Regulatory assets and liabilities

6 Months Ended

Jun. 30, 2021

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory assets and liabilities

The following table summarizes the individual components of unamortized regulatory assets and liabilities:


	Estimated Recovery or Refund Period as of June 30, 2021	*	June 30, 2021		June 30, 2020		December 31, 2020
			(In thousands)
Regulatory assets:
Current:
Natural gas costs recoverable through rate adjustments	Up to 1 year		$	85,045	$	42,582	$	42,481
Conservation programs	Up to 1 year		7,580		7,256		7,117
Cost recovery mechanisms	Up to 1 year		5,692		7,781		10,645
Other	Up to 1 year		11,264		2,938		8,284
			109,581		60,557		68,527
Noncurrent:
Pension and postretirement benefits	**		155,906		157,033		155,942
Plant costs/asset retirement obligations	Over plant lives		72,853		68,191		71,740
Plant retirement	-		46,061		49,185		65,919
Cost recovery mechanisms	Up to 10 years		44,415		13,140		16,245
Manufactured gas plant site remediation	-		26,155		14,826		26,429
Taxes recoverable from customers	Over plant lives		10,929		10,890		10,785
Natural gas costs recoverable through rate adjustments	Up to 3 years		8,389		27,184		21,539
Long-term debt refinancing costs	Up to 39 years		4,110		3,980		4,426
Other	Up to 18 years		8,095		6,596		6,356
			376,913		351,025		379,381
Total regulatory assets			$	486,494	$	411,582	$	447,908
Regulatory liabilities:
Current:
Natural gas costs refundable through rate adjustments	Up to 1 year		$	8,935	$	29,557	$	18,565
Electric fuel and purchased power deferral	Up to 1 year		5,431		7,799		3,667
Taxes refundable to customers	Up to 1 year		3,434		4,012		3,557
Other	Up to 1 year		5,654		6,632		5,661
			23,454		48,000		31,450
Noncurrent:
Taxes refundable to customers	Over plant lives		222,098		236,142		227,850
Plant removal and decommissioning costs	Over plant lives		171,381		173,399		167,171
Pension and postretirement benefits	**		16,940		18,015		16,989
Other	Up to 21 years		18,048		11,096		16,065
			428,467		438,652		428,075
Total regulatory liabilities			$	451,921	$	486,652	$	459,525
Net regulatory position			$	34,573	$	(75,070)	$	(11,617)

*Estimated recovery or refund period for amounts currently being recovered or refunded in rates charged to customers.

** Recovered as expense is incurred or cash contributions are made.

At June 30, 2021 and 2020, and December 31, 2020, approximately $317.0 million, $296.6 million and $332.5 million, respectively, of regulatory assets were not earning a rate of return; however, these regulatory assets are expected to be recovered from customers in future rates. These assets are largely comprised of the unfunded portion of pension and postretirement benefits,

asset retirement obligations, accelerated depreciation on plant retirement and the estimated future cost of manufactured gas plant site remediation.

In February 2021, a prolonged period of unseasonably cold temperatures in the central United States significantly increased the demand for electric and natural gas services and contributed to increased market prices. Overall, Montana-Dakota and Great Plains incurred approximately $44.0 million in increased natural gas costs in February 2021 in order to maintain services for its customers. These extraordinary gas costs were recorded as regulatory assets as they are expected to be recovered from customers. The Company has filed out-of-cycle purchased gas adjustment requests in four out of five jurisdictions affected by this cold-weather event and has received approval in three jurisdictions. The Company will continue to engage with its regulators to determine the appropriate recovery periods over which to recover the associated natural gas costs. For a discussion of the Company's most recent cases by jurisdiction, see Note 19.

In 2019, the Company experienced increased natural gas costs in Washington from the rupture of the Enbridge pipeline in Canada in late 2018. As a result, the Company requested, and the WUTC approved, recovery of the balance of natural gas costs recoverable related to this period of time over three years rather than its normal one-year recovery period.

In February 2019, the Company announced the retirement of three aging coal-fired electric generating units. The Company has accelerated the depreciation related to these facilities in property, plant and equipment and recorded the difference between the accelerated depreciation, in accordance with GAAP, and the depreciation approved for rate-making purposes as regulatory assets. The first unit ceased operations on March 31, 2021, and in the second quarter of 2021, the Company began amortizing plant retirement and closure costs related to this facility. Requests have been filed with the NDPSC and SDPUC to offset the savings associated with the cessation of operations of this unit with the amortization of the deferred regulatory assets. In the second quarter of 2021, the Company moved the costs being recovered for this facility from plant retirement to cost recovery mechanisms in the previous table. The remaining two units are expected to be retired in early 2022. The Company expects to recover the regulatory assets related to the plant retirements in future rates. For a discussion of the Company's most recent cases by jurisdiction, see Note 19.

If, for any reason, the Company's regulated businesses cease to meet the criteria for application of regulatory accounting for all or part of their operations, the regulatory assets and liabilities relating to those portions ceasing to meet such criteria would be removed from the balance sheet and included in the statement of income or accumulated other comprehensive income (loss) in the period in which the discontinuance of regulatory accounting occurs.