APS 2011 Annual Report Download - page 126

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
101
The detail of regulatory liabilities is as follows (dollars in millions):
Remaining
Amortization
Period
December 31, 2011 December 31, 2010
Current Non-Current Current Non-Current
Removal costs (a) $ 22 $ 349 $ 22 $ 357
Asset retirement obligations (a) -- 225 -- 184
Renewable energy standard (b) 2012 54 -- 50 --
Income taxes – change in rates 2041 -- 59 -- --
Spent nuclear fuel 2047 5 44 4 41
Deferred gains on utility property 2019 2 14 2 16
Income taxes-unamortized
investment tax credit 2044 1 30 -- 1
Deferred fuel and purchased
power (b)(c) -- -- 58 --
Other Various 4 16 3 15
Total regulatory liabilities $ 88 $ 737 $ 139 $ 614
(a) In accordance with regulatory accounting guidance, APS accrues for removal costs for its
regulated assets, even if there is no legal obligation for removal. See Note 12.
(b) See “Cost Recovery Mechanisms” discussion above.
(c) Subject to a carrying charge.
4. Income Taxes
Certain assets and liabilities are reported differently for income tax purposes than they are for
financial statements purposes. The tax effect of these differences is recorded as deferred taxes. We
calculate deferred taxes using the currently enacted income tax rates.
APS has recorded regulatory assets and regulatory liabilities related to income taxes on its
Balance Sheets in accordance with accounting guidance for regulated operations. The regulatory assets
are for certain temporary differences, primarily the allowance for equity funds used during construction
and pension and other postretirement benefits. The regulatory liabilities primarily relate to deferred
taxes resulting from investment tax credits (“ITC”) and the change in income tax rates.
In accordance with regulatory requirements, APS investment tax credits are deferred and are
amortized over the life of the related property with such amortization applied as a credit to reduce
current income tax expense in the statement of income.
The $69 million long-term income tax receivable on the Consolidated Balance Sheets
represents the anticipated refunds related to an APS tax accounting method change approved by the
IRS in the third quarter of 2009. This amount is classified as long-term, as cash refunds are not
expected to be received in the next twelve months.
During the first quarter of 2010, the Company reached a settlement with the IRS with regard to
the examination of tax returns for the years ended December 31, 2005 through 2007. As a result of this
settlement, net uncertain tax positions decreased $62 million, including approximately $3 million