PINNACLE WEST CAPITAL CORP, 10-Q filed on 10/30/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Oct. 23, 2020
Entity Information [Line Items]    
Entity Shell Company false  
Entity Interactive Data Current Yes  
Security Exchange Name NYSE  
Trading Symbol PNW  
Title of 12(b) Security Common Stock  
Entity Tax Identification Number 86-0512431  
Entity Address, Address Line One 400 North Fifth Street, P.O. Box 53999  
Entity Address, City or Town Phoenix  
Entity Address, State or Province AZ  
Entity Address, Postal Zip Code 85072-3999  
City Area Code (602)  
Local Phone Number 250-1000  
Entity File Number 1-8962  
Document Transition Report false  
Document Quarterly Report true  
Entity Registrant Name PINNACLE WEST CAPITAL CORPORATION  
Entity Central Index Key 0000764622  
Document Type 10-Q  
Document Period End Date Sep. 30, 2020  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Common Stock, Shares Outstanding (in shares)   112,596,784
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Incorporation, State or Country Code AZ  
APS    
Entity Information [Line Items]    
Entity Shell Company false  
Entity Interactive Data Current Yes  
Entity Tax Identification Number 86-0011170  
Entity Address, Address Line One 400 North Fifth Street, P.O. Box 53999  
Entity Address, City or Town Phoenix  
Entity Address, State or Province AZ  
Entity Address, Postal Zip Code 85072-3999  
City Area Code (602)  
Local Phone Number 250-1000  
Entity File Number 1-4473  
Entity Registrant Name ARIZONA PUBLIC SERVICE COMPANY  
Entity Central Index Key 0000007286  
Document Type 10-Q  
Document Period End Date Sep. 30, 2020  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Common Stock, Shares Outstanding (in shares)   71,264,947
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Incorporation, State or Country Code AZ  
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
OPERATING REVENUES (NOTE 2) $ 1,254,501 $ 1,190,787 $ 2,846,021 $ 2,800,818
OPERATING EXPENSES        
Fuel and purchased power 353,171 344,862 780,074 817,672
Operations and maintenance 236,971 238,582 677,681 711,759
Depreciation and amortization 152,696 149,450 459,257 445,531
Taxes other than income taxes 54,978 53,809 168,514 163,989
Other expenses 1,677 794 3,191 1,904
Total 799,493 787,497 2,088,717 2,140,855
OPERATING INCOME 455,008 403,290 757,304 659,963
OTHER INCOME (DEDUCTIONS)        
Allowance for equity funds used during construction 8,144 5,917 24,652 24,677
Pension and other postretirement non-service credits - net 14,118 5,752 42,171 17,240
Other income (Note 9) 13,881 15,191 42,888 35,245
Other expense (Note 9) (5,838) (5,740) (14,426) (14,448)
Total 30,305 21,120 95,285 62,714
INTEREST EXPENSE        
Interest charges 61,497 57,481 183,421 175,599
Allowance for borrowed funds used during construction (4,663) (3,486) (13,488) (14,645)
Total 56,834 53,995 169,933 160,954
INCOME BEFORE INCOME TAXES 428,479 370,415 682,656 561,723
INCOME TAXES 77,234 53,266 98,086 72,764
NET INCOME 351,245 317,149 584,570 488,959
Less: Net income attributable to noncontrolling interests (Note 6) 4,873 4,873 14,620 14,620
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 346,372 $ 312,276 $ 569,950 $ 474,339
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING        
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING - BASIC (in shares) 112,679 112,463 112,639 112,408
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING - DILUTED (in shares) 112,987 112,746 112,912 112,739
EARNINGS PER WEIGHTED-AVERAGE COMMON SHARE OUTSTANDING        
Net income attributable to common shareholders - basic (in dollars per share) $ 3.07 $ 2.78 $ 5.06 $ 4.22
Net income attributable to common shareholders - diluted (in dollars per share) $ 3.07 $ 2.77 $ 5.05 $ 4.21
APS        
OPERATING REVENUES (NOTE 2) $ 1,254,501 $ 1,190,787 $ 2,846,021 $ 2,800,818
OPERATING EXPENSES        
Fuel and purchased power 353,171 344,862 780,074 817,672
Operations and maintenance 233,452 235,440 667,938 699,958
Depreciation and amortization 152,676 149,428 459,194 445,467
Taxes other than income taxes 54,966 53,798 168,482 163,957
Other expenses 1,677 794 3,191 1,904
Total 795,942 784,322 2,078,879 2,128,958
OPERATING INCOME 458,559 406,465 767,142 671,860
OTHER INCOME (DEDUCTIONS)        
Allowance for equity funds used during construction 8,144 5,917 24,652 24,677
Pension and other postretirement non-service credits - net 14,334 6,133 43,017 18,389
Other income (Note 9) 13,328 14,534 38,233 32,641
Other expense (Note 9) (2,799) (2,826) (11,326) (10,132)
Total 33,007 23,758 94,576 65,575
INTEREST EXPENSE        
Interest charges 59,132 53,812 171,670 164,068
Allowance for borrowed funds used during construction (4,663) (3,486) (13,488) (14,645)
Total 54,469 50,326 158,182 149,423
INCOME BEFORE INCOME TAXES 437,097 379,897 703,536 588,012
INCOME TAXES 81,861 56,154 106,090 76,070
NET INCOME 355,236 323,743 597,446 511,942
Less: Net income attributable to noncontrolling interests (Note 6) 4,873 4,873 14,620 14,620
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 350,363 $ 318,870 $ 582,826 $ 497,322
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
NET INCOME $ 351,245 $ 317,149 $ 584,570 $ 488,959
Derivative instruments:        
Net unrealized gain, net of tax expense (659) 0 (1,916) 0
Reclassification of net realized loss, net of tax benefit 0 218 282 950
Pension and other postretirement benefits activity, net of tax expense 1,043 880 1,239 220
Total other comprehensive income (loss) 384 1,098 (395) 1,170
COMPREHENSIVE INCOME 351,629 318,247 584,175 490,129
Less: Comprehensive income attributable to noncontrolling interests 4,873 4,873 14,620 14,620
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS 346,756 313,374 569,555 475,509
APS        
NET INCOME 355,236 323,743 597,446 511,942
Derivative instruments:        
Net unrealized gain, net of tax expense 0 0 292 0
Reclassification of net realized loss, net of tax benefit 0 218 282 950
Pension and other postretirement benefits activity, net of tax expense 900 755 823 (146)
Total other comprehensive income (loss) 900 973 1,397 804
COMPREHENSIVE INCOME 356,136 324,716 598,843 512,746
Less: Comprehensive income attributable to noncontrolling interests 4,873 4,873 14,620 14,620
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 351,263 $ 319,843 $ 584,223 $ 498,126
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Net unrealized loss, net of tax expense $ 219 $ 0 $ 1,024 $ 0
Reclassification of net realized loss, net of tax benefit 0 (71) (481) (313)
Pension and other postretirement benefits activity, net of tax expense (benefit) (345) (290) (256) (72)
APS        
Net unrealized loss, net of tax expense 0 0 292 0
Reclassification of net realized loss, net of tax benefit 0 (71) (481) (313)
Pension and other postretirement benefits activity, net of tax expense (benefit) $ (298) $ (249) $ (174) $ 48
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
CURRENT ASSETS    
Cash and cash equivalents $ 181,926 $ 10,283
Customer and other receivables 417,415 266,426
Accrued unbilled revenues 175,341 128,165
Allowance for doubtful accounts (18,069) (8,171)
Materials and supplies (at average cost) 322,017 331,091
Fossil fuel (at average cost) 17,060 14,829
Income tax receivable 4,325 21,727
Assets from risk management activities (Note 7) 13,875 515
Deferred fuel and purchased power regulatory asset (Note 4) 162,111 70,137
Other regulatory assets (Note 4) 110,759 133,070
Other current assets 67,926 61,958
Total current assets 1,454,686 1,030,030
INVESTMENTS AND OTHER ASSETS    
Nuclear decommissioning trust (Notes 11 and 12) 1,069,837 1,010,775
Other special use funds (Notes 11 and 12) 268,292 245,095
Other assets 96,855 96,953
Total investments and other assets 1,434,984 1,352,823
PROPERTY, PLANT AND EQUIPMENT    
Plant in service and held for future use 20,453,437 19,836,292
Accumulated depreciation and amortization (6,999,995) (6,637,857)
Net 13,453,442 13,198,435
Construction work in progress 972,024 808,133
Intangible assets, net of accumulated amortization 266,220 290,564
Nuclear fuel, net of accumulated amortization 128,876 123,500
Total property, plant and equipment 14,919,565 14,522,538
DEFERRED DEBITS    
Regulatory assets (Note 4) 1,305,437 1,304,073
Operating lease right-of-use assets (Note 16) 502,898 145,813
Assets for other postretirement benefits (Note 5) 105,675 90,570
Other 28,176 33,400
Total deferred debits 1,942,186 1,573,856
TOTAL ASSETS 19,751,421 18,479,247
CURRENT LIABILITIES    
Current maturities of long-term debt (Note 3) 0 800,000
Accounts payable 288,265 346,448
Accrued taxes 221,358 144,899
Accrued interest 60,642 53,534
Common dividends payable 0 87,982
Short-term borrowings (Note 3) 57,925 114,675
Customer deposits 47,730 64,908
Liabilities from risk management activities (Note 7) 4,266 38,946
Liabilities for asset retirements 12,226 11,025
Operating lease liabilities (Note 16) 89,064 12,713
Regulatory liabilities (Note 4) 308,019 234,912
Other current liabilities 155,289 168,323
Total current liabilities 1,244,784 2,078,365
Long-term debt less current maturities (Note 3) 6,316,420 4,832,558
DEFERRED CREDITS AND OTHER    
Deferred income taxes 2,163,050 1,992,339
Regulatory liabilities (Note 4) 2,079,323 2,267,835
Liabilities for asset retirements 674,025 646,193
Liabilities for pension benefits (Note 5) 177,855 280,185
Liabilities from risk management activities (Note 7) 9,092 33,186
Customer advances 224,924 215,330
Unrecorded Unconditional Purchase Obligation 168,997 165,695
Deferred investment tax credit 187,926 196,468
Unrecognized tax benefits 6,013 6,189
Operating lease liabilities (Note 16) 358,490 51,872
Other 173,347 159,844
Total deferred credits and other 6,223,042 6,015,136
COMMITMENTS AND CONTINGENCIES (NOTE 8)
EQUITY    
Common stock, no par value; authorized 150,000,000 shares, 112,623,623 and 112,540,126 issued at respective dates 2,670,358 2,659,561
Treasury stock at cost; 33,717 and 103,546 shares at respective dates (2,966) (9,427)
Total common stock 2,667,392 2,650,134
Retained earnings 3,231,485 2,837,610
Accumulated other comprehensive loss (57,491) (57,096)
Total shareholders’ equity 5,841,386 5,430,648
Noncontrolling interests (Note 6) 125,789 122,540
Total equity 5,967,175 5,553,188
TOTAL LIABILITIES AND EQUITY 19,751,421 18,479,247
APS    
CURRENT ASSETS    
Cash and cash equivalents 181,793 10,169
Customer and other receivables 417,362 255,479
Accrued unbilled revenues 175,341 128,165
Allowance for doubtful accounts (18,069) (8,171)
Materials and supplies (at average cost) 322,017 331,091
Fossil fuel (at average cost) 17,060 14,829
Income tax receivable 0 7,313
Assets from risk management activities (Note 7) 13,875 515
Deferred fuel and purchased power regulatory asset (Note 4) 162,111 70,137
Other regulatory assets (Note 4) 110,759 133,070
Other current assets 42,847 38,895
Total current assets 1,425,096 981,492
INVESTMENTS AND OTHER ASSETS    
Nuclear decommissioning trust (Notes 11 and 12) 1,069,837 1,010,775
Other special use funds (Notes 11 and 12) 268,292 245,095
Other assets 48,393 43,781
Total investments and other assets 1,386,522 1,299,651
PROPERTY, PLANT AND EQUIPMENT    
Plant in service and held for future use 20,449,975 19,832,805
Accumulated depreciation and amortization (6,996,748) (6,634,597)
Net 13,453,227 13,198,208
Construction work in progress 972,024 808,133
Intangible assets, net of accumulated amortization 266,065 290,409
Nuclear fuel, net of accumulated amortization 128,876 123,500
Total property, plant and equipment 14,919,195 14,522,156
DEFERRED DEBITS    
Regulatory assets (Note 4) 1,305,437 1,304,073
Operating lease right-of-use assets (Note 16) 501,282 144,024
Assets for other postretirement benefits (Note 5) 101,792 86,736
Other 27,592 32,591
Total deferred debits 1,936,103 1,567,424
TOTAL ASSETS 19,666,916 18,370,723
CURRENT LIABILITIES    
Current maturities of long-term debt (Note 3) 0 350,000
Accounts payable 282,868 338,006
Accrued taxes 268,990 136,328
Accrued interest 58,403 52,619
Common dividends payable 0 88,000
Customer deposits 47,730 64,908
Liabilities from risk management activities (Note 7) 4,266 38,946
Liabilities for asset retirements 12,226 11,025
Operating lease liabilities (Note 16) 88,975 12,549
Regulatory liabilities (Note 4) 308,019 234,912
Other current liabilities 153,986 164,736
Total current liabilities 1,225,463 1,492,029
Long-term debt less current maturities (Note 3) 5,820,303 4,833,133
DEFERRED CREDITS AND OTHER    
Deferred income taxes 2,166,599 2,033,096
Regulatory liabilities (Note 4) 2,079,323 2,267,835
Liabilities for asset retirements 674,025 646,193
Liabilities for pension benefits (Note 5) 161,186 262,243
Liabilities from risk management activities (Note 7) 9,092 33,186
Customer advances 224,924 215,330
Unrecorded Unconditional Purchase Obligation 168,997 165,695
Deferred investment tax credit 187,926 196,468
Unrecognized tax benefits 39,589 40,188
Operating lease liabilities (Note 16) 356,783 50,092
Other 142,431 136,432
Total deferred credits and other 6,210,875 6,046,758
COMMITMENTS AND CONTINGENCIES (NOTE 8)
EQUITY    
Common stock 178,162 178,162
Additional paid-in capital 2,721,696 2,721,696
Retained earnings 3,418,753 3,011,927
Accumulated other comprehensive loss (34,125) (35,522)
Total shareholders’ equity 6,284,486 5,876,263
Noncontrolling interests (Note 6) 125,789 122,540
Total equity 6,410,275 5,998,803
Total capitalization 12,230,578 10,831,936
TOTAL LIABILITIES AND EQUITY 19,666,916 18,370,723
Variable Interest Entity    
PROPERTY, PLANT AND EQUIPMENT    
Total property, plant and equipment 99,003 101,906
Variable Interest Entity | APS    
PROPERTY, PLANT AND EQUIPMENT    
Total property, plant and equipment 99,003 101,906
EQUITY    
Noncontrolling interests (Note 6) $ 125,789 $ 122,540
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - shares
Sep. 30, 2020
Dec. 31, 2019
EQUITY    
Common stock, authorized shares (in shares) 150,000,000 150,000,000
Common stock, issued shares (in shares) 112,623,623 112,540,126
Treasury stock at cost, shares (in shares) 33,717 103,546
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES    
NET INCOME $ 584,570 $ 488,959
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization including nuclear fuel 515,742 500,801
Deferred fuel and purchased power (82,679) (60,911)
Deferred fuel and purchased power amortization (9,295) 38,601
Allowance for equity funds used during construction (24,652) (24,677)
Deferred income taxes 91,077 83,703
Deferred investment tax credit (8,541) (7,288)
Stock compensation 12,119 16,486
Customer and other receivables (118,998) (91,506)
Changes in current assets and liabilities:    
Accrued unbilled revenues (47,176) (18,666)
Materials, supplies and fossil fuel 6,843 (18,332)
Income tax receivable 17,402 (14,063)
Other current assets (20,527) (10,104)
Accounts payable (6,400) 33,899
Accrued taxes 76,459 66,111
Other current liabilities 6,946 (68,927)
Change in other long-term assets (10,152) (52,276)
Change in other long-term liabilities (210,719) (27,049)
Net cash flow provided by operating activities 772,019 834,761
CASH FLOWS FROM INVESTING ACTIVITIES    
Capital expenditures (971,052) (857,883)
Contributions in aid of construction 41,457 34,121
Allowance for borrowed funds used during construction (13,488) (14,645)
Proceeds from nuclear decommissioning trust sales and other special use funds 607,885 520,996
Investment in nuclear decommissioning trust and other special use funds (624,249) (523,573)
Other 3,944 8,971
Net cash flow used for investing activities (955,503) (832,013)
CASH FLOWS FROM FINANCING ACTIVITIES    
Issuance of long-term debt 1,483,822 794,981
Short-term borrowing and payments — net (42,750) (6,025)
Short-term debt borrowings 751,690 49,000
Short-term debt repayments (765,690) (62,000)
Repayment of long-term debt (800,000) (500,000)
Dividends paid on common stock (258,924) (243,116)
Common stock equity issuance - net of purchases (1,649) (130)
Distributions to noncontrolling interests (11,372) (11,372)
Net cash flow provided by financing activities 355,127 21,338
NET INCREASE IN CASH AND CASH EQUIVALENTS 171,643 24,086
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,283 5,766
CASH AND CASH EQUIVALENTS AT END OF PERIOD 181,926 29,852
APS    
CASH FLOWS FROM OPERATING ACTIVITIES    
NET INCOME 597,446 511,942
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization including nuclear fuel 515,679 500,737
Deferred fuel and purchased power (82,679) (60,911)
Deferred fuel and purchased power amortization (9,295) 38,601
Allowance for equity funds used during construction (24,652) (24,677)
Deferred income taxes 52,795 97,002
Deferred investment tax credit (8,541) (7,288)
Customer and other receivables (129,892) (90,817)
Changes in current assets and liabilities:    
Accrued unbilled revenues (47,176) (18,666)
Materials, supplies and fossil fuel 6,843 (18,332)
Income tax receivable 7,313 (15,982)
Other current assets (18,512) (8,642)
Accounts payable (3,355) 37,004
Accrued taxes 132,662 38,963
Other current liabilities 7,981 (66,368)
Change in other long-term assets (9,478) (54,872)
Change in other long-term liabilities (216,308) (27,521)
Net cash flow provided by operating activities 770,831 830,173
CASH FLOWS FROM INVESTING ACTIVITIES    
Capital expenditures (971,052) (857,883)
Contributions in aid of construction 41,457 34,121
Allowance for borrowed funds used during construction (13,488) (14,645)
Proceeds from nuclear decommissioning trust sales and other special use funds 607,885 520,996
Investment in nuclear decommissioning trust and other special use funds (624,249) (523,573)
Other (1,260) (3,563)
Net cash flow used for investing activities (960,707) (844,547)
CASH FLOWS FROM FINANCING ACTIVITIES    
Issuance of long-term debt 986,872 794,981
Short-term borrowing and payments — net 0 2,900
Short-term debt borrowings 540,000 0
Short-term debt repayments (540,000) 0
Repayment of long-term debt (350,000) (500,000)
Dividends paid on common stock (264,000) (248,300)
Distributions to noncontrolling interests (11,372) (11,372)
Net cash flow provided by financing activities 361,500 38,209
NET INCREASE IN CASH AND CASH EQUIVALENTS 171,624 23,835
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,169 5,707
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 181,793 $ 29,542
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Treasury Stock
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Noncontrolling Interests
APS
APS
Common Stock
APS
Additional Paid-In Capital
APS
Retained Earnings
APS
Accumulated Other Comprehensive Income (Loss)
APS
Noncontrolling Interests
Beginning balance (in shares) at Dec. 31, 2018   112,159,896 58,135         71,264,947        
Balance at beginning of period at Dec. 31, 2018 $ 5,348,705 $ 2,634,265 $ (4,825) $ 2,641,183 $ (47,708) $ 125,790 $ 5,786,797 $ 178,162 $ 2,721,696 $ 2,788,256 $ (27,107) $ 125,790
Increase (Decrease) in Shareholders' Equity                        
Net Income 488,959     474,339   14,620 511,942     497,322   14,620
Other comprehensive income (loss) 1,170       1,170   804       804  
Dividends on common stock (165,631)     (165,631)                
Issuance of common stock (in shares)   243,855                    
Issuance of common stock 20,165 $ 20,165                    
Purchase of treasury stock (in shares) [1]     (75,894)                  
Purchase of treasury stock [1] (6,892)   $ (6,892)                  
Reissuance of treasury stock for stock-based compensation and other (in shares)     76,082                  
Reissuance of treasury stock for stock-based compensation and other 6,600   $ 6,600 0                
Other             0     (1)   1
Capital activities by noncontrolling interests (11,372)     0   (11,372) (11,372)         (11,372)
Ending balance (in shares) at Sep. 30, 2019   112,403,751 57,947         71,264,947        
Balance at end of period at Sep. 30, 2019 5,681,705 $ 2,654,430 $ (5,117) 2,949,891 (46,538) 129,039 6,122,571 $ 178,162 2,721,696 3,119,977 (26,303) 129,039
Beginning balance (in shares) at Jun. 30, 2019   112,361,595 58,219         71,264,947        
Balance at beginning of period at Jun. 30, 2019 5,357,243 $ 2,648,234 $ (5,140) 2,637,620 (47,636) 124,165 5,797,857 $ 178,162 2,721,696 2,801,110 (27,276) 124,165
Increase (Decrease) in Shareholders' Equity                        
Net Income 317,149     312,276   4,873 323,743     318,870   4,873
Other comprehensive income (loss) 1,098       1,098   973       973  
Dividends on common stock (5)     (5)     (165,600)     (165,600)    
Issuance of common stock (in shares)   42,156                    
Issuance of common stock 6,196 $ 6,196                    
Purchase of treasury stock (in shares)     (103)                  
Purchase of treasury stock (10)   $ (10)                  
Reissuance of treasury stock for stock-based compensation and other (in shares)     375                  
Reissuance of treasury stock for stock-based compensation and other 33   $ 33 0                
Other 1         1 (2)     (3)   1
Ending balance (in shares) at Sep. 30, 2019   112,403,751 57,947         71,264,947        
Balance at end of period at Sep. 30, 2019 $ 5,681,705 $ 2,654,430 $ (5,117) 2,949,891 (46,538) 129,039 6,122,571 $ 178,162 2,721,696 3,119,977 (26,303) 129,039
Beginning balance (in shares) at Dec. 31, 2019 112,540,126 112,540,126 103,546         71,264,947        
Balance at beginning of period at Dec. 31, 2019 $ 5,553,188 $ 2,659,561 $ (9,427) 2,837,610 (57,096) 122,540 5,998,803 $ 178,162 2,721,696 3,011,927 (35,522) 122,540
Increase (Decrease) in Shareholders' Equity                        
Net Income 584,570     569,950   14,620 597,446     582,826   14,620
Other comprehensive income (loss) (395)       (395)   1,397       1,397  
Dividends on common stock (176,079)     (176,079)     (176,000)     (176,000)    
Issuance of common stock (in shares)   83,497                    
Issuance of common stock 10,797 $ 10,797                    
Purchase of treasury stock (in shares)     (34,569)                  
Purchase of treasury stock (3,119)   $ (3,119)                  
Reissuance of treasury stock for stock-based compensation and other (in shares)     104,398                  
Reissuance of treasury stock for stock-based compensation and other 9,580   $ 9,580 0                
Other 5     (4)   1 1     0   1
Capital activities by noncontrolling interests $ (11,372)     0   (11,372)           (11,372)
Ending balance (in shares) at Sep. 30, 2020 112,623,623 112,623,623 33,717         71,264,947        
Balance at end of period at Sep. 30, 2020 $ 5,967,175 $ 2,670,358 $ (2,966) 3,231,485 (57,491) 125,789 6,410,275 $ 178,162 2,721,696 3,418,753 (34,125) 125,789
Beginning balance (in shares) at Jun. 30, 2020   112,591,124 35,983         71,264,947        
Balance at beginning of period at Jun. 30, 2020 5,610,477 $ 2,665,518 $ (3,190) 2,885,109 (57,875) 120,915 6,054,137 $ 178,162 2,721,696 3,068,389 (35,025) 120,915
Increase (Decrease) in Shareholders' Equity                        
Net Income 351,245     346,372   4,873 355,236     350,363   4,873
Other comprehensive income (loss) 384       384   900       900  
Dividends on common stock 1     1                
Issuance of common stock (in shares)   32,499                    
Issuance of common stock 4,840 $ 4,840                    
Purchase of treasury stock (in shares) [1]     (1,499)                  
Purchase of treasury stock [1] (109)   $ (109)                  
Reissuance of treasury stock for stock-based compensation and other (in shares)     3,765                  
Reissuance of treasury stock for stock-based compensation and other 333   $ 333 0                
Other $ 4         1 2     1   1
Capital activities by noncontrolling interests       3     (11,372)          
Ending balance (in shares) at Sep. 30, 2020 112,623,623 112,623,623 33,717         71,264,947        
Balance at end of period at Sep. 30, 2020 $ 5,967,175 $ 2,670,358 $ (2,966) $ 3,231,485 $ (57,491) $ 125,789 $ 6,410,275 $ 178,162 $ 2,721,696 $ 3,418,753 $ (34,125) $ 125,789
[1] Primarily represents shares of common stock withheld from certain stock awards for tax purposes.
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) Parenthetical - $ / shares
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Statement of Stockholders' Equity [Abstract]    
DIVIDENDS DECLARED PER SHARE (in dollars per share) $ 1.57 $ 1.48
v3.20.2
Consolidation and Nature of Operations
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Consolidation and Nature of Operations Consolidation and Nature of Operations
 
The unaudited condensed consolidated financial statements include the accounts of Pinnacle West and our subsidiaries:  APS, 4C Acquisition, LLC ("4CA"), Bright Canyon Energy Corporation ("BCE") and El Dorado Investment Company ("El Dorado").  See Note 8 for more information on 4CA matters. Intercompany accounts and transactions between the consolidated companies have been eliminated.  The unaudited condensed consolidated financial statements for APS include the accounts of APS and the Palo Verde Generating Station ("Palo Verde") sale leaseback variable interest entities ("VIEs") (see Note 6 for further discussion).  Our accounting records are maintained in accordance with accounting principles generally accepted in the United States of America ("GAAP").  The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Amounts reported in our interim Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the respective annual periods, due to the effects of seasonal temperature variations on energy consumption, timing of maintenance on electric generating units ("EGU"), and other factors.
 
Our condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments except as otherwise disclosed in the notes) that we believe are necessary for the fair presentation of our financial position, results of operations, and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to such regulations, although we believe that the disclosures provided are adequate to make the interim information presented not misleading. The accompanying condensed consolidated financial statements and these notes should be read in conjunction with the audited consolidated financial statements and notes included in our 2019 Form 10-K.

On June 30, 2020, the United States Federal Energy Regulatory Commission ("FERC") issued an order granting a waiver request related to the existing Allowance for Funds Used During Construction ("AFUDC") rate calculation beginning March 1, 2020 through February 28, 2021.  The order provides a simplified approach that companies may elect to implement in order to minimize the significant distorted effect on the AFUDC formula resulting from increased short-term debt financing during the COVID-19 pandemic.  APS has adopted this simplified approach to computing the AFUDC composite rate by using a simple average of the actual historical short-term debt balances for 2019, instead of current period short-term debt balances, and has left all other aspects of the AFUDC formula composite rate calculation unchanged. This change impacts the AFUDC composite rate in 2020 but does not impact prior years.  Furthermore, the change in the composite rate calculation does not impact our accounting treatment for these costs. The change will not have a material impact on our financial statements. See Note 1 in our 2019 Form 10-K for information on the accounting treatment for AFUDC.
Supplemental Cash Flow Information

The following table summarizes supplemental Pinnacle West cash flow information (dollars in thousands):
 Nine Months Ended
September 30,
 20202019
Cash paid during the period for:
Income taxes, net of refunds$(3,028)$12,488 
Interest, net of amounts capitalized155,623 166,907 
Significant non-cash investing and financing activities:
Accrued capital expenditures$84,022 $85,099 

The following table summarizes supplemental APS cash flow information (dollars in thousands):
Nine Months Ended
September 30,
 20202019
Cash paid during the period for:
Income taxes, net of refunds$— $35,573 
Interest, net of amounts capitalized148,713 157,593 
Significant non-cash investing and financing activities:
Accrued capital expenditures$84,022 $85,099 

See Note 16 for cash flow information relating to lease activities.
v3.20.2
Revenue
9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Revenue
Sources of Revenue
The following table provides detail of Pinnacle West's consolidated revenue disaggregated by revenue sources (dollars in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Retail Electric Revenue
Residential$726,231 $668,467 $1,566,432 $1,452,601 
Non-Residential461,168 465,602 1,145,640 1,194,199 
Wholesale energy sales45,631 36,775 76,226 95,218 
Transmission services for others18,000 15,841 48,693 46,247 
Other sources3,471 4,102 9,030 12,553 
Total operating revenues$1,254,501 $1,190,787 $2,846,021 $2,800,818 

Retail Electric Revenue. Pinnacle West's retail electric revenue is generated by wholly-owned regulated subsidiary APS's sale of electricity to our regulated customers within the authorized service territory at tariff rates approved by the ACC and based on customer usage. Revenues related to the sale of electricity are generally recognized when service is rendered or electricity is delivered to customers. The billing of electricity
sales to individual customers is based on the reading of their meters. We obtain customers' meter data on a systematic basis throughout the month, and generally bill customers within a month from when service was provided. Customers are generally required to pay for services within 15 days of when the services are billed. See "Allowance for Doubtful Accounts" discussion below for additional details regarding payment terms.

Wholesale Energy Sales and Transmission Services for Others. Revenues from wholesale energy sales and transmission services for others represent energy and transmission sales to wholesale customers. These activities primarily consist of managing fuel and purchased power risks in connection with the cost of serving our retail customers' energy requirements. We may also sell into the wholesale markets generation that is not needed for APS’s retail load. Our wholesale activities and tariff rates are regulated by FERC.

In the electricity business, some contracts to purchase energy are settled by netting against other contracts to sell electricity. This is referred to as a book-out, and usually occurs in contracts that have the same terms (product type, quantities, and delivery points) and for which power does not flow. We net these book-outs, which reduces both wholesale revenues and fuel and purchased power costs.

Revenue Activities

Our revenues primarily consist of activities that are classified as revenues from contracts with customers. We derive our revenues from contracts with customers primarily from sales of electricity to our regulated retail customers. Revenues from contracts with customers also include wholesale and transmission activities. Our revenues from contracts with customers for the three and nine months ended September 30, 2020 were $1,244 million and $2,806 million, respectively, and for the three and nine months ended September 30, 2019 were $1,178 million and $2,756 million, respectively.

We have certain revenues that do not meet the specific accounting criteria to be classified as revenues from contracts with customers. For the three and nine months ended September 30, 2020, our revenues that do not qualify as revenue from contracts with customers were $11 million and $40 million, respectively, and for the three and nine months ended September 30, 2019 were $13 million and $45 million, respectively. This relates primarily to certain regulatory cost recovery mechanisms that are considered alternative revenue programs. We recognize revenue associated with alternative revenue programs when specific events permitting recognition are completed. Certain amounts associated with alternative revenue programs will subsequently be billed to customers; however, we do not reclassify billed amounts into revenue from contracts with customers. See Note 4 for a discussion of our regulatory cost recovery mechanisms.

