13. Regulatory Assets and Liabilities

PSCo's consolidated financial statements are prepared in accordance with the applicable accounting guidance, as discussed in Note 1. Under this guidance, regulatory assets and liabilities are created for amounts that regulators may allow to be collected, or may require to be paid back to customers in future electric and natural gas rates. Any portion of the business that is not rate regulated cannot establish regulatory assets and liabilities. If changes in the utility industry or the business of PSCo no longer allow for the application of regulatory accounting guidance under GAAP, PSCo would be required to recognize the write-off of regulatory assets and liabilities in net income or OCI.

The components of regulatory assets and liabilities shown on the consolidated balance sheets of PSCo at Dec. 31, 2011 and Dec. 31, 2010 were:

	See		Remaining
(Thousands of Dollars)	Note(s)		Amortization Period	Dec. 31, 2011				Dec. 31, 2010
Regulatory Assets				Current		Noncurrent		Current		Noncurrent
Pension and retiree medical obligations (a)		8	Various	$	62,014	$	485,265	$	44,917	$	551,505
Recoverable deferred taxes on AFUDC recorded in plant (b)		1	Plant lives		-		93,410		-		92,444
Contract valuation adjustments (c)		10	Term of related contract		57,595		23,807		43,368		26,498
Depreciation differences (b)		1	One to seven years		4,150		54,892		5,859		12,379
Net AROs (d)		1, 12	Plant lives		-		52,444		-		43,227
Conservation programs (e)		1, 11	One to six years		13,686		24,480		7,770		30,464
Gas pipeline inspection costs			One to five years		13,779		19,689		2,000		25,082
Renewable resources and environmental initiatives		12	One to three years		30,242		4,500		47,961		4,500
Purchased power contract costs		12	Term of related contract		-		23,566		-		18,549
Losses on reacquired debt		4	Term of related debt		1,917		12,833		1,912		14,750
Recoverable purchased natural gas and electric energy costs		1	Less than one year		9,436		-		18,622		-
Other			Various		3,492		14,125		4,187		4,807
Total regulatory assets				$	196,311	$	809,011	$	176,596	$	824,205

Regulatory Liabilities
Plant removal costs	1, 12	Plant lives	$	-	$	380,036	$	-	$	384,640
Deferred electric, gas and steam production costs	7, 1	Less than one year		52,310		-		44,921		-
Investment tax credit deferrals	7, 1	Various		-		27,384		-		29,014
Deferred income tax adjustment	1	Various		-		21,548		-		20,938
Conservation programs (e)	1, 11	Less than one year		8,295		-		-		-
Renewable resources and environmental initiatives	11, 12	Various		-		8,525		-		-
Low income discount program		One to two years		6,068		347		4,706		4,032
Gain from asset sales		One to three years		881		5,467		-		6,700
REC margin sharing (f)	1			-		-		-		26,104
Other		One to five years		1,255		1,135		391		1,418
Total regulatory liabilities			$	68,809	$	444,442	$	50,018	$	472,846

(a)

Includes $3.9 million and $7.8 million of unamortized prior service costs at Dec. 31, 2011 and Dec. 31, 2010, respectively. These amounts are offset by $4.4 and $4.5 million of regulatory assets related to the non-qualified pension plan at Dec. 31, 2011 and Dec. 31, 2010, respectively of which $0.4 million is included in the current asset at Dec. 31, 2011 and Dec. 31, 2010.

(b)	Earns a return on investment in the ratemaking process. These amounts are amortized consistent with recovery in rates.

(c)	Includes the fair value of certain long-term PPAs used to meet energy capacity requirements and valuation adjustments on natural gas commodity purchases.

(d)	Includes amounts recorded for future recovery of AROs.

(e)	Includes over- or under-recovered costs for DSM and conservation programs as well as incentives allowed in certain jurisdictions.

(f)	As described in Note 11, in 2011 the CPUC determined that the customers' share of REC margins will be netted against the RESA regulatory asset balance. This is reflected in the Dec. 31, 2011 regulatory asset balance.