APS 2012 Annual Report Download - page 154

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
129
Pinnacle West has issued parental guarantees and surety bonds for APS which were not material
at December 31, 2012.
12. Asset Retirement Obligations
APS has asset retirement obligations for its Palo Verde nuclear facilities and certain other
generation, transmission and distribution assets. The Palo Verde asset retirement obligation primarily
relates to final plant decommissioning. This obligation is based on the NRC’s requirements for disposal
of radiated property or plant and agreements APS reached with the ACC for final decommissioning of
the plant. In the first quarter of 2011, a new decommissioning study with updated cash flow estimates
was completed for Palo Verde. This study reflects the twenty-year license extension approved by the
NRC on April 21, 2011, which extends the commencement of decommissioning to 2045.
The non-nuclear generation asset retirement obligations primarily relate to requirements for
removing portions of those plants at the end of the plant life or lease term. The Four Corners coal-fired
power plant asset retirement obligation relates to final plant decommissioning, including ash pond
closures. In the fourth quarter of 2012, a new study related to ash pond closure was completed which
updated the total cost estimates and related cash flow estimates.
Some of APS’s transmission and distribution assets have asset retirement obligations because
they are subject to right of way and easement agreements that require final removal. These agreements
have a history of uninterrupted renewal that APS expects to continue. As a result, APS cannot
reasonably estimate the fair value of the asset retirement obligation related to such distribution and
transmission assets.
Additionally, APS has aquifer protection permits for some of its generation sites that require the
closure of certain facilities at those sites.
The following schedule shows the change in our asset retirement obligations for 2012 and 2011
(dollars in millions):
2012
2011
Asset retirement obligations at the
beginning of year
$ 280
$ 329
Changes attributable to:
Accretion expense
19
19
Estimated cash flow revisions
58
(68)
Asset retirement obligations at the
end of year
$ 357 $ 280
In accordance with regulatory accounting, APS accrues removal costs for its regulated utility
assets, even if there is no legal obligation for removal. See detail of regulatory liabilities in Note 3.