Contract Assets and Liabilities from Contracts with Customers

There were no material contract assets, contract liabilities, or deferred contract costs recorded on the Condensed Consolidated Balance Sheets as of September 30, 2020 or December 31, 2019.

Allowance for Doubtful Accounts

The allowance for doubtful accounts represents our best estimate of accounts receivable and accrued unbilled revenues that will ultimately be uncollectible due to credit loss risk. The allowance includes a write-off component that is calculated by applying an estimated write-off factor to retail electric revenues. The write-off factor used to estimate uncollectible accounts is based upon consideration of historical collections experience, the current and forecasted economic environment, changes to our collection policies, and management’s best estimate of future collections success.
During March 2020, due to the COVID-19 pandemic, and to assist customers who may be experiencing economic difficulties, we suspended all service shut-offs due to nonpayment. We may experience an increase in the number of customers needing to utilize longer-term payment plans to avoid service disruption. These changes, among others, including the Summer Disconnection Moratorium (defined in Note 4), impacted our allowance for doubtful accounts including our write-off factor. On September 14, 2020, APS extended the suspension of disconnection of customers for nonpayment and waiver of late payment fees related to COVID-19 until December 31, 2020. We will continue to monitor the impacts of COVID-19 and our disconnection policies on our write-off factor and allowance for doubtful accounts. See Note 4 for additional details.

The following table provides a rollforward of Pinnacle West’s allowance for doubtful accounts (dollars in thousands):
Nine Months Ended
September 30, 2020
Twelve Months Ended December 31, 2019
Allowance for doubtful accounts, balance at beginning of period$8,171 $4,069 
Bad debt expense17,399 11,819 
Actual write-offs(7,501)(7,717)
Allowance for doubtful accounts, balance at end of period$18,069 $8,171 
v3.20.2
Long-Term Debt and Liquidity Matters
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Long-Term Debt and Liquidity Matters Long-Term Debt and Liquidity Matters
Pinnacle West and APS maintain committed revolving credit facilities in order to enhance liquidity and provide credit support for their commercial paper programs, to refinance indebtedness, and for other general corporate purposes.
 
Pinnacle West

On May 5, 2020, Pinnacle West refinanced its 364-day $50 million term loan agreement that would have matured on May 7, 2020 with a new 364-day $31 million term loan agreement that matures May 4, 2021. Borrowings under the agreement bear interest at Eurodollar Rate plus 1.40% per annum. At September 30, 2020, Pinnacle West had $24 million in outstanding borrowings under the current agreement.

On June 17, 2020, Pinnacle West issued $500 million of 1.3% unsecured senior notes that mature June 15, 2025. The net proceeds from the sale were used to repay early its $150 million term loan facility set to mature on December 21, 2020, to repay short-term indebtedness consisting of commercial paper and replenish cash incurred or used to fund capital expenditures, to redeem prior to maturity our $300 million, 2.25% senior notes due November 30, 2020, and for general corporate purposes.

At September 30, 2020, Pinnacle West had a $200 million revolving credit facility that matures in July 2023. Pinnacle West has the option to increase the amount of the facility up to a maximum of $300 million upon the satisfaction of certain conditions and with the consent of the lenders. Interest rates are based on Pinnacle West's senior unsecured debt credit ratings. The facility is available to support Pinnacle West's $200 million commercial paper program, for bank borrowings or for issuances of letters of credits. At September 30, 2020, Pinnacle West had no outstanding borrowings under its credit facility, no letters of credit outstanding and $34 million in commercial paper borrowings.
APS

On January 15, 2020, APS repaid at maturity the remaining $150 million of the $250 million aggregate principal amount of its 2.2% Senior Notes.

On May 22, 2020, APS issued $600 million of 3.35% unsecured senior notes that mature May 15, 2050. The net proceeds from the sale were used to repay early its $200 million term loan facility and to repay short-term indebtedness, consisting of commercial paper and revolver borrowings, and to replenish cash used to fund capital expenditures.

On September 11, 2020, APS issued $400 million of 2.65% unsecured senior notes that mature September 15, 2050. The net proceeds from the sale will be used to replenish cash used for previous eligible green expenditures and fund future eligible green expenditures.

At September 30, 2020, APS had two revolving credit facilities totaling $1 billion, including a $500 million credit facility that matures in June 2022 and a $500 million facility that matures in July 2023.  APS may increase the amount of each facility up to a maximum of $700 million, for a total of $1.4 billion, upon the satisfaction of certain conditions and with the consent of the lenders.  Interest rates are based on APS’s senior unsecured debt credit ratings. These facilities are available to support APS’s $500 million commercial paper program, for bank borrowings or for issuances of letters of credit.  At September 30, 2020, APS had no outstanding borrowings under its revolving credit facilities, no letters of credit outstanding, and no commercial paper borrowings.

On November 27, 2018, the ACC issued a financing order in which, subject to specified parameters and procedures, it approved APS’s short-term debt authorization equal to the sum of (i) 7% of APS’s capitalization, and (ii) $500 million (which is required to be used for costs relating to purchases of natural gas and power) and a long-term debt authorization of $5.9 billion. On March 27, 2020, APS filed an application with the ACC to increase the long-term debt limit from $5.9 billion to $7.5 billion and to continue its authorization of short-term debt granted in the 2018 financing order. This application is pending ACC review and approval.

See "Financial Assurances" in Note 8 for a discussion of other outstanding letters of credit.
 
Debt Fair Value
 
Our long-term debt fair value estimates are classified within Level 2 of the fair value hierarchy. The following table presents the estimated fair value of our long-term debt, including current maturities (dollars in thousands):
 As of September 30, 2020As of December 31, 2019
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Pinnacle West$496,117 $507,500 $449,425 $450,822 
APS5,820,303 6,886,108 5,183,133 5,743,570 
Total$6,316,420 $7,393,608 $5,632,558 $6,194,392 
v3.20.2
Regulatory Matters
9 Months Ended
Sep. 30, 2020
Regulated Operations [Abstract]  
Regulatory Matters Regulatory Matters
 
COVID-19 Pandemic

Due to the COVID-19 pandemic, APS voluntarily suspended disconnections of customers for nonpayment beginning March 13, 2020.  In addition, APS waived all late payment fees during this current suspension period.  On September 14, 2020, APS extended this suspension of disconnection of customers for nonpayment and waiver of late payment fees until December 31, 2020. APS currently estimates that the Summer Disconnection Moratorium (see below for discussion of the Summer Disconnection Moratorium), the suspension of disconnections during the COVID-19 pandemic and the increased bad debt expense associated with both events will result in a negative impact to its 2020 operating results of approximately $20 million to $30 million pre-tax above the impact of disconnections on its operating results for years that did not have the Summer Disconnection Moratorium or COVID-19 pandemic. APS is experiencing an increase in bad debt expense associated with the COVID-19 pandemic, but it still believes that costs associated with the Summer Disconnection Moratorium and the COVID-19 disconnection suspensions and related bad debt expense with both events will fall within this estimated $20 million to $30 million range. These estimated impact amounts depend on certain current assumptions, including, but not limited to, customer behaviors, population and employment growth, and the impacts of COVID-19 on the economy. Additionally, due to COVID-19, APS delayed the reset of the Environmental Improvement Surcharge ("EIS") adjustor and suspended the discontinuation of TEAM Phase II to the first billing cycle in May 2020 rather than April 2020 (see below for discussion of EIS and TEAM Phase II).

On April 17, 2020, APS filed an application with the ACC requesting a COVID-19 emergency relief package to provide additional assistance to its customers. On May 5, 2020, the ACC approved APS returning $36 million that had been collected through the Demand Side Management ("DSM") Adjustor Charge, but not allocated for current DSM programs, directly to customers through a bill credit in June 2020. As of September 30, 2020, APS had refunded approximately $43 million to customers. The additional $7 million over the approved amount was the result of the kWh credit being based on historic consumption which was different than actual consumption in the refund period. This difference was recorded to the DSM balancing account and will be addressed in subsequent DSM filings (see below for discussion of the DSM Adjustor Charge).

APS has committed a total of approximately $8 million to assist customers and local non-profits and community organizations to help with the impact of the COVID-19 pandemic, with $6.8 million of these dollars directly committed to bill assistance programs (the “COVID Customer Support Fund”). The COVID Customer Support Fund is comprised of $5.3 million of non-ratepayer funds that APS voluntarily committed to the ACC that it would contribute to providing assistance to residential and non-residential customers that have been impacted by the COVID-19 pandemic and $1.5 million that APS had already provided to assist customers with a one-time credit of $100 on their bill. Included in the COVID Customer Support Fund are programs that assist customers that have a delinquency of two or more months with a one-time credit of $100, programs to assist extra small and small non-residential customers that have a delinquency of two or more months with a one-time credit of $1,000, and other targeted programs allocated to assist with other COVID-19 needs in support of utility bill assistance. Limited income customers can qualify for assistance without restriction on the timing of past due amounts. As of October 21, 2020, APS had distributed $4.3 million for all COVID Customer Support Fund programs combined. Beyond the COVID Customer Support Fund, APS has also provided $1.25 million to assist local non-profits and community organizations working to mitigate the impacts of the COVID-19 pandemic.
2019 Retail Rate Case Filing with the Arizona Corporation Commission

In accordance with the requirements of the 2018 rate review order described below, APS filed an application with the ACC on October 31, 2019 seeking an annual increase in retail base rates of $69 million. This amount includes recovery of the deferral and rate base effects of the Four Corners selective catalytic reduction ("SCR") project that is currently the subject of a separate proceeding (see “SCR Cost Recovery” below). It also reflects a net credit to base rates of approximately $115 million primarily due to the prospective inclusion of rate refunds currently provided through the Tax Expense Adjustment Mechanism ("TEAM"). The proposed total revenue increase in APS's application is $184 million. The average annual customer bill impact of APS’s request is an increase of 5.6% (the average annual bill impact for a typical APS residential customer is 5.4%).

The principal provisions of APS's application are:

a test year comprised of twelve months ended June 30, 2019, adjusted as described below;
an original cost rate base of $8.87 billion, which approximates the ACC-jurisdictional portion of the book value of utility assets, net of accumulated depreciation and other credits;
the following proposed capital structure and costs of capital:
  Capital Structure Cost of Capital 
Long-term debt 45.3 %4.10 %
Common stock equity 54.7 %10.15 %
Weighted-average cost of capital   7.41 %
 
a 1% return on the increment of fair value rate base above APS’s original cost rate base, as provided for by Arizona law;
a rate of $0.030168 per kWh for the portion of APS’s retail base rates attributable to fuel and purchased power costs ("Base Fuel Rate");
authorization to defer until APS's next general rate case the increase or decrease in its Arizona property taxes attributable to tax rate changes after the date the rate application is adjudicated;
a number of proposed rate and program changes for residential customers, including:
a super off-peak period during the winter months for APS’s time-of-use with demand rates;
additional $1.25 million in funding for APS's limited-income crisis bill program; and
a flat bill/subscription rate pilot program;
proposed rate design changes for commercial customers, including an experimental program designed to provide access to market pricing for up to 200 MW of medium and large commercial customers;
recovery of the deferral and rate base effects of the construction and operating costs of the Ocotillo modernization project (see discussion below of the 2017 Settlement Agreement); and
continued recovery of the remaining investment and other costs related to the retirement and closure of the Navajo Generating Station (the "Navajo Plant") (see "Navajo Plant" below).

APS requested that the increase become effective December 1, 2020.

On October 2, 2020, the ACC Staff, the Residential Utility Consumer Office (“RUCO”) and other intervenors filed their initial written testimony with the ACC in this rate case. The ACC Staff recommends, among other things, a (i) $89.7 million revenue increase, (ii) average annual customer bill increase of 2.7%, (iii) return on equity of 9.4%, (iv) a 0.3% or, as an alternative, a 0% return on the increment of fair value rate base, (v) recovery of the deferral and rate base effects of the construction and operating costs of the Four Corners SCR project and (vi) recovery of the rate base effects of the construction and ongoing consideration of the deferral of the Ocotillo modernization project. RUCO recommends, among other things, a (i) $20.8 million
revenue decrease, (ii) average annual customer bill decrease of 0.63%, (iii) return on equity of 8.74%, (iv) a 0% return on the increment of fair value rate base, (v) nonrecovery of the deferral and rate base effects of the construction and operating costs of the Four Corners SCR project pending further consideration, and (vi) recovery of the deferral and rate base effects of the construction and operating costs of the Ocotillo modernization project.

The filed ACC Staff and intervenor testimony include additional recommendations, some of which materially differ from APS’s filed application. APS is continuing to assess all filed testimony and will file rebuttal testimony with updated positions no later than November 6, 2020. The hearing for this rate case was delayed, at the request of the ACC Staff and RUCO, and is currently scheduled to begin December 14, 2020. Unfavorable ACC Staff and intervenor positions and recommendations could have a material impact to APS’s financial statements if ultimately adopted. APS cannot predict the outcome of this proceeding.

2016 Retail Rate Case Filing with the Arizona Corporation Commission
 
On June 1, 2016, APS filed an application with the ACC for an annual increase in retail base rates. On March 27, 2017, a majority of the stakeholders in the general retail rate case, including the ACC Staff, RUCO, limited income advocates and private rooftop solar organizations signed a settlement agreement (the "2017 Settlement Agreement") and filed it with the ACC. The 2017 Settlement Agreement provides for a net retail base rate increase of $94.6 million, excluding the transfer of adjustor balances, consisting of: (1) a non-fuel, non-depreciation, base rate increase of $87.2 million per year; (2) a base rate decrease of $53.6 million attributable to reduced fuel and purchased power costs; and (3) a base rate increase of $61.0 million due to changes in depreciation schedules. The average annual customer bill impact under the 2017 Settlement Agreement was calculated as an increase of 3.28% (the average annual bill impact for a typical APS residential customer was calculated as an increase of 4.54%).

Other key provisions of the agreement include the following:

an authorized return on common equity of 10.0%;
a capital structure comprised of 44.2% debt and 55.8% common equity;
a cost deferral order for potential future recovery in APS’s next general retail rate case for the construction and operating costs APS incurs for its Ocotillo modernization project;
a cost deferral and procedure to allow APS to request rate adjustments prior to its next general retail rate case related to its share of the construction costs associated with installing SCR equipment at the Four Corners Power Plant ("Four Corners");
a deferral for future recovery (or credit to customers) of the Arizona property tax expense above or below a specified test year level caused by changes to the applicable Arizona property tax rate;
an expansion of the Power Supply Adjustor (“PSA”) to include certain environmental chemical costs and third-party energy storage costs;
a new AZ Sun II program (now known as "APS Solar Communities") for utility-owned solar distributed generation with the purpose of expanding access to rooftop solar for low and moderate income Arizonans, recoverable through the Arizona Renewable Energy Standard and Tariff ("RES"), to be no less than $10 million per year in capital costs, and not more than $15 million per year in capital costs;
an increase to the per kWh cap for the environmental improvement surcharge from $0.00016 to $0.00050 and the addition of a balancing account;
rate design changes, including:
a change in the on-peak time of use period from noon-7 p.m. to 3 p.m.-8 p.m. Monday through Friday, excluding holidays;
non-grandfathered distributed generation ("DG") customers would be required to select a rate option that has time of use rates and either a new grid access charge or demand component;
a Resource Comparison Proxy (“RCP”) for exported energy of 12.9 cents per kWh in year one; and
an agreement by APS not to pursue any new self-build generation (with certain exceptions) having an in-service date prior to January 1, 2022 (extended to December 31, 2027 for combined-cycle generating units), unless expressly authorized by the ACC.

Through a separate agreement, APS, industry representatives, and solar advocates committed to stand by the 2017 Settlement Agreement and refrain from seeking to undermine it through ballot initiatives, legislation or advocacy at the ACC.

On August 15, 2017, the ACC approved (by a vote of 4-1) the 2017 Settlement Agreement without material modifications.  On August 18, 2017, the ACC issued a final written Opinion and Order reflecting its decision in APS’s general retail rate case (the "2017 Rate Case Decision"), which is subject to requests for rehearing and potential appeal. The new rates went into effect on August 19, 2017.

On January 3, 2018, an APS customer filed a petition with the ACC that was determined by the ACC Staff to be a complaint filed pursuant to Arizona Revised Statute §40-246 (the “Complaint”). The Complaint was later amended alleging that the rates and charges in the 2017 Rate Case Decision are not just and reasonable. The ACC held a hearing on this matter, and the Administrative Law Judge issued a Recommended Opinion and Order recommending that the Complaint be dismissed. On July 3, 2019, the Administrative Law Judge issued an amendment to the Recommended Opinion and Order that incorporated the requirements of the rate review of the 2017 Rate Case Decision (see below discussion regarding the rate review). On July 10, 2019, the ACC adopted the Administrative Law Judge's amended Recommended Opinion and Order along with several ACC Commissioner amendments and an amendment incorporating the results of the rate review and resolved the Complaint.

See "Rate Plan Comparison Tool and Investigation" below for information regarding a review and investigation pertaining to the rate plan comparison tool offered to APS customers and other related issues.

ACC Review of APS 2017 Rate Case Decision

On December 24, 2018, certain ACC Commissioners filed a letter stating that because the ACC had received a substantial number of complaints that the rate increase authorized by the 2017 Rate Case Decision was much more than anticipated, they believe there is a possibility that APS is earning more than was authorized by the 2017 Rate Case Decision.  Accordingly, the ACC Commissioners requested the ACC Staff to perform a rate review of APS using calendar year 2018 as a test year. The ACC Commissioners also asked the ACC Staff to evaluate APS’s efforts to educate its customers regarding the new rates approved in the 2017 Rate Case Decision.

On June 4, 2019, the ACC Staff filed a proposed order regarding the rate review of the 2017 Rate Case Decision. On June 11, 2019, the ACC Commissioners approved the proposed ACC Staff order with amendments. The key provisions of the amended order include the following:

APS must file a rate case no later than October 31, 2019, using a June 30, 2019 test year;
until the conclusion of the rate case being filed no later than October 31, 2019, APS must provide information on customer bills that shows how much a customer would pay on their most economical rate given their actual usage during each month;
APS customers can switch rate plans during an open enrollment period of six months;
APS must identify customers whose bills have increased by more than 9% and that are not on the most economical rate and provide such customers with targeted education materials and an opportunity to switch rate plans;
APS must provide grandfathered net metering customers on legacy demand rates an opportunity to switch to another legacy rate to enable such customers to fully benefit from legacy net metering rates;
APS must fund and implement a supplemental customer education and outreach program to be developed with and administered by ACC Staff and a third-party consultant; and
APS must fund and organize, along with the third-party consultant, a stakeholder group to suggest better ways to communicate the impact of changes to adjustor cost recovery mechanisms (see below for discussion on cost recovery mechanisms), including more effective ways to educate customers on rate plans and to reduce energy usage.

APS filed its rate case on October 31, 2019 (see "2019 Retail Rate Case Filing with the Arizona Corporation Commission" above for more information). APS does not believe that the implementation of the other key provisions of the amended order regarding the rate review will have a material impact on its financial position, results of operations or cash flows.

On May 19, 2020, the ACC Staff filed a third-party consultant’s report which evaluated the effectiveness of APS’s customer outreach and education program related to the 2017 Rate Case Decision. On May 29, 2020, the Chairman of the ACC filed a letter with the ACC in response to this report and is alleging that APS is out of compliance with the 2017 Rate Case Decision and is over-earning. The Chairman proposed that the current rates should be classified as interim rates and customers held harmless if APS’s activities have caused the rates set in the 2017 Rate Case Decision to not be just and reasonable. Also, on May 29, 2020, a second commissioner filed a letter with the ACC agreeing with the Chairman’s assertions and further asserting that the 2017 Rate Case Decision should be re-opened. On June 18, 2020, at an ACC Open Meeting, the matters raised in these letters were discussed. The ACC did not vote to move forward with any adjustments to APS’s current rates. APS is monitoring this matter, but believes that the proposals are not legal and further that APS has not over-earned. APS cannot predict the outcome of this matter at this time or whether or how further action may be taken by the ACC.

Cost Recovery Mechanisms
 
APS has received regulatory decisions that allow for more timely recovery of certain costs outside of a general retail rate case through the following recovery mechanisms.
 
Renewable Energy Standard.  In 2006, the ACC approved the RES.  Under the RES, electric utilities that are regulated by the ACC must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including solar, wind, biomass, biogas and geothermal technologies.  In order to achieve these requirements, the ACC allows APS to include a RES surcharge as part of customer bills to recover the approved amounts for use on renewable energy projects.  Each year APS is required to file a five-year implementation plan with the ACC and seek approval for funding the upcoming year’s RES budget. In 2015, the ACC revised the RES rules to allow the ACC to consider all available information, including the number of rooftop solar arrays in a utility’s service territory, to determine compliance with the RES.

On November 20, 2017, APS filed an updated 2018 RES budget to include budget adjustments for APS Solar Communities (formerly known as AZ Sun II), which was approved as part of the 2017 Rate Case Decision. APS Solar Communities is a 3-year program authorizing APS to spend $10 million to $15 million in capital costs each year to install utility-owned DG systems for low to moderate income residential homes, non-profit entities, Title I schools and rural government facilities. The 2017 Rate Case Decision provided that all
operations and maintenance expenses, property taxes, marketing and advertising expenses, and the capital carrying costs for this program will be recovered through the RES.

On June 29, 2018, APS filed its 2019 RES Implementation Plan and proposed a budget of approximately $89.9 million.  APS’s budget request supports existing approved projects and commitments and requests a permanent waiver of the residential distributed energy requirement for 2019 contained in the RES rules. On October 29, 2019, the ACC approved the 2019 RES Implementation Plan including a waiver of the residential distributed energy requirements for the 2019 implementation year.

On July 1, 2019, APS filed its 2020 RES Implementation Plan and proposed a budget of approximately $86.3 million. APS’s budget request supports existing approved projects and commitments and requests a permanent waiver of the residential distributed energy requirement for 2020 contained in the RES rules. On September 23, 2020, the ACC approved the 2020 RES Implementation Plan including a waiver of the residential distributed energy requirements for the 2020 implementation year. In addition, the ACC approved the implementation of a new pilot program that incentivizes Arizona households to install at-home battery systems. Recovery of the costs associated with the pilot will be addressed in the 2021 Demand Side Management Implementation Plan ("DSM Plan").

On July 1, 2020, APS filed its 2021 RES Implementation Plan and proposed a budget of approximately $84.7 million.  APS’s budget request supports existing approved projects and commitments and requests a permanent waiver of the residential distributed energy requirement for 2021 contained in the RES rules. The ACC has not yet ruled on the 2021 RES Implementation Plan.

On July 15, 2020, ACC Staff issued final draft rules which, if approved, would require APS to meet certain clean energy standards, obtain approval for its action plan included in its IRP, and seek cost recovery in a rate process. APS cannot predict the outcome of this matter. See "Energy Modernization Plan" below for more information.

Demand Side Management Adjustor Charge.  The ACC Electric Energy Efficiency Standards require APS to submit a DSM Plan annually for review by and approval of the ACC. Verified energy savings from APS's resource savings projects can be counted toward compliance with the Electric Energy Efficiency Standards; however, APS is not allowed to count savings from systems savings projects toward determination of the achievement of performance incentives, nor may APS include savings from these system savings projects in the calculation of its Lost Fixed Cost Recovery (“LFCR”) mechanism (see below for discussion of the LFCR).

On September 1, 2017, APS filed its 2018 DSM Plan, which proposed modifications to the demand side management portfolio to better meet system and customer needs by focusing on peak demand reductions, storage, load shifting and demand response programs in addition to traditional energy savings measures. The 2018 DSM Plan sought a requested budget of $52.6 million and requested a waiver of the Electric Energy Efficiency Standard for 2018.   On November 14, 2017, APS filed an amended 2018 DSM Plan, which revised the allocations between budget items to address customer participation levels but kept the overall budget at $52.6 million.

On December 31, 2018, APS filed its 2019 DSM Plan, which requested a budget of $34.1 million and continued APS's focus on DSM strategies such as peak demand reduction, load shifting, storage and electrification strategies.

On December 31, 2019, APS filed its 2020 DSM Plan, which requested a budget of $51.9 million and continued APS's focus on DSM strategies such as peak demand reduction, load shifting, storage and
electrification strategies. The 2020 DSM Plan addressed all components of the pending 2018 and 2019 DSM plans, which enabled the ACC to review the 2020 DSM Plan only. On May 15, 2020, APS filed an amended 2020 DSM Plan to provide assistance to customers experiencing economic impacts of the COVID-19 pandemic. The amended 2020 DSM Plan requested the same budget amount of $51.9 million. On September 23, 2020, the ACC approved the amended 2020 DSM Plan.

On April 17, 2020, APS filed an application with the ACC requesting a COVID-19 emergency relief package to provide additional assistance to its customers. On May 5, 2020, the ACC approved APS returning $36 million that had been collected through the DSM Adjustor Charge, but not allocated for current DSM programs, directly to customers through a bill credit in June 2020. As of September 30, 2020, APS had refunded approximately $43 million to customers. The additional $7 million over the approved amount was the result of the kWh credit being based on historic consumption which was different than actual consumption in the refund period. This difference was recorded to the DSM balancing account and will be addressed in subsequent DSM filings. See "COVID-19 Pandemic" above for more information.

Power Supply Adjustor Mechanism and Balance.  The PSA provides for the adjustment of retail rates to reflect variations primarily in retail fuel and purchased power costs.  The following table shows the changes in the deferred fuel and purchased power regulatory asset for 2020 and 2019 (dollars in thousands):
 
 Nine Months Ended
September 30,
 20202019
Beginning balance$70,137 $37,164 
Deferred fuel and purchased power costs — current period82,679 60,911 
Amounts refunded/(charged) to customers9,295 (38,601)
Ending balance$162,111 $59,474 
 
The PSA rate for the PSA year beginning February 1, 2018 is $0.004555 per kWh, consisting of a forward component of $0.002009 per kWh and a historical component of $0.002546 per kWh. This represented a $0.004 per kWh increase over the August 19, 2017 PSA, the maximum permitted under the Plan of Administration for the PSA. This left $16.4 million of 2017 fuel and purchased power costs above this annual cap. These costs rolled over into the following year and were reflected in the 2019 reset of the PSA.

The PSA rate for the PSA year beginning February 1, 2019 was $0.001658 per kWh, consisting of a forward component of $0.000536 per kWh and a historical component of $0.001122 per kWh. This represented a $0.002897 per kWh decrease compared to 2018. These rates went into effect as filed on February 1, 2019.

On November 27, 2019, APS filed its PSA rate for the PSA year beginning February 1, 2020. That rate was $(0.000456) per kWh and consisted of a forward component of $(0.002086) per kWh and a historical component of $0.001630 per kWh. The 2020 PSA rate is a $0.002115 per kWh decrease compared to the 2019 PSA year. These rates went into effect as filed on February 1, 2020.

On March 15, 2019, APS filed an application with the ACC requesting approval to recover the costs related to two energy storage power purchase tolling agreements through the PSA. This application is pending with the ACC. APS cannot predict the outcome of this matter.

Environmental Improvement Surcharge. The EIS permits APS to recover the capital carrying costs (rate of return, depreciation and taxes) plus incremental operations and maintenance expenses associated with
environmental improvements made outside of a test year to comply with environmental standards set by federal, state, tribal, or local laws and regulations.  A filing is made on or before February 1 for qualified environmental improvements made during the prior calendar year, and the new charge becomes effective April 1 unless suspended by the ACC.  There is an overall cap of $0.0005 per kWh (approximately $13 million to $14 million per year).  APS’s February 1, 2020 application requested an increase in the charge to $8.75 million, or $2.0 million over the charge in effect for the 2019-2020 rate effective year. On March 19, 2020, due to the COVID-19 pandemic, APS delayed the reset of the EIS adjustor to the first billing cycle in May 2020 rather than April 2020.
 
Transmission Rates, Transmission Cost Adjustor ("TCA") and Other Transmission Matters In July 2008, FERC approved a modification to APS’s Open Access Transmission Tariff to allow APS to move from fixed rates to a formula rate-setting methodology in order to more accurately reflect and recover the costs that APS incurs in providing transmission services.  A large portion of the rate represents charges for transmission services to serve APS's retail customers ("Retail Transmission Charges").  In order to recover the Retail Transmission Charges, APS was previously required to file an application with, and obtain approval from, the ACC to reflect changes in Retail Transmission Charges through the TCA.  Under the terms of the settlement agreement entered into in 2012 regarding APS's rate case ("2012 Settlement Agreement"), however, an adjustment to rates to recover the Retail Transmission Charges will be made annually each June 1 and will go into effect automatically unless suspended by the ACC.
 
The formula rate is updated each year effective June 1 on the basis of APS's actual cost of service, as disclosed in APS's FERC Form 1 report for the previous fiscal year.  Items to be updated include actual capital expenditures made as compared with previous projections, transmission revenue credits and other items.  The resolution of proposed adjustments can result in significant volatility in the revenues to be collected.  APS reviews the proposed formula rate filing amounts with the ACC Staff.  Any items or adjustments which are not agreed to by APS and the ACC Staff can remain in dispute until settled or litigated at FERC.  Settlement or litigated resolution of disputed issues could require an extended period of time and could have a significant effect on the Retail Transmission Charges because any adjustment, though applied prospectively, may be calculated to account for previously over- or under-collected amounts.

On March 7, 2018, APS made a filing to make modifications to its annual transmission formula to provide transmission customers the benefit of the reduced federal corporate income tax rate resulting from the Tax Cuts and Jobs Act ("Tax Act") beginning in its 2018 annual transmission formula rate update filing. These modifications were approved by FERC on May 22, 2018 and reduced APS’s transmission rates compared to the rate that would have gone into effect absent these changes. On March 17, 2020, APS made a filing to make further modifications to its annual transmission formula to provide additional transparency for excess and deficient Accumulated Deferred Income Taxes resulting from the Tax Act, as well as for future local, state, and federal statutory tax rate changes. This filing is pending with FERC.

Effective June 1, 2018, APS's annual wholesale transmission rates for all users of its transmission system decreased by approximately $22.7 million for the twelve-month period beginning June 1, 2018 in accordance with the FERC-approved formula.  Of this amount, retail customer rates decreased by approximately $26.9 million. An adjustment to APS’s retail rates to recover FERC approved transmission charges went into effect automatically on June 1, 2018.

Effective June 1, 2019, APS's annual wholesale transmission rates for all users of its transmission system increased by approximately $25.8 million for the twelve-month period beginning June 1, 2019 in accordance with the FERC-approved formula. Of this amount, retail customer rates increased by approximately $4.7 million. An adjustment to APS’s retail rates to recover FERC approved transmission charges went into effect automatically on June 1, 2019.
Effective June 1, 2020, APS's annual wholesale transmission rates for all users of its transmission system decreased by approximately $6.1 million for the twelve-month period beginning June 1, 2020 in accordance with the FERC-approved formula.  Of this amount, retail customer rates decreased by approximately $10.9 million. An adjustment to APS’s retail rates to recover FERC approved transmission charges went into effect automatically on June 1, 2020.

