Regulatory Assets and Liabilities

12 Months Ended

Dec. 31, 2024

The Company has recorded regulatory assets and liabilities (in millions) that it expects to pass through to its customers in accordance with, and subject to, regulatory provisions as follows:


December 31,	2024		2023		Recovery/Refund Period Ends
Regulatory assets
Current regulatory assets:
Undercollection of rate riders	$	177	$	127	2025
El Salvador energy pass through costs recovery	117		119		2025

Other	37		19		2025
Total current regulatory assets	331		265
Noncurrent regulatory assets:
AES Indiana and AES Ohio defined benefit pension obligations (1)	183		179		Various
AES Indiana Petersburg Units 1 and 2 retirement costs (1)	129		260		2033
AES Indiana Petersburg Units 3 and 4 retirement costs (1)	94		—		Various
AES Indiana environmental costs	65		70		Various
AES Indiana Hoosier Wind termination of pre-existing PPA (1) (2)	53		—		2039
AES Indiana TDSIC costs (1)	52		36		Various
El Salvador energy pass through costs recovery	39		—		Various
AES Ohio regulatory compliance costs (1)	33		45		2028
Other	143		108		Various
Total noncurrent regulatory assets	791		698
Total regulatory assets	$	1,122	$	963
Regulatory liabilities
Current regulatory liabilities:
Overcollection of costs to be passed back to customers	$	18	$	34	2025

Other	4		7		2025
Total current regulatory liabilities	22		41
Noncurrent regulatory liabilities:
AES Indiana and AES Ohio accrued costs of removal and AROs	465		586		Life of assets
AES Indiana and AES Ohio income taxes payable to customers through rates	93		117		Various
Other	5		6		Various
Total noncurrent regulatory liabilities	563		709
Total regulatory liabilities	$	585	$	750

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(1)Past expenditures on which the Company earns a rate of return.

(2)AES Indiana acquired the Hoosier Wind project in February 2024. See Note 26—Acquisitions for further information.

Our current regulatory assets and liabilities primarily consist of under or overcollection of costs that are generally non-controllable, such as purchased electricity, energy transmission, fuel costs, and other sector costs. These costs are recoverable or refundable as defined by the laws and regulations in our markets. Our noncurrent regulatory assets include defined pension and postretirement benefit obligations equal to the previously unrecognized actuarial gains and losses and prior service costs that are expected to be recovered through future rates, as well as the carrying value of AES Indiana's Petersburg Units 1 through 4 at their retirement dates, which are amortized over the life of the assets beginning on the dates of retirement. Other current and noncurrent regulatory assets primarily consist of:

•Project development costs, mainly legal and consulting fees, incurred for renewables projects as well as carrying costs on AES Indiana's investments in the projects;

•Vegetation management costs and proactive reliability optimization at AES Ohio;

•Materials and supplies inventories related to AES Indiana's Petersburg Units 3 and 4;

•Deferred Midcontinent ISO costs at AES Indiana; and

•Unamortized premiums reacquired or redeemed on long-term debt, which are amortized over the lives of the original issuances, at AES Indiana.

Our noncurrent regulatory liabilities primarily consist of obligations for removal costs which do not have an associated legal retirement obligation. Our noncurrent regulatory liabilities also include deferred income taxes related to differences in income recognition between tax laws and accounting methods, which will be passed through to our regulated customers via a decrease in future retail rates.

In the accompanying Consolidated Balance Sheets, current regulatory assets and liabilities are reflected in Other current assets and Accrued and other liabilities, respectively, and noncurrent regulatory assets and liabilities are reflected in Other noncurrent assets and Other noncurrent liabilities, respectively. All of the regulatory assets and liabilities as of December 31, 2024 and December 31, 2023 are related to the Utilities SBU reportable segment.

Pending Regulatory Action — AES Ohio is facing appeals from the Office of the Ohio Consumers’ Council (“OCC”) regarding the PUCO’s decisions to approve the reversion to ESP 1 and the Smart Grid Comprehensive Settlement. The OCC is specifically seeking a refund of Rate Stabilization Charge revenues dating back to August 2021 and has appealed the final PUCO order with respect to the 2018 and 2019 SEET, which was part of the Smart Grid Comprehensive Settlement. Oral arguments for these appeals are scheduled for April 2025. Additionally, AES Ohio reached a settlement on its Smart Grid Phase 2 plan, which includes a 4-year plan for significant investments in grid modernization and distribution system enhancements; AES Ohio expects an order from the PUCO in the second quarter of 2025. In November 2024, AES Ohio filed an application with the PUCO to increase its distribution rates; the procedural schedule for the new distribution rate case has not yet been established.