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 shown on the consolidated balance sheets of PSCo at Dec. 31, 2012 and Dec. 31, 2011 were:

(Thousands of Dollars)	See Note(s)		Remaining Amortization Period	Dec. 31, 2012				Dec. 31, 2011
Regulatory Assets				Current		Noncurrent		Current		Noncurrent
Pension and retiree medical obligations (a)		8	Various	$	38,219	$	613,391	$	62,014	$	485,265
Recoverable deferred taxes on AFUDC recorded in plant		1	Plant lives		-		100,060		-		93,410
Contract valuation adjustments (b)		10	Term of related contract		3,763		20,094		57,595		23,807
Depreciation differences		1	One to seventeen years		5,274		50,057		4,150		54,892
Net AROs (c)		1, 12	Plant lives		-		40,184		-		52,444
Conservation programs (d)		1, 11	One to five years		16,887		28,528		13,686		24,480
Gas pipeline inspection costs		12	One to four years		5,416		15,220		13,779		19,689
Renewable resources and environmental initiatives		12	One to two years		42,647		1,807		30,242		4,500
Purchased power contract costs		12	Term of related contract		-		28,164		-		23,566
Losses on reacquired debt		4	Term of related debt		1,964		11,376		1,917		12,833
Recoverable purchased natural gas and electric energy costs		1	Less than one year		15,007		-		9,436		-
Property tax		12	One to three years		6,005		12,010
Other			Various		8,507		13,837		3,492		14,125
Total regulatory assets				$	143,689	$	934,728	$	196,311	$	809,011

(a)

There are $3.9 million of unamortized prior service costs included at Dec. 31, 2011 and none as of Dec. 31, 2012. There are $4.4 million of regulatory assets related to the non-qualified pension plan at Dec. 31, 2012 and Dec. 31, 2011 of which $0.4 million is included in the current asset at Dec. 31, 2012 and Dec. 31, 2011.

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

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

(d)	Includes costs for conservation programs, as well as incentives allowed in certain jurisdictions.

The components of regulatory liabilities shown on the consolidated balance sheets of PSCo at Dec. 31, 2012 and Dec. 31, 2011 were:

(Thousands of Dollars)	See Note(s)		Remaining Amortization Period	Dec. 31, 2012				Dec. 31, 2011
Regulatory Liabilities				Current		Noncurrent		Current		Noncurrent
Plant removal costs		1, 12	Plant lives	$	-	$	365,331	$	-	$	380,036
Deferred electric, gas and steam production costs		1, 7	Less than one year		22,022		-		52,310		-
Investment tax credit deferrals		1, 7	Various		-		25,790		-		27,384
Deferred income tax adjustment		1	Various		-		20,218		-		21,548
Conservation programs (a)		1, 11	Less than one year		2,522		-		8,295		-
Renewable resources and environmental initiatives		11, 12	Various		-		1,412		-		8,525
Low income discount program			Less than one year		4,205		-		6,068		347
Gain from asset sales			One to three years		2,414		2,039		881		5,467
Other			Various		2,560		2,614		1,255		1,135
Total regulatory liabilities				$	33,723	$	417,404	$	68,809	$	444,442

(a)	Includes costs for conservation programs, as well as incentives allowed in certain jurisdictions.

At Dec. 31, 2012, approximately $135 million of PSCo's regulatory assets represented past expenditures not currently earning a return. This amount primarily includes certain expenditures associated with renewable resources and environmental initiatives.