Lost Fixed Cost Recovery Mechanism.  The LFCR mechanism permits APS to recover on an after-the-fact basis a portion of its fixed costs that would otherwise have been collected by APS in the kWh sales lost due to APS energy efficiency programs and to DG such as rooftop solar arrays.  The fixed costs recoverable by the LFCR mechanism are currently 2.5 cents for both lost residential and non-residential kWh as set forth in the 2017 Settlement Agreement.  The LFCR adjustment has a year-over-year cap of 1% of retail revenues.  Any amounts left unrecovered in a particular year because of this cap can be carried over for recovery in a future year.  The kWhs lost from energy efficiency are based on a third-party evaluation of APS’s energy efficiency programs.  DG sales losses are determined from the metered output from the DG units.
 
On February 15, 2018, APS filed its 2018 annual LFCR adjustment, requesting that effective May 1, 2018, the LFCR be adjusted to $60.7 million. On February 6, 2019, the ACC approved the 2018 annual LFCR adjustment to become effective March 1, 2019. On February 15, 2019, APS filed its 2019 annual LFCR adjustment, requesting that effective May 1, 2019, the annual LFCR recovery amount be reduced to $36.2 million (a $24.5 million decrease from previous levels). On July 10, 2019, the ACC approved APS’s 2019 LFCR adjustment as filed, effective with the next billing cycle of July 2019. On February 14, 2020, APS filed its 2020 annual LFCR adjustment, requesting that effective May 1, 2020, the annual LFCR recovery amount be reduced to $26.6 million (a $9.6 million decrease from previous levels). On April 14, 2020, the ACC approved the 2020 LFCR adjustment as filed, effective with the first billing cycle in May 2020.

Tax Expense Adjustor Mechanism.  As part of the 2017 Settlement Agreement, the parties agreed to a rate adjustment mechanism to address potential federal income tax reform and enable the pass-through of certain income tax effects to customers. The TEAM expressly applies to APS's retail rates with the exception of a small subset of customers taking service under specially-approved tariffs. On December 22, 2017, the Tax Act was enacted.  This legislation made significant changes to the federal income tax laws including a reduction in the corporate tax rate from 35% to 21% effective January 1, 2018.

On January 8, 2018, APS filed an application with the ACC that addressed the change in the marginal federal tax rate from 35% to 21% resulting from the Tax Act and reduced rates by $119.1 million annually through an equal cents per kWh credit ("TEAM Phase I").  On February 22, 2018, the ACC approved the reduction of rates through an equal cents per kWh credit. The rate reduction was effective for the first billing cycle in March 2018.

The impact of the TEAM Phase I, over time, is expected to be earnings neutral. However, on a quarterly basis, there is a difference between the timing and amount of the income tax benefit and the reduction in revenues refunded through the TEAM Phase I related to the lower federal income tax rate. The amount of the benefit of the lower federal income tax rate is based on quarterly pre-tax results, while the reduction in revenues refunded through the TEAM Phase I is based on a per kWh sales credit which follows our seasonal kWh sales pattern and is not impacted by earnings of the Company.

On August 13, 2018, APS filed a second request with the ACC that addressed the return of an additional $86.5 million in tax savings to customers related to the amortization of non-depreciation related excess deferred taxes previously collected from customers ("TEAM Phase II"). The ACC approved this request on March 13, 2019, effective the first billing cycle in April 2019 through the last billing cycle in March 2020.
On March 19, 2020, due to the COVID-19 pandemic, APS delayed the discontinuation of TEAM Phase II until the first billing cycle in May 2020.  Amounts credited to customers after the last billing cycle in March 2020 will be recorded as a part of the balancing account and will be addressed for recovery as part of APS's 2019 ACC rate case. Both the timing of the reduction in revenues refunded through TEAM Phase II and the offsetting income tax benefit are recognized based upon our seasonal kWh sales pattern.

On April 10, 2019, APS filed a third request with the ACC that addressed the amortization of depreciation related excess deferred taxes over a 28.5-year period consistent with IRS normalization rules (“TEAM Phase III”).  On October 29, 2019, the ACC approved TEAM Phase III providing both (i) a one-time bill credit of $64 million, which was credited to customers on their December 2019 bills, and (ii) a monthly bill credit effective the first billing cycle in December 2019, which will provide an additional benefit of $39.5 million to customers through December 31, 2020. It is currently anticipated that benefits related to the amortization of depreciation related excess deferred taxes for periods beginning after December 31, 2020 will be fully incorporated into the 2019 rate case.

Net Metering

APS's 2017 Rate Case Decision provides that payments by utilities for energy exported to the grid from DG solar facilities will be determined using a RCP methodology, a method that is based on the most recent five-year rolling average price that APS pays for utility-scale solar projects, while a forecasted avoided cost methodology is being developed.  The price established by this RCP method will be updated annually (between general retail rate cases) but will not be decreased by more than 10% per year. Once the avoided cost methodology is developed, the ACC will determine in APS's subsequent rate cases which method (or a combination of methods) is appropriate to determine the actual price to be paid by APS for exported distributed energy.

In addition, the ACC made the following determinations:

Customers who have interconnected a DG system or submitted an application for interconnection for DG systems prior to September 1, 2017, based on APS's 2017 Rate Case Decision, will be grandfathered for a period of 20 years from the date the customer’s interconnection application was accepted by the utility;
Customers with DG solar systems are to be considered a separate class of customers for ratemaking purposes; and
Once an export price is set for APS, no netting or banking of retail credits will be available for new DG customers, and the then-applicable export price will be guaranteed for new customers for a period of 10 years.

This decision of the ACC addresses policy determinations only. The decision states that its principles will be applied in future general retail rate cases, and the policy determinations themselves may be subject to future change, as are all ACC policies. A first-year export energy price of 12.9 cents per kWh was included in the 2017 Settlement Agreement and became effective on September 1, 2017.

In accordance with the 2017 Rate Case Decision, APS filed its request for a second-year export energy price of 11.6 cents per kWh on May 1, 2018.  This price reflected the 10% annual reduction discussed above. The new rate rider became effective on October 1, 2018. APS filed its request for a third-year export energy price of 10.5 cents per kWh on May 1, 2019.  This price also reflects the 10% annual reduction discussed above. The new rate rider became effective on October 1, 2019. APS filed its request for a fourth-year export energy price of 9.4 cents per kWh on May 1, 2020, with a requested effective date of September 1, 2020.  This price reflects the 10% annual reduction discussed above. On September 23, 2020, the ACC approved the annual reduction of the export energy price but voted to delay the effectiveness of the reduction in export
prices until October 1, 2021. APS's export energy price will remain at 10.5 cents per kWh until October 1, 2021.

On January 23, 2017, The Alliance for Solar Choice ("TASC") sought rehearing of the ACC's decision regarding the value and cost of DG. TASC asserted that the ACC improperly ignored the Administrative Procedure Act, failed to give adequate notice regarding the scope of the proceedings, and relied on information that was not submitted as evidence, among other alleged defects. TASC filed a Notice of Appeal in the Arizona Court of Appeals and filed a Complaint and Statutory Appeal in the Maricopa County Superior Court on March 10, 2017. As part of the 2017 Settlement Agreement described above, TASC agreed to withdraw these appeals when the ACC decision implementing the 2017 Settlement Agreement is no longer subject to appellate review.

See "2016 Retail Rate Case Filing with the Arizona Corporation Commission" above for information regarding an ACC order in connection with the rate review of the 2017 Rate Case Decision requiring APS to provide grandfathered net metering customers on legacy demand rates with an opportunity to switch to another legacy rate to enable such customers to benefit from legacy net metering rates.

Subpoena from Arizona Corporation Commissioner Robert Burns

On August 25, 2016, Commissioner Burns, individually and not by action of the ACC as a whole, served subpoenas in APS’s then current retail rate proceeding on APS and Pinnacle West for the production of records and information relating to a range of expenditures from 2011 through 2016. The subpoenas requested information concerning marketing and advertising expenditures, charitable donations, lobbying expenses, contributions to 501(c)(3) and (c)(4) nonprofits and political contributions. The return date for the production of information was set as September 15, 2016. The subpoenas also sought testimony from Company personnel having knowledge of the material, including the Chief Executive Officer.

On September 9, 2016, APS filed with the ACC a motion to quash the subpoenas or, alternatively, to stay APS's obligations to comply with the subpoenas and decline to decide APS's motion pending court proceedings. Contemporaneously with the filing of this motion, APS and Pinnacle West filed a complaint for special action and declaratory judgment in the Superior Court of Arizona for Maricopa County, seeking a declaratory judgment that Commissioner Burns’ subpoenas are contrary to law. On September 15, 2016, APS produced all non-confidential and responsive documents and offered to produce any remaining responsive documents that are confidential after an appropriate confidentiality agreement is signed.

On February 7, 2017, Commissioner Burns opened a new ACC docket and indicated that its purpose is to study and rectify problems with transparency and disclosure regarding financial contributions from regulated monopolies or other stakeholders who may appear before the ACC that may directly or indirectly benefit an ACC Commissioner, a candidate for ACC Commissioner, or key ACC Staff.  As part of this docket, Commissioner Burns set March 24, 2017 as a deadline for the production of all information previously requested through the subpoenas. Neither APS nor Pinnacle West produced the information requested and instead objected to the subpoena. On March 10, 2017, Commissioner Burns filed suit against APS and Pinnacle West in the Superior Court of Arizona for Maricopa County in an effort to enforce his subpoenas. On March 30, 2017, APS filed a motion to dismiss Commissioner Burns' suit against APS and Pinnacle West. In response to the motion to dismiss, the court stayed the suit and ordered Commissioner Burns to file a motion to compel the production of the information sought by the subpoenas with the ACC. On June 20, 2017, the ACC denied the motion to compel.

On August 4, 2017, Commissioner Burns amended his complaint to add all of the ACC Commissioners and the ACC itself as defendants. All defendants moved to dismiss the amended complaint. On February 15,
2018, the Superior Court dismissed Commissioner Burns’ amended complaint. On March 6, 2018, Commissioner Burns filed an objection to the proposed final order from the Superior Court and a motion to further amend his complaint. The Superior Court permitted Commissioner Burns to amend his complaint to add a claim regarding his attempted investigation into whether his fellow commissioners should have been disqualified from voting on APS’s 2017 rate case. Commissioner Burns filed his second amended complaint, and all defendants filed responses opposing the second amended complaint and requested that it be dismissed. Oral argument occurred in November 2018 regarding the motion to dismiss. On December 18, 2018, the trial court granted the defendants’ motions to dismiss and entered final judgment on January 18, 2019. On February 13, 2019, Commissioner Burns filed a notice of appeal. On July 12, 2019, Commissioner Burns filed his opening brief in the Arizona Court of Appeals. APS filed its answering brief on October 21, 2019. The Arizona Court of Appeals originally granted the request for oral argument; however, on March 31, 2020, the court vacated the date scheduled for oral argument given the COVID-19 pandemic.  The court determined that the matter could be submitted without oral argument and has taken the matter under advisement and will issue a decision without oral argument. APS and Pinnacle West cannot predict the outcome of this matter.

Information Requests from Arizona Corporation Commissioners

On January 14, 2019, ACC Commissioner Kennedy opened a docket to investigate campaign expenditures and political participation of APS and Pinnacle West. In addition, on February 27, 2019, ACC Commissioners Burns and Dunn opened a new docket and requested documents from APS and Pinnacle West related to ACC elections and charitable contributions related to the ACC. On March 1, 2019, ACC Commissioner Kennedy issued a subpoena to APS seeking several categories of information for both Pinnacle West and APS, including political contributions, lobbying expenditures, marketing and advertising expenditures, and contributions made to 501(c)(3) and 501(c)(4) entities, for the years 2013-2018. Pinnacle West and APS voluntarily responded to both sets of requests on March 29, 2019. APS also received and responded to various follow-on requests from ACC Commissioners on these matters. Pinnacle West and APS cannot predict the outcome of these matters. The Company's CEO, Mr. Guldner, appeared at the ACC's January 14, 2020 Open Meeting regarding ACC Commissioners' questions about political spending.  Mr. Guldner committed to the ACC that during his tenure, Pinnacle West and APS, and any of their affiliated companies, will not participate in ACC campaign elections through financial contributions or in-kind contributions.

Energy Modernization Plan

On January 30, 2018, former ACC Commissioner Tobin proposed the Energy Modernization Plan, which consisted of a series of energy policies tied to clean energy sources such as energy storage, biomass, energy efficiency, electric vehicles, and expanded energy planning through the integrated resource plan ("IRP") process. In August 2018, the ACC directed ACC Staff to open a new rulemaking docket which will address a wide range of energy issues, including the Energy Modernization Plan proposals. The rulemaking will consider possible modifications to existing ACC rules, such as the RES, Electric and Gas Energy Efficiency Standards, Net Metering, Resource Planning, and the Biennial Transmission Assessment, as well as the development of new rules regarding forest bioenergy, electric vehicles, interconnection of distributed generation, baseload security, blockchain technology and other technological developments, retail competition, and other energy-related topics.

On April 25, 2019, the ACC Staff issued an initial set of draft energy rules and held various workshops to incorporate feedback from stakeholders and ACC Commissioners from April 2019 through July 2020. At the March 11-12, 2020 workshop, the ACC Staff committed to filing a final draft of proposed rules by July 2020. On July 30, 2020, the ACC Staff issued final draft energy rules which propose 100% of retail kWh sales from clean energy resources by the end of 2050. Nuclear is defined as a clean energy resource. The proposed
rules also require 50% of retail energy served be renewable by the end of 2035. A new energy efficiency standard was not included in the proposed rules. APS would be required to obtain approval of its action plan included in its IRP and seek recovery of prudently incurred costs in a rate process. If approved by the ACC Commissioners, the rules would require utilities to file a Clean Energy Implementation Plan and Energy Efficiency Report as part of their IRP every three years beginning in 2023. In addition, the ACC Staff proposed changing the IRP planning horizon from 15 years to 10 years.

The ACC has discussed the final draft energy rules at several different meetings in 2020. On October 14, 2020, the ACC passed one amendment to ACC Staff’s final draft energy rules which will require electric utilities to obtain 35% of peak load (as measured in 2020) by 2030 from DSM resources, including traditional energy efficiency, demand response and other programs aimed at reducing energy usage, peak demand management and load shifting. This standard aligns with the proposed rules’ three-year resource planning cycle and allows recovery of costs through existing mechanisms until the ACC issues a decision in a future rate process. On October 29, 2020, the ACC approved an amendment which will require electric utilities to reduce their carbon emissions over 2016-2018 levels by 50% by 2032; 75% by 2040; and 100% by 2050. The ACC also approved an amendment which will require utilities to install energy storage systems with an aggregate capacity equal to 5% of each utility’s 2020 peak demand by 2035, of which 40% shall be derived from customer-owned or customer-leased distributed storage. Another approved amendment modifies the resource planning process, including requirements for the ACC to approve a utility’s load forecast and resource plan, and for a utility to perform an all-source request for information to guide its resource plan. The ACC must vote to approve a final draft energy rules package, and additional procedural steps in the rulemaking process are required to be completed before the rules may take effect. APS cannot predict the outcome of this matter.

Integrated Resource Planning

ACC rules require utilities to develop 15-year IRPs which describe how the utility plans to serve customer load in the plan timeframe.  The ACC reviews each utility’s IRP to determine if it meets the necessary requirements and whether it should be acknowledged.  In March of 2018, the ACC reviewed the 2017 IRPs of its jurisdictional utilities and voted to not acknowledge any of the plans.  APS does not believe that this lack of acknowledgment will have a material impact on our financial position, results of operations or cash flows.  Based on an ACC decision, APS was originally required to file its next IRP by April 1, 2020.  On February 20, 2020, the ACC extended the deadline for all utilities to file their IRP’s from April 1, 2020 to June 26, 2020. On June 26, 2020, APS filed its final IRP. On July 15, 2020, the ACC extended the schedule for final ACC review of utility IRPs to February 2021. See "Energy Modernization Plan" above for information regarding proposed changes to the IRP filings.

Public Utility Regulatory Policies Act ("PURPA")

In August 2016, APS filed an application requesting that all of its contracts with qualifying facilities over 100 kW be set at a presumptive maximum 2-year term. A qualifying facility is an eligible energy-producing facility as defined by FERC regulations within a host electric utility’s service territory that has a right to sell to the host utility. Host utilities are required to purchase power from qualifying facilities at an avoided cost as determined by the utility subject to state commission oversight. A hearing was held in August 2019 and briefing on this matter was completed in October 2019 regarding APS’s application. On December 17, 2019, the ACC denied the application and mandated a minimum contract length of 18 years for qualifying facilities over 100 kW and the rate paid to the qualifying facilities will be based on the long-term avoided cost. APS is in discussions with qualifying facility developers but has not entered into any new qualifying facility agreements that would be subject to the new requirements of the ACC's decision.
On July 16, 2020, FERC issued a final rule revising FERC’s regulations implementing PURPA. The final rule will go into effect 120 days following publication in the Federal Register. APS is evaluating how the revised regulations may impact its operations.

Residential Electric Utility Customer Service Disconnections

On June 13, 2019, APS voluntarily suspended electric disconnections for residential customers who had not paid their bills. On June 20, 2019, the ACC voted to enact emergency rule amendments to prevent residential electric utility customer service disconnections during the period June 1 through October 15 ("Summer Disconnection Moratorium"). During the Summer Disconnection Moratorium, APS could not charge late fees and interest on amounts that were past due from customers. Customer deposits must also be used to pay delinquent amounts before disconnection can occur and customers will have four months to pay back their deposit and any remaining delinquent amounts. In accordance with the emergency rules, APS began putting delinquent customers on a mandatory four-month payment plan beginning on October 16, 2019. Although the emergency rules expired in December 2019, the Summer Disconnection Moratorium will remain in effect through utility tariffs for 2020 and beyond until the ACC adopts permanent rules or determines otherwise.

In June 2019, the ACC began a formal regular rulemaking process to allow stakeholder input and time for consideration of permanent rule changes. The ACC further ordered that each regulated electric utility serving retail customers in Arizona update its service conditions by incorporating the emergency rule amendments, restore power to any customers who were disconnected during the month of June 2019 and credit any fees that were charged for a reconnection. The ACC Staff issued draft amendments to the customer service disconnections rules. Stakeholders submitted initial comments to the draft amendments on September 23, 2019. ACC stakeholder meetings were held in September 2019, October 2019 and January 2020 regarding the customer service disconnections rules.

Due to the COVID-19 pandemic, APS voluntarily suspended disconnections of customers for nonpayment beginning March 13, 2020. On September 14, 2020, APS extended this suspension of disconnection of customers for nonpayment until December 31, 2020. APS currently estimates that the Summer Disconnection Moratorium, the suspension of disconnections during the COVID-19 pandemic, and the increased bad debt expense associated with both events will result in a negative impact to its 2020 operating results of approximately $20 million to $30 million pre-tax above the impact of disconnections on its operating results for years that did not have the Summer Disconnection Moratorium or COVID-19 pandemic. These estimated impact amounts depend on certain assumptions, including, but not limited to, customer behaviors, population and employment growth, the impacts of COVID-19 on the economy and the results of final rulemaking related to the Summer Disconnection Moratorium. See "COVID-19 Pandemic" above for more information.

Retail Electric Competition Rules

On November 17, 2018, the ACC voted to re-examine the facilitation of a deregulated retail electric market in Arizona. An ACC special open meeting workshop was held on December 3, 2018. No substantive action was taken, but interested parties were asked to submit written comments and respond to a list of questions from ACC Staff. On July 1 and July 2, 2019, ACC Staff issued a report and initial proposed draft rules regarding possible modifications to the ACC’s retail electric competition rules. Interested parties filed comments to the ACC Staff report and a stakeholder meeting and workshop to discuss the retail electric competition rules was held on July 30, 2019. ACC Commissioners submitted additional questions regarding this matter. On February 10, 2020, two ACC Commissioners filed two sets of draft proposed retail electric
competition rules. On February 12, 2020, ACC Staff issued its second report regarding possible modifications to the ACC’s retail electric competition rules. The ACC held a workshop on February 25-26, 2020 for further consideration and discussion of the retail electric competition rules. During the July 15, 2020 ACC Staff meeting, the ACC Commissioners discussed the possible development of a retail competition pilot program, but no action was taken. The ACC Commissioners are continuing to explore the retail electric competition rules. APS cannot predict whether these efforts will result in any changes and, if changes to the rules results, what impact these rules would have on APS.

Rate Plan Comparison Tool and Investigation

On November 14, 2019, APS learned that its rate plan comparison tool was not functioning as intended due to an integration error between the tool and the Company’s meter data management system. APS immediately removed the tool from its website and notified the ACC. The purpose of the tool was to provide customers with a rate plan recommendation based upon historical usage data. Upon investigation, APS determined that the error may have affected rate plan recommendations to customers between February 4, 2019 and November 14, 2019. By the middle of May 2020, APS provided refunds to approximately 13,000 potentially impacted customers equal to the difference between what they paid for electricity and the amount they would have paid had they selected their most economical rate, as applicable, and a $25 payment for any inconvenience that the customer may have experienced. The refunds and payment for inconvenience being provided did not have a material impact on APS's financial statements. APS developed a new tool for comparing customers’ rate plan options.  APS had an independent third party verify that the new rate comparison tool works correctly.  In February 2020, APS launched the new online rate comparison tool, which is now available for its customers. The ACC hired an outside consultant to evaluate the extent of the error and the overall effectiveness of the tool. On August 20, 2020, ACC Staff filed the outside consultant’s report on APS’s rate comparison tool. The report concluded APS’s new rate comparison tool is working as intended. The report also identified a small population of additional customers that may have been affected by the error and APS has provided refunds and the $25 inconvenience payment to approximately 3,800 additional customers. These additional refunds and payment for inconvenience did not have a material impact on APS's financial statements. On September 28, 2020, the ACC discussed this report but did not take any action. APS cannot predict if any action will be taken by the ACC at this time.

APS received civil investigative demands from the Office of the Arizona Attorney General, Civil Litigation Division, Consumer Protection & Advocacy Section that seek information pertaining to the rate plan comparison tool offered to APS customers and other related issues including implementation of rates from the 2017 Settlement Agreement. APS is fully cooperating with the Attorney General’s Office in this matter. APS cannot predict the outcome of this matter.

Four Corners SCR Cost Recovery

On December 29, 2017, in accordance with the 2017 Rate Case Decision, APS filed a Notice of Intent to file its SCR Adjustment to permit recovery of costs associated with the installation of SCR equipment at Four Corners Units 4 and 5.  APS filed the SCR Adjustment request in April 2018.  Consistent with the 2017 Rate Case Decision, the request was narrow in scope and addressed only costs associated with this specific environmental compliance equipment.  The SCR Adjustment request provided that there would be a $67.5 million annual revenue impact that would be applied as a percentage of base rates for all applicable customers.  Also, as provided for in the 2017 Rate Case Decision, APS requested that the adjustment become effective no later than January 1, 2019.  The hearing for this matter occurred in September 2018.  At the hearing, APS accepted ACC Staff's recommendation of a lower annual revenue impact of approximately $58.5 million. The Administrative Law Judge issued a Recommended Opinion and Order finding that the costs for the SCR project were prudently incurred and recommending authorization of the $58.5 million annual revenue
requirement related to the installation and operation of the SCRs. Exceptions to the Recommended Opinion and Order were filed by the parties and intervenors on December 7, 2018.  The ACC has not issued a decision on this matter. APS included the costs for the SCR project in the retail rate base in its 2019 retail rate case filing with the ACC. On March 18, 2020, the ACC agreed to take administrative notice to include in the pending rate case portions of the record in this prior proceeding that are relevant to the SCRs. APS cannot predict the outcome or timing of the decision on this matter. APS may be required to record a charge to its results of operations if the ACC issues an unfavorable decision (see SCR deferral in the Regulatory Assets and Liabilities table below).

Cholla

On September 11, 2014, APS announced that it would close Unit 2 of the Cholla Power Plant ("Cholla") and cease burning coal at the other APS-owned units (Units 1 and 3) at the plant by the mid-2020s, if the United States Environmental Protection Agency ("EPA") approved a compromise proposal offered by APS to meet required environmental and emissions standards and rules. On April 14, 2015, the ACC approved APS's plan to retire Unit 2, without expressing any view on the future recoverability of APS's remaining investment in the unit. APS closed Unit 2 on October 1, 2015. In early 2017, EPA approved a final rule incorporating APS's compromise proposal, which took effect on April 26, 2017. In December 2019, PacifiCorp notified APS that it plans to retire Cholla Unit 4 by the end of 2020.

Previously, APS estimated Cholla Unit 2’s end of life to be 2033. APS has been recovering a return on and of the net book value of the unit in base rates. Pursuant to the 2017 Settlement Agreement described above, APS will be allowed continued recovery of the net book value of the unit and the unit’s decommissioning and other retirement-related costs ($61 million as of September 30, 2020), in addition to a return on its investment. In accordance with GAAP, in the third quarter of 2014, Unit 2’s remaining net book value was reclassified from property, plant and equipment to a regulatory asset. The 2017 Settlement Agreement also shortened the depreciation lives of Cholla Units 1 and 3 to 2025.
On March 20, 2019, APS announced that it began evaluating the feasibility and cost of converting a unit at Cholla to burn biomass. Biomass is a fuel comprised of forest trimmings, and a converted unit at Cholla could assist in forest thinning, responsible forest management, an improved watershed, and a reduced wildfire risk. APS’s ability to operate a biomass power plant would depend on third parties procuring forest biomass for fuel. APS reported the results of its evaluation on May 9, 2019 to the ACC. On July 10, 2019, the ACC voted to not require APS to file a request for proposal to convert the unit at Cholla to burn biomass.
Navajo Plant
The co-owners of the Navajo Plant and the Navajo Nation agreed that the Navajo Plant would remain in operation until December 2019 under the existing plant lease. The co-owners and the Navajo Nation executed a lease extension on November 29, 2017 that allows for decommissioning activities to begin after the plant ceased operations in November 2019.
APS is currently recovering depreciation and a return on the net book value of its interest in the Navajo Plant over its previously estimated life through 2026. APS will seek continued recovery in rates for the book value of its remaining investment in the plant ($74 million as of September 30, 2020) plus a return on the net book value as well as other costs related to retirement and closure, which are still being assessed and may be material. APS believes it will be allowed recovery of the net book value, in addition to a return on its investment. In accordance with GAAP, in the second quarter of 2017, APS's remaining net book value of its interest in the Navajo Plant was reclassified from property, plant and equipment to a regulatory asset. If the ACC does not allow full recovery of the remaining net book value of this interest, all or a portion of the regulatory asset will be written off and APS's net income, cash flows, and financial position will be negatively impacted.
Regulatory Assets and Liabilities 

The detail of regulatory assets is as follows (dollars in thousands): 
 Amortization ThroughSeptember 30, 2020December 31, 2019
 CurrentNon-CurrentCurrentNon-Current
Pension(a)$— $656,092 $— $660,223 
Income taxes — allowance for funds used during construction ("AFUDC") equity20506,815 159,005 6,800 154,974 
Deferred fuel and purchased power (b) (c)2021162,111 — 70,137 — 
Retired power plant costs203328,182 121,259 28,182 142,503 
Ocotillo deferralN/A— 80,359 — 38,144 
SCR deferralN/A— 74,576 — 52,644 
Deferred property taxes20278,569 51,769 8,569 58,196 
Lost fixed cost recovery (b)202137,868 — 26,067 — 
Deferred compensation2036— 36,481 — 36,464 
Four Corners cost deferral20248,077 26,094 8,077 32,152 
Income taxes — investment tax credit basis adjustment20481,097 23,850 1,098 24,981 
Palo Verde VIEs (Note 6)2046— 21,100 — 20,635 
Coal reclamation20261,068 17,266 1,546 17,688 
Loss on reacquired debt20381,637 10,846 1,637 12,031 
Mead-Phoenix transmission line contributions in aid of construction ("CIAC")2050332 9,463 332 9,712 
Demand Side Management2021— 7,259 — — 
Tax expense adjuster mechanism (b) (c)20206,121 — 1,612 — 
Deferred fuel and purchased power — mark-to-market (Note 7)2024— 5,664 36,887 33,185 
Tax expense of Medicare subsidy20241,238 3,728 1,235 4,940 
AG-1 deferral20222,787 626 2,787 2,716 
TCA balancing account (b)20214,490 — 6,324 2,885 
OtherVarious2,478 — 1,917 — 
Total regulatory assets (d) $272,870 $1,305,437 $203,207 $1,304,073 

(a)This asset represents the future recovery of pension benefit obligations through retail rates.  If these costs are disallowed by the ACC, this regulatory asset would be charged to other comprehensive income ("OCI") and result in lower future revenues. See Note 5.
(b)See "Cost Recovery Mechanisms" discussion above.
(c)Subject to a carrying charge.
(d)There are no regulatory assets for which the ACC has allowed recovery of costs, but not allowed a return by exclusion from rate base.  FERC rates are set using a formula rate as described in "Transmission Rates, Transmission Cost Adjustor and Other Transmission Matters."
The detail of regulatory liabilities is as follows (dollars in thousands):
 
 Amortization ThroughSeptember 30, 2020December 31, 2019
 CurrentNon-CurrentCurrentNon-Current
Excess deferred income taxes - ACC - Tax Cuts and Jobs Act (a)2046$113,206 $952,531 $59,918 $1,054,053 
Excess deferred income taxes - FERC - Tax Cuts and Jobs Act (a)20587,256 229,753 6,302 237,357 
Asset retirement obligations2057— 442,035 — 418,423 
Removal costs(c)51,519 112,168 47,356 136,072 
Other postretirement benefits(d)37,575 109,035 37,575 139,634 
Four Corners coal reclamation20385,461 49,151 1,059 51,704 
Spent nuclear fuel20276,520 46,526 6,676 51,019 
Income taxes — change in rates20502,802 48,541 2,797 68,265 
Income taxes — deferred investment tax credit20482,199 47,765 2,202 50,034 
Renewable energy standard (b)202135,813 1,128 39,287 10,300 
Demand side management (b)202117,394 — 15,024 24,146 
Sundance maintenance20312,200 12,303 5,698 11,319 
Property tax deferralN/A— 11,784 — 7,046 
Deferred fuel and purchased power — mark-to-market (Note 7)202410,894 — — — 
FERC transmission true up20225,965 4,291 1,045 2,004 
Active union medical trustN/A— 6,993 — 2,041 
Tax expense adjustor mechanism (b) (c)20206,542 — 7,018 — 
Deferred gains on utility property20222,423 2,379 2,423 4,163 
TCA balancing account (b)2022— 2,665 — — 
OtherVarious250 275 532 255 
Total regulatory liabilities $308,019 $2,079,323 $234,912 $2,267,835 

(a)For purposes of presentation on the Statement of Cash Flows, amortization of the regulatory liabilities for excess deferred income taxes are reflected as "Deferred income taxes" under Cash Flows From Operating Activities.
(b)See “Cost Recovery Mechanisms” discussion above.
(c)In accordance with regulatory accounting guidance, APS accrues removal costs for its regulated assets, even if there is no legal obligation for removal.
(d)See Note 5.
v3.20.2
Retirement Plans and Other Postretirement Benefits
9 Months Ended
Sep. 30, 2020
Retirement Benefits [Abstract]  
Retirement Plans and Other Postretirement Benefits Retirement Plans and Other Postretirement Benefits
 
Pinnacle West sponsors a qualified defined benefit and account balance pension plan, a non-qualified supplemental excess benefit retirement plan, and an other postretirement benefit plan for the employees of Pinnacle West and our subsidiaries.  Pinnacle West uses a December 31 measurement date for its pension and other postretirement benefit plans.  The market-related value of our plan assets is their fair value at the measurement dates.
The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction or billed to electric plant participants) (dollars in thousands):
 Pension BenefitsOther Benefits
 Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
 20202019202020192020201920202019
Service cost — benefits earned during the period$14,058 $12,476 $42,174 $37,427 $5,559 $4,593 $16,677 $13,777 
Non-service costs (credits):
Interest cost on benefit obligation29,642 34,211 88,925 102,632 6,464 7,473 19,393 22,420 
Expected return on plan assets(46,861)(42,971)(140,582)(128,913)(10,019)(9,603)(30,057)(28,809)
  Amortization of:       
  Prior service credit— — — — (9,394)(9,456)(28,182)(28,366)
  Net actuarial loss8,653 10,646 25,959 31,938 — — — — 
Net periodic benefit cost (credit)$5,492 $14,362 $16,476 $43,084 $(7,390)$(6,993)$(22,169)$(20,978)
Portion of cost (credit) charged to expense$736 $7,593 $2,349 $22,837 $(5,286)$(4,966)$(15,798)$(14,846)
 
Contributions
 
We have made voluntary contributions of $100 million to our pension plan year-to-date in 2020. The minimum required contributions for the pension plan are zero for the 2020-2022 period. We expect to make voluntary contributions up to $100 million per year during this period. We do not expect to make any contributions over this period to our other postretirement benefit plans.
v3.20.2
Palo Verde Sale Leaseback Variable Interest Entities
9 Months Ended
Sep. 30, 2020
Variable Interest Entities [Abstract]  
Palo Verde Sale Leaseback Variable Interest Entities Palo Verde Sale Leaseback Variable Interest Entities
 
In 1986, APS entered into agreements with three separate VIE lessor trust entities in order to sell and lease back interests in Palo Verde Unit 2 and related common facilities. APS will retain the assets through 2023 under one lease and 2033 under the other two leases. APS will be required to make payments relating to these leases of approximately $23 million annually for the period 2020 through 2023, and $16 million annually for the period 2024 through 2033. At the end of the lease period, APS will have the option to purchase the leased assets at their fair market value, extend the leases for up to two years, or return the assets to the lessors.

