Regulatory Matters

12 Months Ended

Dec. 31, 2020

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory Assets and Liabilities

The following presents our current and long-term regulatory assets and liabilities as of December 31, 2020 and 2019 and the period we expect to recover or refund such amounts:


	Period of	2020				2019
(in thousands)	Recovery/Refund	Current		Long-Term		Current		Long Term

Regulatory Assets
Pension and Other Postretirement Benefit Plans1	See below	$	11,037	$	146,071	$	9,090	$	130,783
Alternative Revenue Program Riders2	Up to 3 years	8,871		9,373		8,464		2,844
Asset Retirement Obligations1	Asset lives	—		8,462		—		7,772

ISO Cost Recovery Trackers1	Up to 2 years	1,079		867		2,033		1,170
Unrecovered Project Costs1	Up to 3 years	361		2,989		859		478
Deferred Rate Case Expenses1	Various	360		230		260		489
Debt Reacquisition Premiums1	Up to 30 years	192		341		201		548
Other1	Various	—		62		743		54
Total Regulatory Assets		$	21,900	$	168,395	$	21,650	$	144,138
Regulatory Liabilities
Deferred Income Taxes	Asset lives	$	—	$	134,719	$	—	$	141,707
Plant Removal Obligations	Asset lives	—		98,707		—		97,726
Fuel Clause Adjustment	Up to 1 year	10,947		—		3,982		—
Alternative Revenue Program Riders	Up to 1 year	3,581		470		2,857		—
Pension and Other Postretirement Benefit Plans	Up to 1 year	1,959		—		471		—
Deferred Rate Case Expenses	Various	—		—		—		401
ISO Cost Recovery Trackers	Up to 2 years	—		10		—		—
Other	Various	176		67		170		72
Total Regulatory Liabilities		$	16,663	$	233,973	$	7,480	$	239,906

1Costs subject to recovery without a rate of return.
2Amount eligible for recovery includes an incentive or rate of return.

Pension and Other Postretirement Benefit Plans represent benefit costs and actuarial losses and gains subject to recovery or refund through rates as they are expensed or amortized. These unrecognized benefit costs and actuarial losses and gains are eligible for treatment as regulatory assets or liabilities based on their probable inclusion in future electric rates.

Alternative Revenue Program Riders regulatory assets and liabilities are revenue not yet collected from customers or amounts subject to refund, respectively, primarily due to investments in qualifying transmission, conservation, renewable resource, environmental, and other generation assets.

Asset Retirement Obligations represent the difference in timing of recognition of expense arising from these obligations and the amount recovered from customers.

ISO Cost Recovery Trackers represents costs incurred to serve Minnesota customers or the under collection of revenue based on expected versus actual construction costs on eligible projects.

Unrecovered Project Costs reflect costs incurred for abandoned generation and transmission assets and accelerated depreciation expense on a to-be-retired generation asset expected to be recovered from customers.

Deferred Rate Case Expenses relate to costs incurred in conjunction with recent rate cases that are currently or are expected to be recovered from customers.

Debt Reacquisition Premiums represent costs to retire debt which are being recovered from customers over the remaining original lives of the reacquired debt.

Deferred Income Taxes represents income tax benefits, arising primarily from property-related timing differences, that will be refunded to customers as these timing differences reverse.

Plant Removal Obligations represent amounts collected from customers to be used to cover actual removal costs as incurred.

Fuel Clause Adjustments represent the over-collection of fuel costs to be returned to customers.

Regulatory Matters

Minnesota TCR. On October 22, 2020, the MPUC approved OTP's request for a Minnesota TCR rider update. This rider update request followed a Minnesota Supreme Court opinion issued on April 22, 2020, concluding the MPUC lacked the authority to amend an existing TCR rider approved under Minnesota state law to include the costs and revenues associated with certain OTP transmission assets. Accordingly, the rider update excluded the costs and revenues associated with these assets, which had the effect of allowing OTP to recover the appropriate return on these assets from Minnesota customers dating back to the last TCR rider update in September 2016. As a result, OTP recognized additional rider revenue of $2.6 million during the year ended December 31, 2020.

Depreciable Lives. On July 30, 2020 the MPUC ordered a reduction in the remaining depreciable lives of Hoot Lake Plant and seven hydroelectric plants. The MPUC stipulated recoverability of the resulting increase in depreciation expense would be determined in OTP's next rate case. Based on the relevant facts and circumstances, we concluded the additional depreciation expense is probable of recovery and we have recognized a regulatory asset for the amount of incremental expense in 2020, which amounted to $2.8 million.