Asset Retirement Obligations

9 Months Ended

Sep. 30, 2016

(L)

Asset Retirement Obligations. Asset retirement obligations are legal obligations associated with the retirement of long-lived assets. These obligations represent the present value of the estimated costs for an asset's future retirement and are recorded in the period in which the liability is incurred. The liabilities we have recognized primarily relate to the decommissioning of our nuclear facilities. In addition, we have retirement obligations related to ash ponds, gypsum, landfill sites and asbestos removal. Under the accounting provision for regulated operations, we record a regulatory asset or liability to reflect the difference in timing of recognition of the costs related to nuclear and coal ash related decommissioning for financial statement purposes and for ratemaking purposes.

On April 17, 2015 the Environmental Protection Agency (EPA) published its final coal combustion residuals (CCR) rule which regulates CCRs as non-hazardous materials under Subtitle D of the Resource Conservation and Recovery Act. The rule took effect on October 19, 2015. Based on additional assessments of the impact of the final CCR rule and refinement of cost estimates in 2016, we revised the forecasted cash flows for our existing coal ash related asset retirement obligations, and as a result, increased the obligations and corresponding assets in electric plant in service by approximately $70,000,000. The liabilities are estimates based on various assumptions including, but not limited to, closure and post-closure cost estimates, timing of expenditures, escalation factors, discount rates and methods for complying with the CCR rule. The increase is primarily related to closure cost estimates which are based on advanced engineering methods to close the ash ponds in place. Additional adjustments to the asset retirement obligations are expected periodically as we continue to assess the impact of the rule on our estimates and assumptions. For information regarding the impact of the final CCR rule on asset retirement obligations, see "Item 8—FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA—Notes to Consolidated Financial Statements" in our 2015 Form 10-K.