The leases' terms give APS the ability to utilize the assets for a significant portion of the assets’ economic life, and therefore provide APS with the power to direct activities of the VIEs that most significantly impact the VIEs’ economic performance.  Predominantly due to the lease terms, APS has been deemed the primary beneficiary of these VIEs and therefore consolidates the VIEs.

As a result of consolidation, we eliminate lease accounting and instead recognize depreciation expense, resulting in an increase in net income for the three and nine months ended September 30, 2020 of $5 million and $15 million, respectively, and for the three and nine months ended September 30, 2019 of $5 million and $15 million, respectively, entirely attributable to the noncontrolling interests. Income attributable to Pinnacle West shareholders is not impacted by the consolidation.
Our Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019 include the following amounts relating to the VIEs (dollars in thousands):
 
September 30, 2020December 31, 2019
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation
$99,003 $101,906 
Equity — Noncontrolling interests125,789 122,540 
 
Assets of the VIEs are restricted and may only be used for payment to the noncontrolling interest holders. These assets are reported on our condensed consolidated financial statements.
 
APS is exposed to losses relating to these VIEs upon the occurrence of certain events that APS does not consider to be reasonably likely to occur.  Under certain circumstances (for example, the Nuclear Regulatory Commission ("NRC") issuing specified violation orders with respect to Palo Verde or the occurrence of specified nuclear events), APS would be required to make specified payments to the VIEs’ noncontrolling equity participants and take title to the leased Unit 2 interests, which, if appropriate, may be required to be written down in value.  If such an event were to occur during the lease periods, APS may be required to pay the noncontrolling equity participants approximately $304 million beginning in 2020, and up to $456 million over the lease extension terms.
 
For regulatory ratemaking purposes, the agreements continue to be treated as operating leases and, as a result, we have recorded a regulatory asset relating to the arrangements.
v3.20.2
Derivative Accounting
9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Accounting Derivative Accounting
 
Derivative financial instruments are used to manage exposure to commodity price and transportation costs of electricity, natural gas, emissions allowances, and in interest rates.  Risks associated with market volatility are managed by utilizing various physical and financial derivative instruments, including futures, forwards, options and swaps.  As part of our overall risk management program, we may use derivative instruments to hedge purchases and sales of electricity and fuels.  Derivative instruments that meet certain hedge accounting criteria may be designated as cash flow hedges and are used to limit our exposure to cash flow variability on forecasted transactions.  The changes in market value of such instruments have a high correlation to price changes in the hedged transactions.  Derivative instruments are also entered into for economic hedging purposes.  While economic hedges may mitigate exposure to fluctuations in commodity prices, these instruments have not been designated as accounting hedges.  Contracts that have the same terms (quantities, delivery points and delivery periods) and for which power does not flow are netted, which reduces both revenues and fuel and purchased power costs in our Condensed Consolidated Statements of Income, but does not impact our financial condition, net income or cash flows.
 
Our derivative instruments, excluding those qualifying for a scope exception, are recorded on the balance sheets as an asset or liability and are measured at fair value.  See Note 11 for a discussion of fair value measurements.  Derivative instruments may qualify for the normal purchases and normal sales scope exception if they require physical delivery and the quantities represent those transacted in the normal course of business.  Derivative instruments qualifying for the normal purchases and sales scope exception are accounted for under the accrual method of accounting and excluded from our derivative instrument discussion and disclosures below.
 
For its regulated operations, APS defers for future rate treatment 100% of the unrealized gains and losses on derivatives pursuant to the PSA mechanism that would otherwise be recognized in income.  Realized gains and losses on derivatives are deferred in accordance with the PSA to the extent the amounts are above or below the Base Fuel Rate (see Note 4).  Gains and losses from derivatives in the following tables represent the amounts reflected in income before the effect of PSA deferrals.
 
As of September 30, 2020 and December 31, 2019, we had the following outstanding gross notional volume of derivatives, which represent both purchases and sales (does not reflect net position): 
Quantity
CommodityUnit of MeasureSeptember 30, 2020December 31, 2019
PowerGWh142 193 
GasBillion cubic feet213 257 
 
Gains and Losses from Derivative Instruments
 
The following table provides information about APS's gains and losses from derivative instruments in designated cash flow accounting hedging relationships (dollars in thousands):
 
 Financial Statement LocationThree Months Ended
September 30,
Nine Months Ended
September 30,
Commodity Contracts2020201920202019
Loss Reclassified from Accumulated OCI into Income (Effective Portion Realized) (a)Fuel and purchased power (b)$— $(289)$(763)$(1,263)

(a)During the three and nine months ended September 30, 2020 and 2019, we had no gains or losses reclassified from accumulated OCI to earnings related to discontinued cash flow hedges.
(b)Amounts are before the effect of PSA deferrals.
 
During the next twelve months, we estimate that no amounts will be reclassified from accumulated OCI into income. For APS, the delivery period for all derivative instruments in designated cash flow accounting hedging relationships have lapsed.

The following table provides information about gains and losses from derivative instruments not designated as accounting hedging instruments (dollars in thousands):
 
 Financial Statement LocationThree Months Ended
September 30,
Nine Months Ended
September 30,
Commodity Contracts2020201920202019
Net Gain (Loss) Recognized in IncomeFuel and purchased power (a)$49,611 $(28,249)$14,639 $(69,765)

(a)Amounts are before the effect of PSA deferrals.
 
Derivative Instruments in the Condensed Consolidated Balance Sheets
 
Our derivative transactions are typically executed under standardized or customized agreements, which include collateral requirements and, in the event of a default, would allow for the netting of positive and negative exposures associated with a single counterparty.  Agreements that allow for the offsetting of positive and negative exposures associated with a single counterparty are considered master netting arrangements. 
Transactions with counterparties that have master netting arrangements are offset and reported net on the Condensed Consolidated Balance Sheets.  Transactions that do not allow for offsetting of positive and negative positions are reported gross on the Condensed Consolidated Balance Sheets.
 
We do not offset a counterparty’s current derivative contracts with the counterparty’s non-current derivative contracts, although our master netting arrangements would allow current and non-current positions to be offset in the event of a default.  These types of transactions may include non-derivative instruments, derivatives qualifying for scope exceptions, trade receivables and trade payables arising from settled positions, and other forms of non-cash collateral (such as letters of credit).  These types of transactions are excluded from the offsetting tables presented below.
 
The following tables provide information about the fair value of our risk management activities reported on a gross basis and the impacts of offsetting.  These amounts relate to commodity contracts and are located in the assets and liabilities from risk management activities and other assets lines of our Condensed Consolidated Balance Sheets.
As of September 30, 2020:
(dollars in thousands)
Gross
 Recognized
 Derivatives
 (a)
Amounts
Offset
 (b)
Net
 Recognized
 Derivatives
Other
 (c)
Amount Reported on Balance Sheets
Current assets$15,505 $(1,630)$13,875 $— $13,875 
Investments and other assets5,008 (1,579)3,429 — 3,429 
Total assets20,513 (3,209)17,304 — 17,304 
Current liabilities(4,611)1,630 (2,981)(1,285)(4,266)
Deferred credits and other(10,671)1,579 (9,092)— (9,092)
Total liabilities(15,282)3,209 (12,073)(1,285)(13,358)
Total$5,231 $— $5,231 $(1,285)$3,946 

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions or collateral posted in excess of the recognized derivative instrument. Includes cash collateral received from counterparties of $1,285.
As of December 31, 2019:
(dollars in thousands)
Gross
Recognized
Derivatives
 (a)
Amounts
Offset
(b)
Net
 Recognized
 Derivatives
Other
 (c)
Amount
Reported on
Balance Sheets
Current assets$584 $(474)$110 $405 $515 
Current liabilities(38,235)474 (37,761)(1,185)(38,946)
Deferred credits and other(33,186)— (33,186)— (33,186)
Total liabilities(71,421)474 (70,947)(1,185)(72,132)
Total$(70,837)$— $(70,837)$(780)$(71,617)

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral and cash margin that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions, or collateral and margin posted in excess of the recognized derivative instrument.  Includes cash collateral received from counterparties of $1,185 and cash margin provided to counterparties of $405.

Credit Risk and Credit Related Contingent Features
 
We are exposed to losses in the event of nonperformance or nonpayment by counterparties and have risk management contracts with many counterparties. As of September 30, 2020, we have two counterparties for which our exposure represents approximately 37% of Pinnacle West's $17 million of risk management assets. This exposure relates to master agreements with the counterparties, which are both rated investment grade. Our risk management process assesses and monitors the financial exposure of all counterparties.  Despite the fact that the great majority of our trading counterparties' debt is rated as investment grade by the credit rating agencies, there is still a possibility that one or more of these companies could default, resulting in a material impact on consolidated earnings for a given period. Counterparties in the portfolio consist principally of financial institutions, major energy companies, municipalities and local distribution companies.  We maintain credit policies that we believe minimize overall credit risk to within acceptable limits.  Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition.  To manage credit risk, we employ collateral requirements and standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty.  Valuation adjustments are established representing our estimated credit losses on our overall exposure to counterparties.
 
Certain of our derivative instrument contracts contain credit-risk-related contingent features including, among other things, investment grade credit rating provisions, credit-related cross-default provisions, and adequate assurance provisions.  Adequate assurance provisions allow a counterparty with reasonable grounds for uncertainty to demand additional collateral based on subjective events and/or conditions.  For those derivative instruments in a net liability position, with investment grade credit contingencies, the counterparties could demand additional collateral if our debt credit rating were to fall below investment grade (below BBB- for Standard & Poor’s or Fitch or Baa3 for Moody’s).
 
The following table provides information about our derivative instruments that have credit-risk-related contingent features (dollars in thousands):
 September 30, 2020
Aggregate fair value of derivative instruments in a net liability position$15,282 
Cash collateral posted— 
Additional cash collateral in the event credit-risk-related contingent features were fully triggered (a)5,054 

(a)This amount is after counterparty netting and includes those contracts which qualify for scope exceptions, which are excluded from the derivative details above.
 
    We also have energy-related non-derivative instrument contracts with investment grade credit-related contingent features, which could also require us to post additional collateral of approximately $89 million if our debt credit ratings were to fall below investment grade.
v3.20.2
Commitments and Contingencies
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
 
Palo Verde Generating Station
 
Spent Nuclear Fuel and Waste Disposal
 
On December 19, 2012, APS, acting on behalf of itself and the participant owners of Palo Verde, filed a second breach of contract lawsuit against the United States Department of Energy ("DOE") in the United States Court of Federal Claims ("Court of Federal Claims").  The lawsuit sought to recover damages incurred due to DOE’s breach of the Contract for Disposal of Spent Nuclear Fuel and/or High Level Radioactive Waste ("Standard Contract") for failing to accept Palo Verde's spent nuclear fuel and high level waste from January 1, 2007 through June 30, 2011, as it was required to do pursuant to the terms of the Standard Contract and the Nuclear Waste Policy Act.  On August 18, 2014, APS and DOE entered into a settlement agreement, stipulating to a dismissal of the lawsuit and payment by DOE to the Palo Verde owners for certain specified costs incurred by Palo Verde during the period January 1, 2007 through June 30, 2011. In addition, the settlement agreement, as amended, provides APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2019. On September 1, 2020, APS and DOE entered into an addendum to the settlement agreement allowing for the recovery of costs incurred through December 31, 2022.

APS has submitted five claims pursuant to the terms of the August 18, 2014 settlement agreement, for five separate time periods during July 1, 2011 through June 30, 2018. The DOE has approved and paid $84.3 million for these claims (APS’s share is $24.5 million). The amounts recovered were primarily recorded as adjustments to a regulatory liability and had no impact on reported net income. In accordance with the 2017 Rate Case Decision, this regulatory liability is being refunded to customers (see Note 4). On October 31, 2019, APS filed its sixth claim pursuant to the terms of the August 18, 2014 settlement agreement in the amount of $16 million (APS’s share is $4.7 million). On February 11, 2020, the DOE approved a payment of $15.4 million (APS's share is $4.5 million) and on April 20, 2020, APS received this payment.

Nuclear Insurance

Public liability for incidents at nuclear power plants is governed by the Price-Anderson Nuclear Industries Indemnity Act ("Price-Anderson Act"), which limits the liability of nuclear reactor owners to the amount of insurance available from both commercial sources and an industry-wide retrospective payment plan.  In accordance with the Price-Anderson Act, the Palo Verde participants are insured against public liability for a nuclear incident of up to approximately $13.8 billion per occurrence. Palo Verde maintains the
maximum available nuclear liability insurance in the amount of $450 million, which is provided by American Nuclear Insurers ("ANI").  The remaining balance of approximately $13.3 billion of liability coverage is provided through a mandatory industry-wide retrospective premium program.  If losses at any nuclear power plant covered by the program exceed the accumulated funds, APS could be responsible for retrospective premiums.  The maximum retrospective premium per reactor under the program for each nuclear liability incident is approximately $137.6 million, subject to a maximum annual premium of approximately $20.5 million per incident.  Based on APS’s ownership interest in the three Palo Verde units, APS’s maximum retrospective premium per incident for all three units is approximately $120.1 million, with a maximum annual retrospective premium of approximately $17.9 million.

The Palo Verde participants maintain insurance for property damage to, and decontamination of, property at Palo Verde in the aggregate amount of $2.8 billion.  APS has also secured accidental outage insurance for a sudden and unforeseen accidental outage of any of the three units.  The property damage, decontamination, and accidental outage insurance are provided by Nuclear Electric Insurance Limited ("NEIL").  APS is subject to retrospective premium adjustments under all NEIL policies if NEIL’s losses in any policy year exceed accumulated funds. The maximum amount APS could incur under the current NEIL policies totals approximately $25.8 million for each retrospective premium assessment declared by NEIL’s Board of Directors due to losses.  In addition, NEIL policies contain rating triggers that would result in APS providing approximately $75.1 million of collateral assurance within 20 business days of a rating downgrade to non-investment grade.  The insurance coverage discussed in this and the previous paragraph is subject to certain policy conditions, sublimits and exclusions.

Contractual Obligations

During 2020, our fuel and purchased power commitments have increased from the information provided in our 2019 Form 10-K. The increase is primarily due to new fuel and purchased power commitments of approximately $600 million. The majority of the changes relate to 2025 and thereafter.

Other than the item described above, there have been no material changes, as of September 30, 2020, outside the normal course of business in contractual obligations from the information provided in our 2019 Form 10-K. See Note 3 for discussion regarding changes in our short-term and long-term debt obligations.

Superfund-Related Matters
 
The Comprehensive Environmental Response Compensation and Liability Act ("Superfund" or "CERCLA") establishes liability for the cleanup of hazardous substances found contaminating the soil, water or air.  Those who released, generated, transported to or disposed of hazardous substances at a contaminated site are among the parties who are potentially responsible ("PRPs").  PRPs may be strictly, and often are jointly and severally, liable for clean-up.  On September 3, 2003, EPA advised APS that EPA considers APS to be a PRP in the Motorola 52nd Street Superfund Site, Operable Unit 3 ("OU3") in Phoenix, Arizona.  APS has facilities that are within this Superfund site.  APS and Pinnacle West have agreed with EPA to perform certain investigative activities of the APS facilities within OU3.  In addition, on September 23, 2009, APS agreed with EPA and one other PRP to voluntarily assist with the funding and management of the site-wide groundwater remedial investigation and feasibility study ("RI/FS").  Based upon discussions between the OU3 working group parties and EPA, along with the results of recent technical analyses prepared by the OU3 working group to supplement the RI/FS for OU3, APS anticipates finalizing the RI/FS by the end of 2020. We estimate that our costs related to this investigation and study will be approximately $3 million.  We anticipate incurring additional expenditures in the future, but because the overall investigation is not complete and ultimate remediation requirements are not yet finalized, at the present time expenditures related to this matter cannot be reasonably estimated.
 
On August 6, 2013, Roosevelt Irrigation District ("RID") filed a lawsuit in Arizona District Court against APS and 24 other defendants, alleging that RID’s groundwater wells were contaminated by the release of hazardous substances from facilities owned or operated by the defendants.  The lawsuit also alleges that, under Superfund laws, the defendants are jointly and severally liable to RID.  The allegations against APS arise out of APS’s current and former ownership of facilities in and around OU3.  As part of a state governmental investigation into groundwater contamination in this area, on January 25, 2015, the Arizona Department of Environmental Quality ("ADEQ") sent a letter to APS seeking information concerning the degree to which, if any, APS’s current and former ownership of these facilities may have contributed to groundwater contamination in this area.  APS responded to ADEQ on May 4, 2015. On December 16, 2016, two RID environmental and engineering contractors filed an ancillary lawsuit for recovery of costs against APS and the other defendants in the RID litigation. That same day, another RID service provider filed an additional ancillary CERCLA lawsuit against certain of the defendants in the main RID litigation, but excluded APS and certain other parties as named defendants. Because the ancillary lawsuits concern past costs allegedly incurred by these RID vendors, which were ruled unrecoverable directly by RID in November of 2016, the additional lawsuits do not increase APS's exposure or risk related to these matters.

On April 5, 2018, RID and the defendants in that particular litigation executed a settlement agreement, fully resolving RID's CERCLA claims concerning both past and future cost recovery. APS's share of this settlement was immaterial. In addition, the two environmental and engineering vendors voluntarily dismissed their lawsuit against APS and the other named defendants without prejudice. An order to this effect was entered on April 17, 2018. With this disposition of the case, the vendors may file their lawsuit again in the future. On August 16, 2019, Maricopa County, one of the three direct defendants in the service provider lawsuit, filed a third-party complaint seeking contribution for its liability, if any, from APS and 28 other third-party defendants. We are unable to predict the outcome of these matters; however, we do not expect the outcome to have a material impact on our financial position, results of operations or cash flows.
  
Environmental Matters

APS is subject to numerous environmental laws and regulations affecting many aspects of its present and future operations, including air emissions of both conventional pollutants and greenhouse gases, water quality, wastewater discharges, solid waste, hazardous waste, and coal combustion residuals ("CCRs").  These laws and regulations can change from time to time, imposing new obligations on APS resulting in increased capital, operating, and other costs.  Associated capital expenditures or operating costs could be material.  APS intends to seek recovery of any such environmental compliance costs through our rates but cannot predict whether it will obtain such recovery.  The following proposed and final rules involve material compliance costs to APS.
 
Regional Haze Rules.  APS has received the final rulemaking imposing pollution control requirements on Four Corners. EPA required the plant to install pollution control equipment that constitutes best available retrofit technology ("BART") to lessen the impacts of emissions on visibility surrounding the plant. In addition, EPA issued a final rule for Regional Haze compliance at Cholla that does not involve the installation of new pollution controls and that will replace an earlier BART determination for this facility. See below for details of the Cholla BART approval.

Four Corners. Based on EPA’s final standards, APS's 63% share of the cost of required controls for Four Corners Units 4 and 5 was approximately $400 million, which has been incurred.  In addition, APS and El Paso Electric Company ("El Paso") entered into an asset purchase agreement providing for the purchase by APS, or an affiliate of APS, of El Paso's 7% interest in Four Corners Units 4 and 5. 4CA purchased the El Paso interest on July 6, 2016. Navajo Transitional Energy Company, LLC ("NTEC") purchased the interest
from 4CA on July 3, 2018. See "Four Corners - 4CA Matter" below for a discussion of the NTEC purchase. The cost of the pollution controls related to the 7% interest is approximately $45 million, which was assumed by NTEC through its purchase of the 7% interest.

Cholla. APS believed that EPA’s original 2012 final rule establishing controls constituting BART for Cholla, which would require installation of SCR controls, was unsupported and that EPA had no basis for disapproving Arizona’s State Implementation Plan ("SIP") and promulgating a FIP that was inconsistent with the state’s considered BART determinations under the regional haze program.  In September 2014, APS met with EPA to propose a compromise BART strategy, whereby APS would permanently close Cholla Unit 2 and cease burning coal at Units 1 and 3 by the mid-2020s. (See "Cholla" in Note 4 for information regarding future plans for the Cholla plant and details related to the resulting regulatory asset.) APS made the proposal with the understanding that additional emission control equipment is unlikely to be required in the future because retiring and/or converting the units as contemplated in the proposal is more cost effective than, and will result in increased visibility improvement over, the BART requirements for oxides of nitrogen ("NOx") imposed through EPA's BART FIP. In early 2017, EPA approved a final rule incorporating APS's compromise proposal, which took effect for Cholla on April 26, 2017.
 
Coal Combustion Waste. On December 19, 2014, EPA issued its final regulations governing the handling and disposal of CCR, such as fly ash and bottom ash. The rule regulates CCR as a non-hazardous waste under Subtitle D of the Resource Conservation and Recovery Act ("RCRA") and establishes national minimum criteria for existing and new CCR landfills and surface impoundments and all lateral expansions. These criteria include standards governing location restrictions, design and operating criteria, groundwater monitoring and corrective action, closure requirements and post closure care, and recordkeeping, notification, and internet posting requirements. The rule generally requires any existing unlined CCR surface impoundment that is contaminating groundwater above a regulated constituent’s groundwater protection standard to stop receiving CCR and either retrofit or close, and further requires the closure of any CCR landfill or surface impoundment that cannot meet the applicable performance criteria for location restrictions or structural integrity. Such closure requirements are deemed "forced closure" or "closure for cause" of unlined surface impoundments and are the subject of recent regulatory and judicial activities described below.
Since these regulations were finalized, EPA has taken steps to substantially modify the federal rules governing CCR disposal. While certain changes have been prompted by utility industry petitions, others have resulted from judicial review, court-approved settlements with environmental groups, and statutory changes to RCRA. The following lists the pending regulatory changes that, if finalized, could have a material impact as to how APS manages CCR at its coal-fired power plants:

Following the passage of the Water Infrastructure Improvements for the Nation Act in 2016, EPA possesses authority to either authorize states to develop their own permit programs for CCR management or issue federal permits governing CCR disposal both in states without their own permit programs and on tribal lands. Although ADEQ has taken steps to develop a CCR permitting program, it is not clear when that program will be put into effect. On December 19, 2019, EPA proposed its own set of regulations governing the issuance of CCR management permits.

On March 1, 2018, as a result of a settlement with certain environmental groups, EPA proposed adding boron to the list of constituents that trigger corrective action requirements to remediate groundwater impacted by CCR disposal activities. Apart from a subsequent proposal issued on August 14, 2019 to add a specific, health-based groundwater protection standard for boron, EPA has yet to take action on this proposal.
Based on an August 21, 2018 D.C. Circuit decision, which vacated and remanded those provisions of the EPA CCR regulations that allow for the operation of unlined CCR surface impoundments, EPA recently proposed corresponding changes to federal CCR regulations. On July 29, 2020, EPA took final action on new regulations establishing revised deadlines for initiating the closure of unlined CCR surface impoundments; such disposal units must close as soon as technically feasible, but no later than April 22, 2021.

On November 4, 2019, EPA also proposed to change the manner by which facilities that have committed to cease burning coal in the near-term may qualify for alternative closure. Such qualification would allow CCR disposal units at these plants to continue operating, even though they would otherwise be subject to forced closure under the federal CCR regulations. EPA's July 29, 2020 final regulation adopted this proposal and now requires explicit EPA approval for facilities to utilize an alternative closure deadline.

We cannot at this time predict the outcome of these regulatory proceedings or when the EPA will take final action on those matters that are still pending. Depending on the eventual outcome, the costs associated with APS’s management of CCR could materially increase, which could affect APS’s financial position, results of operations, or cash flows.

APS currently disposes of CCR in ash ponds and dry storage areas at Cholla and Four Corners. APS estimates that its share of incremental costs to comply with the CCR rule for Four Corners is approximately $22 million and its share of incremental costs to comply with the CCR rule for Cholla is approximately $15 million. The Navajo Plant disposed of CCR only in a dry landfill storage area. To comply with the CCR rule for the Navajo Plant, APS's share of incremental costs was approximately $1 million, which has been incurred. Additionally, the CCR rule requires ongoing, phased groundwater monitoring.

As of October 2018, APS has completed the statistical analyses for its CCR disposal units that triggered assessment monitoring. APS determined that several of its CCR disposal units at Cholla and Four Corners will need to undergo corrective action. In addition, under the current regulations, all such disposal units must cease operating and initiate closure by October 31, 2020. APS initiated an assessment of corrective measures on January 14, 2019 and expects such assessment will continue through mid- to late-2020. As part of this assessment, APS continues to gather additional groundwater data and perform remedial evaluations as to the CCR disposal units at Cholla and Four Corners undergoing corrective action. In addition, APS will solicit input from the public, host public hearings, and select remedies as part of this process. Based on the work performed to date, APS currently estimates that its share of corrective action and monitoring costs at Four Corners will likely range from $10 million to $15 million, which would be incurred over 30 years. The analysis needed to perform a similar cost estimate for Cholla remains ongoing at this time. As APS continues to implement the CCR rule’s corrective action assessment process, the current cost estimates may change. Given uncertainties that may exist until we have fully completed the corrective action assessment process, we cannot predict any ultimate impacts to the Company; however, at this time we do not believe the cost estimates for Cholla and any potential change to the cost estimate for Four Corners would have a material impact on our financial position, results of operations or cash flows.

Clean Power Plan/Affordable Clean Energy Regulations. On June 19, 2019, EPA took final action on its proposals to repeal EPA's 2015 Clean Power Plan (“CPP”) and replace those regulations with a new rule, the Affordable Clean Energy (“ACE”) regulations. EPA originally finalized the CPP on August 3, 2015, and those regulations had been stayed pending judicial review.

The ACE regulations are based upon measures that can be implemented to improve the heat rate of steam-electric power plants, specifically coal-fired EGUs. In contrast with the CPP, EPA's ACE regulations would not involve utility-level generation dispatch shifting away from coal-fired generation and toward
renewable energy resources and natural gas-fired combined cycle power plants. EPA’s ACE regulations provide states and EPA regions such as the Navajo Nation with three years to develop plans establishing source-specific standards of performance based upon application of the ACE rule’s heat-rate improvement emission guidelines.

We cannot at this time predict the outcome of EPA's regulatory actions repealing and replacing the CPP. Various state governments, industry organizations, and environmental and public-health public interest groups have filed lawsuits in the D.C. Circuit challenging the legality of EPA’s action, both in repealing the CPP and issuing the ACE regulations. In addition, to the extent that the ACE regulations go into effect as finalized, it is not yet clear how the state of Arizona or EPA will implement these regulations as applied to APS’s coal-fired EGUs. In light of these uncertainties, APS is still evaluating the impact of the ACE regulations on its coal-fired generation fleet.Other environmental rules that could involve material compliance costs include those related to effluent limitations, the ozone national ambient air quality standard and other rules or matters involving the Clean Air Act, Clean Water Act, Endangered Species Act, RCRA, Superfund, the Navajo Nation, and water supplies for our power plants.  The financial impact of complying with current and future environmental rules could jeopardize the economic viability of our coal plants or the willingness or ability of power plant participants to fund any required equipment upgrades or continue their participation in these plants.  The economics of continuing to own certain resources, particularly our coal plants, may deteriorate, warranting early retirement of those plants, which may result in asset impairments.  APS would seek recovery in rates for the book value of any remaining investments in the plants as well as other costs related to early retirement, but cannot predict whether it would obtain such recovery.

Federal Agency Environmental Lawsuit Related to Four Corners

On April 20, 2016, several environmental groups filed a lawsuit against the Office of Surface Mining Reclamation and Enforcement ("OSM") and other federal agencies in the District of Arizona in connection with their issuance of the approvals that extended the life of Four Corners and the adjacent mine.  The lawsuit alleges that these federal agencies violated both the Endangered Species Act ("ESA") and the National Environmental Policy Act ("NEPA") in providing the federal approvals necessary to extend operations at the Four Corners Power Plant and the adjacent Navajo Mine past July 6, 2016.  APS filed a motion to intervene in the proceedings, which was granted on August 3, 2016.

On September 15, 2016, NTEC, the company that owns the adjacent mine, filed a motion to intervene for the purpose of dismissing the lawsuit based on NTEC's tribal sovereign immunity. On September 11, 2017, the Arizona District Court issued an order granting NTEC's motion, dismissing the litigation with prejudice, and terminating the proceedings. On November 9, 2017, the environmental group plaintiffs appealed the district court order dismissing their lawsuit. On July 29, 2019, the Ninth Circuit Court of Appeals affirmed the September 2017 dismissal of the lawsuit, after which the environmental group plaintiffs petitioned the Ninth Circuit for rehearing on September 12, 2019. The Ninth Circuit denied this petition for rehearing on December 11, 2019. On March 24, 2020, the environmental group plaintiffs filed a Petition for a Writ of Certiorari with the U.S. Supreme Court seeking review of the Ninth Circuit decision. This petition was denied by the U.S. Supreme Court on June 29, 2020. No further legal proceedings related to this matter are expected at this time.

