APS 2013 Annual Report Download - page 93

Table of Contents
PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Doubtful Accounts
The allowance for doubtful accounts represents our best estimate of existing accounts receivable that will ultimately be uncollectible. The allowance
is calculated by applying estimated write-off factors to various classes of outstanding receivables, including accrued utility revenues. The write-off factors
used to estimate uncollectible accounts are based upon consideration of both historical collections experience and management’s best estimate of future
collections success given the existing collections environment.
Property, Plant and Equipment
Utility plant is the term we use to describe the business property and equipment that supports electric service, consisting primarily of generation,
transmission and distribution facilities. We report utility plant at its original cost, which includes:
· material and labor;
· contractor costs;
· capitalized leases;
· construction overhead costs (where applicable); and
· allowance for funds used during construction.
We expense the costs of plant outages, major maintenance and routine maintenance as incurred. We charge retired utility plant to accumulated
depreciation. Liabilities associated with the retirement of tangible long-lived assets are recognized at fair value as incurred and capitalized as part of the related
tangible long-lived assets. Accretion of the liability due to the passage of time is an operating expense, and the capitalized cost is depreciated over the useful life
of the long-lived asset. See Note 12.
APS records a regulatory liability on its regulated assets for the difference between the amount that has been recovered in regulated rates and the
amount calculated in accordance with guidance on accounting for asset retirement obligations. APS believes it can recover in regulated rates the costs
calculated in accordance with this accounting guidance.
We record depreciation on utility plant on a straight-line basis over the remaining useful life of the related assets. The approximate remaining average
useful lives of our utility property at December 31, 2013 were as follows:
· Fossil plant — 18 years;
· Nuclear plant — 26 years;
· Other generation — 26 years;
· Transmission — 37 years;
· Distribution — 34 years; and
· Other — 7 years.
APS applied for twenty-year extensions of its operating licenses for each of the three Palo Verde units in December 2008. On April 21, 2011, the
NRC approved the extensions of the Palo Verde licenses. The nuclear plant remaining life takes into consideration an ACC decision which authorizes the use
of the new Palo Verde nuclear plant lives, effective January 1, 2012.
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