12. Regulatory Assets and Liabilities

SPS' 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 rates. If changes in the utility industry or the business of SPS no longer allow for the application of regulatory accounting guidance under GAAP, SPS 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 balance sheets of SPS at Dec. 31, 2011 and Dec. 31, 2010 are:

(Thousands of Dollars)	See Notes		Remaining Amortization Period	Dec. 31, 2011				Dec. 31, 2010
Regulatory Assets				Current		Noncurrent		Current		Noncurrent
Pension and retiree medical obligations (a)		7	Various	$	14,879	$	214,111	$	9,407	$	203,513
Recoverable deferred taxes on AFUDC recorded in plant (b)		1	Plant lives		-		25,053		-		23,673
Net AROs (d)		11	Plant lives		-		19,920		-		18,882
Conservation programs (e)		1	One to seven years		1,834		10,786		5,201		12,371
Renewable resources and environmental initiatives		11	One to four years		1,458		10,795		2,046		5,719
Losses on reacquired debt		4	Term of related debt		1,228		6,146		1,249		7,092
Deferred income tax adjustment		1, 6	Typically plant lives		-		6,040		-		7,123
Recoverable electric energy costs		1	Less than one year		1,439		-		1,672		-
Other			Various		4,406		1,962		1,972		4,834
Total regulatory assets				$	25,244	$	294,813	$	21,547	$	283,207

(Thousands of Dollars)	See Notes		Remaining Amortization Period	Dec. 31, 2011				Dec. 31, 2010
Regulatory Liabilities				Current		Noncurrent		Current		Noncurrent
Plant removal costs		11	Plant lives	$	-	$	74,402	$	-	$	88,224
Deferred electric energy costs		1	Less than one year		43,295		-		44,588		-
Contract valuation adjustments (c)		1, 9	Term of related contract		4,292		15,450		4,291		19,743
Gain from asset sales		16	Various		4,899		13,229		4,281		18,792
Conservation programs (e)		1	Less than one year		2,222		-		-		-
Other			Various		2,396		2,254		37		8,193
Total regulatory liabilities				$	57,104	$	105,335	$	53,197	$	134,952

(a)	Includes the non-qualified pension plan.

(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.

(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.