Vistra Corp

14. ASSET RETIREMENT OBLIGATIONS

Our asset retirement obligations (ARO) primarily relate to nuclear generation plant decommissioning, land reclamation related to lignite mining, remediation or closure of coal ash basins, and generation plant disposal costs. AROs are based on legal obligations associated with enacted law, regulatory, or contractual retirement requirements for which decommissioning timing and cost estimates are reasonably estimable. See Note 15 for a discussion of proposed regulations which could result in additional AROs if enacted as proposed and/or if decommissioning timing and cost estimates are revised based on new interpretations of the rules.

The following table summarizes the changes to our current and noncurrent ARO liabilities:

(a)For the three months ended March 31, 2024, nuclear plant decommissioning accretion includes $9 million of accretion expense recognized in operating costs in our condensed statements of operations and $14 million reflected as a change in regulatory liability in our condensed consolidated balance sheets. For the three months ended March 31, 2023, nuclear plant decommissioning accretion reflected as a change in regulatory liability in our condensed consolidated balance sheets.

Nuclear Decommissioning AROs

AROs for nuclear generation decommissioning relate to the Comanche Peak plant in ERCOT and the facilities acquired from Energy Harbor which include the Beaver Valley, Perry and Davis-Besse plants in PJM (the PJM nuclear facilities). To estimate our nuclear decommissioning obligations we use a discounted cash flow model which, on a unit-by-unit basis, considers multiple decommissioning methods and are based on decommissioning cost studies, cost escalation rates, probabilistic cash flow models, and discount rates.

As of March 31, 2024, the carrying value of our ARO related to our Comanche Peak plant decommissioning estimate totaled $1.756 billion, which is lower than the fair value of the assets contained in the Comanche Peak NDT of $2.078 billion. The difference between the carrying value of the ARO and the NDT represents a regulatory liability of $322 million that has been recorded to our condensed consolidated balance sheets in other noncurrent liabilities and deferred credits since any excess funds in the NDT after decommissioning our Comanche Peak plant would be refunded through Oncor's delivery fees.

The carrying value of our ARO for our PJM nuclear facilities was recorded at fair value on the Merger Date. ARO accretion expense attributable to the PJM nuclear facilities is reflected in operating costs in our condensed consolidated statements of operations. ARO estimates for the PJM nuclear facilities will be evaluated on an individual unit basis at least annually unless triggering events warrant a more frequent review. Any changes in ARO estimates are recorded as an increase or decrease in ARO liability along with a corresponding change to asset retirement cost asset within property, plant and equipment on the condensed consolidated balance sheets; however, if the ARO estimate decreases by more than the remaining ARO asset, the balance of the change is recorded as a reduction to operating costs in our condensed consolidated statement of operations.