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v3.26.1

Regulatory Matters (Tables) | 6 Months Ended
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Jun. 30, 2026
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 |  | 47.65 | % |  | 4.26 | %
Common stock equity |  | 52.35 | % |  | 10.70 | %
Weighted-average cost of capital |  |  |  | 7.63 | %
Schedule of Changes in the Deferred Fuel and Purchased Power Regulatory Asset (Liability) | The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) (dollars in thousands):
| Six Months Ended June 30,
| 2026 |  | 2025
Balance at beginning of period | $ | 149,068 |  |  | $ | 287,597 |
Deferred fuel and purchased power costs | 69,325 |  |  | 95,850 |
Amounts charged to customers | (279,830) |  |  | (201,035) |
Balance at end of period | $ | (61,437) |  |  | $ | 182,412 |
Schedule of Regulatory Assets | The detail of regulatory assets is as follows (dollars in thousands):
| Amortization Through |  | June 30, 2026 |  | December 31, 2025
Pension | (a) |  | $ | 712,234 |  |  | $ | 723,042 |
Income taxes — AFUDC equity | 2055 |  | 209,567 |  |  | 203,890 |
Palo Verde sale leaseback noncontrolling interests’ acquisition (b) | N/A |  | 151,506 |  |  | 151,506 |
Ocotillo deferral | 2034 |  | 92,509 |  |  | 99,931 |
Lease incentive (Note 17) | 2046 |  | 92,330 |  |  | 90,005 |
Deferred fuel and purchased power — mark-to-market (Note 10) | 2030 |  | 78,831 |  |  | 29,330 |
SCR deferral (c) | 2038 |  | 74,217 |  |  | 77,186 |
Retired power plant costs | 2031 |  | 47,312 |  |  | 56,809 |
Income taxes — investment tax credit basis adjustment (Note 5) | 2056 |  | 41,691 |  |  | 42,459 |
Deferred compensation | 2036 |  | 32,842 |  |  | 32,204 |
FERC transmission true up | 2028 |  | 22,219 |  |  | 21,471 |
Deferred property taxes | 2027 |  | 11,064 |  |  | 15,349 |
Palo Verde VIEs (Note 9) | 2046 |  | 9,085 |  |  | 8,582 |
Mead-Phoenix transmission line — contributions in aid of construction | 2050 |  | 7,886 |  |  | 8,052 |
Loss on reacquired debt | 2038 |  | 5,180 |  |  | 5,653 |
Active union medical trust | (e) |  | 4,966 |  |  | 3,696 |
TEAM (c) | 2031 |  | 3,551 |  |  | 3,879 |
PSA - interest | 2027 |  | 769 |  |  | 5,679 |
Navajo coal reclamation | 2026 |  | 361 |  |  | 2,516 |
Deferred fuel and purchased power (c) (d) | 2027 |  | — |  |  | 149,068 |
DSM (c) | 2026 |  | — |  |  | 15,706 |
Other | Various |  | 3,314 |  |  | 3,353 |
Total regulatory assets (f) |  |  | $ | 1,601,434 |  |  | $ | 1,749,366 |
Less: current regulatory assets |  |  | $ | 150,106 |  |  | $ | 286,009 |
Total non-current regulatory assets |  |  | $ | 1,451,328 |  |  | $ | 1,463,357 |
(a)This asset represents the future recovery of pension benefit obligations and expense through retail rates. If these costs are disallowed by the ACC, this regulatory asset would be charged to other comprehensive income/loss and result in lower future revenues. The 2022 Rate Case decision allows for the full return on the pension asset in rate base. See Note 8 for further discussion. (b)This asset relates to the purchase of previously leased interest in Palo Verde Unit 2. See Note 9. (c)See “Cost Recovery Mechanisms” discussion above. (d)Subject to a carrying charge. (e)Collected in retail rates. (f)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 Through |  | June 30, 2026 |  | December 31, 2025
Excess deferred income taxes - ACC — Tax Cuts and Jobs Act (a) | 2046 |  | $ | 832,335 |  |  | $ | 847,572 |
Excess deferred income taxes - FERC — Tax Cuts and Jobs Act (a) | 2058 |  | 197,492 |  |  | 200,161 |
AROs and removal costs | (b) |  | 298,964 |  |  | 286,907 |
Other postretirement benefits | (c) |  | 226,529 |  |  | 233,952 |
Four Corners coal reclamation | 2038 |  | 97,048 |  |  | 97,988 |
Income taxes — deferred investment tax credit | 2056 |  | 80,553 |  |  | 81,949 |
Deferred fuel and purchased power (d) (e) | 2027 |  | 61,437 |  |  | — |
Income taxes — change in state rates | 2054 |  | 55,201 |  |  | 56,260 |
RES (d) | 2027 |  | 56,847 |  |  | 54,551 |
Sundance maintenance | 2031 |  | 25,969 |  |  | 25,668 |
Spent nuclear fuel | 2027 |  | 16,928 |  |  | 20,492 |
DSM (d) | 2026 |  | 12,498 |  |  | 26,228 |
TCA Balancing Account (d) | 2028 |  | 10,654 |  |  | 4,860 |
TEAM (d) | 2032 |  | 3,436 |  |  | 3,738 |
Deferred fuel and purchased power — mark-to-market (Note 10) | 2030 |  | — |  |  | 3,641 |
Other | Various |  | 1,977 |  |  | 3,063 |
Total regulatory liabilities |  |  | $ | 1,977,868 |  |  | $ | 1,947,030 |
Less: current regulatory liabilities |  |  | $ | 194,643 |  |  | $ | 210,909 |
Total non-current regulatory liabilities |  |  | $ | 1,783,225 |  |  | $ | 1,736,121 |
(a)For purposes of presentation on the Statements 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)In accordance with regulatory accounting, APS accrues removal costs for its regulated assets, even if there is no legal obligation for removal. (c)See Note 8. (d)See “Cost Recovery Mechanisms” discussion above. (e)Subject to a carrying charge.

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