Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2026

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.