Four Corners National Pollutant Discharge Elimination System ("NPDES") Permit

On July 16, 2018, several environmental groups filed a petition for review before the EPA Environmental Appeals Board ("EAB") concerning the NPDES wastewater discharge permit for Four Corners, which was reissued on June 12, 2018.  The environmental groups allege that the permit was reissued in contravention of several requirements under the Clean Water Act and did not contain required provisions
concerning EPA’s 2015 revised effluent limitation guidelines for steam-electric EGUs, 2014 existing-source regulations governing cooling-water intake structures, and effluent limits for surface seepage and subsurface discharges from coal-ash disposal facilities.  To address certain of these issues through a reconsidered permit, EPA took action on December 19, 2018 to withdraw the NPDES permit reissued in June 2018. Withdrawal of the permit moots the EAB appeal, and EPA filed a motion to dismiss on that basis. The EAB thereafter dismissed the environmental group appeal on February 12, 2019. EPA then issued a revised final NPDES permit for Four Corners on September 30, 2019. This permit is now subject to a petition for review before the EAB, based upon a November 1, 2019 filing by several environmental groups. Oral argument on this appeal was held on September 3, 2020 and the EAB denied the environmental group petition on September 30, 2020. Judicial appeal rights to the Ninth Circuit Court of Appeals are available to the environmental groups. We cannot predict whether these groups will appeal the EAB decision and, if such appeal occurs, whether the appeal will have a material impact on our financial position, results of operations or cash flows.

Four Corners - 4CA Matter

On July 6, 2016, 4CA purchased El Paso’s 7% interest in Four Corners. NTEC purchased this 7% interest on July 3, 2018 from 4CA. NTEC purchased the 7% interest at 4CA’s book value, approximately $70 million, and is paying 4CA the purchase price over a period of four years pursuant to a secured interest-bearing promissory note. The note is secured by a portion of APS’s payments to be owed to NTEC under the 2016 Coal Supply Agreement. As of September 30, 2020, the note has a remaining balance of $31 million. NTEC continues to make payments in accordance with the terms of the note. Due to its short-remaining term, among other factors, there are no expected credit losses associated with the note.

In connection with the sale, Pinnacle West guaranteed certain obligations that NTEC will have to the other owners of Four Corners, such as NTEC's 7% share of capital expenditures and operating and maintenance expenses. Pinnacle West's guarantee is secured by a portion of APS's payments to be owed to NTEC under the 2016 Coal Supply Agreement.

The 2016 Coal Supply Agreement contained alternate pricing terms for the 7% interest in the event NTEC did not purchase the interest. Until the time that NTEC purchased the 7% interest, the alternate pricing provisions were applicable to 4CA as the holder of the 7% interest. These terms included a formula under which NTEC must make certain payments to 4CA for reimbursement of operations and maintenance costs and a specified rate of return, offset by revenue generated by 4CA’s power sales. The amount under this formula for calendar year 2018 (up to the date that NTEC purchased the 7% interest) was approximately $10 million, which was due to 4CA on December 31, 2019. Such payment was satisfied in January 2020 by NTEC directing to 4CA a prepayment from APS of future coal payment obligations of which the prepayment has been fully utilized as of June 2020.

Financial Assurances

In the normal course of business, we obtain standby letters of credit and surety bonds from financial institutions and other third parties. These instruments guarantee our own future performance and provide third parties with financial and performance assurance in the event we do not perform. These instruments support commodity contract collateral obligations and other transactions. As of September 30, 2020, standby letters of credit totaled $4.9 million and will expire in 2021. As of September 30, 2020, surety bonds expiring through 2021 totaled $16 million. The underlying liabilities insured by these instruments are reflected on our balance sheets, where applicable. Therefore, no additional liability is reflected for the letters of credit and surety bonds themselves.
We enter into agreements that include indemnification provisions relating to liabilities arising from or related to certain of our agreements.  Most significantly, APS has agreed to indemnify the equity participants and other parties in the Palo Verde sale leaseback transactions with respect to certain tax matters.  Generally, a maximum obligation is not explicitly stated in the indemnification provisions and, therefore, the overall maximum amount of the obligation under such indemnification provisions cannot be reasonably estimated.  Based on historical experience and evaluation of the specific indemnities, we do not believe that any material loss related to such indemnification provisions is likely.

Pinnacle West has issued parental guarantees and has provided indemnification under certain surety bonds for APS which were not material at September 30, 2020. In connection with the sale of 4CA's 7% interest to NTEC, Pinnacle West is guaranteeing certain obligations that NTEC will have to the other owners of Four Corners. (See "Four Corners - 4CA Matter" above for information related to this guarantee.) Pinnacle West has not needed to perform under this guarantee. A maximum obligation is not explicitly stated in the guarantee and, therefore, the overall maximum amount of the obligation under such guarantee cannot be reasonably estimated; however, we consider the fair value of this guarantee, including expected credit losses, to be immaterial.
In connection with BCE’s acquisition of minority ownership positions in the Clear Creek and Nobles 2 wind farms, Pinnacle West has issued parental guarantees to guarantee the obligations of BCE subsidiaries to make required equity contributions to fund project construction (the “Equity Contribution Guarantees”) and to make production tax credit funding payments to borrowers of the projects (the “PTC Guarantees”).  The amounts guaranteed by Pinnacle West are reduced as payments are made under the respective guarantee agreements.  The Equity Contribution Guarantees are currently anticipated to be terminated upon completion of construction of the respective projects, which is anticipated to occur prior to December 31, 2020, and the PTC Guarantees (approximately $39 million as of September 30, 2020) are currently expected to be terminated ten years following the commercial operation date of the applicable project.
v3.20.2
Other Income and Other Expense
9 Months Ended
Sep. 30, 2020
Other Income and Expenses [Abstract]  
Other Income and Other Expense Other Income and Other Expense
 
The following table provides detail of Pinnacle West's Consolidated other income and other expense (dollars in thousands):
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Other income:    
Interest income$2,956 $2,694 $8,988 $7,695 
Investment gains (losses) - net— — 2,594 — 
Debt return on Four Corners SCR deferrals (Note 4)4,260 4,920 11,649 14,651 
Debt return on Ocotillo modernization project (Note 4)6,663 7,555 19,511 12,849 
Miscellaneous22 146 50 
Total other income$13,881 $15,191 $42,888 $35,245 
Other expense:    
Non-operating costs$(2,453)$(2,647)$(7,401)$(8,832)
Investment gains (losses) — net(291)(716)— (1,445)
Miscellaneous(3,094)(2,377)(7,025)(4,171)
Total other expense$(5,838)$(5,740)$(14,426)$(14,448)
The following table provides detail of APS’s other income and other expense (dollars in thousands):
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Other income:    
Interest income$2,403 $2,037 $6,927 $5,091 
Debt return on Four Corners SCR deferrals (Note 4)4,260 4,920 11,649 14,651 
Debt return on Ocotillo modernization project (Note 4)6,663 7,555 19,511 12,849 
Miscellaneous22 146 50 
Total other income$13,328 $14,534 $38,233 $32,641 
Other expense:    
Non-operating costs$(1,906)$(2,448)$(6,501)$(7,965)
Miscellaneous(893)(378)(4,825)(2,167)
Total other expense$(2,799)$(2,826)$(11,326)$(10,132)
v3.20.2
Earnings Per Share
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Earnings Per Share Earnings Per Share
 
The following table presents the calculation of Pinnacle West’s basic and diluted earnings per share (in thousands, except per share amounts):
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net income attributable to common shareholders$346,372 $312,276 $569,950 $474,339 
Weighted average common shares outstanding — basic
112,679 112,463 112,639 112,408 
Net effect of dilutive securities:
Contingently issuable performance shares and restricted stock units
308 283 273 331 
Weighted average common shares outstanding — diluted
112,987 112,746 112,912 112,739 
Earnings per weighted-average common share outstanding
Net income attributable to common shareholders — basic
$3.07 $2.78 $5.06 $4.22 
Net income attributable to common shareholders — diluted
$3.07 $2.77 $5.05 $4.21 
v3.20.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
 
We classify our assets and liabilities that are carried at fair value within the fair value hierarchy.  This hierarchy ranks the quality and reliability of the inputs used to determine fair values, which are then classified and disclosed in one of three categories.  The three levels of the fair value hierarchy are:
 
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Other significant observable inputs, including quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active, and model-derived valuations whose inputs are observable (such as yield curves).
 
 Level 3 — Valuation models with significant unobservable inputs that are supported by little or no market activity.  Instruments in this category may include long-dated derivative transactions where valuations are unobservable due to the length of the transaction, options, and transactions in locations where observable market data does not exist.  The valuation models we employ utilize spot prices, forward prices, historical market data and other factors to forecast future prices.
 
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Thus, a valuation may be classified in Level 3 even though the valuation may include significant inputs that are readily observable.  We maximize the use of observable inputs and minimize the use of unobservable inputs.  We rely primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities.  If market data is not readily available, inputs may reflect our own assumptions about the inputs market participants would use.  Our assessment of the inputs and the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities as well as their placement within the fair value hierarchy levels.  We assess whether a market is active by obtaining observable broker quotes, reviewing actual market activity, and assessing the volume of transactions.  We consider broker quotes observable inputs when the quote is binding on the broker, we can validate the quote with market activity, or we can determine that the inputs the broker used to arrive at the quoted price are observable.

Certain instruments have been valued using the concept of Net Asset Value ("NAV") as a practical expedient. These instruments are typically structured as investment companies offering shares or units to multiple investors for the purpose of providing a return. These instruments are similar to mutual funds; however, their NAV is generally not published and publicly available, nor are these instruments traded on an exchange. Instruments valued using NAV as a practical expedient are included in our fair value disclosures; however, in accordance with GAAP are not classified within the fair value hierarchy levels.

Recurring Fair Value Measurements
 
We apply recurring fair value measurements to cash equivalents, derivative instruments, and investments held in the Nuclear Decommissioning Trusts and other special use funds. On an annual basis we apply fair value measurements to plan assets held in our retirement and other benefit plans.  See Note 8 in the 2019 Form 10-K for fair value discussion of plan assets held in our retirement and other benefit plans.
 
Cash Equivalents
 
Cash equivalents represent certain investments in money market funds that are valued using quoted prices in active markets.

Risk Management Activities — Derivative Instruments
 
Exchange traded commodity contracts are valued using unadjusted quoted prices.  For non-exchange traded commodity contracts, we calculate fair value based on the average of the bid and offer price, discounted to reflect net present value.  We maintain certain valuation adjustments for a number of risks associated with the valuation of future commitments.  These include valuation adjustments for liquidity and credit risks.  The liquidity valuation adjustment represents the cost that would be incurred if all unmatched positions were closed out or hedged.  The credit valuation adjustment represents estimated credit losses on our net exposure to counterparties, taking into account netting agreements, expected default experience for the credit rating of the counterparties and the overall diversification of the portfolio.  We maintain credit policies that management believes minimize overall credit risk.
 
Certain non-exchange traded commodity contracts are valued based on unobservable inputs due to the long-term nature of contracts, characteristics of the product, or the unique location of the transactions.  Our long-dated energy transactions consist of observable valuations for the near-term portion and unobservable valuations for the long-term portions of the transaction.  We rely primarily on broker quotes to value these instruments.  When our valuations utilize broker quotes, we perform various control procedures to ensure the quote has been developed consistent with fair value accounting guidance.  These controls include assessing the quote for reasonableness by comparison against other broker quotes, reviewing historical price relationships, and assessing market activity.  When broker quotes are not available, the primary valuation technique used to calculate the fair value is the extrapolation of forward pricing curves using observable market data for more liquid delivery points in the same region and actual transactions at more illiquid delivery points.
 
When the unobservable portion is significant to the overall valuation of the transaction, the entire transaction is classified as Level 3. 
 
Investments Held in Nuclear Decommissioning Trusts and Other Special Use Funds

The Nuclear Decommissioning Trusts and other special use funds invest in fixed income and equity securities. Other special use funds include the coal reclamation escrow account and the active union employee medical account. See Note 12 for additional discussion about our investment accounts.

We value investments in fixed income and equity securities using information provided by our trustees and escrow agent. Our trustees and escrow agent use pricing services that utilize the valuation methodologies described below to determine fair market value. We have internal control procedures designed to ensure this information is consistent with fair value accounting guidance. These procedures include assessing valuations using an independent pricing source, verifying that pricing can be supported by actual recent market transactions, assessing hierarchy classifications, comparing investment returns with benchmarks, and obtaining and reviewing independent audit reports on the trustees’ and escrow agent's internal operating controls and valuation processes.

Fixed Income Securities

Fixed income securities issued by the U.S. Treasury are valued using quoted active market prices and are typically classified as Level 1.  Fixed income securities issued by corporations, municipalities, and other agencies, including mortgage-backed instruments, are valued using quoted inactive market prices, quoted active market prices for similar securities, or by utilizing calculations which incorporate observable inputs such as yield curves and spreads relative to such yield curves.  These fixed income instruments are classified as Level 2.  Whenever possible, multiple market quotes are obtained which enables a cross-check validation.  A primary price source is identified based on asset type, class, or issue of securities.

Fixed income securities may also include short-term investments in certificates of deposit, variable rate notes, time deposit accounts, U.S. Treasury and Agency obligations, U.S. Treasury repurchase agreements, commercial paper, and other short-term instruments. These instruments are valued using active market prices or utilizing observable inputs described above.
Equity Securities

The Nuclear Decommissioning Trusts's equity security investments are held indirectly through commingled funds.  The commingled funds are valued using the funds' NAV as a practical expedient. The funds' NAV is primarily derived from the quoted active market prices of the underlying equity securities held by the funds. We may transact in these commingled funds on a semi-monthly basis at the NAV.  The commingled funds are maintained by a bank and hold investments in accordance with the stated objective of tracking the performance of the S&P 500 Index.  Because the commingled funds' shares are offered to a limited group of investors, they are not considered to be traded in an active market. As these instruments are valued using NAV, as a practical expedient, they have not been classified within the fair value hierarchy.

The Nuclear Decommissioning Trusts and other special use funds may also hold equity securities that include exchange traded mutual funds and money market accounts for short-term liquidity purposes. These short-term, highly-liquid, investments are valued using active market prices.
Fair Value Tables
 
The following table presents the fair value at September 30, 2020 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
 
 Level 1Level 2Level 3Other Total
Assets      
Cash equivalents$146,680 $— $— $— $146,680 
Risk management activities — derivative instruments:
Commodity contracts$— $20,206 $307 $(3,209)(a)$17,304 
Nuclear decommissioning trust:
Equity securities24,537 — — (14,148)(b)10,389 
U.S. commingled equity funds— — — 545,845 (c)545,845 
U.S. Treasury debt153,213 — — —  153,213 
Corporate debt— 146,682 — —  146,682 
Mortgage-backed securities— 101,456 — —  101,456 
Municipal bonds— 99,192 — —  99,192 
Other fixed income— 13,060 — —  13,060 
Subtotal nuclear decommissioning trust177,750 360,390 — 531,697 1,069,837 
Other special use funds:
Equity securities8,090 — — 1,444 (b)9,534 
U.S. Treasury debt245,156 — — — 245,156 
Municipal bonds— 13,602 — — 13,602 
Subtotal other special use funds253,246 13,602 — 1,444 268,292 
Total assets$577,676 $394,198 $307 $529,932 $1,502,113 
Liabilities      
Risk management activities — derivative instruments:      
Commodity contracts$— $(10,737)$(4,546)$1,925 (a)$(13,358)

(a)Represents counterparty netting, margin, and collateral. See Note 7.
(b)Represents net pending securities sales and purchases.
(c)Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.
The following table presents the fair value at December 31, 2019 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
 
 Level 1Level 2Level 3Other Total
Assets      
Risk management activities — derivative instruments:
Commodity contracts$— $551 $33 $(69)(a)$515 
Nuclear decommissioning trust:      
Equity securities10,872 — — 2,401 (b)13,273 
U.S. commingled equity funds— — — 518,844 (c)518,844 
U.S. Treasury debt160,607 — — — 160,607 
Corporate debt— 115,869 — —  115,869 
Mortgage-backed securities— 118,795 — —  118,795 
Municipal bonds— 73,040 — —  73,040 
Other fixed income— 10,347 — —  10,347 
Subtotal nuclear decommissioning trust171,479 318,051 — 521,245 1,010,775 
Other special use funds:
Equity securities7,142 — — 474 (b)7,616 
U.S. Treasury debt232,848 — — — 232,848 
Municipal bonds— 4,631 — — 4,631 
Subtotal other special use funds239,990 4,631 — 474 245,095 
Total assets$411,469 $323,233 $33 $521,650 $1,256,385 
Liabilities      
Risk management activities — derivative instruments:      
Commodity contracts$— $(67,992)$(3,429)$(711)(a)$(72,132)

(a)Represents counterparty netting, margin, and collateral. See Note 7.
(b)Represents net pending securities sales and purchases.
(c)Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.

Fair Value Measurements Classified as Level 3
 
The significant unobservable inputs used in the fair value measurement of our energy derivative contracts include broker quotes that cannot be validated as an observable input primarily due to the long-term nature of the quote or other characteristics of the product.  Significant changes in these inputs in isolation would result in significantly higher or lower fair value measurements.  Changes in our derivative contract fair values, including changes relating to unobservable inputs, typically will not impact net income due to regulatory accounting treatment (see Note 4).
 
Because our forward commodity contracts classified as Level 3 are currently in a net purchase position, we would expect price increases of the underlying commodity to result in increases in the net fair value of the related contracts.  Conversely, if the price of the underlying commodity decreases, the net fair value of the related contracts would likely decrease.
 
Other unobservable valuation inputs include credit and liquidity reserves which do not have a material impact on our valuations; however, significant changes in these inputs could also result in higher or lower fair value measurements.
 
Financial Instruments Not Carried at Fair Value
 
The carrying value of our short-term borrowings approximate fair value and are classified within Level 2 of the fair value hierarchy. See Note 3 for our long-term debt fair values. The NTEC note receivable related to the sale of 4CA’s interest in Four Corners bears interest at 3.9% per annum and has a book value of $31 million as of September 30, 2020 and $44 million as of December 31, 2019, as presented on the Condensed Consolidated Balance Sheets.  The carrying amount is not materially different from the fair value of the note receivable and is classified within Level 3 of the fair value hierarchy.  See Note 8 for more information on 4CA matters.
v3.20.2
Investments in Nuclear Decommissioning Trusts and Other Special Use Funds
9 Months Ended
Sep. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Investments in Nuclear Decommissioning Trusts and Other Special Use Funds Investments in Nuclear Decommissioning Trusts and Other Special Use Funds
We have investments in debt and equity securities held in Nuclear Decommissioning Trusts, Coal Mine Reclamation Escrow Account, and an Active Union Employee Medical Account. Investments in debt securities are classified as available-for-sale securities. We record both debt and equity security investments at their fair value on our Condensed Consolidated Balance Sheets. See Note 11 for a discussion of how fair value is determined and the classification of the investments within the fair value hierarchy. The investments in each trust or account are restricted for use and are intended to fund specified costs and activities as further described for each fund below.

Nuclear Decommissioning Trusts — APS established external decommissioning trusts in accordance with NRC regulations to fund the future costs APS expects to incur to decommission Palo Verde.  Third-party investment managers are authorized to buy and sell securities per stated investment guidelines.  The trust funds are invested in fixed income securities and equity securities. Earnings and proceeds from sales and maturities of securities are reinvested in the trusts. Because of the ability of APS to recover decommissioning costs in rates, and in accordance with the regulatory treatment, APS has deferred realized and unrealized gains and losses (including credit losses) in other regulatory liabilities.

Coal Mine Reclamation Escrow Account — APS has investments restricted for the future coal mine reclamation funding related to Four Corners. This escrow account is primarily invested in fixed income securities. Earnings and proceeds from sales of securities are reinvested in the escrow account. Because of the ability of APS to recover coal mine reclamation costs in rates, and in accordance with the regulatory treatment, APS has deferred realized and unrealized gains and losses (including credit losses) in other regulatory liabilities. Activities relating to APS coal mine reclamation escrow account investments are included within the other special use funds in the table below.

Active Union Employee Medical Account — APS has investments restricted for paying active union employee medical costs. These investments may be used to pay active union employee medical costs incurred in the current and future periods. The account is invested primarily in fixed income securities. In accordance with the ratemaking treatment, APS has deferred the unrealized gains and losses (including credit losses) in other regulatory liabilities. Activities relating to active union employee medical account investments are included within the other special use funds in the table below.
APS

The following tables present the unrealized gains and losses based on the original cost of the investment and summarizes the fair value of APS's Nuclear Decommissioning Trusts and other special use fund assets (dollars in thousands):  
September 30, 2020
 Fair ValueTotal
Unrealized
Gains
Total
Unrealized
Losses
Investment Type:Nuclear Decommissioning TrustsOther Special Use FundsTotal
Equity securities$570,382 $8,090 $578,472 $359,112 $(36)
Available for sale-fixed income securities513,603 258,758 772,361 (a)47,158 (674)
Other(14,148)1,444 (12,704)(b)— — 
Total$1,069,837 $268,292 $1,338,129 $406,270 $(710)

(a)As of September 30, 2020, the amortized cost basis of these available-for-sale investments is $726 million.
(b)Represents net pending securities sales and purchases.
December 31, 2019
 Fair ValueTotal
Unrealized
Gains
Total
Unrealized
Losses
Investment Type:Nuclear Decommissioning TrustsOther Special Use FundsTotal
Equity securities$529,716 $7,142 $536,858 $337,681 $— 
Available for sale-fixed income securities478,658 237,479 716,137 (a)25,795 (669)
Other2,401 474 2,875 (b)— — 
Total$1,010,775 $245,095 $1,255,870 $363,476 $(669)

(a)As of December 31, 2019, the amortized cost basis of these available-for-sale investments is $691 million.
(b)Represents net pending securities sales and purchases.
The following tables set forth APS's realized gains and losses relating to the sale and maturity of available-for-sale debt securities and equity securities, and the proceeds from the sale and maturity of these investment securities (dollars in thousands):
 Three Months Ended September 30,
 Nuclear Decommissioning TrustsOther Special Use FundsTotal
2020
Realized gains$2,933 $— $2,933 
Realized losses(750)(15)(765)
Proceeds from the sale of securities (a)178,919 37,107 216,026 
2019
Realized gains$4,732 $$4,736 
Realized losses(2,360)— (2,360)
Proceeds from the sale of securities (a)155,386 56,255 211,641 

(a)    Proceeds are reinvested in the Nuclear Decommissioning Trusts and other special use funds, excluding amounts reimbursed to the Company for active union employee medical claims from the active union employee medical account.
 Nine Months Ended September 30,
 Nuclear Decommissioning TrustsOther Special Use FundsTotal
2020
Realized gains$10,746 $— $10,746 
Realized losses(4,598)(15)(4,613)
Proceeds from the sale of securities (a)534,057 73,828 607,885 
2019
Realized gains$8,478 $$8,482 
Realized losses(5,465)— (5,465)
Proceeds from the sale of securities (a)371,538 149,458 520,996 

(a)    Proceeds are reinvested in the Nuclear Decommissioning Trusts and other special use funds, excluding amounts reimbursed to the Company for active union employee medical claims from the active union employee medical account.

    
The fair value of APS's fixed income securities, summarized by contractual maturities, at September 30, 2020, is as follows (dollars in thousands):
 Nuclear Decommissioning TrustCoal Mine Reclamation Escrow AccountActive Union Employee Medical AccountTotal
Less than one year$23,079 $34,578 $40,506 $98,163 
1 year – 5 years146,885 29,041 142,938 318,864 
5 years – 10 years122,619 2,772 — 125,391 
Greater than 10 years221,020 8,923 — 229,943 
Total$513,603 $75,314 $183,444 $772,361 
v3.20.2
New Accounting Standards
9 Months Ended
Sep. 30, 2020
Accounting Standards Update and Change in Accounting Principle [Abstract]  
New Accounting Standards New Accounting Standards
ASU 2016-13, Financial Instruments: Measurement of Credit Losses

In June 2016, a new accounting standard was issued that amends the measurement of credit losses on certain financial instruments. The new standard requires entities to use a current expected credit loss model to measure impairment of certain investments in debt securities, trade accounts receivables, and other financial instruments. Since the issuance of the new standard, various guidance has been issued that amends the new standard, including clarifications of certain aspects of the standard and targeted transition relief, among other changes. The new standard and related amendments were effective for us on January 1, 2020, and must be adopted using a modified retrospective approach for certain aspects of the standard, and a prospective approach for other aspects of the standard. We adopted the standard on January 1, 2020 using primarily the modified retrospective approach. While the adoption of this guidance changed our process and methodology for determining credit losses and resulted in additional disclosures, these changes did not have a material impact on our financial statements. See Note 2 for allowance for doubtful accounts related credit loss disclosures.
v3.20.2
Changes in Accumulated Other Comprehensive Loss
9 Months Ended
Sep. 30, 2020
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]  
Changes in Accumulated Other Comprehensive Loss Changes in Accumulated Other Comprehensive Loss
 
The following table shows the changes in Pinnacle West's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component (dollars in thousands):
 Pension and Other Postretirement Benefits Derivative Instruments Total
Three Months Ended September 30
Balance June 30, 2020$(56,326)$(1,549)$(57,875)
OCI (loss) before reclassifications— (659)(659)
Amounts reclassified from accumulated other comprehensive loss1,043  (a)— 1,043 
Balance September 30, 2020$(55,283)$(2,208)$(57,491)
Balance June 30, 2019$(46,657)$(979)$(47,636)
Amounts reclassified from accumulated other comprehensive loss880  (a)218  (b)1,098 
Balance September 30, 2019$(45,777)$(761)$(46,538)
Pension and Other Postretirement BenefitsDerivative InstrumentsTotal
Nine Months Ended September 30
Balance December 31, 2019$(56,522)$(574)$(57,096)
OCI (loss) before reclassifications(2,008)(1,916)(3,924)
Amounts reclassified from accumulated other comprehensive loss3,247 (a)282 (b)3,529 
Balance September 30, 2020$(55,283)$(2,208)$(57,491)
Balance December 31, 2018$(45,997)$(1,711)$(47,708)
OCI (loss) before reclassifications(2,422)— (2,422)
Amounts reclassified from accumulated other comprehensive loss2,642 (a)950 (b)3,592 
Balance September 30, 2019$(45,777)$(761)$(46,538)

(a)    These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost.  See Note 5.
(b)    These amounts primarily represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA.  See Note 7.
The following table shows the changes in APS's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands): 
 Pension and Other Postretirement Benefits Derivative Instruments Total
Three Months Ended September 30
Balance June 30, 2020$(35,025)$— $(35,025)
Amounts reclassified from accumulated other comprehensive loss900  (a)— 900 
Balance September 30, 2020$(34,125)$— $(34,125)
Balance June 30, 2019$(26,297)$(979)$(27,276)
Amounts reclassified from accumulated other comprehensive loss755  (a)218  (b)973 
Balance September 30, 2019$(25,542)$(761)$(26,303)
 Pension and Other Postretirement Benefits Derivative Instruments Total
Nine Months Ended September 30
Balance December 31, 2019$(34,948)$(574)$(35,522)
OCI (loss) before reclassifications(1,951)292 (1,659)
Amounts reclassified from accumulated other comprehensive loss2,774 (a)282  (b)3,056 
Balance September 30, 2020$(34,125)$— $(34,125)
Balance December 31, 2018$(25,396)$(1,711)$(27,107)
OCI (loss) before reclassifications(2,414)— (2,414)
Amounts reclassified from accumulated other comprehensive loss2,268 (a)950  (b)3,218 
Balance September 30, 2019$(25,542)$(761)$(26,303)

(a)    These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost.  See Note 5.
(b)    These amounts primarily represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA.  See Note 7.
v3.20.2
Income Taxes
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
The Tax Act reduced the corporate tax rate to 21% effective January 1, 2018. As a result of this rate reduction, the Company recognized a $1.14 billion reduction in its net deferred income tax liabilities as of December 31, 2017. In accordance with accounting for regulated companies, the effect of this rate reduction was substantially offset by a net regulatory liability.

Federal income tax laws require the amortization of a majority of the balance over the remaining regulatory life of the related property. As a result of the modifications made to the annual transmission formula rate during the second quarter of 2018, the Company began amortization of FERC jurisdictional net excess deferred tax liabilities in 2018. On March 13, 2019, the ACC approved the Company's proposal to amortize non-depreciation related net excess deferred tax liabilities subject to its jurisdiction over a twelve-month period. As a result, the Company began amortization in March 2019. The Company has recorded $14 million of income tax benefit related to the amortization of these non-depreciation related net excess deferred tax liabilities in 2020. On October 29, 2019, the ACC approved the Company’s proposal to amortize depreciation related net excess deferred tax liabilities subject to its jurisdiction over a 28.5-year period with amortization to retroactively begin as of January 1, 2018. As of September 30, 2020, the Company has recorded $24 million of income tax benefit related to amortization of these depreciation related liabilities. See Note 4 for more details.

In August 2018, U.S. Treasury proposed regulations that clarified bonus depreciation transition rules under the Tax Act for regulated public utility property placed in service after September 27, 2017 and before January 1, 2018.  However, these proposed regulations were ambiguous with respect to regulated public utility property placed in service on or after January 1, 2018. In September 2019, U.S. Treasury issued final regulations, which replaced the August 2018 proposed regulations. These final regulations did not materially impact any tax position taken by the Company for property placed in service after September 27, 2017 and before January 1, 2018.

In September 2020, U.S. Treasury issued final regulations, which clarify bonus depreciation transition rules under the Tax Act for property placed in service by regulated public utilities after December 31, 2017. The final regulations provide that certain regulated public utility property which was under construction prior to September 28, 2017 and placed in service between January 1, 2018 and December 31, 2020 continues to be eligible for bonus depreciation under the rules and bonus depreciation phase-downs in effect prior to enactment of the Tax Act. These final regulations do not materially impact any tax position taken or expected to be taken by the Company for property which was under construction prior to September 28, 2017 and placed in service between January 1, 2018 and December 31, 2020.

Net income associated with the Palo Verde sale leaseback VIEs is not subject to tax.  As a result, there is no income tax expense associated with the VIEs recorded on the Pinnacle West Consolidated and APS Consolidated Statements of Income. See Note 6 for additional details related to the Palo Verde sale leaseback VIEs.

As of the balance sheet date, the tax year ended December 31, 2017 and all subsequent tax years remain subject to examination by the IRS.  With a few exceptions, the Company is no longer subject to state income tax examinations by tax authorities for years before 2015.
v3.20.2
Leases
9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Leases Leases
 
We lease certain land, buildings, vehicles, equipment and other property through operating rental agreements with varying terms, provisions, and expiration dates. APS also has certain purchased power agreements that qualify as lease arrangements. Our leases have remaining terms that expire in 2020 through 2050. Substantially all of our leasing activities relate to APS.

In 1986, APS entered into agreements with three separate lessor trust entities in order to sell and lease back interests in Palo Verde Unit 2 and related common facilities.  These lessor trust entities have been deemed VIEs for which APS is the primary beneficiary.  As the primary beneficiary, APS consolidated these lessor trust entities.  The impacts of these sale leaseback transactions are excluded from our lease disclosures as lease accounting is eliminated upon consolidation.  See Note 6 for a discussion of VIEs.

