Asset Retirement Obligation (Notes)

9 Months Ended

Sep. 30, 2020

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation Disclosure

ASSET RETIREMENT OBLIGATIONS

The Company uses the cost approach to determine the initial value of ARO liabilities, which is estimated by discounting expected cash outflows to their present value using market-based rates at the initial recording of the liabilities. Cash outflows are based on the approximate future disposal costs as determined by market information, historical information or other management estimates. Subsequent downward revisions of ARO liabilities are discounted using the market-based rates that existed when the liability was initially recognized.

During the nine months ended September 30, 2020, the Company increased the asset retirement obligation and corresponding asset at Hawaii by $12 million in conjunction with the shortened useful life of the coal plant resulting from the passage of Senate Bill 2629, which prohibits issuing or renewing permits for coal power plants after December 31, 2022 and calls for ceasing all coal burning for electricity generation by that date.

During the nine months ended September 30, 2019, the Company increased the asset retirement obligation and corresponding asset at IPL by $80 million and decreased the asset retirement obligation at DPL by $23 million. The increase at IPL reflects an increase to estimated ash pond closure costs, including groundwater remediation as required by the EPA under the Resource Conservation and Recovery Act. The decrease at DPL was due to reductions in estimated closure costs associated with ash ponds and landfills, resulting in a reduction to Cost of Sales on the Condensed Consolidated Statement of Operations as the related plants were no longer in service.