Regulatory Assets and Liabilities

Included in SCE's regulatory assets and liabilities are regulatory balancing accounts. CPUC authorized balancing account mechanisms require SCE to refund or recover any differences between forecasted and actual costs. The CPUC has authorized balancing accounts for specified costs or programs such as fuel, purchased-power, demand-side management programs, nuclear decommissioning and public purpose programs. Certain of these balancing accounts include a return on rate base of 7.90% in 2013 and 8.74% in 2012. The CPUC also authorizes the use of a balancing account to recover from or refund to customers differences in revenue resulting from actual and forecasted electricity sales.

Balancing account over and under collections represent differences between cash collected in current rates for specified forecasted costs and such costs that are actually incurred. Under-collections are recorded as regulatory balancing account assets. Over-collections are recorded as regulatory balancing account liabilities. With some exceptions, SCE seeks to adjust rates on an annual basis or at other designated times to recover or refund the balances recorded in its balancing accounts. Regulatory balancing accounts that SCE does not expect to collect or refund in the next 12 months are reflected in the long-term section of the consolidated balance sheets. Under and over collections accrue interest based on a three-month commercial paper rate published by the Federal Reserve.

Amounts included in regulatory assets and liabilities are generally recorded with corresponding offsets to the applicable income statement accounts.

Regulatory Assets

SCE's regulatory assets included on the consolidated balance sheets are:



	December 31,
(in millions)	2013		2012
Current:
Regulatory balancing accounts	$	484	$	502
Energy derivatives	54		70
Total current	538		572
Long-term:
Deferred income taxes, net	2,957		2,663
Pensions and other postretirement benefits	369		1,550
Energy derivatives	816		900
Unamortized investments, net	332		507
San Onofre	1,325		—
Unamortized loss on reacquired debt	222		228
Nuclear-related investment, net	34		141
Regulatory balancing accounts	818		73
Other	368		360
Total long-term	7,241		6,422
Total regulatory assets	$	7,779	$	6,994

SCE's regulatory assets related to energy derivatives are primarily an offset to unrealized losses on derivatives. The regulatory asset changes based on fluctuations in the fair market value of the contracts, which expire in 1 to 10 years.

SCE's regulatory assets related to deferred income taxes represent tax benefits passed through to customers. The CPUC requires SCE to pass through certain deferred income tax benefits to customers by reducing electricity rates, thereby deferring recovery of such amounts to future periods. Based on current regulatory ratemaking and income tax laws, SCE expects to recover its regulatory assets related to deferred income taxes over the life of the assets that give rise to the accumulated deferred income taxes, approximately from 1 to 45 years.

SCE's regulatory assets related to pensions and other post-retirement plans represent the unfunded net loss and prior service costs of the plans (see "Pension Plans and Postretirement Benefits Other than Pensions" discussion in Note 8). This amount is being recovered through rates charged to customers as the plans are funded.

SCE's unamortized investments include nuclear assets related to Palo Verde which are expected to be recovered by 2027 and SCE's unamortized coal plant investment which is being recovered through December 2015. Unamortized investments also include legacy meters retired as part of the Edison SmartConnect^® program which are expected to be recovered by 2017. Although SCE's unamortized investments are classified as regulatory assets on the consolidated balance sheets, they continue to be a component of rate base and earned a rate of return of 7.90% in 2013 and 8.74% in 2012, except for the Mohave generating station, which did not earn a rate of return in 2013 or 2012 and the legacy meters, which earned a rate of return of 6.46% in 2013 and 2012.

For information on regulatory assets related to San Onofre, see Note 9.

SCE's net regulatory asset related to its unamortized loss on reacquired debt will be recovered over the remaining original amortization period of the reacquired debt over periods ranging from 1 to 30 years.

SCE's 2013 nuclear-related investment include assets and accumulated depreciation related to the ARO for Palo Verde.

Regulatory Liabilities

SCE's regulatory liabilities included on the consolidated balance sheets are:



	December 31,
(in millions)	2013		2012
Current:
Regulatory balancing accounts	$	724	$	484
Other	43		52
Total current	767		536
Long-term:
Costs of removal	2,780		2,731
Asset retirement obligations	1,071		1,385
Regulatory balancing accounts	1,132		1,091
Other	12		7
Total long-term	4,995		5,214
Total regulatory liabilities	$	5,762	$	5,750

SCE's regulatory liabilities related to costs of removal represent differences between asset removal costs recorded and amounts collected in rates for those costs.

The regulatory liability related to asset retirement obligations represents the nuclear decommissioning trust assets in excess of the related asset retirement obligations. The decrease in this regulatory liability resulted from a revision to the asset retirement obligations of San Onofre. For further information, see Note 1.

Regulatory Balancing Accounts

The following table summarizes the significant components of regulatory balancing accounts included in the above tables of regulatory assets and liabilities:



	December 31,
(in millions)	2013			2012
Asset (liability)
Energy resource recovery account	$	1,005		$	(135	)
Four Corners memorandum account	145			25
New system generation balancing account	132			(21		)
Public purpose programs and energy efficiency programs	(1,037		)	(994		)
Base rate recovery balancing account	(247		)	505
Greenhouse gas auction revenue	(385		)	(109		)
FERC balancing accounts	(59		)	(129		)
Other	(108		)	(142		)
Asset (liability)	$	(554	)	$	(1,000	)