On June 1, 2020, APS had two separate purchased power lease contracts that commenced. The lease terms end on September 30, 2025 and September 30, 2026, respectively. Both of these leases allow APS the right to the generation capacity from certain natural-gas fueled generators during the months of June through September over the contract term.  APS does not operate or maintain these leased assets. APS controls the dispatch of the leased assets during the months of June through September and is required to pay a fixed monthly capacity payment during these periods of use. For these types of leased assets APS has elected to combine both the lease and non-lease payment components and accounts for the entire fixed payment as a lease obligation. These purchased power lease contracts are accounted for as operating leases. The contracts do not contain purchase options or term extension options.  In addition to the fixed monthly capacity payment, APS must also pay variable charges based on the actual production volume of the asset. The variable consideration is not included in the measurement of our lease obligation.

The following tables provide information related to our lease costs (dollars in thousands):
Three Months Ended
September 30, 2020
Three Months Ended
September 30, 2019
Purchased Power Lease ContractsLand, Property & Equipment LeasesTotalPurchased Power Lease ContractsLand, Property & Equipment LeasesTotal
Operating lease cost$51,662 $4,655 $56,317 $21,095 $4,581 $25,676 
Variable lease cost40,658 232 40,890 36,917 183 37,100 
Short-term lease cost— 1,038 1,038 — 812 812 
Total lease cost$92,320 $5,925 $98,245 $58,012 $5,576 $63,588 

Nine Months Ended
September 30, 2020
Nine Months Ended
September 30, 2019
Purchased Power Lease ContractsLand, Property & Equipment LeasesTotalPurchased Power Lease ContractsLand, Property & Equipment LeasesTotal
Operating lease cost$68,883 $13,959 $82,842 $35,159 $13,343 $48,502 
Variable lease cost102,052 730 102,782 95,736 543 96,279 
Short-term lease cost— 2,824 2,824 — 3,477 3,477 
Total lease cost$170,935 $17,513 $188,448 $130,895 $17,363 $148,258 
Lease costs are primarily included as a component of operating expenses on our Condensed Consolidated Statements of Income.  Lease costs relating to purchased power lease contracts are recorded in fuel and purchased power on the Condensed Consolidated Statements of Income, and are subject to recovery under the PSA or RES (see Note 4).  The tables above reflect the lease cost amounts before the effect of regulatory deferral under the PSA and RES.  Variable lease costs are recognized in the period the costs are incurred, and primarily relate to renewable purchased power lease contracts.  Payments under most renewable purchased power lease contracts are dependent upon environmental factors, and due to the inherent uncertainty associated with the reliability of the fuel source, the payments are considered variable and are excluded from the measurement of lease liabilities and right-of-use lease assets. Certain of our lease agreements have lease terms with non-consecutive periods of use. For these agreements, we recognize lease costs during the periods of use.  Leases with initial terms of 12 months or less are considered short-term leases and are not recorded on the balance sheet.

The following table provides information related to the maturity of our operating lease liabilities (dollars in thousands):
September 30, 2020
YearPurchased Power Lease ContractsLand, Property & Equipment LeasesTotal
2020 (remaining three months of 2020)$14,889 $3,294 $18,183 
202166,658 13,402 80,060 
202268,325 9,781 78,106 
202370,033 7,443 77,476 
202471,784 5,162 76,946 
202573,578 3,457 77,035 
Thereafter36,759 36,961 73,720 
Total lease commitments402,026 79,500 481,526 
Less imputed interest15,565 18,407 33,972 
Total lease liabilities$386,461 $61,093 $447,554 

We recognize lease assets and liabilities upon lease commencement. At September 30, 2020, we have additional lease arrangements that have been executed, but have not yet commenced. These arrangements primarily relate to purchased power lease contracts with lease commencement dates beginning in May 2021 with terms ending in October 2027. We expect the total fixed consideration paid for these arrangements, which includes both lease and nonlease payments, will approximate $258 million over the term of the arrangements.
The following tables provide other additional information related to operating lease liabilities (dollars in thousands):
Nine Months Ended
September 30, 2020
Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows:$56,896 $51,980 
Right-of-use operating lease assets obtained in exchange for operating lease liabilities436,587 8,759 

September 30, 2020December 31, 2019
Weighted average remaining lease term7 years13 years
Weighted average discount rate (a)1.69 %3.71 %
(a) Most of our lease agreements do not contain an implicit rate that is readily determinable. For these agreements we use our incremental borrowing rate to measure the present value of lease liabilities.  We determine our incremental borrowing rate at lease commencement based on the rate of interest that we would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. We use the implicit rate when it is readily determinable.
v3.20.2
Asset Retirement Obligations
9 Months Ended
Sep. 30, 2020
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations Asset Retirement Obligations
During the nine months ended September 30, 2020, the Company revised its cost estimates for existing AROs at Cholla relating to updated estimates for the closure of ponds and facilities, and at Four Corners and Navajo Plant relating to corrective action and water monitoring costs (see additional details in Notes 4 and 8).

The following schedule shows the change in our asset retirement obligations for the nine months ended September 30, 2020 (dollars in thousands): 
 2020
Asset retirement obligations at January 1, 2020$657,218 
Changes attributable to: 
Accretion expense29,454 
Settlements(5,611)
Estimated cash flow revisions5,190 
Asset retirement obligations at September 30, 2020$686,251 

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 4.
v3.20.2
New Accounting Standards (Policies)
9 Months Ended
Sep. 30, 2020
Accounting Standards Update and Change in Accounting Principle [Abstract]  
New Accounting Standards
ASU 2016-13, Financial Instruments: Measurement of Credit Losses

In June 2016, a new accounting standard was issued that amends the measurement of credit losses on certain financial instruments. The new standard requires entities to use a current expected credit loss model to measure impairment of certain investments in debt securities, trade accounts receivables, and other financial instruments. Since the issuance of the new standard, various guidance has been issued that amends the new standard, including clarifications of certain aspects of the standard and targeted transition relief, among other changes. The new standard and related amendments were effective for us on January 1, 2020, and must be adopted using a modified retrospective approach for certain aspects of the standard, and a prospective approach for other aspects of the standard. We adopted the standard on January 1, 2020 using primarily the modified retrospective approach. While the adoption of this guidance changed our process and methodology for determining credit losses and resulted in additional disclosures, these changes did not have a material impact on our financial statements. See Note 2 for allowance for doubtful accounts related credit loss disclosures.
v3.20.2
Consolidation and Nature of Operations (Tables)
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Summary of supplemental cash flow information
The following table summarizes supplemental Pinnacle West cash flow information (dollars in thousands):
 Nine Months Ended
September 30,
 20202019
Cash paid during the period for:
Income taxes, net of refunds$(3,028)$12,488 
Interest, net of amounts capitalized155,623 166,907 
Significant non-cash investing and financing activities:
Accrued capital expenditures$84,022 $85,099 

The following table summarizes supplemental APS cash flow information (dollars in thousands):
Nine Months Ended
September 30,
 20202019
Cash paid during the period for:
Income taxes, net of refunds$— $35,573 
Interest, net of amounts capitalized148,713 157,593 
Significant non-cash investing and financing activities:
Accrued capital expenditures$84,022 $85,099 
v3.20.2
Revenue (Tables)
9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue
The following table provides detail of Pinnacle West's consolidated revenue disaggregated by revenue sources (dollars in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Retail Electric Revenue
Residential$726,231 $668,467 $1,566,432 $1,452,601 
Non-Residential461,168 465,602 1,145,640 1,194,199 
Wholesale energy sales45,631 36,775 76,226 95,218 
Transmission services for others18,000 15,841 48,693 46,247 
Other sources3,471 4,102 9,030 12,553 
Total operating revenues$1,254,501 $1,190,787 $2,846,021 $2,800,818 
Schedule of Accounts Receivable
The following table provides a rollforward of Pinnacle West’s allowance for doubtful accounts (dollars in thousands):
Nine Months Ended
September 30, 2020
Twelve Months Ended December 31, 2019
Allowance for doubtful accounts, balance at beginning of period$8,171 $4,069 
Bad debt expense17,399 11,819 
Actual write-offs(7,501)(7,717)
Allowance for doubtful accounts, balance at end of period$18,069 $8,171 
v3.20.2
Long-Term Debt and Liquidity Matters (Tables)
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Schedule of estimated fair value of long-term debt, including current maturities The following table presents the estimated fair value of our long-term debt, including current maturities (dollars in thousands):
 As of September 30, 2020As of December 31, 2019
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Pinnacle West$496,117 $507,500 $449,425 $450,822 
APS5,820,303 6,886,108 5,183,133 5,743,570 
Total$6,316,420 $7,393,608 $5,632,558 $6,194,392 
v3.20.2
Regulatory Matters (Tables)
9 Months Ended
Sep. 30, 2020
Regulated Operations [Abstract]  
Schedule of capital structure and cost of capital the following proposed capital structure and costs of capital:
  Capital Structure Cost of Capital 
Long-term debt 45.3 %4.10 %
Common stock equity 54.7 %10.15 %
Weighted-average cost of capital   7.41 %
Schedule of changes in the deferred fuel and purchased power regulatory asset The following table shows the changes in the deferred fuel and purchased power regulatory asset for 2020 and 2019 (dollars in thousands):
 
 Nine Months Ended
September 30,
 20202019
Beginning balance$70,137 $37,164 
Deferred fuel and purchased power costs — current period82,679 60,911 
Amounts refunded/(charged) to customers9,295 (38,601)
Ending balance$162,111 $59,474 
Schedule of regulatory assets
The detail of regulatory assets is as follows (dollars in thousands): 
 Amortization ThroughSeptember 30, 2020December 31, 2019
 CurrentNon-CurrentCurrentNon-Current
Pension(a)$— $656,092 $— $660,223 
Income taxes — allowance for funds used during construction ("AFUDC") equity20506,815 159,005 6,800 154,974 
Deferred fuel and purchased power (b) (c)2021162,111 — 70,137 — 
Retired power plant costs203328,182 121,259 28,182 142,503 
Ocotillo deferralN/A— 80,359 — 38,144 
SCR deferralN/A— 74,576 — 52,644 
Deferred property taxes20278,569 51,769 8,569 58,196 
Lost fixed cost recovery (b)202137,868 — 26,067 — 
Deferred compensation2036— 36,481 — 36,464 
Four Corners cost deferral20248,077 26,094 8,077 32,152 
Income taxes — investment tax credit basis adjustment20481,097 23,850 1,098 24,981 
Palo Verde VIEs (Note 6)2046— 21,100 — 20,635 
Coal reclamation20261,068 17,266 1,546 17,688 
Loss on reacquired debt20381,637 10,846 1,637 12,031 
Mead-Phoenix transmission line contributions in aid of construction ("CIAC")2050332 9,463 332 9,712 
Demand Side Management2021— 7,259 — — 
Tax expense adjuster mechanism (b) (c)20206,121 — 1,612 — 
Deferred fuel and purchased power — mark-to-market (Note 7)2024— 5,664 36,887 33,185 
Tax expense of Medicare subsidy20241,238 3,728 1,235 4,940 
AG-1 deferral20222,787 626 2,787 2,716 
TCA balancing account (b)20214,490 — 6,324 2,885 
OtherVarious2,478 — 1,917 — 
Total regulatory assets (d) $272,870 $1,305,437 $203,207 $1,304,073 

(a)This asset represents the future recovery of pension benefit obligations through retail rates.  If these costs are disallowed by the ACC, this regulatory asset would be charged to other comprehensive income ("OCI") and result in lower future revenues. See Note 5.
(b)See "Cost Recovery Mechanisms" discussion above.
(c)Subject to a carrying charge.
(d)There are no regulatory assets for which the ACC has allowed recovery of costs, but not allowed a return by exclusion from rate base.  FERC rates are set using a formula rate as described in "Transmission Rates, Transmission Cost Adjustor and Other Transmission Matters."
Schedule of regulatory liabilities
The detail of regulatory liabilities is as follows (dollars in thousands):
 
 Amortization ThroughSeptember 30, 2020December 31, 2019
 CurrentNon-CurrentCurrentNon-Current
Excess deferred income taxes - ACC - Tax Cuts and Jobs Act (a)2046$113,206 $952,531 $59,918 $1,054,053 
Excess deferred income taxes - FERC - Tax Cuts and Jobs Act (a)20587,256 229,753 6,302 237,357 
Asset retirement obligations2057— 442,035 — 418,423 
Removal costs(c)51,519 112,168 47,356 136,072 
Other postretirement benefits(d)37,575 109,035 37,575 139,634 
Four Corners coal reclamation20385,461 49,151 1,059 51,704 
Spent nuclear fuel20276,520 46,526 6,676 51,019 
Income taxes — change in rates20502,802 48,541 2,797 68,265 
Income taxes — deferred investment tax credit20482,199 47,765 2,202 50,034 
Renewable energy standard (b)202135,813 1,128 39,287 10,300 
Demand side management (b)202117,394 — 15,024 24,146 
Sundance maintenance20312,200 12,303 5,698 11,319 
Property tax deferralN/A— 11,784 — 7,046 
Deferred fuel and purchased power — mark-to-market (Note 7)202410,894 — — — 
FERC transmission true up20225,965 4,291 1,045 2,004 
Active union medical trustN/A— 6,993 — 2,041 
Tax expense adjustor mechanism (b) (c)20206,542 — 7,018 — 
Deferred gains on utility property20222,423 2,379 2,423 4,163 
TCA balancing account (b)2022— 2,665 — — 
OtherVarious250 275 532 255 
Total regulatory liabilities $308,019 $2,079,323 $234,912 $2,267,835 

(a)For purposes of presentation on the Statement of Cash Flows, amortization of the regulatory liabilities for excess deferred income taxes are reflected as "Deferred income taxes" under Cash Flows From Operating Activities.
(b)See “Cost Recovery Mechanisms” discussion above.
(c)In accordance with regulatory accounting guidance, APS accrues removal costs for its regulated assets, even if there is no legal obligation for removal.
(d)See Note 5.
v3.20.2
Retirement Plans and Other Postretirement Benefits (Tables)
9 Months Ended
Sep. 30, 2020
Retirement Benefits [Abstract]  
Schedule of net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction, billed to electric plant participants or charged or amortized to the regulatory asset)
The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction or billed to electric plant participants) (dollars in thousands):
 Pension BenefitsOther Benefits
 Three Months Ended
September 30,
Nine Months Ended
September 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
 20202019202020192020201920202019
Service cost — benefits earned during the period$14,058 $12,476 $42,174 $37,427 $5,559 $4,593 $16,677 $13,777 
Non-service costs (credits):
Interest cost on benefit obligation29,642 34,211 88,925 102,632 6,464 7,473 19,393 22,420 
Expected return on plan assets(46,861)(42,971)(140,582)(128,913)(10,019)(9,603)(30,057)(28,809)
  Amortization of:       
  Prior service credit— — — — (9,394)(9,456)(28,182)(28,366)
  Net actuarial loss8,653 10,646 25,959 31,938 — — — — 
Net periodic benefit cost (credit)$5,492 $14,362 $16,476 $43,084 $(7,390)$(6,993)$(22,169)$(20,978)
Portion of cost (credit) charged to expense$736 $7,593 $2,349 $22,837 $(5,286)$(4,966)$(15,798)$(14,846)
v3.20.2
Palo Verde Sale Leaseback Variable Interest Entities (Tables)
9 Months Ended
Sep. 30, 2020
Variable Interest Entities [Abstract]  
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets
Our Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019 include the following amounts relating to the VIEs (dollars in thousands):
 
September 30, 2020December 31, 2019
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation
$99,003 $101,906 
Equity — Noncontrolling interests125,789 122,540 
v3.20.2
Derivative Accounting (Tables)
9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Outstanding gross notional amount of derivatives, which represents both purchases and sales (does not reflect net position)
As of September 30, 2020 and December 31, 2019, we had the following outstanding gross notional volume of derivatives, which represent both purchases and sales (does not reflect net position): 
Quantity
CommodityUnit of MeasureSeptember 30, 2020December 31, 2019
PowerGWh142 193 
GasBillion cubic feet213 257 
Gains and losses from derivative instruments in designated cash flow accounting hedges relationships
The following table provides information about APS's gains and losses from derivative instruments in designated cash flow accounting hedging relationships (dollars in thousands):
 
 Financial Statement LocationThree Months Ended
September 30,
Nine Months Ended
September 30,
Commodity Contracts2020201920202019
Loss Reclassified from Accumulated OCI into Income (Effective Portion Realized) (a)Fuel and purchased power (b)$— $(289)$(763)$(1,263)

(a)During the three and nine months ended September 30, 2020 and 2019, we had no gains or losses reclassified from accumulated OCI to earnings related to discontinued cash flow hedges.
(b)Amounts are before the effect of PSA deferrals.
Gains and losses from derivative instruments not designated as accounting hedges instruments
The following table provides information about gains and losses from derivative instruments not designated as accounting hedging instruments (dollars in thousands):
 
 Financial Statement LocationThree Months Ended
September 30,
Nine Months Ended
September 30,
Commodity Contracts2020201920202019
Net Gain (Loss) Recognized in IncomeFuel and purchased power (a)$49,611 $(28,249)$14,639 $(69,765)

(a)Amounts are before the effect of PSA deferrals.
Schedule of offsetting assets
The following tables provide information about the fair value of our risk management activities reported on a gross basis and the impacts of offsetting.  These amounts relate to commodity contracts and are located in the assets and liabilities from risk management activities and other assets lines of our Condensed Consolidated Balance Sheets.
As of September 30, 2020:
(dollars in thousands)
Gross
 Recognized
 Derivatives
 (a)
Amounts
Offset
 (b)
Net
 Recognized
 Derivatives
Other
 (c)
Amount Reported on Balance Sheets
Current assets$15,505 $(1,630)$13,875 $— $13,875 
Investments and other assets5,008 (1,579)3,429 — 3,429 
Total assets20,513 (3,209)17,304 — 17,304 
Current liabilities(4,611)1,630 (2,981)(1,285)(4,266)
Deferred credits and other(10,671)1,579 (9,092)— (9,092)
Total liabilities(15,282)3,209 (12,073)(1,285)(13,358)
Total$5,231 $— $5,231 $(1,285)$3,946 

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions or collateral posted in excess of the recognized derivative instrument. Includes cash collateral received from counterparties of $1,285.
As of December 31, 2019:
(dollars in thousands)
Gross
Recognized
Derivatives
 (a)
Amounts
Offset
(b)
Net
 Recognized
 Derivatives
Other
 (c)
Amount
Reported on
Balance Sheets
Current assets$584 $(474)$110 $405 $515 
Current liabilities(38,235)474 (37,761)(1,185)(38,946)
Deferred credits and other(33,186)— (33,186)— (33,186)
Total liabilities(71,421)474 (70,947)(1,185)(72,132)
Total$(70,837)$— $(70,837)$(780)$(71,617)

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral and cash margin that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions, or collateral and margin posted in excess of the recognized derivative instrument.  Includes cash collateral received from counterparties of $1,185 and cash margin provided to counterparties of $405.
Schedule of offsetting liabilities
The following tables provide information about the fair value of our risk management activities reported on a gross basis and the impacts of offsetting.  These amounts relate to commodity contracts and are located in the assets and liabilities from risk management activities and other assets lines of our Condensed Consolidated Balance Sheets.
As of September 30, 2020:
(dollars in thousands)
Gross
 Recognized
 Derivatives
 (a)
Amounts
Offset
 (b)
Net
 Recognized
 Derivatives
Other
 (c)
Amount Reported on Balance Sheets
Current assets$15,505 $(1,630)$13,875 $— $13,875 
Investments and other assets5,008 (1,579)3,429 — 3,429 
Total assets20,513 (3,209)17,304 — 17,304 
Current liabilities(4,611)1,630 (2,981)(1,285)(4,266)
Deferred credits and other(10,671)1,579 (9,092)— (9,092)
Total liabilities(15,282)3,209 (12,073)(1,285)(13,358)
Total$5,231 $— $5,231 $(1,285)$3,946 

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions or collateral posted in excess of the recognized derivative instrument. Includes cash collateral received from counterparties of $1,285.
As of December 31, 2019:
(dollars in thousands)
Gross
Recognized
Derivatives
 (a)
Amounts
Offset
(b)
Net
 Recognized
 Derivatives
Other
 (c)
Amount
Reported on
Balance Sheets
Current assets$584 $(474)$110 $405 $515 
Current liabilities(38,235)474 (37,761)(1,185)(38,946)
Deferred credits and other(33,186)— (33,186)— (33,186)
Total liabilities(71,421)474 (70,947)(1,185)(72,132)
Total$(70,837)$— $(70,837)$(780)$(71,617)

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral and cash margin that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions, or collateral and margin posted in excess of the recognized derivative instrument.  Includes cash collateral received from counterparties of $1,185 and cash margin provided to counterparties of $405.
Information about derivative instruments that have credit-risk-related contingent features
The following table provides information about our derivative instruments that have credit-risk-related contingent features (dollars in thousands):
 September 30, 2020
Aggregate fair value of derivative instruments in a net liability position$15,282 
Cash collateral posted— 
Additional cash collateral in the event credit-risk-related contingent features were fully triggered (a)5,054 

(a)This amount is after counterparty netting and includes those contracts which qualify for scope exceptions, which are excluded from the derivative details above.
v3.20.2
Other Income and Other Expense (Tables)
9 Months Ended
Sep. 30, 2020
Other Income and Expenses [Abstract]  
Detail of other income and other expense
The following table provides detail of Pinnacle West's Consolidated other income and other expense (dollars in thousands):
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Other income:    
Interest income$2,956 $2,694 $8,988 $7,695 
Investment gains (losses) - net— — 2,594 — 
Debt return on Four Corners SCR deferrals (Note 4)4,260 4,920 11,649 14,651 
Debt return on Ocotillo modernization project (Note 4)6,663 7,555 19,511 12,849 
Miscellaneous22 146 50 
Total other income$13,881 $15,191 $42,888 $35,245 
Other expense:    
Non-operating costs$(2,453)$(2,647)$(7,401)$(8,832)
Investment gains (losses) — net(291)(716)— (1,445)
Miscellaneous(3,094)(2,377)(7,025)(4,171)
Total other expense$(5,838)$(5,740)$(14,426)$(14,448)
The following table provides detail of APS’s other income and other expense (dollars in thousands):
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Other income:    
Interest income$2,403 $2,037 $6,927 $5,091 
Debt return on Four Corners SCR deferrals (Note 4)4,260 4,920 11,649 14,651 
Debt return on Ocotillo modernization project (Note 4)6,663 7,555 19,511 12,849 
Miscellaneous22 146 50 
Total other income$13,328 $14,534 $38,233 $32,641 
Other expense:    
Non-operating costs$(1,906)$(2,448)$(6,501)$(7,965)
Miscellaneous(893)(378)(4,825)(2,167)
Total other expense$(2,799)$(2,826)$(11,326)$(10,132)
v3.20.2
Earnings Per Share (Tables)
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Schedule of earnings per weighted average common share outstanding
The following table presents the calculation of Pinnacle West’s basic and diluted earnings per share (in thousands, except per share amounts):
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net income attributable to common shareholders$346,372 $312,276 $569,950 $474,339 
Weighted average common shares outstanding — basic
112,679 112,463 112,639 112,408 
Net effect of dilutive securities:
Contingently issuable performance shares and restricted stock units
308 283 273 331 
Weighted average common shares outstanding — diluted
112,987 112,746 112,912 112,739 
Earnings per weighted-average common share outstanding
Net income attributable to common shareholders — basic
$3.07 $2.78 $5.06 $4.22 
Net income attributable to common shareholders — diluted
$3.07 $2.77 $5.05 $4.21 
v3.20.2
Fair Value Measurements (Tables)
9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Fair value of assets and liabilities that are measured at fair value on a recurring basis
The following table presents the fair value at September 30, 2020 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
 
 Level 1Level 2Level 3Other Total
Assets      
Cash equivalents$146,680 $— $— $— $146,680 
Risk management activities — derivative instruments:
Commodity contracts$— $20,206 $307 $(3,209)(a)$17,304 
Nuclear decommissioning trust:
Equity securities24,537 — — (14,148)(b)10,389 
U.S. commingled equity funds— — — 545,845 (c)545,845 
U.S. Treasury debt153,213 — — —  153,213 
Corporate debt— 146,682 — —  146,682 
Mortgage-backed securities— 101,456 — —  101,456 
Municipal bonds— 99,192 — —  99,192 
Other fixed income— 13,060 — —  13,060 
Subtotal nuclear decommissioning trust177,750 360,390 — 531,697 1,069,837 
Other special use funds:
Equity securities8,090 — — 1,444 (b)9,534 
U.S. Treasury debt245,156 — — — 245,156 
Municipal bonds— 13,602 — — 13,602 
Subtotal other special use funds253,246 13,602 — 1,444 268,292 
Total assets$577,676 $394,198 $307 $529,932 $1,502,113 
Liabilities      
Risk management activities — derivative instruments:      
Commodity contracts$— $(10,737)$(4,546)$1,925 (a)$(13,358)

(a)Represents counterparty netting, margin, and collateral. See Note 7.
(b)Represents net pending securities sales and purchases.
(c)Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.
The following table presents the fair value at December 31, 2019 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
 
 Level 1Level 2Level 3Other Total
Assets      
Risk management activities — derivative instruments:
Commodity contracts$— $551 $33 $(69)(a)$515 
Nuclear decommissioning trust:      
Equity securities10,872 — — 2,401 (b)13,273 
U.S. commingled equity funds— — — 518,844 (c)518,844 
U.S. Treasury debt160,607 — — — 160,607 
Corporate debt— 115,869 — —  115,869 
Mortgage-backed securities— 118,795 — —  118,795 
Municipal bonds— 73,040 — —  73,040 
Other fixed income— 10,347 — —  10,347 
Subtotal nuclear decommissioning trust171,479 318,051 — 521,245 1,010,775 
Other special use funds:
Equity securities7,142 — — 474 (b)7,616 
U.S. Treasury debt232,848 — — — 232,848 
Municipal bonds— 4,631 — — 4,631 
Subtotal other special use funds239,990 4,631 — 474 245,095 
Total assets$411,469 $323,233 $33 $521,650 $1,256,385 
Liabilities      
Risk management activities — derivative instruments:      
Commodity contracts$— $(67,992)$(3,429)$(711)(a)$(72,132)

(a)Represents counterparty netting, margin, and collateral. See Note 7.
(b)Represents net pending securities sales and purchases.
(c)Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.
v3.20.2
Investments in Nuclear Decommissioning Trusts and Other Special Use Funds (Tables)
9 Months Ended
Sep. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Fair value of APS's nuclear decommissioning trust fund assets
The following tables present the unrealized gains and losses based on the original cost of the investment and summarizes the fair value of APS's Nuclear Decommissioning Trusts and other special use fund assets (dollars in thousands):  
September 30, 2020
 Fair ValueTotal
Unrealized
Gains
Total
Unrealized
Losses
Investment Type:Nuclear Decommissioning TrustsOther Special Use FundsTotal
Equity securities$570,382 $8,090 $578,472 $359,112 $(36)
Available for sale-fixed income securities513,603 258,758 772,361 (a)47,158 (674)
Other(14,148)1,444 (12,704)(b)— — 
Total$1,069,837 $268,292 $1,338,129 $406,270 $(710)

(a)As of September 30, 2020, the amortized cost basis of these available-for-sale investments is $726 million.
(b)Represents net pending securities sales and purchases.
December 31, 2019
 Fair ValueTotal
Unrealized
Gains
Total
Unrealized
Losses
Investment Type:Nuclear Decommissioning TrustsOther Special Use FundsTotal
Equity securities$529,716 $7,142 $536,858 $337,681 $— 
Available for sale-fixed income securities478,658 237,479 716,137 (a)25,795 (669)
Other2,401 474 2,875 (b)— — 
Total$1,010,775 $245,095 $1,255,870 $363,476 $(669)

(a)As of December 31, 2019, the amortized cost basis of these available-for-sale investments is $691 million.
(b)Represents net pending securities sales and purchases.
Realized gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds
The following tables set forth APS's realized gains and losses relating to the sale and maturity of available-for-sale debt securities and equity securities, and the proceeds from the sale and maturity of these investment securities (dollars in thousands):
 Three Months Ended September 30,
 Nuclear Decommissioning TrustsOther Special Use FundsTotal
2020
Realized gains$2,933 $— $2,933 
Realized losses(750)(15)(765)
Proceeds from the sale of securities (a)178,919 37,107 216,026 
2019
Realized gains$4,732 $$4,736 
Realized losses(2,360)— (2,360)
Proceeds from the sale of securities (a)155,386 56,255 211,641 

(a)    Proceeds are reinvested in the Nuclear Decommissioning Trusts and other special use funds, excluding amounts reimbursed to the Company for active union employee medical claims from the active union employee medical account.
 Nine Months Ended September 30,
 Nuclear Decommissioning TrustsOther Special Use FundsTotal
2020
Realized gains$10,746 $— $10,746 
Realized losses(4,598)(15)(4,613)
Proceeds from the sale of securities (a)534,057 73,828 607,885 
2019
Realized gains$8,478 $$8,482 
Realized losses(5,465)— (5,465)
Proceeds from the sale of securities (a)371,538 149,458 520,996 

(a)    Proceeds are reinvested in the Nuclear Decommissioning Trusts and other special use funds, excluding amounts reimbursed to the Company for active union employee medical claims from the active union employee medical account.
Fair value of fixed income securities, summarized by contractual maturities
The fair value of APS's fixed income securities, summarized by contractual maturities, at September 30, 2020, is as follows (dollars in thousands):
 Nuclear Decommissioning TrustCoal Mine Reclamation Escrow AccountActive Union Employee Medical AccountTotal
Less than one year$23,079 $34,578 $40,506 $98,163 
1 year – 5 years146,885 29,041 142,938 318,864 
5 years – 10 years122,619 2,772 — 125,391 
Greater than 10 years221,020 8,923 — 229,943 
Total$513,603 $75,314 $183,444 $772,361 
v3.20.2
Changes in Accumulated Other Comprehensive Loss (Tables)
9 Months Ended
Sep. 30, 2020
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]  
Schedule of changes in accumulated other comprehensive loss including reclassification adjustments, net of tax, by component
The following table shows the changes in Pinnacle West's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component (dollars in thousands):
 Pension and Other Postretirement Benefits Derivative Instruments Total
Three Months Ended September 30
Balance June 30, 2020$(56,326)$(1,549)$(57,875)
OCI (loss) before reclassifications— (659)(659)
Amounts reclassified from accumulated other comprehensive loss1,043  (a)— 1,043 
Balance September 30, 2020$(55,283)$(2,208)$(57,491)
Balance June 30, 2019$(46,657)$(979)$(47,636)
Amounts reclassified from accumulated other comprehensive loss880  (a)218  (b)1,098 
Balance September 30, 2019$(45,777)$(761)$(46,538)
Pension and Other Postretirement BenefitsDerivative InstrumentsTotal
Nine Months Ended September 30
Balance December 31, 2019$(56,522)$(574)$(57,096)
OCI (loss) before reclassifications(2,008)(1,916)(3,924)
Amounts reclassified from accumulated other comprehensive loss3,247 (a)282 (b)3,529 
Balance September 30, 2020$(55,283)$(2,208)$(57,491)
Balance December 31, 2018$(45,997)$(1,711)$(47,708)
OCI (loss) before reclassifications(2,422)— (2,422)
Amounts reclassified from accumulated other comprehensive loss2,642 (a)950 (b)3,592 
Balance September 30, 2019$(45,777)$(761)$(46,538)

