company’s AROs (in millions):



	Years Ended December 31,
	2015			2014			2013
Balance as of beginning of year	$	116		$	100		$	94
Liabilities incurred	2			15			4
Liabilities settled	(4		)	(3		)	(4		)
Accretion expense	7			6			6
Revisions in estimated cash flows	30			(2		)	—
Balance as of end of year	$	151		$	116		$	100

Pursuant to regulation, the amortization of utility plant AROs is included in depreciation expense and in customer prices. Any differences in the timing of recognition of costs for financial reporting and ratemaking purposes are deferred as a regulatory asset or regulatory liability. Recovery of Trojan decommissioning costs is included in PGE’s retail prices, approximately $4 million annually, with an equal amount recorded in Depreciation and amortization expense.

PGE maintains a separate trust account, Nuclear decommissioning trust in the consolidated balance sheet, for funds collected from customers through prices to cover the cost of Trojan decommissioning activities. See “Trust Accounts” in Note 3, Balance Sheet Components, for additional information on the Nuclear decommissioning trust.

The Oak Grove hydro facility and transmission and distribution plant located on public right-of-ways and on certain easements meet the requirements of a legal obligation and will require removal when the plant is no longer in service. An ARO liability is not currently measurable as management believes that these assets will be used in utility operations for the foreseeable future. Removal costs are charged to accumulated asset retirement removal costs, which is included in Regulatory liabilities on PGE’s consolidated balance sheets.