APS 2015 Annual Report Download - page 133

Table of Contents
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fuel and Purchased Power Commitments and Purchase Obligations
APS is party to various fuel and purchased power contracts and purchase obligations with terms expiring between 2016 and
2043 that include required purchase provisions. APS estimates the contract requirements to be approximately $876 million in 2016;
$949 million in 2017; $737 million in 2018; $603 million in 2019; $498 million in 2020; and $7.8 billion thereafter. However, these
amounts may vary significantly pursuant to certain provisions in such contracts that permit us to decrease required purchases under
certain circumstances.
Of the various fuel and purchased power contracts mentioned above, some of those contracts for coal supply include take-or-
pay provisions. The current coal contracts with take-or-pay provisions have terms expiring through 2031.
The following table summarizes our estimated coal take-or-pay commitments (dollars in thousands):
Years Ended December 31,
2016
2017
2018
2019
2020
Thereafter
Coal take-or-pay commitments (a) $ 170,714
$ 195,428
$ 189,588
$ 193,818
$ 198,160
$ 2,270,974
(a) Total take-or-pay commitments are approximately $3.2 billion. The total net present value of these commitments is
approximately $2.2 billion.
APS may spend more to meet its actual fuel requirements than the minimum purchase obligations in our coal take-or-pay
contracts. The following table summarizes actual payments under the coal contracts which include take-or-pay provisions for each of
the last three years (dollars in thousands):
Year Ended December 31,
2015
2014
2013
Total payments $ 211,327
$ 236,773
$ 188,496
Renewable Energy Credits
APS has entered into contracts to purchase renewable energy credits to comply with the RES. APS estimates the contract
requirements to be approximately $42 million in 2016; $40 million in 2017; $40 million in 2018; $40 million in 2019; $40 million in
2020; and $432 million thereafter. These amounts do not include purchases of renewable energy credits that are bundled with energy.
Coal Mine Reclamation Obligations
APS must reimburse certain coal providers for amounts incurred for final and contemporaneous coal mine reclamation. We
account for contemporaneous reclamation costs as part of the cost of the delivered coal. We utilize site-specific studies of costs
expected to be incurred in the future to estimate our final reclamation obligation. These studies utilize various assumptions to estimate
the future costs. Based on the most recent reclamation studies, APS recorded an obligation for the coal mine final reclamation of
approximately $202 million at December 31, 2015 and $198 million at December 31, 2014. Under our current coal supply agreements,
we expect to make payments for the final mine reclamation as follows: $15 million in 2016; $16 million in 2017; $18 million in 2018;
$19 million in 2019; $20 million in 2020; and $262 million thereafter. Any amendments to current coal supply agreements may
change the timing of the contribution. Portions of
128