(a)    These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost.  See Note 5.
(b)    These amounts primarily represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA.  See Note 7.
The following table shows the changes in APS's consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands): 
 Pension and Other Postretirement Benefits Derivative Instruments Total
Three Months Ended September 30
Balance June 30, 2020$(35,025)$— $(35,025)
Amounts reclassified from accumulated other comprehensive loss900  (a)— 900 
Balance September 30, 2020$(34,125)$— $(34,125)
Balance June 30, 2019$(26,297)$(979)$(27,276)
Amounts reclassified from accumulated other comprehensive loss755  (a)218  (b)973 
Balance September 30, 2019$(25,542)$(761)$(26,303)
 Pension and Other Postretirement Benefits Derivative Instruments Total
Nine Months Ended September 30
Balance December 31, 2019$(34,948)$(574)$(35,522)
OCI (loss) before reclassifications(1,951)292 (1,659)
Amounts reclassified from accumulated other comprehensive loss2,774 (a)282  (b)3,056 
Balance September 30, 2020$(34,125)$— $(34,125)
Balance December 31, 2018$(25,396)$(1,711)$(27,107)
OCI (loss) before reclassifications(2,414)— (2,414)
Amounts reclassified from accumulated other comprehensive loss2,268 (a)950  (b)3,218 
Balance September 30, 2019$(25,542)$(761)$(26,303)

(a)    These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost.  See Note 5.
(b)    These amounts primarily represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA.  See Note 7.
v3.20.2
Leases (Tables)
9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Lease cost
The following tables provide information related to our lease costs (dollars in thousands):
Three Months Ended
September 30, 2020
Three Months Ended
September 30, 2019
Purchased Power Lease ContractsLand, Property & Equipment LeasesTotalPurchased Power Lease ContractsLand, Property & Equipment LeasesTotal
Operating lease cost$51,662 $4,655 $56,317 $21,095 $4,581 $25,676 
Variable lease cost40,658 232 40,890 36,917 183 37,100 
Short-term lease cost— 1,038 1,038 — 812 812 
Total lease cost$92,320 $5,925 $98,245 $58,012 $5,576 $63,588 

Nine Months Ended
September 30, 2020
Nine Months Ended
September 30, 2019
Purchased Power Lease ContractsLand, Property & Equipment LeasesTotalPurchased Power Lease ContractsLand, Property & Equipment LeasesTotal
Operating lease cost$68,883 $13,959 $82,842 $35,159 $13,343 $48,502 
Variable lease cost102,052 730 102,782 95,736 543 96,279 
Short-term lease cost— 2,824 2,824 — 3,477 3,477 
Total lease cost$170,935 $17,513 $188,448 $130,895 $17,363 $148,258 
Schedule of future minimum payments
The following table provides information related to the maturity of our operating lease liabilities (dollars in thousands):
September 30, 2020
YearPurchased Power Lease ContractsLand, Property & Equipment LeasesTotal
2020 (remaining three months of 2020)$14,889 $3,294 $18,183 
202166,658 13,402 80,060 
202268,325 9,781 78,106 
202370,033 7,443 77,476 
202471,784 5,162 76,946 
202573,578 3,457 77,035 
Thereafter36,759 36,961 73,720 
Total lease commitments402,026 79,500 481,526 
Less imputed interest15,565 18,407 33,972 
Total lease liabilities$386,461 $61,093 $447,554 
The following tables provide other additional information related to operating lease liabilities (dollars in thousands):
Nine Months Ended
September 30, 2020
Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows:$56,896 $51,980 
Right-of-use operating lease assets obtained in exchange for operating lease liabilities436,587 8,759 

