SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

SHARE-BASED COMPENSATION

2011 STOCK AND INCENTIVE PLAN

The Fortis acquisition of UNS Energy in 2014 resulted in accelerated vesting and expense recognition of all outstanding non-vested UNS Energy share-based awards issued under the UNS Energy 2011 Omnibus Stock and Incentive Plan (2011 Plan). The outstanding non-vested awards would otherwise have been recognized over remaining vesting periods through February 2017. TEP recognized approximately $2 million of expense in 2014 due to the accelerated vesting of the awards. TEP recorded total share-based compensation expense of $5 million for the year ended December 31, 2014. In August 2014, UNS Energy settled all outstanding share-based compensation awards related to the 2011 Plan in cash.

2015 SHARE UNIT PLAN

The Human Resources and Governance Committee (Committee) of UNS Energy approved and UNS Energy's Board of Directors ratified the 2015 Share Unit Plan (Plan) effective as of January 1, 2015. Under the Plan, key employees, including executive officers of UNS Energy and its subsidiaries, may be granted long-term incentive awards of performance-based share units (PSUs) and time-based restricted share units (RSUs) annually. Each PSU and RSU granted will be valued based on one share of Fortis common stock traded on the Toronto Stock Exchange, converted to U.S. dollars. UNS Energy allocates the obligation and expense for this plan to its subsidiaries based on the Massachusetts Formula.

UNS Energy awarded PSUs and RSUs as follows:

	2016	2015
PSUs	66,974	47,776
RSUs	33,488	23,888

The awards are classified as liability awards based on the cash settlement feature. Liability awards are measured at their fair value at the end of each reporting period and will fluctuate based on the price of Fortis common stock as well as the level of achievement of the financial performance criteria. The awards are payable on the third anniversary of the grant date. TEP's allocated share of probable payout was $4 million and $2 million as of December 31, 2016 and 2015, respectively.

TEP's allocated portion of compensation expense is recognized in Operations and Maintenance Expense on the Consolidated Statements of Income. Compensation expense associated with unvested PSUs and RSUs is recognized on a straight-line basis over the minimum required service period in an amount equal to the fair value on the measurement date or each reporting period. TEP recorded $2 million and $1 million in years ended 2016 and 2015, respectively, based on its share of UNS Energy's compensation expense.