Vectren 2008 Annual Report Download - page 75

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regulatory assets and liabilities and the ability to continue to account for its activities based on the criteria set forth
in SFAS 71. Based on current regulation, the Company believes such accounting is appropriate. If all or part of the
Company's operations cease to meet the criteria of SFAS 71, a write-off of related regulatory assets and liabilities
could be required. In addition, the Company would be required to determine any impairment to the carrying value
of its utility plant and other regulated assets.
Regulatory Assets consist of the following:
At December 31,
(In millions) 2008 2007
Future amounts recoverable from ratepayers related to:
Benefit obligations 101.0$ 23.6$
Income taxes- transition to SFAS 109 (0.7) (0.9)
Income taxes- deferred income taxes 12.1 14.9
Interest rate derivatives - 8.9
Asset retirement obligations & othe
r
8.5 10.9
120.9 57.4
Amounts
d
e
f
erre
d
f
or
f
uture recovery re
l
ate
d
to:
Cost recovery riders & othe
r
1.7 1.9
1.7 1.9
Amounts current
l
y recovere
d
i
n customer rates re
l
ate
d
to:
Deman
d
s
id
e management programs 21.5 27.6
Unamortized debt issue costs & hedging proceeds 38.4 25.0
Indiana authorized trackers 13.8 42.3
Ohio authorized trackers 11.6 10.4
Premiums paid to reacquire debt & othe
r
8.8 10.7
94.1 116.0
Total regulatory assets 216.7$ 175.3$
Of the $94.1 million currently being recovered in customer rates charged to customers, $21.5 million is earning a
return. The weighted average recovery period of regulatory assets currently being recovered is 13 years. The
Company has rate orders for all deferred costs not yet in rates and therefore believes that future recovery is
probable.
Regulatory Liabilities
At December 31, 2008 and 2007, the Company has approximately $315.1 million and $307.2 million, respectively,
in regulatory liabilities. Of these amounts, $292.4 million and $288.3 million relate to cost of removal obligations.
The Company collects an estimated cost of removal of its utility plant through depreciation rates established in
regulatory proceedings. The Company records amounts expensed in advance of payments as a Regulatory liability
because the liability does not meet the threshold of an asset retirement obligation as defined by SFAS No. 143,
“Accounting for Asset Retirement Obligations” and its related interpretations (SFAS 143).
M. Asset Retirement Obligations
A portion of removal costs related to interim retirements of gas utility pipeline and utility poles, certain asbestos-
related issues, and reclamation activities meet the definition of an asset retirement obligation (ARO). SFAS 143
requires entities to record the fair value of a liability for a legal ARO in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived
asset. The liability is accreted, and the capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss. To
the extent regulation is involved, such gain or loss may be deferred.
ARO’s included in Other liabilities total $27.5 million and $18.8 million at December 31, 2008 and 2007,
respectively. ARO’s included in Accrued liabilities total $7.2 million and $9.5 million at December 31, 2008 and
2007, respectively. During 2008, the Company recorded accretion of $1.1 million and increases in estimates, net of