Regulatory assets and liabilities

9 Months Ended

Sep. 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 September 30, 2021	*	September 30, 2021		September 30, 2020		December 31, 2020
			(In thousands)
Regulatory assets:
Current:
Natural gas costs recoverable through rate adjustments	Up to 1 year		$	98,211	$	48,478	$	42,481
Conservation programs	Up to 1 year		8,495		7,857		7,117
Cost recovery mechanisms	Up to 1 year		4,693		8,177		10,645
Other	Up to 1 year		21,736		14,613		8,284
			133,135		79,125		68,527
Noncurrent:
Pension and postretirement benefits	**		155,888		157,015		155,942
Plant costs/asset retirement obligations	Over plant lives		73,528		68,815		71,740
Plant retirement	-		48,544		57,499		65,919
Cost recovery mechanisms	Up to 10 years		43,955		14,281		16,245
Manufactured gas plant site remediation	-		26,000		25,964		26,429
Taxes recoverable from customers	Over plant lives		11,438		10,847		10,785
Natural gas costs recoverable through rate adjustments	Up to 3 years		6,084		24,677		21,539
Long-term debt refinancing costs	Up to 39 years		3,952		3,826		4,426
Other	Up to 18 years		9,856		6,840		6,356
			379,245		369,764		379,381
Total regulatory assets			$	512,380	$	448,889	$	447,908
Regulatory liabilities:
Current:
Taxes refundable to customers	Up to 1 year		$	3,867	$	4,223	$	3,557
Electric fuel and purchased power deferral	Up to 1 year		3,205		6,171		3,667
Natural gas costs refundable through rate adjustments	-		—		20,556		18,565
Other	Up to 1 year		9,419		8,887		5,661
			16,491		39,837		31,450
Noncurrent:
Taxes refundable to customers	Over plant lives		218,566		232,186		227,850
Plant removal and decommissioning costs	Over plant lives		172,683		173,367		167,171
Pension and postretirement benefits	**		16,915		17,991		16,989
Other	Up to 21 years		17,977		11,392		16,065
			426,141		434,936		428,075
Total regulatory liabilities			$	442,632	$	474,773	$	459,525
Net regulatory position			$	69,748	$	(25,884)	$	(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.

Regulatory assets not earning a rate of return were approximately $318.2 million at September 30, 2021 and 2020, and $332.5 million at December 31, 2020; 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 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. Montana-Dakota and Great Plains have received approval for the recovery of purchased gas adjustments related to the cold-weather event in all jurisdictions impacted, including out-of-cycle purchased gas adjustment requests in most jurisdictions. 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 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.

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 loss in the period in which the discontinuance of regulatory accounting occurs.