Regulatory Matters

Regulatory assets represent costs that are expected to be recovered in future rates. The Company's regulatory assets reflected on the Consolidated Balance Sheets consist of the following as of December 31 (in millions):



	Weighted
	Average
	Remaining Life	2014		2013

Employee benefit plans⁽²⁾	10 years	$	115	$	90
Deferred income taxes⁽¹⁾	29 years	94		96
Merger costs from 1999 merger	32 years	87		90
Abandoned projects	9 years	51		59
Deferred excess energy costs	1 year	32		17
Loss on reacquired debt	17 years	24		27
Legacy meters	6 years	21		24
Asset retirement obligations	15 years	12		10
Unrealized loss on regulated derivative contracts	2 years	1		13
Other	Various	39		16
Total regulatory assets		$	476	$	442

Reflected as:
Current assets		$	32	$	15
Other assets		444		427
Total regulatory assets		$	476	$	442


(1)	Amounts represent income tax benefits related to accelerated tax depreciation and certain property-related basis differences that were previously flowed through to customers and will be included in regulated rates when the temporary differences reverse.


(2)	Represents amounts not yet recognized as a component of net periodic benefit cost that are expected to be included in regulated rates when recognized.

The Company had regulatory assets not earning a return on investment of $269 million as of December 31, 2014 that primarily related to deferred income taxes, merger costs from 1999 merger, loss on reacquired debt, legacy meters and asset retirement obligations. As of December 31, 2013, the Company had regulatory assets not earning a return on investment of $232 million, that primarily related to deferred income taxes, merger costs from 1999 merger, a portion of deferred excess energy costs and unrealized loss on regulated derivative contracts.

Regulatory liabilities represent income to be recognized or amounts to be returned to customers in future periods. The Company's regulatory liabilities reflected on the Consolidated Balance Sheets consist of the following as of December 31 (in millions):



	Weighted
	Average
	Remaining Life	2014		2013

Cost of removal⁽¹⁾	41 years	$	233	$	219
Renewable energy program	1 year	32		24
Energy efficiency program	1 year	7		12
Deferred income taxes	11 years	8		9
Other	Various	21		16
Total regulatory liabilities		$	301	$	280

Reflected as:
Current liabilities		$	39	$	37
Other long-term liabilities		262		243
Total regulatory liabilities		$	301	$	280


(1)	Amounts represent estimated costs, as accrued through depreciation rates and exclusive of ARO liabilities, of removing regulated property, plant and equipment in accordance with accepted regulatory practices. Amounts are deducted from rate base or otherwise accrue a carrying cost.

Deferred Energy

Nevada statutes permit regulated utilities to adopt deferred energy accounting procedures. The intent of these procedures is to ease the effect on customers of fluctuations in the cost of purchased natural gas, fuel and electricity and are subject to annual prudency review by the PUCN.

Under deferred energy accounting, to the extent actual fuel and purchased power costs exceed fuel and purchased power costs recoverable through current rates that excess is not recorded as a current expense on the Consolidated Statements of Operations but rather is deferred and recorded as a regulatory asset on the Consolidated Balance Sheets and is included in the table above as deferred excess energy costs. Conversely, a regulatory liability is recorded to the extent fuel and purchased power costs recoverable through current rates exceed actual fuel and purchased power costs and is included in the table above as deferred energy over collected. These excess amounts are reflected in quarterly adjustments to rates and recorded as cost of fuel, energy and capacity in future time periods.

Energy Efficiency Implementation Rates and Energy Efficiency Program Rates

In July 2010, regulations were adopted by the PUCN that authorizes an electric utility to recover lost revenue that is attributable to the measurable and verifiable effects associated with the implementation of efficiency and conservation programs approved by the PUCN through energy efficiency implementation rates ("EEIR"). As a result, the Company files annually in March to adjust energy efficiency program rates and EEIR for over- or under-collected balances, which are effective in October of the same year.

In March 2013, the Company filed applications with the PUCN for the twelve-month period ended December 31, 2012 to reset EEIR elements. In September 2013, the PUCN issued an order indicating that EEIR revenue should not contribute to the Company earning more than its authorized rate of return. As the Company earned in excess of its authorized rate of return in 2012, the PUCN disallowed approximately $5 million in EEIR revenue (including carrying charges) and the Company recorded a charge to operating and maintenance on the Consolidated Statements of Operations for the year ended December 31, 2013.

The PUCN's final order approving the BHE Merger stipulated that the Company will not seek recovery of any lost revenue for calendar year 2013 and, for the calendar year 2014 in an amount that exceeds 50% of the lost revenue that the Company could otherwise request. As a result, for the year ended December 31, 2013, the Company has not recorded revenue for EEIR and has recorded a regulatory liability to refund to customers amounts collected in 2013 of $5 million, which is included in current regulatory liabilities on the Consolidated Balance Sheets as of December 31, 2013. In February 2014, the Company filed an application with the PUCN to reset the EEIR and energy efficiency program rates. In June 2014, the PUCN accepted a stipulation to adjust the EEIR, as of July 1, 2014, to collect 50% of the estimated lost revenue that the Company would otherwise be allowed to recover for the 2014 calendar year. The EEIR was effective from July through December 2014 and will reset on January 1, 2015 and remain in effect through September 2015. To the extent the Company's earned rate of return exceeds the rate of return used to set base general rates, the Company is required to refund to customers EEIR revenue collected. As a result, the Company has deferred recognition of EEIR collected and has recorded a liability of $2 million, which is included in current regulatory liabilities on the Consolidated Balance Sheets as of December 31, 2014.

General Rate Case

In connection with Nevada Power's general rate case filing in May 2014, as required by the PUCN, the Company made a "companion filing" for the purpose of documenting the costs and benefits of the Company's investment in the advanced service delivery program. In October 2014, the PUCN issued an order in the companion filing issued with the general rate case order that, among other things, provided for the implementation of new rates effective January 1, 2015 to begin recovery of costs associated with advance service delivery. The recovery of advanced service delivery costs will increase annual revenue approximately $10 million. As a result of the PUCN order in the companion filing issued with the Nevada Power general rate case order, the Company recorded $7 million in asset impairments related to property, plant and equipment and $1 million of regulatory asset impairments, which are included in operating and maintenance on the Consolidated Statements of Operations for the year ended December 31, 2014.

2013 FERC Transmission Rate Case

In May 2013, the Company, along with Nevada Power, filed an application with the FERC to establish single system transmission and ancillary service rates. The combined filing requested incremental rate relief of $17 million annually to be effective January 1, 2014. In August 2013, the FERC granted the companies' request for a rate effective date of January 1, 2014 subject to refund, and set the case for hearing or settlement discussions. On January 1, 2014, the Company implemented the filed rates in this case subject to refund as set forth in the FERC's order.

In September 2014, the Company, along with Nevada Power, filed an unopposed settlement offer with the FERC on behalf of NV Energy and the intervening parties providing rate relief of $4 million. The settlement offer would resolve all outstanding issues related to this case. In addition, a preliminary order from the administrative law judge granting the motion for interim rate relief was issued, which authorizes the Company to institute the interim rates effective September 1, 2014, and begin billing transmission customers under the settlement rates for service provided on and after that date. In January 2015, the FERC approved the settlement and refunds will be processed in 2015. As of December 31, 2014, the Company accrued $2 million for amounts subject to rate refund, which is included in other current liabilities on the Consolidated Balance Sheets.