September 30, 2020December 31, 2019
Weighted average remaining lease term7 years13 years
Weighted average discount rate (a)1.69 %3.71 %
(a) Most of our lease agreements do not contain an implicit rate that is readily determinable. For these agreements we use our incremental borrowing rate to measure the present value of lease liabilities.  We determine our incremental borrowing rate at lease commencement based on the rate of interest that we would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. We use the implicit rate when it is readily determinable.
v3.20.2
Asset Retirement Obligations (Tables)
9 Months Ended
Sep. 30, 2020
Asset Retirement Obligation Disclosure [Abstract]  
Change in asset retirement obligations
The following schedule shows the change in our asset retirement obligations for the nine months ended September 30, 2020 (dollars in thousands): 
 2020
Asset retirement obligations at January 1, 2020$657,218 
Changes attributable to: 
Accretion expense29,454 
Settlements(5,611)
Estimated cash flow revisions5,190 
Asset retirement obligations at September 30, 2020$686,251 
v3.20.2
Consolidation and Nature of Operations (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash paid during the period for:    
Income taxes, net of refunds $ (3,028) $ 12,488
Interest, net of amounts capitalized 155,623 166,907
Significant non-cash investing and financing activities:    
Accrued capital expenditures 84,022 85,099
APS    
Cash paid during the period for:    
Income taxes, net of refunds 0 35,573
Interest, net of amounts capitalized 148,713 157,593
Significant non-cash investing and financing activities:    
Accrued capital expenditures $ 84,022 $ 85,099
v3.20.2
Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Disaggregation of Revenue [Line Items]        
Operating revenues $ 1,254,501 $ 1,190,787 $ 2,846,021 $ 2,800,818
Regulatory cost recovery revenue 11,000 13,000 40,000 45,000
Electric Service | Residential        
Disaggregation of Revenue [Line Items]        
Operating revenues 726,231 668,467 1,566,432 1,452,601
Electric Service | Non-Residential        
Disaggregation of Revenue [Line Items]        
Operating revenues 461,168 465,602 1,145,640 1,194,199
Electric Service | Wholesale energy sales        
Disaggregation of Revenue [Line Items]        
Operating revenues 45,631 36,775 76,226 95,218
Transmission services for others        
Disaggregation of Revenue [Line Items]        
Operating revenues 18,000 15,841 48,693 46,247
Other sources        
Disaggregation of Revenue [Line Items]        
Operating revenues 3,471 4,102 9,030 12,553
Electric and Transmission Service        
Disaggregation of Revenue [Line Items]        
Operating revenues $ 1,244,000 $ 1,178,000 $ 2,806,000 $ 2,756,000
v3.20.2
Revenue Allowance for Doubtful Accounts (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2020
Dec. 31, 2019
Sep. 30, 2020
Accounts Receivable, Allowance for Credit Loss [Roll Forward]      
Allowance for doubtful accounts, balance at beginning of period $ 8,171 $ 4,069  
Bad debt expense 17,399 11,819  
Actual write-offs (7,501) (7,717)  
Allowance for doubtful accounts, balance at end of period $ 8,171 $ 4,069 $ 18,069
v3.20.2
Long-Term Debt and Liquidity Matters - Narrative (Details)
9 Months Ended
Jun. 17, 2020
USD ($)
May 22, 2020
USD ($)
Jan. 15, 2020
USD ($)
Sep. 30, 2020
USD ($)
Facility
Sep. 30, 2019
USD ($)
Sep. 11, 2020
USD ($)
Jun. 16, 2020
USD ($)
May 05, 2020
USD ($)
May 04, 2020
USD ($)
Mar. 26, 2020
USD ($)
Nov. 27, 2018
USD ($)
Long-Term Debt and Liquidity Matters                      
Percentage of capitalization                     7.00%
Capacity available for trade purchases                     $ 500,000,000
Repayment of long-term debt       $ 800,000,000 $ 500,000,000            
Long-term debt limit       7,500,000,000              
Senior Unsecured Notes                      
Long-Term Debt and Liquidity Matters                      
Debt instrument, interest rate 1.30%           2.25%        
Senior Unsecured Notes | Senior notes                      
Long-Term Debt and Liquidity Matters                      
Debt instrument, face amount $ 500,000,000           $ 300,000,000        
Term Loan                      
Long-Term Debt and Liquidity Matters                      
Repayment of long-term debt $ 150,000,000                    
Pinnacle West | Revolving Credit Facility | Revolving credit Facility maturing July 2023                      
Long-Term Debt and Liquidity Matters                      
Maximum borrowing capacity on credit facility upon satisfaction of certain conditions and consent of lenders (up to)       300,000,000              
Long-term line of credit       0              
Current borrowing capacity on credit facility       200,000,000              
Pinnacle West | Letter of Credit | Revolving credit Facility maturing July 2023                      
Long-Term Debt and Liquidity Matters                      
Outstanding letters of credit       0              
Pinnacle West | Commercial paper | Revolving credit Facility maturing July 2023                      
Long-Term Debt and Liquidity Matters                      
Commercial paper       34,000,000              
Pinnacle West | Term Loan                      
Long-Term Debt and Liquidity Matters                      
Long-term line of credit       $ 24,000,000              
Debt instrument, face amount               $ 31,000,000 $ 50,000,000    
Variable rate       1.40%              
APS                      
Long-Term Debt and Liquidity Matters                      
Repayment of long-term debt       $ 350,000,000 $ 500,000,000            
Long-term debt limit                   $ 5,900,000,000  
APS | Senior Unsecured Notes                      
Long-Term Debt and Liquidity Matters                      
Debt instrument, interest rate   3.35%       2.65%          
APS | Senior Unsecured Notes | Senior notes                      
Long-Term Debt and Liquidity Matters                      
Debt instrument, face amount   $ 600,000,000 $ 250,000,000     $ 400,000,000          
Extinguishment of debt     $ 150,000,000                
APS | Revolving Credit Facility | Revolving credit Facility maturing July 2023                      
Long-Term Debt and Liquidity Matters                      
Maximum borrowing capacity on credit facility upon satisfaction of certain conditions and consent of lenders (up to)       700,000,000              
Current borrowing capacity on credit facility       500,000,000              
APS | Revolving Credit Facility | Revolving Credit Facility Maturing in 2022 and 2023                      
Long-Term Debt and Liquidity Matters                      
Maximum borrowing capacity on credit facility upon satisfaction of certain conditions and consent of lenders (up to)       1,400,000,000              
Long-term line of credit       0              
Current borrowing capacity on credit facility       $ 1,000,000,000              
Number of line of credit facilities | Facility       2              
APS | Revolving Credit Facility | Revolving credit facility maturing June 2022                      
Long-Term Debt and Liquidity Matters                      
Maximum borrowing capacity on credit facility upon satisfaction of certain conditions and consent of lenders (up to)       $ 700,000,000              
Current borrowing capacity on credit facility       500,000,000              
APS | Commercial paper                      
Long-Term Debt and Liquidity Matters                      
Maximum commercial paper support available under credit facility       $ 500,000,000              
APS | Term Loan                      
Long-Term Debt and Liquidity Matters                      
Repayment of long-term debt   $ 200,000,000                  
Minimum | APS | Senior Unsecured Notes                      
Long-Term Debt and Liquidity Matters                      
Debt instrument, interest rate     2.20%                
v3.20.2
Long-Term Debt and Liquidity Matters - Estimated Fair Value of Long-Term Debt (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Estimated fair value of long-term debt, including current maturities    
Carrying Amount $ 6,316,420 $ 5,632,558
Fair Value 7,393,608 6,194,392
Pinnacle West    
Estimated fair value of long-term debt, including current maturities    
Carrying Amount 496,117 449,425
Fair Value 507,500 450,822
APS    
Estimated fair value of long-term debt, including current maturities    
Carrying Amount 5,820,303 5,183,133
Fair Value $ 6,886,108 $ 5,743,570
v3.20.2
Regulatory Matters - Regulatory Matters - COVID-19 (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Oct. 21, 2020
May 05, 2020
Public Utilities, General Disclosures [Line Items]            
Pre-tax income $ 428,479,000 $ 370,415,000 $ 682,656,000 $ 561,723,000    
APS            
Public Utilities, General Disclosures [Line Items]            
Pre-tax income 437,097,000 $ 379,897,000 703,536,000 $ 588,012,000    
Demand side management funds           $ 36,000,000
Customer credits 43,000,000   43,000,000      
Customer credits, additional funds 7,000,000   7,000,000      
Voluntary funds 8,000,000   8,000,000     5,300,000
Customer COVID assistance $ 6,800,000   $ 6,800,000      
Customer support fund           1,500,000
Customer support fund, bill credit           100
COVID bill credit           100
Customer assistance, small customers, bill credit           $ 1,000
APS | Subsequent Event            
Public Utilities, General Disclosures [Line Items]            
COVID, support         $ 4,300,000  
Customer support fund, non-profits and community organizations         $ 1,250,000  
v3.20.2
Regulatory Matters - Retail Rate Case Filing (Details)
Oct. 31, 2019
USD ($)
$ / kWh
GW
Jun. 30, 2019
USD ($)
Mar. 27, 2017
USD ($)
$ / kWh
Oct. 02, 2020
USD ($)
Retail Rate Case Filing with Arizona Corporation Commission | ACC | APS        
Public Utilities, General Disclosures [Line Items]        
Base rate decrease, elimination of tax expense adjustment mechanism $ 115,000,000      
Approximate percentage of increase in average customer bill 5.60%   3.28%  
Rate matter, cost base rate   $ 8,870,000,000    
Net retail base rate, increase     $ 94,600,000  
Non-fuel and non-depreciation base rate, increase     87,200,000  
Fuel-related base rate decrease     53,600,000  
Base rate increase, changes in depreciation schedules     $ 61,000,000.0  
Approximate percentage of increase in average residential customer bill 5.40%   4.54%  
Authorized return on common equity (as a percent)     10.00%  
Percentage of debt in capital structure     44.20%  
Percentage of common equity in capital structure     55.80%  
Rate matter, resource comparison proxy for exported energy (in dollars per kWh) | $ / kWh     0.129  
Base fuel rate (in dollars per kWh) | $ / kWh 0.030168      
Funding limited income crisis bill program $ 1,250,000      
Commercial customers, market pricing, threshold | GW 0.02      
AZ Sun Program Phase 2 | Retail Rate Case Filing with Arizona Corporation Commission | ACC | APS        
Public Utilities, General Disclosures [Line Items]        
Public utilities, minimum annual renewable energy standard and tariff     $ 10,000,000  
Public utilities, maximum annual renewable energy standard and tariff     $ 15,000,000  
Minimum | ACC | APS        
Public Utilities, General Disclosures [Line Items]        
Operating Results $ 69,000,000      
Minimum | Retail Rate Case Filing with Arizona Corporation Commission | ACC | APS        
Public Utilities, General Disclosures [Line Items]        
Rate matter, environmental surcharge cap rate (in dollars per kWh) | $ / kWh     0.00016  
Maximum | Retail Rate Case Filing with Arizona Corporation Commission | ACC | APS        
Public Utilities, General Disclosures [Line Items]        
Rate matter, environmental surcharge cap rate (in dollars per kWh) | $ / kWh     0.00050  
Subsequent Event | ACC        
Public Utilities, General Disclosures [Line Items]        
Revenue increase (decrease)       $ 89,700,000
Recommended return on equity, percentage       9.40%
Increment of fair value rate, percentage       0.00%
Alternative, percentage       0.30%
Average annual customer bill increase (decrease), percent       2.70%
Subsequent Event | Residential Utility Consumer Office        
Public Utilities, General Disclosures [Line Items]        
Revenue increase (decrease)       $ (20,800,000)
Recommended return on equity, percentage       8.74%
Increment of fair value rate, percentage       0.00%
Average annual customer bill increase (decrease), percent       (0.63%)
v3.20.2
Regulatory Matters - Capital Structure and Costs of Capital (Details) - $ / kWh
Oct. 01, 2021
May 01, 2020
Oct. 31, 2019
May 01, 2019
May 01, 2018
Cost of Capital          
Long-term debt     4.10%    
Common stock equity     10.15%    
Weighted-average cost of capital     7.41%    
Retail Rate Case Filing with Arizona Corporation Commission | APS          
Capital Structure          
Common stock equity     54.70%    
Retail Rate Case Filing with Arizona Corporation Commission | ACC | APS          
Capital Structure          
Long-term debt     45.30%    
Net Metering | ACC | APS          
Cost of Capital          
Second-year export energy price (in dollars per kWh)   0.094   0.105 0.116
Net Metering | ACC | APS | Forecast          
Cost of Capital          
Second-year export energy price (in dollars per kWh) 10.5        
v3.20.2
Regulatory Matters - Cost Recovery Mechanism and Net Metering (Details)
1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Oct. 01, 2021
$ / kWh
Aug. 20, 2020
USD ($)
Customer
Jun. 01, 2020
USD ($)
May 01, 2020
$ / kWh
Feb. 14, 2020
USD ($)
Feb. 01, 2020
USD ($)
$ / kWh
Nov. 14, 2019
USD ($)
Customer
Oct. 31, 2019
USD ($)
Oct. 29, 2019
USD ($)
Jun. 01, 2019
USD ($)
May 01, 2019
$ / kWh
Apr. 10, 2019
Feb. 15, 2019
USD ($)
Feb. 01, 2019
$ / kWh
Aug. 13, 2018
USD ($)
Jun. 01, 2018
USD ($)
May 01, 2018
$ / kWh
Feb. 15, 2018
USD ($)
Feb. 01, 2018
$ / kWh
Jan. 08, 2018
USD ($)
Nov. 20, 2017
USD ($)
Dec. 20, 2016
$ / kWh
Aug. 31, 2016
Sep. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Sep. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Dec. 31, 2020
USD ($)
Dec. 31, 2017
$ / kWh
Jul. 01, 2020
USD ($)
May 15, 2020
USD ($)
May 05, 2020
USD ($)
Dec. 31, 2019
USD ($)
Jul. 01, 2019
USD ($)
Mar. 15, 2019
agreement
Dec. 31, 2018
USD ($)
Jun. 29, 2018
USD ($)
Nov. 14, 2017
USD ($)
Sep. 01, 2017
USD ($)
Settlement Agreement                                                                              
Pre-tax income                                               $ 428,479,000 $ 370,415,000 $ 682,656,000 $ 561,723,000                        
Change in regulatory asset                                                                              
Deferred fuel and purchased power costs — current period                                                   82,679,000 60,911,000                        
Amounts refunded/(charged) to customers                                                   9,295,000 (38,601,000)                        
Rate plan comparison tool, number of customers | Customer   3,800         13,000                                                                
Rate plan comparison tool, inconvenience payment   $ 25         $ 25                                                                
APS                                                                              
Settlement Agreement                                                                              
Pre-tax income                                               437,097,000 379,897,000 703,536,000 588,012,000                        
Change in regulatory asset                                                                              
Deferred fuel and purchased power costs — current period                                                   82,679,000 60,911,000                        
Amounts refunded/(charged) to customers                                                   9,295,000 (38,601,000)                        
Demand side management funds                                                               $ 36,000,000              
Customer credits                                               43,000,000   43,000,000                          
Customer credits, additional funds                                               $ 7,000,000   $ 7,000,000                          
Lost Fixed Cost Recovery Mechanisms | APS                                                                              
Change in regulatory asset                                                                              
Fixed cost recoverable per power lost (in dollars per kWh) | $ / kWh                                                         0.025                    
Percentage of retail revenues                                               1.00%   1.00%                          
Amount of adjustment representing prorated sales losses pending approval         $ 26,600,000               $ 36,200,000         $ 60,700,000                                          
Increase (decrease) in amount of adjustment representing prorated sales losses         $ (9,600,000)               $ (24,500,000)                                                    
ACC | APS                                                                              
Settlement Agreement                                                                              
Program term                                             2 years                                
Change in regulatory asset                                                                              
Gross-up for revenue requirement of rate regulation               $ (184,000,000)             $ 86,500,000         $ 119,100,000                                      
Deferred taxes amortization, period                       28 years 6 months                                                      
Public Utilities, one-time bill credit                 $ 64,000,000                                                            
Public Utilities, one-time bill credit, additional benefit                 $ 39,500,000                                                            
ACC | RES | APS                                                                              
Settlement Agreement                                                                              
Plan term                                                   5 years                          
ACC | RES 2018 | APS                                                                              
Settlement Agreement                                                                              
Amount of proposed budget                                                           $ 84,700,000       $ 86,300,000     $ 89,900,000    
ACC | RES 2018 | APS | Solar Communities                                                                              
Settlement Agreement                                                                              
Program term                                         3 years                                    
ACC | Demand Side Management Adjustor Charge 2018 | APS                                                                              
Settlement Agreement                                                                              
Amount of proposed budget                                                                           $ 52,600,000 $ 52,600,000
ACC | Demand Side Management Adjustor Charge 2019 | APS                                                                              
Settlement Agreement                                                                              
Amount of proposed budget                                                                       $ 34,100,000      
ACC | Demand Side Management Adjustor Charge 2020 | APS                                                                              
Settlement Agreement                                                                              
Amount of proposed budget                                                             $ 51,900,000   $ 51,900,000            
ACC | Power Supply Adjustor (PSA) | APS                                                                              
Change in regulatory asset                                                                              
Beginning balance                                                   $ 70,137,000 37,164,000 $ 70,137,000                      
Deferred fuel and purchased power costs — current period                                                   82,679,000 60,911,000                        
Amounts refunded/(charged) to customers                                                   9,295,000 (38,601,000)                        
Ending balance                                               $ 162,111,000 $ 59,474,000 162,111,000 $ 59,474,000                        
PSA rate (in dollars per kWh) | $ / kWh           (0.000456)               0.001658         0.004555                                        
PSA rate for prior year (in dollars per kWh) | $ / kWh           (0.002086)               0.000536         0.002009                                        
Forward component of increase in PSA (in dollars per kWh) | $ / kWh           0.001630               0.001122         0.002546                                        
Maximum increase (decrease) in PSA rate | $ / kWh                                     0.004                                        
Fuel and purchased power costs, excess annual limit                                               $ 16,400,000   $ 16,400,000                          
ACC | Net Metering | APS                                                                              
Change in regulatory asset                                                                              
Cost of service, resource comparison proxy method, maximum annual percentage decrease                                           10.00%                                  
Cost of service for interconnected DG system customers, grandfathered period                                           20 years                                  
Cost of service for new customers, guaranteed export price period                                           10 years                                  
First-year export energy price (in dollars per kWh) | $ / kWh                                           0.129                                  
Second-year export energy price (in dollars per kWh) | $ / kWh       0.094             0.105           0.116                                            
United States Federal Energy Regulatory Commission | Environmental Improvement Surcharge | APS                                                                              
Change in regulatory asset                                                                              
Increase (decrease) in annual wholesale transmission rates           $ 8,750,000                                                                  
United States Federal Energy Regulatory Commission | Open Access Transmission Tariff | APS                                                                              
Change in regulatory asset                                                                              
Increase (decrease) in annual wholesale transmission rates     $ (6,100,000)             $ 25,800,000           $ (22,700,000)                                              
Retail customer rates     $ 10,900,000             $ 4,700,000           $ (26,900,000)                                              
Cost Recovery Mechanisms | ACC | Power Supply Adjustor (PSA) | APS                                                                              
Change in regulatory asset                                                                              
Historical component of increase in PSA (in dollars per kWh) | $ / kWh           (0.002115)               (0.002897)                                                  
Cost recovery, number of agreements | agreement                                                                     2        
Forecast | ACC | Net Metering | APS                                                                              
Change in regulatory asset                                                                              
Second-year export energy price (in dollars per kWh) | $ / kWh 10.5                                                                            
Forecast | United States Federal Energy Regulatory Commission | Environmental Improvement Surcharge | APS                                                                              
Change in regulatory asset                                                                              
Rate matters, increase (decrease) in cost recovery, excess of annual amount                                                       (2,000,000.0)                      
Minimum | ACC | APS                                                                              
Change in regulatory asset                                                                              
Operating Results               $ (69,000,000)                                                              
Minimum | ACC | RES 2018 | APS | Solar Communities                                                                              
Settlement Agreement                                                                              
Required annual capital investment                                         $ 10,000,000                                    
Maximum | ACC | RES 2018 | APS | Solar Communities                                                                              
Settlement Agreement                                                                              
Required annual capital investment                                         $ 15,000,000                                    
Damage from Fire, Explosion or Other Hazard | Minimum | Forecast | APS                                                                              
Settlement Agreement                                                                              
Pre-tax income                                                       20,000,000                      
Damage from Fire, Explosion or Other Hazard | Maximum | Forecast | APS                                                                              
Settlement Agreement                                                                              
Pre-tax income                                                       $ 30,000,000                      
v3.20.2
Regulatory Matters - Four Corners and Cholla (Details) - APS - USD ($)
$ in Millions
1 Months Ended
Sep. 30, 2018
Apr. 30, 2018
Sep. 30, 2020
SCE | Four Corners Units 4 and 5      
Business Acquisition [Line Items]      
Settlement agreement, ACC approved rate adjustment, annualized customer impact $ 58.5 $ 67.5  
Retired power plant costs      
Business Acquisition [Line Items]      
Net book value     $ 61.0
Navajo Plant      
Business Acquisition [Line Items]      
Net book value     $ 74.0
v3.20.2
Regulatory Matters - Schedule of Regulatory Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Detail of regulatory assets    
Current $ 272,870 $ 203,207
Non-Current 1,305,437 1,304,073
Pension    
Detail of regulatory assets    
Current 0 0
Non-Current 656,092 660,223
Income taxes — allowance for funds used during construction ("AFUDC") equity    
Detail of regulatory assets    
Current 6,815 6,800
Non-Current 159,005 154,974
Retired power plant costs    
Detail of regulatory assets    
Current 28,182 28,182
Non-Current 121,259 142,503
Deferred fuel and purchased power    
Detail of regulatory assets    
Current 162,111 70,137
Non-Current 0 0
Ocotillo deferral    
Detail of regulatory assets    
Current 0 0
Non-Current 80,359 38,144
SCR deferral    
Detail of regulatory assets    
Current 0 0
Non-Current 74,576 52,644
Deferred property taxes    
Detail of regulatory assets    
Current 8,569 8,569
Non-Current 51,769 58,196
Lost fixed cost recovery    
Detail of regulatory assets    
Current 37,868 26,067
Non-Current 0 0
Deferred compensation    
Detail of regulatory assets    
Current 0 0
Non-Current 36,481 36,464
Four Corners cost deferral    
Detail of regulatory assets    
Current 8,077 8,077
Non-Current 26,094 32,152
Income taxes — investment tax credit basis adjustment    
Detail of regulatory assets    
Current 1,097 1,098
Non-Current 23,850 24,981
Palo Verde VIEs (Note 6)    
Detail of regulatory assets    
Current 0 0
Non-Current 21,100 20,635
Coal reclamation    
Detail of regulatory assets    
Current 1,068 1,546
Non-Current 17,266 17,688
Loss on reacquired debt    
Detail of regulatory assets    
Current 1,637 1,637
Non-Current 10,846 12,031
Mead-Phoenix transmission line contributions in aid of construction ("CIAC")    
Detail of regulatory assets    
Current 332 332
Non-Current 9,463 9,712
Demand side management    
Detail of regulatory assets    
Current 0 0
Non-Current 7,259 0
Tax expense adjustor mechanism    
Detail of regulatory assets    
Current 6,121 1,612
Non-Current 0 0
Deferred fuel and purchased power — mark-to-market (Note 7)    
Detail of regulatory assets    
Current 0 36,887
Non-Current 5,664 33,185
Tax expense of Medicare subsidy    
Detail of regulatory assets    
Current 1,238 1,235
Non-Current 3,728 4,940
AG-1 deferral    
Detail of regulatory assets    
Current 2,787 2,787
Non-Current 626 2,716
TCA balancing account    
Detail of regulatory assets    
Current 4,490 6,324
Non-Current 0 2,885
Other    
Detail of regulatory assets    
Current 2,478 1,917
Non-Current $ 0 $ 0
v3.20.2
Regulatory Matters - Schedule of Regulatory Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Detail of regulatory liabilities    
Current $ 308,019 $ 234,912
Non-Current 2,079,323 2,267,835
Asset retirement obligations    
Detail of regulatory liabilities    
Current 0 0
Non-Current 442,035 418,423
Removal costs    
Detail of regulatory liabilities    
Current 51,519 47,356
Non-Current 112,168 136,072
Other postretirement benefits    
Detail of regulatory liabilities    
Current 37,575 37,575
Non-Current 109,035 139,634
Four Corners coal reclamation    
Detail of regulatory liabilities    
Current 5,461 1,059
Non-Current 49,151 51,704
Spent nuclear fuel    
Detail of regulatory liabilities    
Current 6,520 6,676
Non-Current 46,526 51,019
Income taxes — change in rates    
Detail of regulatory liabilities    
Current 2,802 2,797
Non-Current 48,541 68,265
Income taxes — deferred investment tax credit    
Detail of regulatory liabilities    
Current 2,199 2,202
Non-Current 47,765 50,034
Renewable energy standard    
Detail of regulatory liabilities    
Current 35,813 39,287
Non-Current 1,128 10,300
Sundance maintenance    
Detail of regulatory liabilities    
Current 2,200 5,698
Non-Current 12,303 11,319
Demand side management    
Detail of regulatory liabilities    
Current 17,394 15,024
Non-Current 0 24,146
Property tax deferral    
Detail of regulatory liabilities    
Current 0 0
Non-Current 11,784 7,046
Deferred fuel and purchased power — mark-to-market (Note 7)    
Detail of regulatory liabilities    
Current 10,894 0
Non-Current 0 0
FERC transmission true up    
Detail of regulatory liabilities    
Current 5,965 1,045
Non-Current 4,291 2,004
Active union medical trust    
Detail of regulatory liabilities    
Current 0 0
Non-Current 6,993 2,041
Tax expense adjustor mechanism    
Detail of regulatory liabilities    
Current 6,542 7,018
Non-Current 0 0
Deferred gains on utility property    
Detail of regulatory liabilities    
Current 2,423 2,423
Non-Current 2,379 4,163
TCA balancing account    
Detail of regulatory liabilities    
Current 0 0
Non-Current 2,665 0
Other    
Detail of regulatory liabilities    
Current 250 532
Non-Current 275 255
ACC | Excess deferred income taxes - ACC - Tax Cuts and Jobs Act    
Detail of regulatory liabilities    
Current 113,206 59,918
Non-Current 952,531 1,054,053
United States Federal Energy Regulatory Commission | Excess deferred income taxes - ACC - Tax Cuts and Jobs Act    
Detail of regulatory liabilities    
Current 7,256 6,302
Non-Current $ 229,753 $ 237,357
v3.20.2
Retirement Plans and Other Postretirement Benefits - Schedule of Net Benefit Cost (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Amortization of:        
Portion of cost (credit) charged to expense $ (14,118) $ (5,752) $ (42,171) $ (17,240)
Pension Benefits        
Retirement Plans and Other Benefits        
Service cost — benefits earned during the period 14,058 12,476 42,174 37,427
Interest cost on benefit obligation 29,642 34,211 88,925 102,632
Expected return on plan assets (46,861) (42,971) (140,582) (128,913)
Amortization of:        
Prior service credit 0 0 0 0
Net actuarial loss 8,653 10,646 25,959 31,938
Net periodic benefit cost (credit) 5,492 14,362 16,476 43,084
Portion of cost (credit) charged to expense 736 7,593 2,349 22,837
Other Benefits        
Retirement Plans and Other Benefits        
Service cost — benefits earned during the period 5,559 4,593 16,677 13,777
Interest cost on benefit obligation 6,464 7,473 19,393 22,420
Expected return on plan assets (10,019) (9,603) (30,057) (28,809)
Amortization of:        
Prior service credit (9,394) (9,456) (28,182) (28,366)
Net actuarial loss 0 0 0 0
Net periodic benefit cost (credit) (7,390) (6,993) (22,169) (20,978)
Portion of cost (credit) charged to expense $ (5,286) $ (4,966) $ (15,798) $ (14,846)
v3.20.2
Retirement Plans and Other Postretirement Benefits - Narrative (Details)
9 Months Ended
Sep. 30, 2020
USD ($)
Pension Benefits  
Contributions  
Voluntary contributions $ 100,000,000
Minimum employer contributions for the next three years 0
Maximum employer contributions for the next two years (up to) 100,000,000
Other Benefits  
Contributions  
Estimated future employer contributions in next three years $ 0
v3.20.2
Palo Verde Sale Leaseback Variable Interest Entities - Narrative (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2020
USD ($)
power_plant
Sep. 30, 2019
USD ($)
Sep. 30, 2020
USD ($)
Lease
power_plant
Sep. 30, 2019
USD ($)
Dec. 31, 1986
Trust
Palo Verde Sale Leaseback Variable Interest Entities          
Less: Comprehensive income attributable to noncontrolling interests $ 4,873,000 $ 4,873,000 $ 14,620,000 $ 14,620,000  
APS          
Palo Verde Sale Leaseback Variable Interest Entities          
Number of VIE lessor trusts 3   3   3
Less: Comprehensive income attributable to noncontrolling interests $ 4,873,000 4,873,000 $ 14,620,000 14,620,000  
Palo Verde VIE | APS          
Palo Verde Sale Leaseback Variable Interest Entities          
Less: Comprehensive income attributable to noncontrolling interests $ 5,000,000 $ 5,000,000 15,000,000 $ 15,000,000  
Initial loss exposure to the VIE's noncontrolling equity participants during lease extension period     304,000,000    
Maximum loss exposure to the VIE's noncontrolling equity participants during lease extension period     $ 456,000,000    
Palo Verde VIE | APS | Through 2023          
Palo Verde Sale Leaseback Variable Interest Entities          
Number of leases under which assets are retained | Lease     1    
Palo Verde VIE | APS | Through 2033          
Palo Verde Sale Leaseback Variable Interest Entities          
Number of leases under which assets are retained | Lease     2    
Palo Verde VIE | APS | Period 2017 through 2023          
Palo Verde Sale Leaseback Variable Interest Entities          
Annual lease payments     $ 23,000,000    
Palo Verde VIE | APS | Period 2024 through 2033          
Palo Verde Sale Leaseback Variable Interest Entities          
Annual lease payments     $ 16,000,000    
Palo Verde VIE | APS | Period 2024 through 2033 | Maximum          
Palo Verde Sale Leaseback Variable Interest Entities          
Lease period (up to)     2 years    
v3.20.2
Palo Verde Sale Leaseback Variable Interest Entities - Schedule of VIEs (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Palo Verde Sale Leaseback Variable Interest Entities    
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation $ 14,919,565 $ 14,522,538
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets    
Equity — Noncontrolling interests 125,789 122,540
APS    
Palo Verde Sale Leaseback Variable Interest Entities    
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation 14,919,195 14,522,156
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets    
Equity — Noncontrolling interests 125,789 122,540
Palo Verde VIE    
Palo Verde Sale Leaseback Variable Interest Entities    
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation 99,003 101,906
Palo Verde VIE | APS    
Palo Verde Sale Leaseback Variable Interest Entities    
Palo Verde sale leaseback property plant and equipment, net of accumulated depreciation 99,003 101,906
Amounts relating to the VIEs included in Condensed Consolidated Balance Sheets    
Equity — Noncontrolling interests $ 125,789 $ 122,540
v3.20.2
Derivative Accounting - Narrative (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Derivative Accounting            
Derivative liability $ 13,358,000 $ 13,358,000   $ 13,358,000   $ 72,132,000
Commodity Contracts            
Derivative Accounting            
Derivative liability 13,358,000 13,358,000   13,358,000   $ 72,132,000
Additional collateral to counterparties for energy related non-derivative instrument contracts 89,000,000 89,000,000   89,000,000    
Aggregate fair value of derivative instruments in a net liability position $ 15,282,000 15,282,000   15,282,000    
Commodity Contracts | Designated as Hedging Instruments            
Derivative Accounting            
Amount reclassified from accumulated other comprehensive income to earnings related to discontinued cash flow hedges   $ 0 $ 0 $ 0 $ 0  
APS            
Derivative Accounting            
Percentage of unrealized gains and losses on certain derivatives deferred for future rate treatment 100.00% 100.00%   100.00%    
Risk Management Assets | Credit Concentration Risk            
Derivative Accounting            
Concentration risk 37.00%          
Aggregate fair value of derivative instruments in a net liability position $ 17,000,000 $ 17,000,000   $ 17,000,000    
v3.20.2
Derivative Accounting - Schedule of Gross Notional Amounts Outstanding (Details) - Commodity Contracts
GWh in Thousands, Bcf in Thousands
Sep. 30, 2020
GWh
Bcf
Dec. 31, 2019
GWh
Bcf
Outstanding gross notional amount of derivatives    
Power | GWh 142 193
Gas | Bcf 213 257
v3.20.2
Derivative Accounting - Gains and Losses from Derivative Instruments (Details) - Commodity Contracts - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Designated as Hedging Instruments        
Gains and losses from derivative instruments        
Amount reclassified from accumulated other comprehensive income to earnings related to discontinued cash flow hedges $ 0 $ 0 $ 0 $ 0
Designated as Hedging Instruments | Fuel and purchased power        
Gains and losses from derivative instruments        
Loss Reclassified from Accumulated OCI into Income (Effective Portion Realized) 0 (289,000) (763,000) (1,263,000)
Not Designated as Hedging Instruments | Fuel and purchased power        
Gains and losses from derivative instruments        
Net Gain (Loss) Recognized in Income $ 49,611,000 $ (28,249,000) $ 14,639,000 $ (69,765,000)
v3.20.2
Derivative Accounting - Derivative Instruments in the Balance Sheets (Details) - USD ($)
Sep. 30, 2020
Dec. 31, 2019
Assets    
Gross Recognized Derivatives $ 17,304,000 $ 515,000
Liabilities    
Amount Reported on Balance Sheets (13,358,000) (72,132,000)
Commodity Contracts    
Assets    
Gross Recognized Derivatives 20,513,000  
Amounts Offset (3,209,000)  
Net Recognized Derivatives 17,304,000  
Other 0 405,000
Amount Reported on Balance Sheets 17,304,000  
Liabilities    
Gross Recognized Derivatives (15,282,000) (71,421,000)
Amounts Offset 3,209,000 474,000
Net Recognized Derivatives (12,073,000) (70,947,000)
Other (1,285,000) (1,185,000)
Amount Reported on Balance Sheets (13,358,000) (72,132,000)
Assets and Liabilities    
Gross Recognized Derivatives 5,231,000 (70,837,000)
Amounts Offset 0 0
Net Recognized Derivatives 5,231,000 (70,837,000)
Other (1,285,000) (780,000)
Amount Reported on Balance Sheets 3,946,000 (71,617,000)
Cash collateral received from counterparties 1,285,000 1,185,000
Commodity Contracts | Current assets    
Assets    
Gross Recognized Derivatives 15,505,000 584,000
Amounts Offset (1,630,000) (474,000)
Net Recognized Derivatives 13,875,000 110,000
Other 0 405,000
Amount Reported on Balance Sheets 13,875,000 515,000
Commodity Contracts | Investments and other assets    
Assets    
Gross Recognized Derivatives 5,008,000  
Amounts Offset (1,579,000)  
Net Recognized Derivatives 3,429,000  
Other 0  
Amount Reported on Balance Sheets 3,429,000  
Commodity Contracts | Current liabilities    
Liabilities    
Gross Recognized Derivatives (4,611,000) (38,235,000)
Amounts Offset 1,630,000 474,000
Net Recognized Derivatives (2,981,000) (37,761,000)
Other (1,285,000) (1,185,000)
Amount Reported on Balance Sheets (4,266,000) (38,946,000)
Assets and Liabilities    
Cash collateral received from counterparties 1,285,000 1,185,000
Commodity Contracts | Deferred credits and other    
Liabilities    
Gross Recognized Derivatives (10,671,000) (33,186,000)
Amounts Offset 1,579,000 0
Net Recognized Derivatives (9,092,000) (33,186,000)
Other 0 0
Amount Reported on Balance Sheets (9,092,000) (33,186,000)
Assets and Liabilities    
Cash collateral received from counterparties $ 0 $ 0
v3.20.2
Derivative Accounting - Credit Risk and Credit Related Contingent Features (Details) - Commodity Contracts
$ in Thousands
Sep. 30, 2020
USD ($)
Credit Risk and Credit-Related Contingent Features  
Aggregate fair value of derivative instruments in a net liability position $ 15,282
Cash collateral posted 0
Additional cash collateral in the event credit-risk-related contingent features were fully triggered $ 5,054
v3.20.2
Commitments and Contingencies - Palo Verde Nuclear Generating Station and Contractual Obligations (Details)
9 Months Ended 84 Months Ended
Feb. 11, 2020
USD ($)
Oct. 31, 2019
USD ($)
Sep. 30, 2020
USD ($)
power_plant
Jun. 30, 2018
USD ($)
claim
time_period
Dec. 31, 1986
Trust
Breach of Contract for Disposal of Spent Nuclear Fuel and/or High Level Radioactive Waste          
Commitments and Contingencies          
Litigation settlement amount $ 15,400,000 $ 16,000,000   $ 84,300,000  
APS          
Commitments and Contingencies          
Maximum insurance against public liability per occurrence for a nuclear incident (up to)     $ 13,800,000,000    
Maximum available nuclear liability insurance (up to)     450,000,000    
Remaining nuclear liability insurance through mandatory industry wide retrospective assessment program     13,300,000,000    
Maximum retrospective premium assessment per reactor for each nuclear liability incident     137,600,000    
Annual limit per incident with respect to maximum retrospective premium assessment     $ 20,500,000    
Number of VIE lessor trusts     3   3
Maximum potential retrospective assessment per incident of APS     $ 120,100,000    
Annual payment limitation with respect to maximum potential retrospective premium assessment     17,900,000    
Amount of "all risk" (including nuclear hazards) insurance for property damage to, and decontamination of, property at Palo Verde     2,800,000,000    
Maximum amount that APS could incur under the current NEIL policies for each retrospective assessment     25,800,000    
Collateral assurance provided based on rating triggers     $ 75,100,000    
Period to provide collateral assurance based on rating triggers     20 days    
APS | Public Utilities, Inventory, Fuel          
Commitments and Contingencies          
Purchase obligation     $ 600,000,000    
APS | Breach of Contract for Disposal of Spent Nuclear Fuel and/or High Level Radioactive Waste          
Commitments and Contingencies          
Litigation settlement amount $ 4,500,000 $ 4,700,000   $ 24,500,000  
Number of claims submitted | claim       5  
Number of settlement agreement time periods | time_period       5  
v3.20.2
Commitments and Contingencies - Superfund-Related Matters, Southwest Power Outage and Clean Air Act (Details) - APS - Contaminated groundwater wells
$ in Millions
9 Months Ended
Apr. 05, 2018
plaintiff
Defendant
Dec. 16, 2016
plaintiff
Aug. 06, 2013
Defendant
Sep. 30, 2020
USD ($)
Loss Contingencies [Line Items]        
Costs related to investigation and study under Superfund site | $       $ 3
Number of defendants against whom Roosevelt Irrigation District (RID) filed lawsuit | Defendant 28   24  
Number of plaintiffs   2    
Settled Litigation        
Loss Contingencies [Line Items]        
Number of plaintiffs 2      
v3.20.2
Commitments and Contingencies - Environmental Matters and Financial Assurances (Details) - USD ($)
$ in Millions
9 Months Ended
Jul. 03, 2018
Jul. 06, 2016
Sep. 30, 2020
Financial Assurances      
Equity contribution guarantees     $ 39.0
APS | Letters of Credit Expiring in 2020      
Financial Assurances      
Outstanding letters of credit     4.9
APS | Surety Bonds Expiring in 2020      
Financial Assurances      
Surety bonds expiring, amount     16.0
4C Acquisition, LLC | Four Corners      
Environmental Matters      
Percentage of share of cost of control   7.00%  
Four Corners Coal Supply Agreement      
Notes receivable, related parties     31.0
4C Acquisition, LLC | Coal Supply Agreement Arbitration | Four Corners      
Four Corners Coal Supply Agreement      
Reimbursement payments due to 4CA     $ 10.0
NTEC | Four Corners      
Four Corners Coal Supply Agreement      
Option to purchase ownership interest (as a percent) 7.00% 7.00%  
Proceeds from operating and maintenance cost reimbursement $ 70.0    
NTEC | Coal Supply Agreement Arbitration | Four Corners      
Four Corners Coal Supply Agreement      
Option to purchase ownership interest (as a percent)   7.00%  
Regional Haze Rules | APS | Four Corners Units 4 and 5      
Environmental Matters      
Percentage of share of cost of control     63.00%
Expected environmental cost     $ 400.0
Regional Haze Rules | APS | Natural gas tolling contract obligations | Four Corners Units 4 and 5      
Environmental Matters      
Additional percentage share of cost of control     7.00%
Regional Haze Rules | APS | Four Corners | Four Corners Units 4 and 5      
Environmental Matters      
Site contingency increase in loss exposure not accrued, best estimate     $ 45.0
Coal combustion waste | APS | Four Corners      
Environmental Matters      
Site contingency increase in loss exposure not accrued, best estimate     22.0
Coal combustion waste | APS | Navajo Plant      
Environmental Matters      
Site contingency increase in loss exposure not accrued, best estimate     1.0
Minimum | Coal combustion waste | APS | Cholla      
Environmental Matters      
Site contingency increase in loss exposure not accrued, best estimate     15.0
Minimum | Coal combustion waste | APS | Cholla and Four Corners      
Environmental Matters      
Site contingency increase in loss exposure not accrued, best estimate     10.0
Maximum | Coal combustion waste | APS | Cholla and Four Corners      
Environmental Matters      
Site contingency increase in loss exposure not accrued, best estimate     $ 15.0
v3.20.2
Other Income and Other Expense (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Other income:        
Interest income $ 2,956 $ 2,694 $ 8,988 $ 7,695
Investment gains (losses) - net 0 0 2,594 0
Miscellaneous 2 22 146 50
Total other income 13,881 15,191 42,888 35,245
Other expense:        
Non-operating costs (2,453) (2,647) (7,401) (8,832)
Investment gains (losses) — net (291) (716) 0 (1,445)
Miscellaneous (3,094) (2,377) (7,025) (4,171)
Total other expense (5,838) (5,740) (14,426) (14,448)
APS        
Other income:        
Interest income 2,403 2,037 6,927 5,091
Miscellaneous 2 22 146 50
Total other income 13,328 14,534 38,233 32,641
Other expense:        
Non-operating costs (1,906) (2,448) (6,501) (7,965)
Miscellaneous (893) (378) (4,825) (2,167)
Total other expense (2,799) (2,826) (11,326) (10,132)
SCR deferral        
Other income:        
Debt return on Four Corners SCR deferrals (Note 4) 4,260 4,920 11,649 14,651
SCR deferral | APS        
Other income:        
Debt return on Four Corners SCR deferrals (Note 4) 4,260 4,920 11,649 14,651
Ocotillo deferral        
Other income:        
Debt return on Four Corners SCR deferrals (Note 4) 6,663 7,555 19,511 12,849
Ocotillo deferral | APS        
Other income:        
Debt return on Four Corners SCR deferrals (Note 4) $ 6,663 $ 7,555 $ 19,511 $ 12,849
v3.20.2
Earnings Per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Earnings Per Share [Abstract]        
Net income attributable to common shareholders $ 346,372 $ 312,276 $ 569,950 $ 474,339
Weighted average common shares outstanding - basic (in shares) 112,679 112,463 112,639 112,408
Net effect of dilutive securities:        
Contingently issuable performance shares and restricted stock units (in shares) 308 283 273 331
Weighted average common shares outstanding — diluted (in shares) 112,987 112,746 112,912 112,739
Earnings per weighted-average common share outstanding        
Net income attributable to common shareholders - basic (in dollars per share) $ 3.07 $ 2.78 $ 5.06 $ 4.22
Net income attributable to common shareholders - diluted (in dollars per share) $ 3.07 $ 2.77 $ 5.05 $ 4.21
v3.20.2
Fair Value Measurements - Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Assets    
Cash equivalents $ 146,680  
Commodity contracts, assets 17,304 $ 515
Commodity contracts, liabilities (3,209) (69)
Nuclear decommissioning trust 1,069,837 1,010,775
Nuclear decommissioning trust, other 531,697 521,245
Other special use funds 268,292 245,095
Other special use funds, other 1,444 474
Total assets 1,502,113 1,256,385
Total assets, other 529,932 521,650
Liabilities    
Gross derivative liability, other 1,925  
Gross derivative liability, other   711
Amount reported on balance sheet (13,358) (72,132)
Equity securities    
Assets    
Nuclear decommissioning trust 10,389 13,273
Nuclear decommissioning trust, other (14,148) 2,401
Other special use funds 9,534 7,616
Other special use funds, other 1,444 474
U.S. commingled equity funds    
Assets    
Nuclear decommissioning trust 545,845 518,844
U.S. Treasury debt    
Assets    
Nuclear decommissioning trust 153,213 160,607
Other special use funds 245,156 232,848
Corporate debt    
Assets    
Nuclear decommissioning trust 146,682 115,869
Mortgage-backed securities    
Assets    
Nuclear decommissioning trust 101,456 118,795
Municipal bonds    
Assets    
Nuclear decommissioning trust 99,192 73,040
Other special use funds 13,602 4,631
Other fixed income    
Assets    
Nuclear decommissioning trust 13,060 10,347
Level 1    
Assets    
Cash equivalents 146,680  
Commodity contracts, assets 0 0
Nuclear decommissioning trust 177,750 171,479
Other special use funds 253,246 239,990
Total assets 577,676 411,469
Liabilities    
Gross derivative liability 0 0
Level 1 | Equity securities    
Assets    
Nuclear decommissioning trust 24,537 10,872
Other special use funds 8,090 7,142
Level 1 | U.S. commingled equity funds    
Assets    
Nuclear decommissioning trust 0 0
Level 1 | U.S. Treasury debt    
Assets    
Nuclear decommissioning trust 153,213 160,607
Other special use funds 245,156 232,848
Level 1 | Corporate debt    
Assets    
Nuclear decommissioning trust 0 0
Level 1 | Mortgage-backed securities    
Assets    
Nuclear decommissioning trust 0 0
Level 1 | Municipal bonds    
Assets    
Nuclear decommissioning trust 0 0
Other special use funds 0 0
Level 1 | Other fixed income    
Assets    
Nuclear decommissioning trust 0 0
Level 2    
Assets    
Cash equivalents 0  
Commodity contracts, assets 20,206 551
Nuclear decommissioning trust 360,390 318,051
Other special use funds 13,602 4,631
Total assets 394,198 323,233
Liabilities    
Gross derivative liability (10,737) (67,992)
Level 2 | Equity securities    
Assets    
Nuclear decommissioning trust 0 0
Other special use funds 0 0
Level 2 | U.S. commingled equity funds    
Assets    
Nuclear decommissioning trust 0 0
Level 2 | U.S. Treasury debt    
Assets    
Nuclear decommissioning trust 0 0
Other special use funds 0 0
Level 2 | Corporate debt    
Assets    
Nuclear decommissioning trust 146,682 115,869
Level 2 | Mortgage-backed securities    
Assets    
Nuclear decommissioning trust 101,456 118,795
Level 2 | Municipal bonds    
Assets    
Nuclear decommissioning trust 99,192 73,040
Other special use funds 13,602 4,631
Level 2 | Other fixed income    
Assets    
Nuclear decommissioning trust 13,060 10,347
Level 3    
Assets    
Cash equivalents 0  
Commodity contracts, assets 307 33
Nuclear decommissioning trust 0 0
Other special use funds 0 0
Total assets 307 33
Liabilities    
Gross derivative liability (4,546) (3,429)
Level 3 | Equity securities    
Assets    
Nuclear decommissioning trust 0 0
Other special use funds 0 0
Level 3 | U.S. commingled equity funds    
Assets    
Nuclear decommissioning trust 0 0
Level 3 | U.S. Treasury debt    
Assets    
Nuclear decommissioning trust 0 0
Other special use funds 0 0
Level 3 | Corporate debt    
Assets    
Nuclear decommissioning trust 0 0
Level 3 | Mortgage-backed securities    
Assets    
Nuclear decommissioning trust 0 0
Level 3 | Municipal bonds    
Assets    
Nuclear decommissioning trust 0 0
Other special use funds 0 0
Level 3 | Other fixed income    
Assets    
Nuclear decommissioning trust 0 0
Fair Value Measured at Net Asset Value Per Share | U.S. commingled equity funds    
Assets    
Nuclear decommissioning trust $ 545,845 $ 518,844
v3.20.2
Fair Value Measurements - Financial Instruments Not Carried at Fair Value (Details) - USD ($)
$ in Millions
Sep. 30, 2020
Dec. 31, 2019
Fair Value Disclosures [Abstract]    
Stated interest rate for notes receivable 3.90%  
Note receivable, net book value $ 31 $ 44
v3.20.2
Investments in Nuclear Decommissioning Trusts and Other Special Use Funds (Details) - APS - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Nuclear decommissioning trust fund assets          
Fair Value $ 1,338,129   $ 1,338,129   $ 1,255,870
Total Unrealized Gains 406,270   406,270   363,476
Total Unrealized Losses (710)   (710)   (669)
Amortized cost 726,000   726,000   691,000
Realized gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds          
Realized gains 2,933 $ 4,736 10,746 $ 8,482  
Realized losses (765) (2,360) (4,613) (5,465)  
Proceeds from the sale of securities 216,026 211,641 607,885 520,996  
Equity securities          
Nuclear decommissioning trust fund assets          
Equity securities 578,472   578,472   536,858
Total Unrealized Gains 359,112   359,112   337,681
Total Unrealized Losses (36)   (36)   0
Available for sale-fixed income securities          
Nuclear decommissioning trust fund assets          
Fair Value 772,361   772,361   716,137
Total Unrealized Gains 47,158   47,158   25,795
Total Unrealized Losses (674)   (674)   (669)
Fair value of fixed income securities, summarized by contractual maturities          
Less than one year 98,163   98,163    
1 year – 5 years 318,864   318,864    
5 years – 10 years 125,391   125,391    
Greater than 10 years 229,943   229,943    
Total 772,361   772,361    
Other          
Nuclear decommissioning trust fund assets          
Other (12,704)   (12,704)   2,875
Total Unrealized Gains 0   0   0
Total Unrealized Losses 0   0   0
Nuclear Decommissioning Trust          
Nuclear decommissioning trust fund assets          
Fair Value 1,069,837   1,069,837   1,010,775
Realized gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds          
Realized gains 2,933 4,732 10,746 8,478  
Realized losses (750) (2,360) (4,598) (5,465)  
Proceeds from the sale of securities 178,919 155,386 534,057 371,538  
Nuclear Decommissioning Trust | Equity securities          
Nuclear decommissioning trust fund assets          
Equity securities 570,382   570,382   529,716
Nuclear Decommissioning Trust | Available for sale-fixed income securities          
Nuclear decommissioning trust fund assets          
Fair Value 513,603   513,603   478,658
Fair value of fixed income securities, summarized by contractual maturities          
Less than one year 23,079   23,079    
1 year – 5 years 146,885   146,885    
5 years – 10 years 122,619   122,619    
Greater than 10 years 221,020   221,020    
Total 513,603   513,603    
Nuclear Decommissioning Trust | Other          
Nuclear decommissioning trust fund assets          
Other (14,148)   (14,148)   2,401
Other Special Use Funds          
Nuclear decommissioning trust fund assets          
Fair Value 268,292   268,292   245,095
Realized gains and losses and proceeds from the sale of securities by the nuclear decommissioning trust funds          
Realized gains 0 4 0 4  
Realized losses (15) 0 (15) 0  
Proceeds from the sale of securities 37,107 $ 56,255 73,828 $ 149,458  
Other Special Use Funds | Equity securities          
Nuclear decommissioning trust fund assets          
Equity securities 8,090   8,090   7,142
Other Special Use Funds | Available for sale-fixed income securities          
Nuclear decommissioning trust fund assets          
Fair Value 258,758   258,758   237,479
Other Special Use Funds | Other          
Nuclear decommissioning trust fund assets          
Other 1,444   1,444   $ 474
Coal Mine Reclamation Escrow Account | Available for sale-fixed income securities          
Fair value of fixed income securities, summarized by contractual maturities          
Less than one year 34,578   34,578    
1 year – 5 years 29,041   29,041    
5 years – 10 years 2,772   2,772    
Greater than 10 years 8,923   8,923    
Total 75,314   75,314    
Active union medical trust | Available for sale-fixed income securities          
Fair value of fixed income securities, summarized by contractual maturities          
Less than one year 40,506   40,506    
1 year – 5 years 142,938   142,938    
5 years – 10 years 0   0    
Greater than 10 years 0   0    
Total $ 183,444   $ 183,444    
v3.20.2
Changes in Accumulated Other Comprehensive Loss (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period $ 5,610,477 $ 5,357,243 $ 5,553,188 $ 5,348,705
OCI (loss) before reclassifications (659)   (3,924) (2,422)
Amounts reclassified from accumulated other comprehensive loss 1,043 1,098 3,529 3,592
Balance at end of period 5,967,175 5,681,705 5,967,175 5,681,705
Pension and Other Postretirement Benefits        
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period (56,326) (46,657) (56,522) (45,997)
OCI (loss) before reclassifications 0   (2,008) (2,422)
Amounts reclassified from accumulated other comprehensive loss 1,043 880 3,247 2,642
Balance at end of period (55,283) (45,777) (55,283) (45,777)
Derivative Instruments        
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period (1,549) (979) (574) (1,711)
OCI (loss) before reclassifications (659)   (1,916) 0
Amounts reclassified from accumulated other comprehensive loss 0 218 282 950
Balance at end of period (2,208) (761) (2,208) (761)
Accumulated Other Comprehensive Income (Loss)        
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period (57,875) (47,636) (57,096) (47,708)
Balance at end of period (57,491) (46,538) (57,491) (46,538)
APS        
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period 6,054,137 5,797,857 5,998,803 5,786,797
OCI (loss) before reclassifications     (1,659) (2,414)
Amounts reclassified from accumulated other comprehensive loss 900 973 3,056 3,218
Balance at end of period 6,410,275 6,122,571 6,410,275 6,122,571
APS | Pension and Other Postretirement Benefits        
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period (35,025) (26,297) (34,948) (25,396)
OCI (loss) before reclassifications     (1,951) (2,414)
Amounts reclassified from accumulated other comprehensive loss 900 755 2,774 2,268
Balance at end of period (34,125) (25,542) (34,125) (25,542)
APS | Derivative Instruments        
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period 0 (979) (574) (1,711)
OCI (loss) before reclassifications     292 0
Amounts reclassified from accumulated other comprehensive loss 0 218 282 950
Balance at end of period 0 (761) 0 (761)
APS | Accumulated Other Comprehensive Income (Loss)        
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]        
Balance at beginning of period (35,025) (27,276) (35,522) (27,107)
Balance at end of period $ (34,125) $ (26,303) $ (34,125) $ (26,303)
v3.20.2
Income Taxes (Details) - USD ($)
$ in Millions
9 Months Ended 12 Months Ended
Sep. 30, 2020
Dec. 31, 2017
Income Tax [Line Items]    
Reduction in net deferred income tax liabilities   $ 1,140
Amortization of an excess deferred tax liability $ 24  
Regulatory liability, amortization period 28 years 6 months  
Domestic Tax Authority    
Income Tax [Line Items]    
Amortization of an excess deferred tax liability $ 14  
v3.20.2
Leases - Additional information (Details)
$ in Millions
Sep. 30, 2020
USD ($)
Lease
Jun. 01, 2020
Lease
Leases [Abstract]    
Number of lease agreements, lease and sell back 3  
Number of lease agreements   2
Lease not yet commenced | $ $ 258  
v3.20.2
Leases - Lease costs (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Operating Leased Assets [Line Items]        
Operating lease cost $ 56,317 $ 25,676 $ 82,842 $ 48,502
Variable lease cost 40,890 37,100 102,782 96,279
Short-term lease cost 1,038 812 2,824 3,477
Total lease cost 98,245 63,588 188,448 148,258
Purchased Power Lease Contracts        
Operating Leased Assets [Line Items]        
Operating lease cost 51,662 21,095 68,883 35,159
Variable lease cost 40,658 36,917 102,052 95,736
Short-term lease cost 0 0 0 0
Total lease cost 92,320 58,012 170,935 130,895
Land, Property & Equipment Leases        
Operating Leased Assets [Line Items]        
Operating lease cost 4,655 4,581 13,959 13,343
Variable lease cost 232 183 730 543
Short-term lease cost 1,038 812 2,824 3,477
Total lease cost $ 5,925 $ 5,576 $ 17,513 $ 17,363
v3.20.2
Leases - Maturity of our operating lease liabilities (Details)
$ in Thousands
Sep. 30, 2020
USD ($)
Lessee, Lease, Description [Line Items]  
2020 (remaining three months of 2020) $ 18,183
2021 80,060
2022 78,106
2023 77,476
2024 76,946
2025 77,035
Thereafter 73,720
Total lease commitments 481,526
Less imputed interest 33,972
Total lease liabilities 447,554
Purchased Power Lease Contracts  
Lessee, Lease, Description [Line Items]  
2020 (remaining three months of 2020) 14,889
2021 66,658
2022 68,325
2023 70,033
2024 71,784
2025 73,578
Thereafter 36,759
Total lease commitments 402,026
Less imputed interest 15,565
Total lease liabilities 386,461
Land, Property & Equipment Leases  
Lessee, Lease, Description [Line Items]  
2020 (remaining three months of 2020) 3,294
2021 13,402
2022 9,781
2023 7,443
2024 5,162
2025 3,457
Thereafter 36,961
Total lease commitments 79,500
Less imputed interest 18,407
Total lease liabilities $ 61,093
v3.20.2
Leases - Other additional information related to operating lease liabilities (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Leases [Abstract]      
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows: $ 56,896 $ 51,980  
Right-of-use operating lease assets obtained in exchange for operating lease liabilities $ 436,587 $ 8,759  
Weighted average remaining lease term 7 years   13 years
Weighted average discount rate 1.69%   3.71%
v3.20.2
Asset Retirement Obligations - Roll-Forward (Details) - APS
$ in Thousands
9 Months Ended
Sep. 30, 2020
USD ($)
Change in asset retirement obligations  
Asset retirement obligations at the beginning of year $ 657,218
Changes attributable to:  
Accretion expense 29,454
Settlements (5,611)
Newly incurred liabilities 5,190
Asset retirement obligations at the end of year $ 686,251