(J) Regulatory Assets and Liabilities. We apply the accounting guidance for regulated operations. Regulatory assets represent certain costs that are probable of recovery through future rates. We expect to recover such costs from our members in future revenues through rates under the wholesale power contracts we have with each of our members . The wholesale power contracts extend through December 31, 2050. Regulatory liabilities represent certain items of income that we are retaining and that will be applied in the future to reduce revenues required to be recovered from our members.

The following regulatory assets and liabilities are reflected on the unaudited consolidated balance sheets as of September 30, 2019 and December 31, 2018.



	2019		2018
	(dollars in thousands)
Regulatory Assets:
Premium and loss on reacquired debt(a)	$	41,580	$	46,315
Amortization of financing leases(b)		35,304		34,918
Outage costs(c)		36,272		36,352
Asset retirement obligations - Ashpond and other(k)		258,227		137,835
Asset retirement obligations - Nuclear (k)		—		7,031
Depreciation expense(d)		40,176		41,244
Deferred charges related to Vogtle Units No. 3 and No. 4 training costs(e)		52,802		51,549
Interest rate options cost(f)		120,685		116,960
Deferral of effects on net margin - Smith Energy Facility(g)		156,051		160,509
Other regulatory assets(m)		32,683		22,350
Total Regulatory Assets	$	773,780	$	655,063

Regulatory Liabilities:
Accumulated retirement costs for other obligations(h)	$	14,092	$	13,873
Deferral of effects on net margin - Hawk Road Energy Facility(g)		18,639		19,101
Major maintenance reserve(i)		46,907		45,547
Amortization of financing leases(b)		14,981		17,156
Deferred debt service adder(j)		112,144		105,192
Asset retirement obligations - Nuclear(k)		37,879		—
Revenue deferral plan(l)		52,003		15,670
Other regulatory liabilities(m)		2,882		2,459
Total Regulatory Liabilities	$	299,527	$	218,998
Net Regulatory Assets	$	474,253	$	436,065

^(a)

Represents premiums paid, together with unamortized transaction costs related to reacquired debt that are being amortized over the lives of the refunding debt, which range up to 25 years.

^(b)

Represents the difference between expense recognized for rate-making purposes versus financial statement purposes related to finance lease payments and the aggregate of the amortization of the asset and interest on the obligation.

^(c)

Consists of both coal-fired maintenance and nuclear refueling outage costs. Coal-fired outage costs are amortized on a straight-line basis to expense over periods up to 48 months, depending on the operating cycle of each unit. Nuclear refueling outage costs are amortized on a straight-line basis to expense over the 18 or 24-month operating cycles of each unit.

^(d)

Prior to Nuclear Regulatory Commission (NRC) approval of a 20-year license extension for Plant Vogtle Units No. 1 and No. 2, we deferred the difference between the units’ depreciation expense based on the then 40-year operating license and depreciation expense assuming an expected 20-year license extension. Amortization commenced upon NRC approval of the license extension in 2009 and is being amortized over the remaining life of the plant.

^(e)

Deferred charges consist of training related costs, including interest and carrying costs of such training. Amortization will commence effective with the commercial operation date of each unit and amortized to expense over the life of the units.

^(f)

Deferral of premiums paid to purchase interest rate options used to hedge interest rates on certain borrowings, related carrying costs and other incidentals associated with construction of Vogtle Units No.3 and No.4. Amortization will commence in February 2020 and continue through February 2044, the life of the DOE-guaranteed loan which is financing a portion of the construction project.

^(g)

Effects on net margin for Smith and Hawk Road Energy Facilities were deferred through the end of 2015 and are being amortized over the remaining life of each respective plant.

^(h)

Represents the accrual of retirement costs associated with long-lived assets for which there are no legal obligations to retire the assets.

⁽ⁱ⁾

Represents collections for future major maintenance costs; revenues are recognized as major maintenance costs are incurred.

^(j)

Represents collections to fund certain debt payments to be made through the end of 2025, which will be in excess of amounts collected through depreciation expense; the deferred credits will be amortized over the remaining useful life of the plants.

^(k)

Represents the difference in the timing of recognition of decommissioning costs for financial statement purposes versus ratemaking purposes, as well as the deferral of unrealized gains and losses of funds set aside for decommissioning.

^(l)

Deferred revenues under a rate management program that allows for additional collections over a five-year period which began in 2018. These amounts will be amortized to income and applied to member billings over the subsequent five-year period.

^(m)

The amortization periods for other regulatory assets range up to 31 years and the amortization periods of other regulatory liabilities range up to 8 years.